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PIMT
Journal of Research
Volume-11, No.-2 (January to June) 2019 ISSN No: 2278-7925 UGC Care Listed Journal
PATRONS
Sh. Naresh Aggarwal, Chairman
Sh. Raj Kumar Goyal, Secretary
Sh. Pawan Sachdeva, President
EDITOR –IN- CHIEF
Dr. Manisha Gupta, Director
Published By
Punjab Institute of Management & Technology
(Estd. In 1997, Approved by AICTE, New Delhi, Affiliated to IKG PTU, Jalandhar) (Near GPS, Mandi Gobindgarh) Vill. Alour, Khanna -141401, Distt, Ludhiana, Punjab, India
PUNJAB INSTITUTE OF MANAGEMENT & TECHNJOLOGY
(Estd. In 1997, Approved by AICTE, New Delhi, Affiliated to IKG PTU, Jalandhar) (Near GPS, Mandi Gobindgarh) Vill. Alour, Khanna -141401, Distt, Ludhiana, Punjab, India
AIMS AND SCOPE
The PIMT Journal of Research (PIMT JR), a peer-reviewed refereed journal, started in March, 2008 is the half yearly
publication of the Punjab Institute of Management and Technology, Khanna. The main aim of this journal is to
disseminate knowledge and information in the various functional areas of Business, Management, Economics, IT and
Commerce. The journal focuses on pure empirical, applied and interdisciplinary research in different areas. The
journal is intended to provide forum for debate and deliberation for academics, policy planners, and research students
of MBA and MCA programs. The PIMT Journal of Research publishes articles, research papers, abstract of doctoral
dissertations, book reviews, case studies, short communications and bibliography in the main areas of business
management and information technology or allied areas.
EDITORIAL BOARD ISSN No: 2278-7925
PATRONS
Sh. Naresh Aggarwal, Chairman
Sh. Raj Kumar Goyal, Secretary
Sh. Pawan Sachdeva, President
EDITOR –IN- CHIEF
Dr. Manisha Gupta, Director
EDITORIAL TEAM
CMA (Dr.) Rajni Bala, Editor
Dr. Neha Mahajan , Co-Editor
EDITORIAL ADVISORY BOARD
Dr. Rajib Doogar, University of ILLINOIS, USA
Dr. Jeremy Cripps, Heidelberg College, Ohio, USA
Dr. Ravi Sen, Texas Ad M University, USA
Dr. Mahesh Joshi, RMIT University, Melbourne, Australia
Dr. Revti Raman, University of Auckland, Newzeeland
Dr. Khwaja Amjad Saeed, Pro Vice- Chancellor (Retd.), University of Punjab, Lahore, Pakistan
Prof. H.L.Verma , Guru Jambheshwar University of Sciences & Technology, Hissar
Prof. G.S Batra, Punjabi University, Patiala
Prof. R.K.Mittal, GGS Indraprastha University, Delhi
Prof. Ajay K.Rajan, MD University, Rohtak
Prof. D.D. Arora, Kurushetra University, Kurushetra
Prof. Raghbir Singh, GND University, Amritsar
Prof. Yogesh Singh, GGS Indrapstha University, Delhi
Prof. S.K. Chadha, Punjab University, Chandigarh
Prof. M.K. Jain, Kurushetra University, Kurushetra
Prof. P.K Sharma, Director, Kota Open University, Kota (Rj.)
Prof. D.P.S. Verma (Retd.), Delhi University, Delhi
Prof. S.K. Singla, Director, GNA- IMT, Phagwara
Prof. S.L.Gupta, Director, Birla Institute of Technology, Mesra, Ranchi
Dr. Nawab Ali Khan, EX-Dean, Faculty of Commerce, Aligarh Muslim University
Dr. Pooja Mehta, Assistant Professor, IKG PTU, Kapurthala
Dr. Neena Seth Pajni, Principal, GPC, Alour Khanna
Dr. K.K Sharma, Associate Professor, A.S College Khanna
Dr. S.K Mishra, Registrar & Head –Centre of Continuing Education, Dr. B.R Ambedkar National Institute of Technology,
Jalandhar
© 2019.All rights reserved with Punjab Institute of Management & Technology, Vill. Alour, Khanna, Distt. Ludhiana, Punjab, India
Published by Dr. Manisha Gupta, on behalf of Punjab Institute of Management & Technology, Vill. Alour, Khanna Distt. Ludhiana,
Printed by National Press Associates, New Delhi
From the Editor’s Desk
I am pleased to place before the readers this issue (Vol-11, No.2) of PIMT Journal of Research (UGC care
listed Journal), a publication of Punjab Institute of Management and Technology, Village Alour, Khanna.
The response from the contributors of research articles has been overwhelming. The PIMT Journal of
Research presents an academically proficient blending of research articles, short communications, book
reviews and doctoral dissertation abstracts. The significance of management and information technology has
become very well founded all over the world. These fields are witnessing rapid challenges and changes in
the face of globalization forcing researchers, academicians and practicing managers to keep them updated on
the latest advances in the field of Management and IT. To promote exchange of ideas among the scholars
and practicing managers in the field, PIMT has launched the PIMT Journal of Research. The Journal reflects
a keen interest and sustained efforts of researchers, academicians and professionals who have covered wide
spectrum of contemporary issues in the field of Management, Information Technology and its allied areas.
We appreciate the efforts put in by the researchers in terms of quality research work done by them and
versatility in the methodology adopted in their research work.
We also express our gratitude to the reviewers of the various articles and contributors of the doctoral
dissertation abstracts for giving their valuables contributions, comments and the suggestions for the
enrichment of this journal. I thank and look forward to their continued association and support to PIMT
Journal of Research.
Our commitment to the cause of promoting high quality research work in all areas of Business Management
and Information Technology will contribute to enlighten our readers in the times to come.
The Chairman Sh. Naresh Aggarwal, Secretary Sh. Raj Kumar Goyal, President Sh. Pawan Sachdeva and
other members of Governing Council of the Institute have taken the keen interest in this academic endeavor.
I am extremely grateful to them for their continued guidance and support.
Dr. Manisha Gupta
Editor-in-Chief
PIMT, Alour, Khanna
CONTENTS
HOUSEHOLD SAVING AND INVESTMENT BEHAVIOUR: A COMPARISON BETWEEN BUSINESS CLASS AND SERVICE CLASS IN LUDHIANA Dr. Pallavi Dawra 1
CURRENT ACCOUNT DEFICIT OF INDIA: DURING PRE AND POST GLOBAL FINANCIAL CRISES Kiranjot Kaur, Dr. B.S.Bhatia 6
GROWTH PROSPECTS IN EQUITY DERIVATIVE MARKET IN INDIA Dr. Ruchika Jain 13
INSTITUTION APPRECIATION AND CRITICISM: THE CASE OF ETHIOPIAN UNIVERSITIES Endris Nuru Zeleke, Dr. Bharat Bhushan Singla 24
FINTECH (FINANCIAL TECHNOLOGY): A BOON FOR FINANCIAL SECTOR CMA (Dr.) Rajni Bala, CA (Dr.) Sanjeev Bansal, Dr. Anil Angrish 30
A DROWNING SPEED BOAT "THE INDIAN GROWTH STORY" Dr. Monika Chopra 34
A REVIEW STUDY ON INHIBITING FACTORS OF IMPULSE BUYING BEHAVIOR OF ONLINE SHOPPING CUSTOMERS Amanpreet, Dr. Anupama Bains 39
A STUDY OF WELFARE MEASURES ON EMPLOYEE’S MORALE Dr. Gopal Krishan, Veeni 43
AGE AND GENDER EQUALITY IN AUTOMOBILES Dr.K.K.Sharma, Dr. Yashmin Sofat 49
A STUDY ON THE RELATIONSHIP BETWEEN COMPANY CHARACTERISTICS AND EXTENT OF DISCLOSURE IN SMALL-CAP COMPANIES Madhur Joshi, Dr. B S Bhatia 59
A STUDY ON AWARENESS LEVEL OF BANK EMPLOYEES ON SECURITIZATION OF BANKING LOANS IN INDIA Reena Rani, Dr. Manisha Gupta, James Kanda 66
A STUDY OF ECONOMIC AND LEGAL ASPECT OF BITCOIN IN INDIA Mankaj Mehta 73
JOB SATISFACTION OF EMPLOYEES IN SHREE GANESH EDIBLE PVT. LTD. Ritika Sharma 78
IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS: A CASE OF RUSSIAN ECONOMY Dr. Robin Inderpal Singh, CA (Dr.) Sanjeev K. Bansal, Dr. Sandeep K. Bansal 84
TO STUDY THE ROLE OF SPIRITUAL INTELLIGENCE AT WORK PLACE A REVIEW Dr. B.B. Singla, Damanpreet Kaur 90
INTERDEPENDENCE OF PERFORMANCE MANAGEMENT SYSTEM AND EMPLOYEE ENGAGEMENT Ramneek Kaur, Deepika Singla 96
A STUDY ON EFFECT OF REWARD SYSTEM ON THE MOTIVATION LEVEL OF EMPLOYEES Dalbir Kaur 107
IMPACT OF PERFORMANCE APPRAISAL ON EMPLOYEE’S PRODUCTIVITY Ankita 111
A STUDY ON ABSENTEEISM OF WORKERS Manpreet Kaur 115
EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON SCALING AND PERFORMANCE OF SHGs OF UDAIPUR (RAJASTHAN) Dr. Ashish Adholiya, Dr. Santosh Kumar C.S, Shilpa Adholiya 119
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HOUSEHOLD SAVING AND INVESTMENT BEHAVIOUR:
A COMPARISON BETWEEN BUSINESS CLASS AND SERVICE CLASS IN
LUDHIANA
Dr. Pallavi Dawra*
*Faculty Department of Business Management, PCTE, Ludhiana, Punjab, India
ABSTRACT
This Research studies the saving behavior and investment behavior of the business class and service class
households in Ludhiana (Punjab). It is a comparative study between business class and service class
households. The study focus is on their saving behavior, Motives of saving, Alternatives used to keep saving,
their investment trend in various investment alternatives, factors considered by them at the time of
investment and their source of advice while taking any investment decision. The purpose of the study is to
understand their saving and investment behavior, compare their attitude towards different investment
alternatives and to compare their investment preferences. The study was conducted in Ludhiana (Punjab), A
questionnaire was used to collect all the data about saving and investment behavior of business and service
class households. The results have shown, there is no significant difference between the motives of saving of
business class and service class. There is not much difference between the investment choices of business
class households and service class households. However, their ranking to various investment options differs.
The majority of respondents both in business class and service class do not believe in speculation.
Keywords: Motives, Investment, Behaviour.
INTRODUCTION
Financial sector is the backbone of every country.
Growth of financial sector depends on savings and
investments rate of that economy.
Saving - Savings means the act of refraining from
spending one’s income on consumption. The part of the
income, which is unspent, is called savings.
Saving Behavior – Saving behavior depicts how
people save, it includes their saving needs and
motives. Saving behavior of a person depends on
factors like age, education, family size, asset
ownership, Stage in life cycle, employment
status etc.
Investment – Savings can be idle or active, when
savings are canalized into risk bearing avenues, it
is called investment.
Investment Behavior - Investment avenues for an
individual or family or household are many,
generally known as instruments. The preference
shown by an investor in choosing a particular
instrument is called investment behavior. The
determinants of investment behavior are
sociological and psychological factors.
Sociological factors – Culture, sub culture, social
classes and reference groups
Psychological factors – Personality, attitude,
beliefs and values
Purpose of investment can be related with saving
objective. Each individual investor selects the investment
option for certain time period looking at their personal
financial goals. Investment behavior of an individual
investor reveals how he/she wants to allocate the surplus
financial resources to various instruments for investment
available.
FACTORS CONSIDERED WHILE MAKING AN
INVESTMENT DECISION
I. Risk Tolerance
II. Age
III. Investment objective
IV. Financial literacy
INVESTMENT ALTERNATIVES AVAILABLE IN
INDIA
A. Financial Assets – These do not have physical
presence; it derives its value from contractual
rights and ownership claims. For example, Fixed
deposit, Equity, Insurance, Provident Fund,
Mutual Fund, Pension fund etc.
B. Physical Assets – These have physical presence.
For example, Real estate, Gold, Diamond,
Platinum etc.
REVIEW OF LITERATURE
Syed et. Al, (2017) concluded in their study that
dependency ratio affects the household savings. So, more
employment opportunities should be created to eliminate
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its negative impact on saving. Household finance
committee report by RBI (2017) has found that the
average Indian household holds 84% of its wealth in real
estate, 11% in gold and 5% in financial assets. Business
Standard (2017) have mentioned in their report that
people are shifting their investments from unproductive
assets like gold to other alternatives since demonetization
in November 2016. Samantaraya and Patra (2014)
mentioned in their study that GDP has favorable effect
on household saving, while inflation puts a negative
impact on it. Chaudhary (2013) has mentioned in his
study that male investors are more satisfied after
investing in shares than mutual funds. Bhushan and
Medury (2013) mentioned in their study that employees
are highly satisfied after investing in fixed deposit,
recurring deposit and life insurance. Samudra and
Burghate (2012) have concluded in their study that not
only income has immediate bearing on investment
choices but also the age group to which the head of the
family belongs, Psychology plays an important role in
investment decisions of the household’s risk-taking
ability. Hira (2012) has found out in his study how,
through financial education, we can improve the
economic performance of individuals in the economy
financial education has to include discussion of attitudes,
values and beliefs that enable people to make financial
decisions that promote long term security for families
and communities. Achar (2012) has mentioned in his
study that apart from risk and return, factors like
marketability, initial investment, tax benefit, loan facility,
institution, past experience, age and needs, social
conditions, and liquidity have great influence on
investment decision. Geetha and Ramesh (2011) have
mentioned in their study that most of the people were not
aware about all the investment options available and they
were not aware of equity, stock market and debentures.
National Council of Applied Economic Research (2011)
has found out in its study that the percentage of investors
in urban area is 20 per cent while in rural areas it is 6 per
cent. Kibet et.al, (2009) mentioned in their study of
household saving determinants in rural areas of Kenya,
that household income, nature of businessmen
occupation, gender, and education level of household
head positively influenced the saving behavior of the
rural households while credit access, age, and
dependency ratio negatively influence household saving.
Benartzi and Thaler (2007) have found out in their study
that Saving for retirement is a difficult problem, and most
employees have little training on it. They are slow to join
advantageous plans; they make infrequent changes; and
they adopt naive diversification strategies. In short, they
need all the help they can get.
OBJECTIVES OF THE STUDY
1. To understand savings and investment behavior
of households in Ludhiana.
2. To compare the attitude of business class and
service class households towards different type
of investment alternatives
3. To compare preference of business class and
service class towards different investment
alternatives.
RESEARCH METHODOLOGY
In order to identify and analyze the saving and
investment behavior of business class and service class
household, a questionnaire has been used for data
collection. In questionnaire various investment
alternatives like post office savings, life insurance,
commercial banks, government securities, Gold, mutual
funds, Real estate etc. have been mentioned and
households have been asked for their preferred
investment alternative and their attitude towards different
types of saving and investment instruments. A sample of
150 respondents has been taken in this study. T test has
been used to determine whether there is statistically
significant difference between motives of savings
between service class and business class.
Hypothesis for Testing
H0: There is no significant difference between motives
of saving of business class and service class
H1: There is significant difference between motives of
saving of business class and service class
Findings of the study
The survey data has shown that there is no significant
difference between the saving motives of business class
and service class in Ludhiana. Following table justify the
same on the basis of T- test.
PIMT Journal of Research
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PP: 1-5 ISSN No: 2278-7925
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Table No.1 Showing Results of T Test to Study Difference between Motives of Savings amongst Service Class
and Business Class
Independent Samples Test
Levene's Test for
Equality of Variances
T test for equality of means
Sr. No. F Sig. t df Sig. (2-tailed)
1 Desire to build reserve for
contingencies
Equal variances assumed 2.896 0.091 -0.888 148 0.376
2 Your desire for future
needs
Equal variances assumed 0.022 0.883 0.712 148 0.477
3 Desire to enjoy enlarged
future income
Equal variances assumed 3.771 0.054 -1.341 148 0.182
4 Desire to enjoy
independence and power to
do things
Equal variances assumed 0.128 0.721 -0.982 148 0.328
5 Desire to meet gradually
increasing expenses
Equal variances assumed 0.506 0.478 -0.051 148 0.959
6 Desire to spend less Equal variances assumed 2.728 0.101 -1.049 148 0.296
7 Desire to pass fortune to
next generation
Equal variances assumed 0.095 0.758 -1.158 148 0.249
8 Desire to carry out
speculation business
Equal variances assumed 5.15 0.025 -0.248 148 0.804
Table No.2 Showing Acceptance and Rejection of Null Hypothesis for different Motives of Savings
Serial
no.
Null hypothesis P value Results
H01 There is no significant difference between business class and service class’ saving
motive of” Desire to build reserve for contingencies” .376
ACCEPTED
H02 There is no significant difference between business class and service class’ saving
motive of” Desire for future needs”
.477 ACCEPTED
H03 There is no significant difference between business class and service class’ saving
motive of” Desire to enjoy enlarged future income” .182
ACCEPTED
H04 There is no significant difference between business class and service class’ saving
motive of” Desire to enjoy independence and power to do things” .328
ACCEPTED
H05 There is no significant difference between business class and service class’ saving
motive of” Desire to meet gradually increasing expenses”
.959 ACCEPTED
H06 There is no significant difference between business class and service class’ saving
motive of” Desire to spend less”
.296 ACCEPTED
H07 There is no significant difference between business class and service class’ saving
motive of” Desire to pass fortune to next generation”
.249 ACCEPTED
H08 There is no significant difference between business class and service class’ saving
motive of” Desire to carry out speculation business”
.804 ACCEPTED
Majority of the respondents whether from
business class or service consider factors like
safety, Time, Risk, Regular return, premature
withdrawal very important at the time of
investment.
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Neither business class nor service class consider
carrying out speculation business as a motive of
their saving. Majority of business class
households spend first and save the rest of their
income, whereas service class household majorly
save regularly and put money aside each month.
As far as different investment options are
concerned both classes have different preference.
Following table is showing ranking given to
different investment options.
Table 3 Showing Ranking of Investment Options by Business class and Service class
Investment Alternatives Business class Service class
1. Bank 1st most preferred investment option 1
st most preferred investment option
2. Real Estate 2nd most preferred investment option 7th most preferred investment option
3. Gold 3rd most preferred investment option 6th most preferred investment option
4. Government Securities 4th most preferred investment option 2nd most preferred investment option
5. Insurance 5th most preferred investment option 5th most preferred investment option
6. Post Office 6th most preferred investment option 4th most preferred investment option
7. Mutual funds 7th most preferred investment option 3rd most preferred investment option
8. Equity 8th most preferred investment option 8th most preferred investment option
Respondents have ranked bank their most
preferred investment alternative in both business
class as well as in service class. 67% business
class respondents keep their savings in real
estate which shows popularity of this investment
alternative amongst them. 65% of the service
class respondents save their money in insurance.
Post offices are becoming least favorite of both
business class and service class households for
investment. Investment in equity is more popular
among service class households as comparison to
business class households. Real estate
investment is on rising spree among business
class households and on a declining trend among
service class households. Investment in gold has
been seen declining in both business and service
class.
Mutual fund investments are on a rising trend
amongst service class households. Majorly, both
business class and service class respondents take
advice from their spouse and family members
before making any investment decision.
Respondents strongly agree that better servicing
of investors can help to attract more investors
towards investment alternatives. Majority of
respondents agree that bank is a better place of
investment than other investment avenues. They
also strongly agree that household savings can
help the economic development of country.
CONCLUSION & RECOMMENDATIONS
The investors need to be properly taught about various
equity investment and mutual fund investments. The
awareness regarding these avenues of investment should
be created in city of Ludhiana and a positive attitude of
investors has to be made regarding these investment
options. The penetration of financial advisors has to be
increased in the city to tap more investors for making
investments in different avenues. Mutual fund schemes
can be offered to investors according to their investment
objectives considering their safety, risk and premature
withdrawal needs. A great service experience has to be
given to investors in order to attract more investors, so
financial companies should focus on good experience of
investors. People should be encouraged to save more by
showing them the long-term benefit of saving. They
should be persuaded to invest more in different and better
investment alternatives. In this way a boost can be given
to household saving and investments.
There is not much difference between the investment
choices of business class households and service class
households. However, their ranking to various
investment options differ. The majority of respondents
both in business class and service class have disagree on
carrying speculation business being called their motive of
saving, which shows the risk aversion and reason for
their least preference for equity investments.
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REFERENCES
1. Achar, A. (2012). Saving and Investment Behavior of
teachers-An empirical study. International Journal of
Physical and Social Sciences, 2(8), 263-286.
2. Amaresh Samantaraya and Suresh Kumar Patra -
Determinants of Household Savings in India: An Empirical
Analysis Using ARDL Approach
https://www.hindawi.com/journals/ecri/2014/454675/
3. Benartzi, S., & Thaler, R. (2007). Heuristics and biases in
retirement savings behavior. Journal of Economic
perspectives, 21(3), 81-104.
4. Bhushan, P., & Medury, Y. (2013). Gender differences in
investment behaviour among employees. Asian Journal of
research in Business Economics and management, 3(12),
147.
5. Browning, M. (2000). The saving behaviour of a two‐person
household. scandinavian Journal of Economics, 102(2),
235-251.
6. Business standard- http://compete.org.in/indias-evolving-
household-savings/
7. Chaudhary, R. (2013). Investment Behaviour of Engineers
towards Mutual Funds: An Analysis of Gender
Differences. Journal of Social Science and
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8. Geetha, N., & Ramesh, M. (2011). A study on people’s
preferences in Investment Behavior. International Journal
of Engineering and Management Research, 1(6), 285-306.
9. Guariglia, A. (2003). Saving behaviour and earnings
uncertainty: Evidence from the British Household Panel
Survey. In Family, Household and Work (pp. 135-150).
Springer, Berlin, Heidelberg.
10. Hira, T. K. (2012). Promoting sustainable financial
behaviour: implications for education and
research. International Journal of Consumer Studies, 36(5),
502-507.
11. Kibet, L. K., Mutai, B. K., Ouma, D. E., Ouma, S. A., &
Owuor, G. (2009). Determinants of household saving: Case
study of smallholder farmers, entrepreneurs and teachers in
rural areas of Kenya. Journal of Development and
Agricultural Economics, 1(7), 137-143.
12. Live Mint
https://www.livemint.com/Opinion/gfmAEHElVpmjl4xLeZ
rPCI/Our-changing-saving-habits.html
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Liberalization and savings in developing countries: the case
of India. DISCUSSION PAPER-LANCASTER UNIVERSITY
MANAGEMENT SCHOOL EC.
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and Investors’ Satisfaction. The Indian Journal of
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saving and investment report : Evidence from NCAER
household survey- July 2011
16. Prinsloo, J. W. (2000). The saving behavior of the South
African economy. South African Reserve Bank.
17. Report by Household finance committee of RBI (2017)
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CURRENT ACCOUNT DEFICIT OF INDIA: DURING PRE AND POST GLOBAL
FINANCIAL CRISES
Kiranjot Kaur*, Dr. B.S.Bhatia
**
*Research scholar, RIMT University, Mandi Gobindgarh, Punjab, India
**Pro Vice-Chancellor, RIMT University, Mandi Gobindgarh, Punjab, India
ABSTRACT
BOP has been an important determinant of the economic position of India as it gives the basis of international
transactions and investments. For a growing economy such as India, a persistent deficit in the current account
section of BOP may have an adverse impact on the economy. The long-time negative growth decreases the
economic growth impacting the exports and productive investments impacting employment and currency value of
the domestic economy. This research aims to examine the relationship between current account deficit and
external debt by studying their trends before and after global financial crises. As well as to determine the
significance of long term-short term debt, inflation and foreign exchange rates on current account deficit.
Key Words: Foreign exchange rate, Inflation, External Debt, Current account deficit multiple regression analysis
INTRODUCTION
The current account is one of the two components in the
balance of payment and it is the sum of the balance of
trade. It is calculated by subtracting the net value of
export of the country from the import value of the goods
and services. It includes the interest and dividends
received by the country as well. A deficit in the current
account is thus accountable for a trade deficit in the
country (Srikumar, 2013a). Current account deficit as
defined by (Şahin & Mucuk, 2014), is “the measurement
of a country’s trade in which the value of goods and
services it imports exceeds the value of goods and
services it exports” (p. 321).
The formula for current account calculation is:
Current account =change in net official reserves - private
capital flows
The current account deficit is thus dependent on three
factors:
Balance of Trade
Earning from Investment
Cash Transfers Balance of Trade
For a growing economy such as India, a persistent deficit
in the current account section of BOP may have an
adverse impact on the economy. The trends observed in
the Current Account Deficits (CAD) of India over the
decades have been studied by many researchers and
organizations. Current Account of India, declared by the
Reserve Bank of India, shows an average of Rs- 8611
croresfrom 1949 to 2015, reached the highest at Rs
33820.672 croresin Q1 of 2004 and has reached an all-
time low of Rs- 152669.23 crores in Q4 of 2012 (Trading
Economics, 2016). As of Q2 of 2015, the CAD showed
sequential increase to Rs 50143 crores(representing 1.6%
of its GDP), owing to decrease in its trade deficits (as
compared to previous year) of RS 228663.6 crores as
well as marginal improvement in net invisibles.
Furthermore, the Balance of Payments (BoP) in
September quarters stayed in the negative territory due to
drawdown from reserves, but economists have predicted
positive trend for BoP in first half of 2015-2016 with an
accretion of Rs 64808.4 croresto foreign exchange
reserves (Business Standard, 2015).
REVIEW OF LITERATURE
The study of (Aristovnik, 2006a) focused upon the issue
of excessive external imbalances within the transition
countries. The findings of the study indicated that there
exist a positive and significant relationship between the
external debt and current account balance for selected
European countries. The study applied generalized
method of moments (GMM) to investigate the
relationship. It was found that a 1% point increase in
total external debt led to 0.02-0.04 % point increase in
current account balance in the next year.
(Georgescu, 2007) studied the relationship between CAD
and external debt in Romania using trend analysis for the
period 2003-2007. The study found that high current
account deficit can lead to high external debt. This could
further result in higher risks for sustainability of a
country’s financial position. It was suggested that the
main cause of current account deficit was the trade
balance deficit.
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The study of (Agarwal & Gangal, 2015) examined the
long run and short run causality relationship between
external debts, foreign direct investment and current
account balance in reference to India from 2000-01 to
2012-13. The analysis was done by using Granger
causality and Vector Error Correction models (VECM).
It was assessed that selected variables were integrated of
order 1 that isI(1). Results of VECM models showed that
there was only long run causality relationship between
external debts and current account balance but not in the
short run.
(Karabulut & Şahbaz, 2016) assessed the effect of
exchange rate on current account balance in five
economies, that of Brazil, Turkey, Indonesia, India and
South Africa. The time period used for the analysis was
different for the five countries. It was 1991Q1 – 2016Q1
for Brazil; for Turkey, data was taken for 1987Q1 –
2016Q1; for India, 2004Q1 – 2015Q2; for Indonesia
1990Q1 – 2015Q3 data was considered and for South
Africa the dataset included data for 1980Q1 – 2016Q1.
The authors applied structural VAR (SVAR) model for
the analysis. It was found that an increase in real
exchange rate (depreciation in national currency) led to
decline in current account deficit in case of Brazil,
Turkey and Indonesia whereas there was no relation
found between these two variables in case of India and
South Africa
(Homaifar & Salimullah, 2016)studied factors affecting
U.S. current account deficit empirically by using
quarterly data from January 1973 to April 2013. For the
analysis, the study conducted ordinary least square (OLS)
coefficients, Auto Regressive Moving Average (ARMA)
model, CUSUM test and Quandt Likelihood Ratio (QLR)
test. Findings suggested that increase in GDP growth
rate, inflation rate and a decrease in the interest rate
caused the country's imports to exceed exports which
ultimately led to increase in trade deficit. Moreover,
weightedU.S. dollar index as a measure of exchange rate
did not have any major impact on the CAD.
In a recent empirical study, (Ousseini, Hu, & Aboubacar,
2017) focused on the determinants that impacted current
account balance for West African Economic and
Monetary Union (WAEMU) countries from 1980 to
2013. The study adopted VAR and Granger causality test
for the analysis. It was found that money supply (M2),
real exchange rate, income, inflation, investment, and
house-hold consumption expenditure had an effect on
trade and current account balance.
RESEARCH GAP
The existing literature reveals that there exists a positive
and significant relationship between current account
deficit and external debt and on the other hand, one study
reveals only long run causality relationship between
these two variables. The existing literature further depicts
the significant relation between real exchange rate and
inflation on current account deficit. Whereas, one study
rules out the impact of weighted U.S dollar on CAD. But,
there is lack of research comparing the movement of
external debt and current account balance in two different
phases of developing economy and on the impact of
foreign currencies on CAD of leading trade partners of
India.
RATIONALE FOR THE STUDY
Current account balance is relevant for a country from
macroeconomic policy perspectives. Therefore, it is
important to study the reasons behind the current account
deficit. The other reason behind choosing the study of
current account deficit is due other macroeconomic
changes in around the world. Firstly in the global world
has seen the period of currency depreciation. The
economic slowdown in China, (the world second largest
economy), the increase in the interest rate by the Federal
bank in US, almost after a decade, has led to the
depreciation of the currency such as Chinese Yuan , Euro
along with the Indian Rupee. Thirdly the international
price of the crude oil has been continuously declining
which due to the slowdown and the oversupply by the
OPEC countries, which has significantly affected on the
Indian current account balance. This along with the
research gap as mentioned above provide the rationale of
this study which aims to analyze the impact of macro
economic variables on current account balance and its
trends in two different periods. For, policy makers, this
study will come up with appropriate policies so that
current account deficit in the country can be controlled.
OBJECTIVES OF THE PAPER
To analyze the trends of current account balance
and external debt during pre and post global
financial crises period.
To study the growth and composition of long
term and short term debt.
To examine the impact of long term-short term
debt, foreign exchange rates and inflation on
current account balance.
To suggest the policies to manage current
account deficit.
SCOPE OF THE STUDY
The issue of current account deficit is a contentious and
debatable topic in the context of Indian economy. Both a
persistent high or low CAD impacts the growth and the
flow of funds in the economy adversely. However, when
the CAD is maintained within a threshold, the deficit can
be used to provide the required boost to the economy.
CAD is essential for the growth of the
economy.Conversely, if it goes beyond the threshold, the
economy would not be able to auto-correct and would
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require the assistant from the government in form of
corrective policies. With this scenario, the current
research aimed to study the movement of current account
deficit and external debt in pre and post global financial
crises period. During this period growth and composition
of long term and short term debt is examined and impact
of macroeconomic variables on current account deficit is
also determined. The study covers the all the years of pre
and post global financial crises period. Therefore, it takes
into account significant global and national economic
events therein such as global financial crisis of 2008-
2009, sovereign debt crises.
RESEARCH METHODOLOGY
a) Sources of Data
This study is entirely based on the secondary data which
has been collected from the various sources such as the
Data base of Reserve Bank of India, Various government
sources and Published journals and articles.
b) Selection of Time period
The study covers the time period of 15 years. The entire
time period has been divided into two phases. The first
phase is from 2000 – 2007 which has been taken as the
pre- financial crisis period and the second phase is after
2007 – 2015 which has been taken as the post-financial
crisis period. The justification of dividing the period in
two phases is to get the clear idea that how the trends of
current account balance and external debt changed over
the two phases.
c) Data Analysis Procedure
The study intends to analyze the trends of current account
deficit and external debt during pre and post global
financial crises period.For these purpose simple
statistical tools such as trend analysis is used. It is
analytical research in nature.Similarly to examine the
impact of external debt and foreign exchange rates and
inflation on current account balance, the multiple
regression analysis has been conductedby taking the
current account balance as the dependent variable.The
independent variables used were External debt (short
term debt and long term debt) and major foreign
exchange reserves (US dollar, Euro and Yen) and
Inflation
ANALYSIS
d) Trend Analysis
Current account deficit and External debt
The figure below shows the trend of the India’s current
account balance and the total external debt (both the short
term and the long term debt). The current account surplus
during this period is due to huge amount of the capital
inflow in the country through Foreign Direct Investment
and the huge amount of foreign reserve. However after
2007 the current account deficit has been increasing. The
main reason behind the increasing current account deficit
in India is due to the huge import of the gold and other
metals by the Indian consumer and also due to
continuous decline in Indian exports.
Figure 1: Trend Analysis of Current Account Balance and total external debt of India during 2000-2015 (in Rs.
Crore)
Similarly the external debt of India has been
continuously increasing for the entire study period. The
total external debt which was around Rs163001 crores in
1991 has increased to Rs 2978666 crores in 2015. In the
recent time the major increase in the external debt is due
to the external commercial borrowing and the increase in
the NRI deposits. However the Debt-GDP (Gross
Domestic Product) ratio in the recent years has increased.
Current account deficit and External debt before and
after the period of financial crises
One of the objectives of this paper is to examine the
current account balance of India in two different periods.
The first period is from 2000- 2007 which is the period
before the financial crisis. As shown in the figure below
during the pre-crisis period the current account was in
surplus after 2001-2002 till the 2004-2005. After 2005
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
Rs crore
Year
Current account deficit and
External debt
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the current account again runs into deficit and the deficit
continue to decline. On the other hand the total external
debts of India continue to increase. The External debt
was not increasing on the period when the current
account was in surplus. However, the external debt start
rising sharply after 2004- 2005.
Figure 2: Trend Analysis of Current account balance and total external debt of India(2000- 2007) (in Rs. Crore)
The second period is from 2007 -2015 which includes the
global financial crisis of 2007-08. The trend analysis of
the current account and the external debt in this time
period has been shown in the figure below. In this period
the current account deficit and the total external debt both
increases sharply. Only after the 2013 the current account
deficit shows some improvement and there are various
reasons which led to reduction in the current account
deficit.
Figure 3: Trend analysis of Total external debt and Current account balance of India (2007 – 2015) (in Rs. Crore)
The government has increased the tariff on gold import
which has led to a decrease in the import of gold. The
other reason behind the slight improvement in the current
account deficit in 2014-15 is the increase in exports
(because of the currency depreciation and the slowdown
in China). Similarly the decline in the price of crude oil
in the international market has helped to reduce the
import bill for India.
Long term debt and short term debt
In terms of the composition of the total external debt of
India the long term debt is significantly more than short
term debt. As shown in the figure below in 2000 out of
total debt of Rs 4,82,328crores, 97 % of the debt was
long term and the remaining debt was short term.
Figure 4: Long Term debt and Short Term Debt of India (2000-2014) (in Rs. Crore)
-200,000
0
200,000
400,000
600,000
800,000
2000 2001 2002 2003 2004 2005 2006 2007
R
s
c
r
o
r
e
s
Year
Current account balance
total external debt
-1,000,000
0
1,000,000
2,000,000
3,000,000
Rs ( crores)
Year
current account balance
Total externl debt
0
500000
1000000
1500000
2000000
2500000
3000000
20002002200420062008201020122014
Rs ( crores)
Year
Long Term Debt (Rs inCrores)
Short term Debt (Rs inCrores)
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However the contribution of short term loans in total debt
has increased over time. During the financial year 2012-
2013, 25 % of the total debt was short term debt, but the
share declined after 2013 to 18% in 2015. The major
components of long term debt include commercial
borrowing, NRI deposits, multilateral and bilateral loans,
export credit and IMF debt.
e) Regression Analysis
Regression analysis was conducted to examine the
impact of external debt and foreign exchange rates of
major currencies and inflation on current account
balance of India for the time period 2000- 2015. The
multiple regressions have been conducted by taking the
current account balance of India as the dependent
variable and external debt and foreign exchanges rates
and inflation as the independent variables. The results are
presented in the table below:
TABLE -1: Regression results for the impact of external debt and foreign exchange rates and inflation on
current account balance
Coefficients
Model
Unstandardized Coefficients
Standardized
Coefficients
T Sig. B Std. Error Beta
1 (Constant) -463648.602 170377.103 -2.721 .024
Long Term Debt .216** .078 .912 2.755 .022
Short term Debt -1.623** .334 -2.156 -4.854 .001
US Dollar 2551.652** 1009.506 .225 2.528 .032
Euro 7459.517** 2484.954 .561 3.002 .015
Yen -2522.308 3175.039 -.158 -.794 .447
Inflation rate 5658.923 8015.913 .096 .706 .498
a. Dependent Variable: Current Account Balance
*significant at 5 % significance level
R2 – 0.94
Adjusted R2 – 0.904
F – Statistic – 0.000
FINDINGS
As shown in the table above the adjusted R – square is
0.904 which shows that 90 % variation in the current
account balance of India is being explained by the
independent variables included in the model. Similarly
the F –statistics is significant at 1 % significance level
which confirms that the cumulative effect is also
significant.
Results from the regression coefficient shows that
external debt (both long term and short term debt) has
significant impact on the current account balance.
However, long term debt shows positive impact whereas
the short term debt shows negative association with the
current account balance. Among the foreign currencies
US dollar and Euro shows positive and significant effect
on current account balance of India whereas Japanese
Yen and inflation does not show any statistically
significant results. The significant and positive impact of
the long term debt is due to the fact that the long term
debt are mostly taken to invest in the productive projects
where the returns are realized in long run such as
infrastructure, education, health, establishing new
manufacturing units etc. So in the long run the returns
from this project will help to improve the current account
through higher exports and high productivity. On the
other hand the short term debts are generally taken for
short term expenses such as day to day expenses. So the
short term debt only increases the current account deficit
and does not add much value to the economy. Similarly
the positive impact of the US dollar and Euro can be
explained in terms of exchange rate. The depreciation of
Indian rupee in terms of US dollar or Euro makes Indian
goods and services comparatively cheaper for other
countries which may lead to increase in the exports of
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India. However depreciation of currency also increase the
import bill as import becomes more expensive.
CONCLUSION
The results shows that the current account balance of the
India has always been in deficit expect for few years. The
latest data suggests that there has been improvement in
the current account balance due to low oil price and some
regulation on imports of metals like gold and silver. The
data for the India’s external debt shows that total external
debt of India has been continuously increasing and long
term debt has contributed the major portion of the
external debt. The main components of India’s long term
debt are the commercial borrowings and NRI deposits.
The exchange rate data shows that Indian rupees has been
depreciating in the recent time against the US dollar and
is expected to fall more in the coming future. Similarly
the result from the regression analysis shows that the
Long term debt , US dollar and Euro has significant and
positive impact on the current account balance of India ,
whereas short term debt adversely affect the current
account balance. The results for Japanese Yen and
Inflation rate do not show any statistically significant
results. On this basis of this research it can be concluded
that external debt and foreign exchanges are the major
determinants of the current account balance in India and
the government of India should focus on reducing the
short term debt and improve the exports from India.
Similarly the dominance of the US Dollar and Euro in the
Indian economy can also be seen as the results shows
significant impact of these currencies on the current
account balance of India.
RECOMMENDATIONS
The pervasive deficit in the current account hurt the
economic growth and corrective policies from the
government act as a tool to help its reduction.
One of the policies to be adopted is the devaluation of the
domestic currency. Devaluation occurs when the
government deliberately reduces the value of its
currency. With devaluation, the price of imports
increases, thus leading to a decline in the import
demands. The domestic manufacturing takes the place of
the imports increasing the production and hence exports
in the economy. Devaluation is only a short-term
measure policy (Central Bank of Kenya, 2011).
Other policy includes the adoption of contractionary
fiscal and monetary policies. Monetary policy measure of
increase in the interest rates and deflationary fiscal policy
of an increase in income tax in the country will contract
the money supply in the economy. Both measures limit th
circulation of money in the economy. The contraction in
the money supply will decrease the spending on the
import goods and promote domestic savings. The saving
would promote investment and promote export
production (Brown E & Bidemi O, 2015).
Further, the imposition of trade restriction as a
government policy or protectionism will make imports
expensive in the country. The trade restriction would
facilitate the domestic industries and provide assistance
to the exporters. The methods of quotas, tariff, subsidy
and other favors to domestic companies would promote
protectionism. These methods reduce the imports and
positively affect the current account and short-term gains
to furnish the CAD (P. Ray, 2015).
The government can also adopt the policy to improve the
competitiveness of the domestic industry. As the
prevailing conditions of free trade and globalization have
made the imposition of import controls difficult and the
policy of deflation pose a risk of recession, the
government leads the policy competitiveness.
Competitiveness in the economy is gained through non-
price factors, such as quality. The tax-relief on research
and development and tax relief on capital investments
into the improvement of skill of the workforce will help
enhancement of competitiveness in the domestic
production and lead to a decrease in CAD (P. Ray, 2015).
REFERENCES
1. Agarwal, A., & Gangal, V. K. (2015). Current Account
Balance, External Debts and Foreign Direct Investment:
Empirical Evidences From India. ZENITH International
Journal of Business Economics & Management Research,
5(8), 51–60.
2. Aristovnik, A. (2006a). How Excessive are External
Imbalances in Selected Transition Countries? Prague
Economic Papers, 15(3), 243–267.
https://doi.org/10.18267/j.pep.287
3. Alam, N., & Taib, F. M. (2013). An Investigation of the
Relationship of External Public Debt With Budget Deficit ,
Current Account Deficit , and Exchange Rate Depreciation
in Debt Trap and Non-Debt Trap Countries. European
Scientific Journal, 9(22), 144–158.
4. Blaise Gnimassoun, & Mignon, V. (2013). Current-account
adjustments and exchange-rate misalignments.
5. BOSE, S., & JHA\, S. (2011). India’s Twin Deficits: Some
Fresh Empirical Evidence. Money & Finance. New Delhi.
6. Brown E, D., & Bidemi O, J. (2015). Fiscal Policy
Measures and Balance of Payments in Nigeria. Journal of
Global Economics, 03(04), 1–6.
https://doi.org/10.4172/2375-4389.1000161
7. Business Standard. (2015). India’s Q2 current account
deficit narrows to $8.2 bn | Business Standard News.
8. Calderon, C. A., Chong, A., & Loayza, N. V. (2002).
Developing Countries Determinants of Current Account
Deficits in Developing Countries. Contributions to
Macroeconomics, 2(1), 1–31.
9. Central Bank Of Kenya. (2011). The Exchange Rate And
The Current Account Deficit Implications.
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10. Georgescu, G. (2007). Current Account Deficits and
Implications on Country Risk of Romania. Romanian
Journal of Economic Forecasting, 4, 88–96.
11. G.Jayachandran (2013). Impact Of Exchange Rate On Trade
And Gdp For India -A Study Of Last Four Decade.
International Journal Of Marketing, Financial Services &
Management Research, 2(9), 154–170.
12. Homaifar, G. A., & Salimullah, A. H. M. (2016). Factors
Affecting U.S. Current Account Deficit : An Empirical
Evidence. Journal of Economics and International Finance,
8(9), 148–154. https://doi.org/10.5897/JEIF2016.0786
13. International Monetary Fund. (2003). The Measurement of
External Debt : Definition and Core Accounting Principles.
14. Karabulut, T., & Şahbaz, A. (2016). Effects of Exchange
Rate on Current Account in Fragile Five: Is the End of QE a
Solution for Chronic Current Account Deficits? Journal of
Asian Development Studies, 5(3).
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s Current Account Deficit On External Debts And Foreign
Exchange Rates. IOSR Journal of Economics and Finance,
1, 54–65.
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17. Ousseini, A. M., Hu, X., & Aboubacar, B. (2017). WAEMU
Trade and Current Account Balance Deficit Analysis: A
Panel VAR Approach. Theoretical Economics Letters, 7(4),
834–861. https://doi.org/10.4236/tel.2017.74060
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Account Deficit.
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GROWTH PROSPECTS IN EQUITY DERIVATIVE MARKET IN INDIA
Dr. Ruchika Jain*
*Assistant Professor, Gobindgarh Public College, Alour, Khanna, Punjab, India
ABSTRACT
The most well-known instruments that permit participants in stock market to oversee hazards in the
securities trading are known as derivatives. Derivatives are the agreements that have no intrinsic worth, yet
get their value from some other resource and such resource is called an underlying asset. In the most recent
decade, many developing economies have begun the introduction of derivative contracts. In India, derivative
trading initiated in June 2000 after SEBI allowed the same with effect from May, 2000. Financial
Derivatives like futures and options in Indian financial exchange have turned out to be significant
instruments of hazard supporting and portfolio expansion. The present paper is an endeavor to look at pre-
crisis and post-crisis development of financial derivative market in India from 2000-01 to 2017-18 and to
investigate the prospects for raising their development in India.
Key words: Derivatives, Intrinsic value, Underlying asset, Portfolio expansion, Financial derivative market.
INTRODUCTION
Global liberalization and financial market integration has
developed fresh investment avnues, which in turn require
the creation of new tools that are more effective in dealin
g with enhanced financial risk (Jain, Khokhwat, 2012).
The economic markets are characterizedby a very high de
gree of volatility. By locking in
asset prices, price risks can be partly or completely transf
erred with the assistance of derivative products (Leo
Melamed, 1998). These are usually not influencing the
changes in underlying asset prices as risk management
tools. By locking up asset prices, however derivative
products minimize the effect of asset price changes on
risk averse investors‟ profitability and cash flow
condition.
A derivative instrument is a monetary arrangement
whose payoffs are dependent upon value of its
underlying asset. A commodity, security, interest rate,
share price index, oil price, currency in circulation,
precious metals or the like may be the underlying asset.
So, a derivative contract gets its value from the
underlying variable. (Hull, 2006, p. 1) describes
derivatives as financial instruments whose value can be
extracted from any related variable. A derivative
instrument does not constitute ownership but rather it is a
pledge to transfer ownership.
In the IMF working paper Robert M Heath (1998)
described a financial derivative as-„Financial derivatives
are avenues connected to a particular financial instrument
or indicator etc. through which particular financial
hazards can be avoided in financial markets on their own.
The value of a financial derivative stems from the price
of an underlying asset or index. No principal amount is
advanced for repayment and no investment revenue is
accrued. Financial derivatives are used for risk
management, hedging, market arbitration and
speculation.
The derivatives market has grown dramatically over the
last three decades. A wide range of derivative contracts
were introduced at exchanges across the world.
Barot,Gajjar (2013) discussed that the factors driving the
growth of financial derivatives are:
1. Increasing fluctuations in financial market asset
prices,
2. Globalization of financial markets world-wide,
3. Significant development in communication
system and huge decline in expenses,
4. Advanced risk management tools provide a
wider selection of risk management policies, and
5. Innovations in derivative market, that combine
the hazards and returns over a big amount of
economic assets lead to greater yields, decreased
risk as well as transactions costs relative to
individual economic assets.
OBJECTIVES OF THE STUDY
To study pre-crisis and post-crisis growth of
equity derivatives (Futures & Options) in
India.
To explore how to increase volume in equity
derivative market.
REVIEW OF LITERATURE
Ashutosh Vashishtha and Satish Kumar (2010); Mittal
Parul(2012) addressed India's derivative market growth
and development. The authors reported that NSE
derivative turnover has dominated the equity market
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turnover. Dharen k pandey (2011), in his research paper
on „Currency Futures in India‟ concluded that the
currency futures market will grow more rapidly and will
be a good option in near future for all the market
participants and will find its way into Indian economy.
Bhagwat Shree, More Ritesh, Chand Deepak (2012)
analyzed the growth and composition of derivative
market in India pre and post crisis. Malhotra Meenakshi
(2012) traces the origin and growth of commodity
derivatives market. Khakhar Kamlesh & Meetu (2013)
asserted that despite the development in derivative
market, there are a lot of problems such as the absence of
economies of scale, tax and legal hurdles, increased off-
balance sheet exposure of Indian banks requiring an
autonomous regulator etc, that should be addressed
instantly to increase the investors‟ trust in the Indian
derivative market.Hatem Mansali; Wissem Daadaa
(2018) investigated the long-run performance of seasonal
equity offering firms in Tunisia. Robert Jarrow, Scott
Fung, Shih Chuan Tsai (2018) investigated the existence
of market manipulation due to the ability of large traders.
GROWTH OF DERIVATIVES- PRE AND POST
CRISIS
The Indian Capital Market with its abundant assets has
created a benchmark in the all-inclusive financial
framework and equity derivative market is remarked as
its significant entity. The present study seeks to analyse
the growth of equity derivative market in India. There are
three important phases of the journey of equity
derivatives (Futures & Options) in India since its
inception i.e Pre-crisis (2000-01 to 2007-2008), Post-
crisis-Phase I (2008-09 to 2010-11) and Post-crisis-Phase
II (2011-12 to 2017-18). The reason for dividing the
post-crisis phase into two categories is that firstly in the
year 2008, there was global financial crisis. As a result,
there was downturn in the market in the year 2008-09.
But, somehow even after crisis, the equity derivative
market started recovery. Thenin the year 2011-12, there
was financial crisis. In the year 2016-17, again number of
contracts traded were reduced by 33.3% due to
demonetization of Indian currency.
Table 1.1: Turnover & Contracts traded of Equity Derivatives
Year Total Turnover % Change No. of contracts traded % Change
Pre-Crisis Period
2000-01 2365 - 90580 -
2001-02 101926 4209.76 4196873 4533.33
2002-03 439862 331.55 16768909 299.55
2003-04 2130610 384.38 56886776 239.24
2004-05 2546982 19.54 77017185 35.39
2005-06 4824174 89.41 157619271 104.65
2006-07 7356242 52.49 216883573 37.59
2007-08 13090478 77.95 425013200 95.96
Post-Crisis-Phase I
2008-09 11010482 -15.89 657390497 54.67
2009-10 17663665 60.42 679293922 3.33
2010-11 29248221 65.58 1034212062 52.25
Post-Crisis-Phase II
2011-12 31349732 7.18 1205045464 16.52
2012-13 31533004 0.58 1131467418 -6.11
2013-14 38211408 21.18 1284424321 13.52
2014-15 55606453 45.52 1837041131 43.02
2015-16 64825834 16.58 2098610395 14.24
2016-17 94370301 45.57 1399746129 -33.30
2017-18 164984859 74.83 1913878548 36.73
As shown in the table above, the equity derivative market
has shown a continuous growth except for the year 2008-
09 when it declined by around 16%. The value of
turnover which stood at Rs. 25, 46,982 Crores in 2004
crossed Rs. 5 crores by the end of 2014-15. The previous
recovery of Indian economy from the impacts of
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worldwide crisis has resulted to forecasts of a yield to 9%
growth pace in 2003-08 (EPW Reseach Foundation,
2010).
Overall, Equity Derivative market has demonstrated a
Compound Annual Growth Rate of 95% in last 18 years
relative to turnover and 93% relative to quantum of
contracts. In pre crisis period, the CAGR was 100%
relative to turnover and 93% in terms of number of
contracts traded. Whereas, In post crisis-Phase I, the
CAGR is 38% in terms of turnover and 16% relative to
quantum of contracts. In post- crisis-Phase II, the CAGR
is 15% in and 11% respectively.
INDEX FUTURES
NSE began its index future trading on S&P CNX Nifty
Index on June 12, 2000. With the passage of time, index
future trading was also started on many other indices.
Table 1.2
Figure 1.1 show the journey of index future trading at
NSE since June, 2000.
Table: 1.2- Contracts Traded and Trading Volume
Year Index Futures Percentage Share of index
futures in terms of total
Quantum of
contracts
% Change Volume of Trades % Change Quantum of
contracts
Volume of
Trades
(Rs. Crores)
2000-01 90580 - 2365 - 100 100
2001-02 1025588 1032.24 21483 808.37 24.44 21.08
2002-03 2126763 107.37 43952 104.59 12.68 9.99
2003-04 17191668 708.35 554446 1161.48 30.22 26.02
2004-05 21635449 25.85 772147 39.26 28.09 30.32
2005-06 58537886 170.56 1513755 96.04 37.14 31.38
2006-07 81487424 39.20 2539574 67.76 37.57 34.52
2007-08 156598579 92.17 3820667.27 50.44 36.85 29.19
2008-09 210428103 34.37 3570111.4 -6.56 32.01 32.42
2009-10 178306889 -15.26 3934388.67 10.20 26.25 22.27
2010-11 165023653 -7.45 4356754.53 10.73 15.96 14.9
2011-12 146188740 -11.41 3577998.41 -17.87 12.13 11.41
2012-13 96100385 -34.26 2527130.76 -29.37 8.49 8.01
2013-14 105252983 9.52 3083103.23 22.00 8.19 8.07
2014-15 129303044 22.85 4107215.2 33.22 7.04 7.39
2015-16 140538674 8.6 4557113.64 10.95 6.69 7.03
2016-17 66535070 -52 4335940.78 -4.8 4.75 4.59
2017-18 57674584 -13.31 4810454.34 10.94 3.01 2.9
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Figure 1.1: Growth of Index Futures at NSE
As shown in Table 1.2 & Figure 1.1, the index future
trading at NSE has grown from Rs. 2365 crore in 2000-
01 to Rs. 4107215 crore in 2014-15. It means that index
futures have shown a CAGR of 64.43% in terms of
turnover and 62.29% in terms of contracts traded.
The above information also demonstrates a constant
development in the turnover of index futures except in
2008-09 and 2011-12 owing to global financial crisis in
2008 and debt crisis in Euro Zone 2011 respectively. As
a result the CAGR in terms of turnover was reduced to
6.8% in post-crisis phase I and only 3.5% in post-crisis
phase II, although it was 151.79% in before crisis. In
terms of number of contracts also, CAGR was 153.93%
in pre-crisis period but it was -7.78% in post-crisis phase
I and -3.02% in post-crisis phase II. The percentage share
of this product against total turnover of equity derivative
market at NSE shows that in the early years of its
inception, it was the most preferred product in India but
now its share against the total turnover of equity
derivative market has reduced.
Index Options
Index options on S&P CNX Nifty were permitted on
June 4, 2001.The following table and figure depicts the
journey of this product till 2017-18 since its inception.
Table 1.3: Contracts Traded and Trading Volume of Index Options at NSE
Year Index Options Percentage Share of index options in terms of
total
Quantum of
contracts
%
Change
Volume of
Trades
% Change Quantum of
contracts
Volume of Trades
(Rs. Crores)
2000-01 - - - - - -
2001-02 175900 - 3765 - 4.19 3.69
2002-03 442241 151.42 9246 145.58 2.64 2.1
2003-04 1732414 291.73 52816 471.23 3.05 2.48
2004-05 3293558 90.11 121943 130.88 4.28 4.79
2005-06 12935116 292.74 338469 177.56 8.21 7.02
2006-07 25157438 94.49 791906 133.97 11.6 10.77
2007-08 55366038 120.08 1362110.88 72.00 13.03 10.41
2008-09 212088444 283.06 3731501.84 173.95 32.26 33.89
0
1000000
2000000
3000000
4000000
5000000
6000000
0
50000000
100000000
150000000
200000000
250000000
Index Futures Index Futures
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2009-10 341379523 60.96 8027964.2 115.14 50.26 45.45
2010-11 650638557 90.59 18365365.76 128.77 62.91 62.79
2011-12 864017736 32.79 22720031.64 23.71 70.21 72.47
2012-13 820877149 -4.99 22781574.14 0.27 72.54 72.25
2013-14 928565175 13.12 27767341.25 21.88 72.29 72.67
2014-15 1378642863 48.47 39922663.48 43.77 75.04 71.79
2015-16 1623528486 17.76 48951930 22.61 77.36 75.51
2016-17 1067244916 -34.26 72797287 -49.82 76.24 77.14
2017-18 1515034222 41.96 134921876 -45.07 79.16 81.77
Figure 1.2: Growth of index options at NSE
During the early life of equity derivative market in India,
index futures were the most popular product for trading.
But, nowadays, index options are the most preferred
equity derivative product in India as shown by the
highest percentage of share of this product (i.e. 71.79%)
in terms of total turnover of equity derivative market at
NSE. NSE's growth in terms of turnover in index options
ranged from Rs 3,765 crore in 2001-02 to Rs 39,922,663
crore in 2014-15. This demonstrates that index options
have seen a CAGR of 94%in trading quantity in past
fifteen years and a CAGR of 90% in terms of quantum of
traded contracts.
In pre crisis period, the CAGR was 132% relative to
turnover and 127% relative to number of contracts
traded. Whereas, In post crisis-Phase I, the CAGR is 70%
and 45% respectively and In post- crisis-Phase II, it is
15% and 12%.
Stock Futures
Table 1.4 and Figure 1.3 depict the journey of stock
futures at NSE:
0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
160000000
0
200000000
400000000
600000000
800000000
1E+09
1.2E+09
1.4E+09
1.6E+09
1.8E+09
Index Options Index Options
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Table 1.4: Contracts Traded and Trading Volume of Stock Futures at NSE
Year Stock Futures Percentage Share of Stock Futures
Quantum of
contracts
% Change Volume of
Trades
% Change Quantum of
contracts
Volume of Trades
(Rs. Crores)
2000-01 - - - - - -
2001-02 1957856 - 51515 - 46.65 50.54
2002-03 10676843 445.33 286533 456.21 63.67 65.14
2003-04 32368842 203.17 1305939 355.77 56.9 61.29
2004-05 47043066 45.33 1484056 13.64 61.08 58.27
2005-06 80905493 71.98 2791697 88.11 51.33 57.87
2006-07 104955401 29.73 3830967 37.23 48.39 52.08
2007-08 203587952 93.97 7548563.23 97.04 47.9 57.66
2008-09 221577980 8.84 3479642.12 -53.90 33.71 31.6
2009-10 145591240 -34.29 5195246.64 49.30 21.43 29.41
2010-11 186041459 27.78 5495756.7 5.78 17.99 18.79
2011-12 158344617 -14.89 4074670.73 -25.86 13.14 13
2012-13 147711691 -6.715 4223872.02 3.66 13.05 13.39
2013-14 170414186 15.37 4949281.72 17.17 13.27 12.95
2014-15 237604741 39.43 8291766.27 67.53 12.93 14.91
2015-16 234243967 -1.41 7828606.00 -5.58 11.16 12.07
2016-17 173860130 -25.77 11129587.14 42.16 12.42 11.79
2017-18 214758366 23.52 15597519.71 40.14 11.22 9.45
Figure 1.3: Growth of Stock Futures at NSE
0
2000000
4000000
6000000
8000000
10000000
12000000
14000000
16000000
18000000
0
50000000
100000000
150000000
200000000
250000000
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Stock Futures Stock Futures
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Table 1.4 and Figure 1.3 demonstrate the growth of stock
futures from Rs 51,515 crore in 2001-02 to Rs 8291766
crore in 2014-15 at NSE. Share of stock futures has
decreased over a passage of time. By 2007-08, the
proportion of stock futures was 57.66% which was
comparatively less than the proportion of 61.29% in
2003-04. Since then the share of stock futures has
reduced massively to 9.41% in 2017-18. This depicts that
there was a downturn in participation in the stock futures.
Trends reveal that in terms of turnover, Stock Futures
showed a CAGR of 103% in Pre-crisis and just 13% in
post- crisis era.
Stock Options
NSE started stock option trading on July 2, 2001. The
table and figure below show the journey of this financial
instrument:
Table 1.5: Contracts Traded and Trading Volume of Stock Options at NSE
Year Stock Options Percentage Share of stock options in
terms of total
Quantum of
contracts
% Change Volume of Trades % Change Quantum of
contracts
Volume of Trades
(Rs. Crores)
2000-01 - - - - -
2001-02 1037529 - 25163 24.72 24.69
2002-03 3523062 239.56 100131 297.93 21.09 22.76
2003-04 5583071 58.47 217207 116.92 9.81 10.19
2004-05 5045112 -9.63 168836 -22.27 6.55 6.63
2005-06 5240776 3.88 180253 6.76 3.32 3.74
2006-07 5283310 0.811 193795 7.51 2.44 2.63
2007-08 9460631 79.06 359136.55 85.32 2.23 2.74
2008-09 13295970 40.54 229226.81 -36.17 2.02 2.08
2009-10 14016270 5.42 506065.18 120.77 2.06 2.87
2010-11 32508393 131.93 1030344.21 103.60 3.14 3.52
2011-12 36494371 12.26 977031.13 -5.17 3.03 3.12
2012-13 66778193 82.98 2000427.29 104.74 5.9 6.34
2013-14 80174431 20.06 2409488.61 20.45 6.24 6.3
2014-15 91479209 14.10 3282552.18 36.23 4.98 5.9
2015-16 100299174 9.64 3488173.85 6.26 4.77 5.38
2016-17 92106012 -8.16 6107486 75.09 6.58 6.47
2017-18 126411376 37.24 9655009 58.08 6.60 5.85
This product again has shown a CAGR of 41.61% in
terms of turnover and 37.71% in terms of quantum of
contracts in fifteen years of trading. During pre-crisis
period, the CAGR was 46.26% in terms of turnover and
in post-crisis, it is 65% and 35% in phase I and phase II
respectively. But as far as the percentage share of this
product against total trading in equity derivative market
is concerned, stock options had share of 24.72% in terms
of turnover and 24.69% in terms of quantum of
contractsin 2001-02 but in 2014-15, it has reduced to
4.98% and 5.9% respectively.
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Figure 1.4: Growth of Stock Options at NSE
The precedent above exhibits the prodigious impression
of the crisis on the investment performance of the
investors. The investments were aligned towards high
returns although the period of pre-crisis pictured high
risk but eventually these shifted towards safer index
options in the post crisis years. The primary concern of
investors was Stock as well as index Futures with their
high risk-return profile before the crisis which showcase
the investor‟s priority towards the returns than the risk in
the pre crisis period. Nonetheless, in the post-crisis
period, Index options indicate a rapid increase at the cost
of decline in the stock and the index futures relocated to
the safer derivatives trades. By 2007-08, the share of
index options was 10.41% of total volume of derivatives
trading but in 2008-09 and 2009-10, it represented a
share of 33.89% and 45.45% respectively rising to
71.79% in 2014-15. The extent of increment in index
options can be ascribed to the financial crisis at world
level that made options a favored product of trading as it
safeguarded it in quandary.
PRE-CRISIS: SUPERMACY OF STOCK FUTURES
Single Stock Futures in India captured the top place
among the financial products traded on stock exchanges
of India before crisis. As single stock futures possess
most of the characteristics of Badla trading, market
participants vehemently received their introduction. As a
matter of fact, in its formative days, the trading in stock
futures excelled trading in other available derivative
products as well as the cash segment of NSE. Stock
Futures recommended diverse edges to the investors that
championed the growth of this product in equity
derivatives segment of NSE. It can be attributed to the
following advantages offered by these instruments over
options:
1) Margins: There is no need of ant initial
investment in future contracts. Whereas, the
exchanges need both the buyer and seller to
make a deposit in the form of security known as
margin, which is normally between 10 to 20% of
the value of the contract. This margin can vary
upwards and downwards depending upon the
market conditions. It gives guarantee that
adequate funds are accessible to both sides to
mark to market. Margin rules are stated in terms
of initial margin (which must be deposited with
the broker when entering the contract) plus
upfront margin. If the balance of the account falls
below the initial margin, the broker makes a
margin call upon the individual, who will then
have to readjust the account to the level of initial
margin + upfront margin before trading begins
the next day. This facility of margins makes the
future contract a leveraged derivative product.
2) Cost effective: In comparison to stock options,
the cost of futures contract is less as it is only the
opportunity cost of the funds deposited in the
form of margins. These margins are also settled
at the time of final settlement of the futures
contracts. Whilst, options involve payment of
option premium which is to be paid on
compulsory basis.
3) Short Selling: Short selling is also allowed in
futures. It is advantageous for the traders to opt
this facility as it is inexpensive and less
restrictive regarding the number of contracts with
short position.
Owing to these determinants, the yield of stock futures
sub-segment of equity derivatives exceeded the total
0
2000000
4000000
6000000
8000000
10000000
12000000
0
20000000
40000000
60000000
80000000
100000000
120000000
140000000
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Stock Options Stock Options
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yield of the entire cash segment of NSE in the third year
of their introduction itself. However, the relative share of
stock futures at NSE was observing a dwindle, both in
terms of the percentage of the numbers of contracts
traded and percentage share of stock futures turnover in
total turnover. The world financial crisis of 2008
demonstrated a systematic transformation in the avenue
of the stock futures contracts. The provisional
disappointment of the investors from the single stock
futures trading was only due to the distressing effects of
the futures trading aborted on account of global
downturn. Single stock futures have successfully
endeavored to accomplish its foregoing level of contracts
traded but it is also getting a strongrivalry from Index
futures contracts in terms of number of contracts traded.
POST-CRISIS: SUPERMACY OF INDEX
OPTIONS
In the post-crisis scenario, the National Stock Exchange
of India (NSE) has registered an unrivalled ascendancy
of Index Option contracts. This supremacy can be
attached with the following factors:
1) Limited risk: In index options, the downside
risk of losing money invested by the investors is
limited to the option premium paid especially
when the market takes wild approach during the
global financial crisis.
2) Diversification: When the market is volatile
during the global financial crisis, investors desist
additional risk on their investment. Making
investment in stock futures will expose them
with firm-specific risk over and above the market
risk borne by them. Thus, by making investment
in Index based product helps them to reduce the
firm-specific risks by adequate diversification.
3) Exposure to a broad market: Index options
enable investors to gain exposure to a broad
market, with one trading decision and with one
transaction and that too frequently. Since, broad
exposure can be gained with one trade;
transaction cost is also reduced by using Index
Options. As a percentage of the underlying value,
premiums of Index options are usually lower
than those of stock options because stock options
are more volatile than the Index.
4) Emendation in tax treatment: On 1st June,
2008, anamendment was made in the tax-
treatment of option contracts. From this day, the
value of the transaction relating to an option in
securities for the purpose of charging STT was
shifted to the option premium amount for seller
and settlement price for buyer from the earlier
basis of aggregate of the strike price & option
premium only for seller. This alteration in tax
treatment increased the profit margin of the
option seller
4.2 PROSPECTS FOR ESCALATING THE
VOLUMES IN EQUITY DERIVATIVE MARKET
IN INDIA
The secondary goal of the present study is to investigate
the increase of volumes in equity derivative market in
India. The survey of dealers was posed an indeterminate
question in which the participants were asked to denote
the determinants that hinder the increase of volumes in
equity derivative market. The following determinants
were formulated:
Fewer hours to Trade
Taxation Policy
Ingress Obstacles to Domestic Financial
Institutions
Capital Controls for Foreign Participation
High Margins
These determinants were further analyzed on the basis of
secondary data and the plausible share of these in
hampering the increase of volumes in equity derivative
market is detailed as below:
1. FEWER HOURS TO TRADE
The offshore competitive markets are opportunistic to
receive time much higher in comparison to others to trade
the equity derivatives in India. The equity derivatives
market for trade exchange lasts only for 6 hours i.e. from
9:30am to 3:30 pm. The analysis below in the tabular
form showcase the opportunistic favor of time by
offshore competitive markets and the India unfortunately
receives lesser time:
Table 1.6: Hours of trading in various derivative exchanges
Site for Trading Hours for Trading Duration
London Stock Exchange 8:00-16:30 8.30 hrs
Singapore Exchange 9:00-17:00 8 hrs
Hong Kong 9:00-16:00 7 hrs
Dubai 7:00-23.30 16.30 hrs
France 9:00-17:30 8.30 hrs
India 9:00-15.30 6.30 hrs
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For equity derivative market in India to escalate the time
to trade needs immediate expansion. The reasons for the
same are:
a. India is no doubt witness to the increased
integration of the global markets where
information originating from one country has a
bearing on the markets in other country. To
facilitate the assimilation of any economic
information that may flow in from other global
markets, it is obligatory to ally Indian market
with the International market especially when the
issue of time is considered.
b. Speedy and effectual assimilation of information
increases the efficiency of market with respect to
unearthening cost, lessened volatility and impact
cost. The extension of market hours may help
Indian markets efficiently, benefiting Indian
investors.
c. Essentially Indian markets ought to ally with the
global markets to enhance the interest in trading
that may escalate its participation while
competing with the global exchanges of the
world Increase in trading hours would ensure
better strategies and plan with the amount of the
information received which would otherwise
amputate its planning and witness the execution
of it outside India. Time extension may allow
participants to better seats for longer and also
enables benefit them of market movements
overseas.
2. TAXATION POLICY
Securities Transaction Tax and stamp duty are pertinent
to segment of equity derivatives and append to the cost of
transactions. On all F&O sales transactions, STT is
payable. It represents 0.01% of futures traded prices and
0.017% of options premiums. 0.125% STT is payable by
the customer of an option on the defrayal price.
Although equity derivatives are settled in cash, there is
no room for the relocation of the underlying securities,
stamp duty becomes obligatory. 0.002 percent stamp
duty is relevant to the estimated amount of alternatives
that expire in - the-money and to futures sales. These tax
issues unconstructively influence volumes in Indian
equity derivative market. To increase volumes in this
market, there is a necessity to modify policies of
taxation.
3. INGRESS OBSTACLES TO DOMESTIC
FINANCIAL INSTITUTIONS
In the current scenario of India, the equity derivatives
market experiences participant constriction. Domestic
financial institutions are either debarred or rarely engage
in the market for equity derivatives. The examples are as
follows:
IRDA consented to trade equity derivatives by in
surance companies but had not
endowed clarity to function. Significantly,
insurance companies have no existence in equity
derivatives, even despite the fact that ULIPs are a
noteworthy part of their folder.
RBI prohibits Banks to participate in equity
derivatives.
The participation of foreign intermediaries in
India is prescribed in accordance with FIPB
standards.
Equity mutual funds lack the clarity to operate on
significant sub-components of equity derivatives
trading thus it show lesser participation in equity
derivatives.
4. CAPITAL CONTROLS FOR FOREIGN
PARTICIPATION
Capital controls has hindered the foreign institutional
investor participation and the chaotic conversion into the
new Foreign Portfolio Investor framework.
Two elements of capital controls hamper foreign
participation in Indian equity derivatives markets,, (1)
limitations on access and (2) fragmented markets
LIMITATIONS ON ACCESS
Foreign investors participating in equity derivatives are
classified into (a) SEBI Registered foreign investors and
(b) Unregistered foreign investors. Inventory investors
have to conform to rigorous registration and fulfillment
requirements. The varied rules of participation need to be
followed. There is no clarity regarding applicability of
General Anti-Avoidance Rules (GAAR) and indirect
transfer rules upon them. There is also no immediate
access to the Indian market for unregistered investors
except through PNs.
FRAGMENTED MARKETS
Given that interest of overseas respondents in Indian
equities resides in the returns they can gain on their
investment, they should be able to access equity and
currency markets in an impeccable manner and at the
same time, both for taking positions and for leveraging
and hedging. However, executing a position on a hedged
dollar return engross investment in India's distinct
markets. The costs and frictions of doing this are
composited by diverse rules of access and varieties of
constraints on foreign participants in each of these
markets. The size of positions allowed in exchange
traded equity and currency derivatives as well as the
issuance and subscription of participatory notes poses
problems. This disintegration guarantees that India's
global competitiveness is small as opposed to global
members providing a one-stop shop for all of these
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commitments, with diminutive or no procedural
disadvantages.
5. HIGH MARGINS
Effectual margins on NSE comprise the initial margin
and margin of severe loss attuned to the danger of T+2
settlement.Offshore replacements, on the other hand, hav
e an initial margin and a safeguard margin indicated for a
n agreement as a set USD value.
The complete margin is 10 percent on the NSE as a prop
ortion of contract size, while it is about 3.3 percent on the
Singapore
Exchange.Higher NSE margins indicate greater transacti
on costs making it less competitive than exchanges like t
he SGX.The reason for greater margins in India is that th
ey were scheduled to reward larger payment systems for
greater insecurity and to reduce counterparty risk. There
is a necessity to re-evaluate margins requisite for higher
levels of competency in the rest of the payments and
settlement systems in India.
CONCLUSION
Equity Derivative Market has experienced an
unprecedented and unjustified boom in its journey of last
18 years. Still, there is an ample of scope for this market
to grow if some hindrances hampering this market are
removed.
REFERENCES
1. Andreas A. Jobst, (2008) “The development of equity
derivative markets, An examination of current standards and
challenges in emerging Asia”, International Monetary Fund,
Monetary and Capital Markets Department, International
Journal of Emerging Markets, Vol. 3 No. 2, pp. 163-180.
2. Anuradha Guru, (2010) “Credit Derivatives: International
Developments and Lessons for India, Journal of
Macroeconomics and Finance in Emerging Market
Economies”, Vol. 3, No. 1.
3. Arvind Virmani, (1998) “Derivatives: An Economic
Perspective”, Derivatives Markets in India, Tata
4. Ashutosh Vashishtha, Satish Kumar, (2010) “Development
of Financial Derivatives Market in India- A Case Study”,
International Research Journal of Finance and Economics,
ISSN 1450-2887 Issue 37
5. Baluch & M. Ariff, (2007) “Derivative Markets &
Economics, Growth: Is there a relationship?”,Bond
University, Globalization & Development Centre, Working
Paper Series; No. 13.
6. Bansal Shipra & Kalra Megha (2014), “Analytical Study of
Derivative Market in India: a Study of Northern Tri-city i.e.
Chandigarh, Panchkula and Mohali” ZENITH International
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Vol.4 (10), pp. 55-70
7. Bhagwat Shree, More Ritesh, Chand Deepak (2012),
“Development of Financial Derivative Market in India and
its Position in Global Financial Crisis”, International
Journal of Scientific & Engineering & Research, ISSN
2229-5518, Volume 3, Issue 12.
8. Dharambeer& Barinder Singh (2011), “Indian Commodity
Market: Growth & Prospects”, International Journals of
Multidisciplinary Research Academy, ISSN: 2249-1058,
July 2011, Volume 1, Issue 2.
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Pre- and Post- Crisis”, Economic & Political Weekly,
Volume 45, No. 47.
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449 and 474-509.
11. Frank H Bezzina and Simon Grima (2011), “Exploring
factors affecting the proper use of derivatives: An empirical
study with active users and controllers of derivatives”,
12. Gakhar Kamlesh & Meetu(2013), “Derivative Market in
India: Evaluation, Trading Mechanism & Future Prospects”,
International Journal of Marketing, Financial Services &
Management Research, ISSN: 2277-3622, Volume 2, No.3,
March 2013, pp 38-49.
13. Gupta, S. L. (2009). “Financial Derivatives: Theory,
Concepts and Problems.” Prentice Hall of India Pvt. Ltd, pp.
173- 226.
14. Hatem Mansali; Wissem Daadaa (2018), “Equities Issues &
Long-term Firm‟s Performances in Tunisian Stock Market”,
International Journal of Managerial & Financial
Accounting, Volume 10, Issue 1, pp 32-47.
15. John C Hull, (2009), "Options, Futures and other
Derivatives”, Pearson Education Inc., (7th Edition).
16. Misra Dheeraj and Misra Sangeeta D (2005), „Growth of
Derivatives in the Indian Stock Market: Hedging v/s
Speculation‟, The Indian Journal of Economics, Vol.
LXXXV, No. 340.
17. Mittal parul (2012), “Financial derivatives market in India –
current scenerio & growth, ZENITH International Journal of
Business Economics & Management Research Year : 2012,
Volume : 2, Issue : 8, ISSN : 2249-8826
18. Rajiv Srivastava, (2010) “Derivatives and Risk
Management”, ISBN: 9780198064343, Oxford University
Press.
19. Ralph Chami, Connel Fullenkamp and Sunil Sharma, (2009)
“A Framework for Financial Market Development”, IMF
Working Paper IMF Institute.
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Derivatives: Myths and reality”, Indian Journal of Finance,
pp 24-31
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Empirical Investigation of Large Trader Market
Manipulation in Derivative Market”, Review of Derivatives
Research, Volume 21, Issue 2, pp 331-374.
22. SEBI Advisory Committee on Derivative (September 2002),
“Report on Development and Regulation of Derivative
Market in India”.
23. Singh D.R., Gupta Manisha, Jain Ruchika (2012), “Security
Analysis & Portfolio Management”, Kalyani Publishers, 3rd
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McGraw–Hill Series. Tata McGraw–Hill.
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INSTITUTION APPRECIATION AND CRITICISM: THE CASE OF ETHIOPIAN
UNIVERSITIES
Endris Nuru Zeleke*, Dr. Bharat Bhushan Singla
**
*Ph.D Scholar, School of Management Studies, Punjabi University, Patiala, Punjab, India
**Asst. Professor, School of Management Studies, Punjabi University, Patiala, Punjab India
ABSTRACT
This study was aimed to assess employees’ appreciation and criticism about their institutions which
help to assess the overall working environment of the institutions. Data collected from academic
staffs of nine universities through open-ended questions was reduced into manageable elements and
the identified elements were grouped together into different categories for data analysis and
discussion. Leadership, working condition, relationship, human development, academic freedom,
monitoring and evaluation, services, administrative staffs, respect and recognition, staffs and
technology were main areas which academic staffs appreciated and criticized. Adoption of new
technology, insufficient fund for research and community service, no respecting and recognition,
less administration support, inadequate service, insufficient facilities and materials were problems
criticized by respondents of academic staffs which should be addressed and solved.
Keywords: Institutional Development, Employees Appreciation, Administrative Staffs.
BACKGROUND OF THE STUDY
For the country strive to move from an agrarian to a
modern economy, education is vital. Modern secular
higher education in Ethiopian was started in 1950 with
the establishment of the University College of Addis
Ababa, now Addis Ababa University. Over the past two
decades the government has been making remarkable
reforms that aimed at expanding and modernizing the
higher education Subsector in Ethiopian. Numbers of
students enrolled in higher education institutions
increased time to time. In line with the expansion of
higher education institutions, the demand for access to
tertiary education has increased significantly in Ethiopia.
Policy issues related to structure, funding, management,
quality, capacity, performance and organisation of work
have raised as demand for access of tertiary education
and training increased (Clarke, Kenny, & Loxley, 2015).
Tertiary education plays important roles for growth and
development a country and specifically for developing
countries, it is the backbone of human resource
development that ensures the effective growth of the
economy. Tertiary education trained qualified labor who
will contribute for the growth of the nation. It trained the
professionals, including doctors, nurses, teachers ,
administrators and the like who will perform and
implement activities in their respective professions to a
nation as well as foster relevant capacities in science,
applied technology and community service. It is
essential for success of any nation which enhances the
economic potential of entire nation leading to the
development of the whole nation (Singh & Singh, 2015).
Therefore, it is important to give emphasized for higher
education institutions of a country and continuously
assess the views of academic staffs about their
institutions.
It is may be important to explore how staffs perceive
their institutions by asking what they appreciate and
criticize about their institutions which may relate with
their activities in their academic career. The place,
conditions and surrounding influences people perform an
activity (Clarke et al., 2015) has an impact on academic
staffs’ performance related to teaching and research.
Effective leadership in higher education institutions also
plays significant role in creating a conducive working
environment for staffs in providing students with quality
of education they deserve (Afnan Al-Shuaiby, 2009 cited
in Shahmandi, Silong, Ismail, Samah, & Othman, 2011).
According to Sakiru, Othman, yero, Abdullahi, & Kia(
2013) performance and achievement require critical
leadership that inspires and leadership occupies a
sensitive position in modern organization which impact
on employees’ productivity. Strong leadership is
demanded in every organization, including public
schools whose aim is to be effective and worthwhile
(Teigland , 1973). New skills and competencies is a key
element of the academic working environment (Clarke et
al., 2015).
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Academic facilities and teaching aid resources/ materials
are one of the important elements that must be must be
available in order to facilitate the teaching and learning
process in higher education institutions. Thus, this is one
of the important area which higher education institutions
should highly invested (Vidalakis, Sun, & Papa, 2013).
Academic staffs want freedom and an absence of
constraints on teaching, publication, control over time
and workload, freedom of speech and expression of
ideas, the challenging of accepted paradigms and
intellectual inquiry and the pursuit of knowledge
(A˚kerlind & Kayrooz, 2003)). Incentives, rewards and
recognitions are also the key factors that influence on
employee motivation (Danish & Usman, 2010) and
motivated employees will strive to achieve greater
organizational efficiency. Workplace relationships
include supervisor-subordinate relationships, peer-worker
relationships, workplace friendships and customer
relationships (Sias, 2008 cited in Abe & Mason, 2016)
which may influence individual employees’ performance
in the organization. Thus, this study tries to assess
employees’ appreciation and criticism about their
institutions which help to assess the overall working
environment of the institutions.
RESEARCH METHOD
To assess academic staffs’ appreciation and criticism
about their institutions the open-ended questions were
asked which are discussed in this section of the chapter.
Academic staffs from nine universities were asked
important questions which inquired them to offer their
overall feelings about their institutions which were
related to positive side they would appreciate and
anything about which they would criticize. Data in the
form of words called qualitative data (Sekaran & Bougie,
2010)and interview notes, answers to open-ended
questions, transcripts of focus groups, transcriptions of
video records, accounts of experiences with a product on
the Internet, news articles and the like are examples of
qualitative data (Sekaran & Bougie, 2010). Therefore,
this part of the study was a qualitative nature which
conducted via open end questions.
A total 98 respondents responds on the open end
questions were used in this study. The aim was to
uncover their opinion and experience / about their
perceptions related to weakens and strength of their
institutions. Respondents were classified into three:
respondents from first generation universities, second
generation universities and third generation universities.
To understand the respondents’ perceptions which they
appreciate and they criticize about their universities’
codes were used. Therefore, ‘FA’ represents respondents
from first generation; ‘SA’ represents respondents from
second generations, while ‘TA’ represents respondents
from third generation universities.
FINDINGS AND DISCUSSIONS
The data collected from academic staffs of nine
universities through the open-ended questions were read
carefully to understand the respondents’ responses, the
data were reduced into manageable elements and the
identified elements were grouped together into different
categories. Then, the key themes were identified which
relate to the academic staffs’ appreciation and criticism
about their institutions and then data analysis and
discussion by means of grouping the data under the
different identified elements was conducted. Finally,
conclusion and recommendation were forwarded based
on the finding of the data analysis.
LEADERSHIP/MANAGEMENT SYSTEM OF THE
INSTITUTION
Today’s to cope with the constant organizational
changes, today’s leaders need to know new knowledge,
abilities and skills (Shahmandi et al., 2011). In case of
higher education, effective leadership in higher
education institutions plays significant role in creating a
conducive working environment for staffs in providing
students with quality of education they deserve(Afnan
Al-Shuaiby, 2009 cited in Shahmandi et al., 2011). Top
management of the institutions plays great role and top
monument of the universities must be included
competent persons who understand their roles and
responsibilities and work hard for the growth and
development of their institutions. And they are
responsible to implement policies and procedures to
achieve goals of their institutions. Hence, they should
have the capability and the ability to run their institutions
in the right direction. They should have knowledge,
skills, abilities and behaviors to providing direction,
implementing plans and motivating employees in order
to create a conducive working environment.
Management of the institutions is one of the areas which
respondents appreciated about their higher education
institutions in first generation universities. Most of the
respondents of the first generation universities believed
that there is a good management system in their
universities. Top management of the universities is
interactive, positive to discuss with employees of their
institutions and work hard to create conducive working
environment. This view supported by the following
quotes:
‘What I appreciate from this university is that:
University’s top managements are easy access and there
is good cooperation and open discussion of top
management with employees.’ (FA 1, 12 years
experience)
‘The top managements of the university are work hand
in hand with staffs, fell responsibility to staffs and work
hard to create conducive working environment. And they
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also welcome any effort from employees that contribute
for the university as well as the community at large…
This is what I appreciate from our university.’ (FA 5, 8
years experience)
From the above, it’s evident that there is a wider issue
which participants of respondent identified as positive
sides of their institutions, including top managements’
good cooperation, open to discuss with employees, their
commitment to create a conducive working environment.
However, most respondents of academic staffs from
second and third generation universities believe that the
management system of their universities is not good
which characterized by lack of management capabilities
and bad employee treatment. This view supported by the
following quotes:
‘I criticize the management system of this university
which employees are treated badly and in some directors
dictators who have no interest to listen staffs.’ (SA 42, 7
years experience)
‘In addition to lack of management capabilities the
management system of our university is very bad which I
criticized.’ (TA 75, 5 years experience)
‘‘Negligent and lack of management commitment is the
negative side of the university which I criticized.’(SA 43,
6 years experience)
Thus, bad employee treatment, management incapability
and dictatorship are the main problems of the
managements of the second and third generation
universities which may impact on employee,
commitment, satisfaction and performance. This is
supported by different studies (Pahi & Ab.Hamid, 2015;
Sakiru et al., 2013; Wallace, de Chernatony, & Buil,
2013). The organization leadership can impact on
employees’ satisfaction as well as on their attitude and
commitment to serve customers. According to (Sakiru et
al., 2013) performance and achievement require critical
leadership that inspires and leadership occupies a
sensitive position in modern organization which impact
on employees’ productivity. Leadership can create an
environment that can change employee attitudes towards
offering better quality service (Pahi & Ab.Hamid, 2015)
and can encourage employees’ commitment (Wallace et
al., 2013). Pahi & Ab.Hamid (2015) found that
leadership is positively related to employees’
commitment to offer quality service. This implies that
effective leadership is very important in an organization
that has an impact on employee performance.
WORKING CONDITION: PHYSICAL
SURROUNDINGS, EQUIPMENTS AND
FACILITIES
According to respondents from first generation
universities, universities are trying to crate positive
working area which they perceived that their universities’
surroundings are clan, their universities fulfill resources/
materials which demanded for the teaching learning
process. This view supported by the following quotes:
‘I appreciate the university’s surrounding which is clean
and the efforts which are taken to fulfill teaching aid
materials or resources like smart board and laptop is the
positive side of this university.’ (FA 5, 8 years
experience)
‘I appreciate fulfilling laboratory materials and use
technology to support the teaching- learning process in
this university.’ (FA 8, 8 years experience). All this
indicted that in first generation universities materials/
resources fulfilled which allowed creating conducive
working environment. However, academic staffs from
second and third generation universities respond that
there is lack of facilities and shortage of materials and
unfair resource distribution are what they criticized. This
view supported by the following quotes:
‘There is Lack of facilities for the teaching learning
process in this university which need to be solved.’ (SA
43, 4 years experience)
‘Shortage of teaching learning materials as well as
unfair distribution of aid materials like personal
computer...’ (SA 44, 8 years experience)
‘Insufficient office, lack of office equipments and internet
problem are what I criticized in this university.’(TA 76, 5
years experience)
‘‘I criticize this university on its commitment on fulfilling
teaching material availability.’ (TA 77, 4 years
experience)
‘Lack of office equipments like table and chair in this
university is what I criticized.’ (SA 45, 3 years
experience)
‘Resource problem related to white board, LCD
projector and Lack of teaching aid materials are the
main areas which need improvement in this university.’
(TA 78, 5 years experience).
This is associated with the working environment of the
organization which help employee to work their job in
appropriate manner. This implies that the lack of
facilities and materials create un-conducive working
environment in the third and second generation
universities which may severely affect employees’
satisfaction and commitment as well as the teaching
learning process at large. Basic facilities that provide
appropriate environments for effective learning,
including functional library facilities, functional lecture
rooms which have a chalkboard, whiteboard, projection
screen, audio-visual equipment, artificial lighting and
electrical outlets, functional seating and desk for each
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student place and functional laboratories and the like.
Therefore, these facilities and equipments should be
fulfilled and managed and managements in higher
education institutions should emphasize to fulfill those
facilities to support the teaching learning process.
RELATIONSHIPS
In the first and second generation universities there is
healthy interpersonal relationship between employees
and their immediate heads and good teamwork and high
commitment of staffs as well as good staff to staff
relationship. This view supported by the following
quotes:
‘‘Good relationship among staffs and between staffs and
their immediate boss is the positive side of our university.
(SA 46, 5 years experience)’’
‘I appreciate in this university: No bureaucracy.. You
can contact any person in different positions and Smooth
staff management relationship.’(FA 6, 5 years working
experience)
‘Free communication and No bureaucracy in the
university...employees are free to contact freely even the
top management of the university are the positive sides
what I appreciate in this university.’ (SA 47, 6 years
experience).
Relationships between supervisors and subordinates and
among peer-worker determine employees’ productivity.
Thus, good relationship among staffs and between staffs
and their immediate heads is demanded in higher
education institutions to create a conducive working
environment.
HUMAN DEVELOPMENT
Human development is one of the positive sides in the
three generation universities. According to respondents
from all generation universities their universities are
good in human development through sending staffs for
further education and arranging trainings which improve
the staffs’ educational level and enhance their skills and
knowledge. This view supported by the following quotes:
‘What I appreciate in our university is its commitment to
arrange further education for academic staffs.’(SA 48, 7
years experience).
‘Giving opportunities for further education and training
is one of the positive sides of our university.’ (FA 7, 12
years experience)
‘‘Working to send further education is one area I
consider positive side of this university (TA 80, 3 years
experience)
‘Our university is work on staff development through
arranging scholarship opportunities for academic
staffs.’(FA 8, 13 years experience)
Since training and development is essential to enhance
employee performance, universities should enhance the
skills and knowledge of staffs through arranging training
and further education in the country and abroad.
ACADEMIC FREEDOM
Respondents from all generation universities explicitly
explained that there is academic freedom in their
institutions which academic staffs express their views
freely, discuss their subjects freely in the classroom and
perform other academic tasks including assessments
without other interferences. This creates a better working
environment for staffs. This view supported by the
following quotes:
‘What I appreciate in this university is that the
managements are less interfering on staffs activities that
are there is academic freedom in the universities.’ (SA
49, 6 years experience)
‘What I appreciate in this university is freedom which
we freely express and discuss different issues in the
university…. and we perform our academic tasks freely.’
(FA 9, 10 years experience)
‘The positive thing I personally appreciate in this
university is the academic freedom.’ (TA 81, 4 years
experience)
Fining of this study indicated that relatively good
academic freedom exists in the higher education
institutions which create a conducive working
environment for academic staffs. According to Moshman
(2017) the academic freedom of individual faculty
members should be respected. Academic institutions are
distinct from a center of propaganda and indoctrination
and what makes an institution genuinely academic is
protecting academic freedom (Moshman, 2017). Thus,
academic freedom should be an integral part of academic
institutions to create conducive working environment.
MONITORING AND EVALUATION
Lack of strong monitoring and evaluation system and less
supervision for activities performed at lower level in the
university is one of weakness of first generation
universities as expressed by respondents of academic
staffs from the first-generation universities. This view
supported by the following quotes:
‘Low management follows up on research and
community service activities are the problem I see in this
university. Most of the research and community service
were not properly conducted and implemented due to
lack of strong monitoring and evaluation system in the
universities.’(FA 10, 14 years experience)
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SERVICES
Most respondents from the three generation universities
believe there are internet and transport problem, as well
as an insufficient cafeteria in their universities which are
associated with service for staffs. This view supported by
the following quotes:
‘Poor internet service, insufficient cafeterias for staffs
are issue I criticized this university.’(TA 82, 7 years
experience)
‘Lack of service related to internet and transport, are
problems of this university.’ (FA 11, 5 years experience)
Problem of service delivery associated with internet,
transportation and cafeteria were identified by
respondents from Ethiopian higher education institutions.
Those services, especially internet service should
improved which is highly supportive the teaching
learning process as well as the researchers conducted by
academic staffs. In today’s rapidly changing and
competitive working environment, it requires learning
continuously new ideas /knowledge and skills.
Importance of internet in education is unquestionable,
which allowed to make the relearning process interesting
and diverse and helped staffs to access different teaching
resources and in their research activities. Thus, higher
education institutions should prioritize investment in
information technology.
ADMINISTRATIVE STAFFS
Respondents of first and third generation universities
respond that the academic staffs criticize administrative
staffs. This view supported by the following quotes:
‘Supportive staffs of our university do not play their role
appropriately to support the academic staffs… this is
what I criticize about this university.’(FA 12, 9 years
experience)
‘No smooth interaction from administrative staffs in this
university.’ (TA 83, 5 years experience)
Administrative staffs who are performing the
management and administration, related to human
resources, administrative organization, financial affairs,
libraries, information, general services, as well as any
process of administrative management should be trained
appropriately and should have a smooth relationship with
academic staffs. Thus, continuous training for
administrative staffs in universities increases their
professional competences and abilities.
RESPECT AND RECOGNITION
According to most respondents from the second and third
generation universities, academic staffs are not respected
and rewarded and motivated. Generally, they perceived
that the managements of their university aren’t care about
employees. This view supported by the following quotes:
‘Academic staffs are not respected, staffs promotion and
motivation is almost no in our university.’ (SA 50, 6
years experience)
‘Most of people in different management level are
dictators they are not deal with polite way.’(TA 84, 6
years experience)
‘Management of the university never cares about the
employee and less concern for employees and Poor
rewarding system. These are what I criticize this
university.’ (TA 85, 5 years experience)
Danish & Usman (2010) finds out that there is a
relationship between rewards recognition and incentives,
and employee motivation and satisfaction. Better
rewards and recognition increases employee motivation
and enhance employee satisfaction all of which
contribute to for the greater the levels of performance and
productivity (Baskar & Rajkumar, 2015). Thus,
employees should be treated as an important asset,
respected, rewarded and motivated to utilize their
efficiency and effectiveness.
RESEARCH AND COMMUNITY SERVICE
Respondents expressed that availability of research and
community service funding is inadequate, which hinder
them to participate in conducting research and
community service activities.
‘One of the main things I strongly criticized in this
university is lack of research and community service fund
which hider us to conduct research and community
services projects.’ (SA 51, 8 years experience)
STAFFS
According to respondents of academic staffs’ second
generation universities composed of young qualified
energetic staffs who work hard for the success of their
universities. This view supported by the following
quotes:
‘In this university I appreciate that staffs are energetic
and qualified to perform their jobs.’ (SA 52, 9 years
experience)
‘Young staffs are the positive side of this university.’(SA
53, 6 years experience)
TECHNOLOGY
According to respondents of academic staffs of the
second generation universities, their universities are
limited in adapting new technology for teaching learning
process. This view supported by the following quotes:
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‘‘I criticize this university in using technology…in this
university there is poor culture of using technology like
smart board’ (SA 54, 7 years experience)
‘…..Our University is limited in adapting technology for
education.’ (SA 55, 6 years experience)
CONCLUSION
The problems in the higher education institutions rose by
academic staffs including adoption of new technology,
insufficient fund for research and community service, no
respecting and recognition, less administrative support,
inadequate service, insufficient facilities and materials
should be addressed and solved.
Generally, from the finding of this study it can be
conclude that hat there is good management system in
first generation universities, but not good management
system in second and third generation universities,
facilities and resources/ materials were fulfilled in first
generation universities, but not second and third
generation universities, good training and development
and academic freedom but insufficient service of
cafeteria, internet and transport as well as insufficient
fund for research and community service in all three
generation universities, unsupportive administrative
staffs and not respected and rewarded and motivated
staffs in second and third generation universities and
young qualified energetic staffs but limited adaption of
new technology in second generation universities.
RECOMMENDATIONS
Teaching related activities should adequately fund and
managements in higher education institutions should
supported the teaching aspects of academic staffs’ role,
academics staffs should get appropriate supports to
support their research and community service related
activities and the institutions should support their staffs
on research and community services, management of the
higher education institutions would create networking
and collaboration with international higher education
institutions to enhance their capacity in relation to
education quality and research, Provide administrative
supports to academic staffs that will help them directly
with their academic work, there is a need for more
investment in facilities and materials which required and
supports the academic staffs’ activities, the higher
education institutions should have clear reward and
motivation system and all academic staffs should be
respected and recognized, the higher education
institutions should create a working environment to
satisfy their staff, the higher education institutions need
to develop couture of integration, collaboration and
working together through good interpersonal
relationship, technology should adapt in higher education
institutions to fit itself with changes in the world and
employees should be treated as an important asset,
respected, rewarded and motivated to utilize their
efficiency and effectiveness.
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FINTECH (FINANCIAL TECHNOLOGY): A BOON FOR FINANCIAL SECTOR
CMA Dr. Rajni Bala*, CA (Dr.) Sanjeev Bansal
**, Dr. Anil Angrish
***
*Assistant Professor, PIMT, Alour Khanna, Punjab, India
**Assistant Professor, PTU, Jalandhar, Punjab, India
***Associate Professor, NIPER, Chandigarh, India
ABSTRACT
Digitization has a strong impact on the financial services industry. One major reason is that financial
products are almost exclusively based on information. Examples are payment transactions or credit
contracts which, in contrast to purchasing a car, do in most cases not include any physical components.
Another reason is that most processes are almost entirely implemented without any physical interaction such
as for example online payment or stock trading – exemptions are some physical forms of interaction such as
client advisory. Due to recent developments in information technology (IT), the ongoing process of
digitization is not only leading to an increasing automation of processes, but to a fundamental
reorganization of the financial services value chain with new business models (e.g., robo-advisors) and new
actors entering the market (e.g., Apple). The term “financial technology” or short “fintech” reflects this.
This concept is often seen as marriage of financial services and information technology.
Keywords: Fintech, Financial technology, Digitization, Innovation, Financial Service Industry.
INTRODUCTION
Fintech is basically an amalgam of two words i.e.
Financial + Technology. It is concerned with the use of
technology in the economic industry, i.e. financial
services, banking etc. in order to provide clients with the
finest possible services and also with a lot of time
savings. It is used in the economic industry for more
consumer-oriented services. According to a global
accounting firm‟s Global Fintech Report 2017, the
Fintech space is currently “all about innovation,
disruption and transformation, and will undoubtedly
impact and shape the way financial institutions around
the world operate.” Fintech today have become a global
phenomenon with mind boggling innovations attracting
huge investments worldwide. India‟s Fintech adoption
has risen exponentially over the last two years led by the
government‟s push toward a digitalised economy and
financial inclusion. Global Fintech adoption rate almost
doubled to 64% in 2019, compared to two years ago,
with emerging markets like China and India leading the
way with 87% adoption, according to EY Global Fintech
Adoption Index 2019. In 2017, the first time the index
was created, India‟s Fintech adoption rate was 52% still
higher than the global average of 33%.
FEATURES OF FINTECH (FINANCIAL
TECHNOLOGY)
The following are the main features of Fintech (Financial
Technology):
1. Fintech is mainly concerned with monetising
data. Further, it concentrates on value creation
from the already available data by taking
maximum use of technology in the field of
finance.
2. Fintech involves crypto-currencies creation and
use.
3. Fintech includes a range of economic operations
such as payments, online money transfers, loan
application, raising money or managing
investment in stock/mutual funds without a
middleman‟s assistance.
4. The combination of streamlined products with
technology enables Fintech companies to be
more efficient and decrease each transaction‟s
related costs.
5. Fintech is also a passionate adaptor of automated
customer service technology, using AI interfaces
to support fundamental functions for clients.
6. It is also helping lower financial shocks to the
market through diversification and
decentralization, and is creating more accurate
and transparent financial risk assessment models.
7. Fintech is also leveraged to combat fraud by
leveraging payment history data to non-standard
flag transactions.
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CHALLENGES IN FINTECH
The following are the main challenges in Fintech:
1. Increased focus on cyber security
Process automation and information digitization
makes Fintech systems susceptible hacker
assaults. For the promotion of Fintech, strict
measures are needed for the protection of
sensitive information from cyber attacks.
Therefore, there is a need of creating a safer,
more secure cyberspace and more robust controls
to ensure that the risks and opportunities
associated with emerging digital technologies are
balanced. Though one of Fintechs‟ top priorities
is safety, data that is available online can easily
be stolen and used for other lucrative purposes
by third parties.
2. Managing collision of a technology culture
There have also been cases where the collision
with the conservative and risk-averse globe of
finance with a technology culture that believes in
a philosophy of "Move quickly and break things"
has generated undesirable outcomes.
3. Regulatory Measures
Excessive volatility due to Fintech has the
potential to amplify market shocks. One of the
great difficulties of Fintech expansion is the lack
of compatibility of different regulatory
environments. A good example is Bitcoin: it is
banned in a number of countries, regulated as a
wallet in others, treated as a currency in some,
encouraged in a few, pushed into a „grey‟ area by
more, and left unaddressed by authorities by
many. There are differences in regulation,
licensing and other compliance requirements.
BENEFITS OF FINTECH
The following are the main benefits of Fintech:
1. Useful to Financial Services Industry
Fintech is transforming/reshaping the financial
services landscape. Fintech has enormous
potential in improving the financial services to
better manage risk in the financial system by
allowing greater transparency in payments
systems and more security in financial
transactions. Fintech helps a financial services
provider to make proactive and passionate
strategic decisions. Fintech may help in
minimizing cost and offering faster, more
transparent, cheaper and user-friendly financial
services. Fintech helps in focusing on markets
where a business have a true competitive
advantage. Fintech can also help drive
improvements in traditional financial services
and promote disruption through innovative new
products and services, which can offer benefits to
consumers and other sectors of the economy.
Fintech provides solutions that respond to
consumer needs for trust, security, privacy,
transparency, better services, and change the
competitive landscape and more user-friendly
financial services. Fintech is very useful to
financial services industry in formulating
innovative strategies, offerings, and tactics that
drive higher consumer expectations. Fintech can
help financial service firms think more
holistically about their customers‟ needs and
expectations and develop innovative solutions
without losing sight of their core offerings and
revenue streams.In developed markets, a new
tool has been deployed to better tackle this
challenge; Robo-advisors are a class of financial
advisors that provide financial advice or
Investment management online with moderate to
minimal human intervention. Investors of the
future will have the ability to invest their funds,
monitor the performance of their portfolio, and
liquidate their investments in real time using
their smart phone or personal computers. One of
the major benefits of Fintech, specifically in
regards to blockchain-based Fintech and AI-
powered regtech for the financial services
industry, is the introduction of transparency.
Fintech projects create auditable money trails
and can help identify potentially fraudulent
activity faster and more easily than a human.
2. Useful in Accounting
Fintech will definitely be having a wide-ranging
and transformative effects on accountants.
Artificial intelligence, automation and cloud
accounting etc. transform the accountancy and
advisory profession, and, by extension, create
huge new opportunities for the businesses they
serve. Due to Fintech, financial information is
flowing faster and freer than ever. It results in
greater automation of processes like payroll
services, invoice management, credit control,
cash flow forecasting, and reconciliations, it will
reduce the time accountants need to spend on
these traditional duties, freeing up resources and
expertise to focus on more value-adding projects.
The accountants will be able to concentrate on
their key knowledge and build the company.
They will be able to take an increasingly
strategic position in defining threats and
possibilities with more strong instruments at their
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disposal around planning, forecasting and
evaluation.
3. Useful in Business
Business will have access to real-time economic
information and reporting, and increased access
to data and more strong instruments and could
lead to better insight and budgeting, forecasting,
assessment and resource management choices.
Companies can now depend on data-driven ideas
that are powered by AI to form strategy. Data-
driven insights to shape strategy. Companies can
make better informed choices on where to direct
resources and how to target customers.
4. Useful to SMEs
Fintech start-ups are offering solutions to many
of the problems faced by small businesses, such
as cash flow concerns and insufficient funding.
Fintechs around the world have been playing
over the years in service of bridging the SME
financing gap. According to the World Economic
Forum (WEF), Fintech start-ups in P2P lending
and crowd funding are well poised to play a key
role in bridging the $2-trillion funding gap for
millions of small businesses across the world. A
2017 report showed that India had the fourth-
highest number of Fintech start-ups focused on
alternate lending for SMEs.
5. Useful to Banks
Fintech allows banks a fast and convenient way
to innovate their product offerings. Banks can
vastly improve their customers‟ experience with
lower capital expenditures. Banks may think of
starting reinventing their services by leveraging
the latest technologies such as data analytics, big
data, and artificial intelligence. Fintech can
deliver better, cheaper, faster and more
innovative solutions for customers.
6. Useful to National Economy
Fintech sector can play a vital role in aiding the
positive transition by generating new value
streams in our economy. Various microeconomic
reforms will also be accelerated by innovations
in Fintech, especially in payments systems.
Fintech will be very helpful in creating job
opportunities in our economy.
ACTIVE AREAS OF FINTECH INNOVATION
According to a recent Deloitte‟s report, Fintech
companies will have on six areas within financial
services including payments, insurance, deposits and
lending, capital raising, investment management, and
market provisioning. Some of the liveliest areas of
Fintech innovation comprise or rotate around the
following areas:
1. Mobile Banking Apps
With Smart phones and devices perking up, most the
banks have already started offering their personalized
apps, where entire services can be availed at a single
destination.
2. Mobile Payment Apps
Mobile wallet apps like Paytm or PhonePe has received
overwhelming response from the users. These apps offer
services such as mobile and DTH recharging, payment
for electricity or phone bills, booking railway, flight, or
payment of school fees, and many more. It also serves as
a fastest medium of P2P payments for transferring the
money most secured manner.
3. Loan Apps
There are a few loan apps as well that are specifically
developed to simplify the process of availing personal
loans. These personal finance apps are playing an
important role in promoting the Fintech industry.
4. Wealth Management Apps
People want to invest and manage their money online
smartly and various apps help in managing the finances
and preparing an investment strategy. It acts as your
digital financial adviser.
5. Stock Trading and Mutual Funds Apps
Fintech provides a lot of exciting new opportunities to
investors to bypass brokers and investment bankers.
Various apps enable user‟s access their financial data
from anywhere. Fintech simplifies the process of stock
trading. In a similar way, various apps are there to
purchase Mutual Funds units in virtually real time. In this
context, the apps by Karvy and CAMS are worth
mentioning.
CONCLUSION
To conclude, it may be remarked that Fintech has really
brought a revolution in the financial industry influencing
every domain including the banking services, the mobile
wallet, stock trading and equity funds, the insurance
sector, and the Block chain technology etc. Fintech
strives to make financial services more accessible for
both consumers and businesses. By connecting customers
to a digital world, Fintech enhances their experiences,
making them efficient, economical and frictionless.
While the landscape for financial technology is still in its
infancy, its potential is transformational. Fintech is
reducing information asymmetry on the marketplace,
thereby contributing to risk mitigation and promoting
more effective resource allocation. Fintechs‟ potential to
unleash a new era of innovation and healthy competition
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is definitely noteworthy. As Fintech continues to the
shape the future of the financial services industries,
companies must invest in emerging technologies as it
makes sense to their business. Advances in artificial
intelligence and information processing and analytics
will drive the Fintech sector even more innovation.
REFERENCES
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evolution of Fintech: A new post-crisis paradigm. Geo. J.
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Fintech, regulatory arbitrage, and the rise of shadow
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4. Nicoletti, B., Nicoletti, & Weis. (2017). Future of FinTech.
Basingstoke, UK: Palgrave Macmillan.
5. Puschmann, T. (2017). Fintech. Business & Information
Systems Engineering, 59(1), 69-76.
6. Schueffel, P. (2016). Taming the beast: a scientific
definition of fintech. Available at SSRN 3097312.
7. Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., &
Hess, J. (2018). The Global Findex Database 2017:
Measuring financial inclusion and the fintech revolution.
The World Bank.
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FinTech. Journal of Network and Computer
Applications, 103, 262-273.
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FinTech, RegTech, and the reconceptualization of financial
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A DROWNING SPEED BOAT "THE INDIAN GROWTH STORY"
Dr. Monika Chopra*
*Assistant Professor, Department of Commerce, DAV College, Chandigarh, India
ABSTRACT
The Economy of India is the tenth-largest in the world by nominal GDP and the third largest by phasing
power parity (PPP). The country is one of the G-20 major economies, a member of BRICS and a developing
economy that is among the top 20 global traders according to the WTO. In the recent past, the Indian
economy has had to overcome varied challenges in its resolve to sustain its economics success. The major
challenges included: unsupportive external environment, domestic structural constraints, growth slowdown
and inflationary pressures. The slowdown manifested in the decline in the growth of Gross Domestic Product
(at factor cost at constant 2004-05 prices) from 8.9 per cent in 2010-11 to 6.7 per cent in 2011-12 and 4.5 per
cent in 2012-13. With the economy projected to have registered a growth rate of 4.9 per cent in 2013-14, the
declining trend in growth seems to have reversed. The growth slowdown in India is broadly in sync with
trends in similar emerging economies. The sharp downturn in growth owes to the interface of domestic
factors with the global economic environment of uncertainties and slow growth in many advanced
economies. The growth of real GDP has generally shown a declining trend since the first quarter (Q1) of
2011-12, and is characterized by a moderation in services growth and a protracted slowdown in industry. The
revival in agriculture on the back of a steady monsoon and robust growth in financial and business services
led to a modest uptick in growth in 2013-14. The Union Budget 2013-14 laid considerable emphasis to
control inflationary pressures and mitigation of structural bottlenecks to growth. The policy response of the
Government to the present growth slowdown has been in the form of structural reforms aimed at reducing
entry-barriers and boosting competition and productivity in various sectors; fiscal consolidation and reforms
in administered prices; further strengthening of financial/banking sectors; introduction of instruments to
encourage financial savings of households; measures to restart the investment cycle through support to
infrastructure financing and encouragement to micro, small and medium enterprises (MSMEs); steps to
revive growth in manufacturing and reforms in energy pricing. These policies have gone hand-in-hand with
macroeconomic stabilization characterized by a sharp depreciation of the Rupee witnessed till the second
quarter (Q2) of 2013-14.
Keywords: Indian Economy, GDP, Agriculture, Industry
INTRODUCTION
Economic growth is defined as the steady process by
which the productive capacity of the economy is
increased over time to bring about rising levels of
national output and income (Todaro and Smith, 2003).
Samuelson and Nordhaus (2007) assert that economic
growth represents the expansion of a country's potential
GDP or national output. Soon after the Independence,
Indian Economy was facing chronic imbalances as part
of colonial rule.
Indian economy. Indian made the first declaration of
industrial policy in their resolution dated 6th, 1948 in
which both public and private sectors had been given
importance. India Followed the planning model like all
other Socialist Countries The First five FYP was started
in 1 951 . The development however, the development of
industrialization and sub normality as part of industrial
development can be traced through the facts. According
to the 1st Five Year Plan, on the one hand, factory
establishment in the country accounted for merely 6.6 per
cent in 1948-49 as a proportion of national income and
on the other, only 1-8 per cent of the working population
were engaged in these establishments. On April 1956, a
new policy statement was announced. It was aimed at
accelerating the process of industrialization and
specifically developing large scale heavy industries. The
new revised industrial policy includes Schedule A and
Schedule B. Schedule A included industries which were
the exclusive responsibility of the state - monopoly of the
state. Schedule B included mixed sector of public and
private undertaking. All the rest of the industrial were left
for the private sector to establish and operate. The third
plan focused on long run benefits with the objective of
increase in the national outputs and income generating
huge employment. The focus was on the development of
capital and producer goods industries. It also emphasized
on the development of machine-building industries.
However, the growth rate of industrial output declined,
initially at slow place and after that, it decelerated
sharply reaching stagnation levels. This created serious
concerns for nearly three years when the economy
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fluctuated. This year 1968-69 showed a clear sign of
recovery. Fourth Five Year Plan (1969-74), was marked
by a very low growth in industrial production of 3.9 per
cent again the targeted rate of 8-10 percent. Fifth Five
Year Plan, started in 1974; proposed to achieve growth
with the attainment of self-reliance. The emphasis was on
the industries of core-sector like iron & steel, non-ferrous
metals, fertilizers, mineral oil, machinery-building, coal
and others. The economy was faced with pressures and
the industrial growth rate was: low at 23 per cent in
1974-75. It was 53 per cent in 1975-76 which provided
some relief for the economy. Sixth Five Year Plan was
started in 1980. Substantial policy changes were
announced during this plan. Industrial licensing and
controls were relaxed and import policy was more
liberalized than ever before. The result was that growth
was witnessed in industrial production. Seventh Five
Year Plan was started in 1985. The emphasis was on
development with growth and increases in productivity.
The industrial growth rate during this plan was, 8.5
percent against the target of 8.4 per cent. Thus, it was
successful on the part of industries. Ahluwalia (1995)
pointed out that the inadequacy of the growth
performance of the Indian economy led Prof. Raj Krishna
to the coin the much quoted phrase 'the Hindu rate of
growth, to specify the disappointing trend of growth. The
Hindu growth rate has nothing to do with any specific
religion; rather it is a term that was economics in nature.
It was a caustic remark on the socialist pattern that was
adopted by the government after he independence. It was
an indication of low and almost stagnant growth of
Indian economy during 1950s to 1980. The average
annual growth rate of GDP during this period was 3.5 per
cent. Virmani (2004), asserts that the new economic
policy introduced in 1991-92 had changed the Indian
economy and pushed it from the Hindu rate of growth to
a new higher rate of 5 per cent - 6 per cent, called as, new
Hindu rate of growth. More recently, Piketty (2014) has
argued for preventing the growth in functional
inequalities - based on a differential movement between
the rate of return on capital (r) and the rate of economic
growth (g) - as a means of protecting democracy. Growth
potential of Indian economy can be gauged in two ways:
quantitative and structural. To understand the
quantitative aspects, growth rate of different sectors and
overall GDP growth are considered. But the understand
the economy well, structural aspects have to be
considered. Changes in sectoral distribution of GDP give
the more realistic account on the part of economics
growth of the country. Agriculture dominated sectoral
composition of the GDP till 1970. In 1950-51 agriculture
and allied sector's share in GDP was 55.3 per cent. Two
decades of planning in India, did not show any
significant decline in the share of agriculture and allied
sector. This was the manifestation of the fact that
industries were indeed in a bad"- condition in India. The
process of industrialization was not smooth and not
contributing significantly.
RECENT GROWTH TRENDS
The crises of 1991 led the Indian policy makers to think
beyond the policy. of import substitution to outward
oriented export promotion model. The Indian Economy
was integrated with the economies of the world. Reforms
were initiated in industrial policy and foreign investment
policy, trade and exchange rate policy, trade and
exchange rate policy, tax policy, tax reforms, public
sector, financial sector reforms, reforms in agricultural
sector, labor market reforms and others. The result of
these reforms were seen soon after the reforms. The GDP
growth rate which was merely 1.43 per cent in 1991-92,
increased to 5.36 per cent in 1992-93. In the present
paper the growth rates of different sector of the economy
have shown.
Table 1 : GDP growth rate from 1950-1979
Decades GDP Growth Rate
1950-59 3.3
1960-69 4.4
1970-79 2.9
1950-79 3.5
For the calculation of sectoral growth in India Mean,
sample variance (S2), Sample standard deviations (S) &
Sample Pearson correlation coefficient (r) are used.
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Table 2 : Mean, sample variance and Sample standard deviation of Growth Rates from 1991-92 to 2012-13
Sectors Mean growth
rate
Sample variance v
(S2)
Sample standard deviation
(S)
Agri. & Allied
(X1)
3.01 16.7 4.90
Industry (X2) 6.54 10.03 3.16
Services (X3) 8.24 3.75 1.93
GDP (X4) 6.62 4.38 2.09
Table 3 : Trade balance and GDP growth rate
Year GDP Growth Trade Balance (US m 5)2
1991-92 1.43 -1546
2001-02 5.52 -7586
2007-08 9.32 -88522
2012-13 4.96 -118633
AGRICULTURE & ALLIED SECTORS
Indian grounds agriculture. The low production and
productivity poses constraints on the total output of
agriculture. The inefficiency on the part of agriculture
merits sound policy implications and investments. A very
alarming characteristic of agricultural sector is that real
investment in agriculture, both private and public, has
been stagnant (Ahluwalia, 1993). This, with other
structural factors, led to slow growth in agricultural and
allied sector.
INDUSTRY
The economic reforms were more radical as far as
industries were concerned. Changes in the policy
framework gave a big boost to industries. The major
reforms were the abolition of licenses to a wide range of
industries. Licenses are required now only for some
industries. Industries have thus grown significantly
during the last two decades after the reforms. Average
growth rate from 1991-92 to 2010-11 was 5.7 per cent
with a peak growth of 12.17 per cent in 2006-07 and
lowest of 0.34 per cent in 1991-92.
SERVICE SECTOR
The service sector in India after the reforms has
dominated the sectoral composition of GDP. The share of
services in 1991-92 was 43.9 per cent which rose to
59.29 per cent in 2012-13. There is a sharp increase in
IT, telecom, banking service, insurance, entertainment
and many more. But, it's also true that only few services
are performing well. Today, India is well known for IT
and IT- enabled services (ITES), communication and
BPO. The growth of service sector after the reforms
shows a relatively smooth trend compared to agriculture
and industries. The growth rate which was 4.69 per cent
in 1991-92, started increasing and witnessed double-digit
growth in several years.
PERFORMANCE OF INDIAN ECONOMY
There are different phases of growth of Indian economy.
Before 1980s, there was relative stagnation in the
economy, with average growth rate of GDP at 3.5 per
cent. Partial reforms were started during 1980s. But total
reforms were initiated only after 1991. The currency
crisis of 1990s compelled the policy makers to initiate
the reforms.
GDP started peaking after reforms. Table 2 show the
growth rate, mean, sample variance, sample standard
deviation and deviations from mean and sample standard
deviation of GDP growth rates.
The mean growth rates of all the three sectors-
agriculture & allied, industry and services, have been
shown in Table 3. It gives the complete picture of
performance of the economy on the basis of each
individual sector's performance.
EXTERNAL LINKAGES
Domestic sectors have been discussed till now. To
analyze the economy completely, it is imperative to
understand the external linkages of growth also,
comprising exports and imports. Trade balance remained
negative since long. There has been trade deficit in the
balance of payments account. Table 4 shows trade
balance and GDP growth rates from 1991-92 to 2010-11.
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The correlation coefficient between GDP growth rate and
trade deficit is found to be 0.58. This indicates that there
is a moderate positive relationship between these two.
The value of correlation coefficient shows that when
GDP increases, India's trade deficit also increases
(though moderately), indicating that the exports are not
responding as fast as compared to imports. These growth
rates indicate that the reforms had certainly brought more
imports which has contributed in our growth because
such range of growth rate (1991-2010) has not been
achieved by India before trade liberalization started in
1991. Figure 1 shows how GDP growth rate and trade
deficit are inter-related. Primary vertical axis shows trade
deficit in US million S and secondary vertical axis shows
GDP growth rate in percentage (per cent). Horizontal
axis indicates years from 1991-92 to 2010-11.
RECENT GROWTH TRENDS
The Indian economy is acing problems that are reflected
through the facts released by the Ministry of Finance.
Department of Economic Affairs during recent couple of
year. Quarterly data released from 2010-11 to 2'012-13
related to the growth rates of agriculture & allied sector
industry and service sector have been changing at a wider
rate.
Agriculture & allied sectors have been performing
poorly. This is the most fluctuating sector — growth
rates have fluctuated between peak rates of 11.0 per cent
in quarter 3 (Q3) of 2010-11 to mere 11 per cent in
quarter 2 (Q2) of 2012-13. Average growth rate during
this period was 3.4 per cent. Industrial sector is also a
matter of concern for the policy makers and the
government. Industries have grown on an average of 4.4
per cent during Q 1 of 2010-11 to Q 2 of 2012-13.
However, service sector shows a steady trend rate in this
sector stood at 8_6 per cent. Overall GDP growth rate
during this period was 6.9 per cent.
CONCLUSION
Compared to the pre reforms era, Indian economy had
much faster economic growth in the post reforms period.
But, the recent revised forecasts released by ADB and
others on the growth of Indian economy provide a
glimpse of slow down of Indian economy.
Agriculture and allied sector is still a matter of concern
as it is the most fluctuating sector in the Indian economy
with mean growth of mere 3.01 per cent with high
standard deviation of 4.09 pa cent in the post-reforms era.
Mean growth of industries during 1991-92 to 2012-13
stood at 6.5 per cent with standard deviation of 3.16 per
cent indicating fluctuations in the growth rates. Seri ices
are performing well as compared to agriculture and allied
and industries. The mean growth is 8.24 per cent which
gives a trend of growth from 1991-92 to 2012-13.
Sample standard deviation is comparatively low at 1.93
per cent showing low spread of growth rates from mean.
These results show a relative smooth tend of services
growth in India.
After the wake-up call of economic reforms an trade the
role of external sector become crucial in determining the
fate of Indian economy. Trade balance exports-imports
(X-M) remained negative and sharp even in the post
reforms period. The correlation coefficient between GDP
growth rate and trade deficit is found to be 0.58 which
shows positive moderate association between two GDP is
increasing and so is trade deficit. At the beginning of this
period, the ratio was admittedly low but after 1991
reforms, the ratio rose more rapidly (Sinha and Bharti
2012). The values reveal the fact that the increase in GDP
growth has not turned into increasing exports as
increasing import. This indicates that the ex s are not
responding as fast as compared to imports.
The results on growth statistics after the reforms suggest
that GDP growth of 6.6 per cent during 1991-92 to 2012-
13 is out-lying from Hindu growth rate of 3.5 per cent.
The sectoral mean of growth rates of industry and service
sector are 6.5 per cent and 8.2 per cent respectively,
moving far away from Hindu growth rate. But the most
revealing fact lies in the growth rate of agriculture and
allied sector witnessing mean growth rate of only 3.01
per cent during the same period, which is even lower than
Hindu growth rate. Thus, agriculture and allied sector
being close to Hindu growth rate means more need of the
God's blessing. This is a big question on our post reform
growth performance that at the sectoral level, the major
contributor in our growth is services where a small
workforce is dependent For many years, agriculture had
negative growth rate where the majority of the workforce
is dependent. To conclude, there may be fluctuations in
growth of the economy, but the post-reforms growth
statistics show that India will certainly not be back to the
Hindu Growth but much ahead from such growth. The
quantum of fear for back to Hindu as mostly been
exaggerated.
REFERENCES
1. Atkinson, A.B. (2009). "Factor shares. the principal
problem of political economy?, Oxford Review of
Economic Policy, Vol. 25, No.1, pp. 3-16.
2. Balakrishnan P. and M. Parameswaran (2007):
"Understanding Economic Growth in India: A prerequisite",
Economic and Political Weekly, July 14, pp. 2915-22.
3. Dholakia, Ravindra H. (2014): "Sacrifice Ratio and Cost of
Inflation for the Indian Economy", IIMA sworking Paper
No. 2014-02-04.
4. Daudey, E. & C. Garcia-Penalosa (2007). "The personal and
the factor distributions of income ina cross-section of
countries", Journal of Development Studies, 43(5), pp. 812-
829.
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5. Feenstra, R.C., R. Inklaar & M. Timmer (2013). "The Next
Generation of the Penn World Table," NI3ER Working
Paper; 19255, National Bureau of Economic Research, Inc.
6. Glyn, A. (2009). "Functional Distribution and Inequality",
in W. Salverda, B. Nolan and T.M. Smeeding (eds), The
Oxford Handbook of Economic Inequality, pp. 1001-126.
Oxford: Oxford University Press.
7. Hatekar, N,. And A. Dongre (2005): "Structural Breaks in
India's Growth", Economic and Political Weekly, April 2,
pp. 1432-35.
8. Sivasubramonian S. (2004): The National Income of India
in the Twentieth Century, Oxford. University Press.
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A REVIEW STUDY ON INHIBITING FACTORS OF IMPULSE BUYING
BEHAVIOR OF ONLINE SHOPPING CUSTOMERS
Amanpreet*, Dr. Anupama Bains
**
*Research Scholar of School of Management Studies, Punjabi University, Patiala, Punjab, India
**Principal of Ratan Professional Education College, Mohali, Punjab, India
ABSTRACT
In the 21st century where living standards of people are improving and their living patterns has been
changed positively which can be easily seen from their shopping behaviors. As per the various
research studies customers considered the online shopping as the convenient shopping. A high
increase in the number of online shopping customers indicates that customers prefers online
shopping due to its number of encouraging factors which influence them to buy online and influence
them to make sudden purchase decisions but there are so many factors which discourages the online
shopping customers to make sudden or spontaneous purchase decisions. The descriptive research
study has the purpose to identify the various inhibiting factors that discourages the online shopping
customers to make sudden buying decisions. After studied or reviewing a number of research studies
it is found that delay in delivery, more control of consumer, comparison between product and price,
quality perception, family control or boundaries, conscientiousness, website quality and
impulsiveness in customers behavior are the inhibiting factors of online shopping customers which
discourages them to make spontaneous purchases. The research study will be helpful to the
marketers to understand the discouraging factors so that they can improve them.
Keywords: Impulsiveness, Online Shopping, Inhibiting Factors, Customers.
INTRODUCTION
Customers buying behavior is important to measure for
the marketer to understand their needs, desires and
demands to sale their products or services. Online
shopping is highly in the trend which can be seen in the
high rise in the number of online shopping customers as
per the statistical reports of the various organizations.
There are large number of online shopping portals are
available which are offering a wide range of products or
items with different promotional offers. Online shopping
is convenient for the customers and its easy access
attracts the customers towards it. There are various
encouraging factors that influence the customers to buy
online from the various online shopping portals such
factors are convenient, variety, low cost, free shipping
services, promotional offers etc which affects their
degree of impulsiveness and encourage them to make
sudden purchases. But there are also some discouraging
factors that affect the buying decisions of the customers.
Customers are affected by their mood or awareness that
influences their buying decisions. In 1951, Applebaum
defined impulse buying as the customer exposure to their
stimuli. Customer income, family background, self
awareness, reference and experience play a vital role in
their buying decisions. The aim of the research study is
to identify the all those parameters that negatively
influence the online shopping customers and inhibiting
them to make sudden or spontaneous purchase decision
through the internet.
REVIEW OF LITERATURE
Dr. Sanjib Chakraborty, (2017), studied the online
impulsive buying behavior of online shoppers. The aim
of the research study was to identify the motivators and
the inhibitors of the impulse purchase decisions of
internet shopping customers. Structured questionnaire
was designed to collect the responses of online shoppers.
The analysis of the study revealed that customers are
found highly influenced toward the low price products
offered by the online shopping portals and the quality of
website affects them negatively. Quality of website does
not associated positively with the impulse purchase
decisions of online shopping customers.
Zhiguo Fan and Ping Zhang, (2015), studied the impulse
buying behavior of online shopping customers. The
purpose of the research study was to identify the impact
of credit card and increased consumer control on sudden
purchase decisions of customers. The responses were
collected from online shopping customers and it was
found after analyzing the data that customers found it
convenient to purchase online and to pay with the credit
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card as credit card is positively associated with the
purchase decisions of online shopping customers. Online
reviews regarding the product provide the detail
information of the product that increases the control of
customers on their purchase decisions so it has not
significant impact on impulse buying decisions of online
shopping customers.
Yalin Chen and Liang Zhang, (2015), conducted a
research study to examine the customer sudden purchase
decisions. The research study determined the impact of
price and product comparison on the sudden purchase
decisions of online shoppers. To collect the primary
survey was conducted and it was found that customers
have so many alternatives of any product on different
online shopping portals that make convenient for them to
make comparisons of products and prices that stops them
to make spontaneous purchase decision online.
Dr. Mehdi Shirmohammadi, Dr. Mohammad Reza
Ebrahimi and Nina Ghane, (2014), studied the impact of
quality on purchase decisions of online shoppers. The
study indicated that customers preferred online shopping
as the convenient shopping. Quality is one of the
important factors of buying decisions. The responses of
the online shoppers revealed that the quality of received
product found not satisfactory that retrain them to make
purchase decisions.
Ceyda Aysuna Turkyilmaz, Sakir Erdem and Aypar
Uslu,(2014), conducted a research study on the purchase
behavior of customers and determine the impact of
conscientiousness on the purchase decisions of
customers. It was found that customers with introvert
behavior are not easily influenced by the promotional
offers and website designs.
Yong Liu, Hongxiu Li and Feng Hu, (2013), studied the
impulsive buying behavior of online shopping customers
and determined their buying decisions. The primary
survey was conducted to understand the customer
purchase decisions. The findings revealed that customers
are positively associated with the quality of product but it
is found that delay in delivery of products has not
significant impact on customers purchase decisions.
Malin Sundstrom, Jenny Balkow, Jonas Florhed, Matilda
Tjernstorm and Pernilla Wadenfors, (2013), conducted a
research study with the objective to identify the factors of
buying decisions and measured their impacts on purchase
decisions. To achieve the purpose the survey was
conducted and after analyzing the responses it was
indicated that customers with more awareness make
buying decisions after evaluating the alternatives. Ease of
access is the positive factor of buying decision of
customers via internet.
Rashed Al Karim, (2013), studied the buying behavior
with the objective to understand the buying decision of
customers. As per the findings of the research study it
was revealed that customers preferred the online
shopping as the easy shopping due to its all time
availability. Various factors such are conscientiousness,
delayed gratification and perception of quality affects the
customers negatively and stops them to make sudden
purchase decisions.
Clair Elizabeth Crafts, (2012), stated that as per the
research study conducted on the purchase behavior of
customers that various factors such are degree of
impulsiveness, conscientiousness, quality of website are
the inhibitors of the impulsive buying decisions of
customers. Customers who are aware evaluates the
available options do not make sudden purchase decisions.
Degree of impulsiveness, conscientiousness and quality
of website does not have positive impact on impulse
purchase decisions of customers.
John D. Wells, Veena Parboteeah and Joseph S.
Valacich, (2011), measured the sudden purchase
behavior of customers with the help of this research
study. The structured questionnaire was developed based
on 5 point Likert’s Scale. The responses were collected
from the customers to understand their buying behavior
and to determine their purchase decision. The results of
the research study revealed that customers shopping
behavior are highly influenced by their general behavior.
Customers who are very introvert as per their behavior
and having less degree of impulsiveness control their
purchase decisions and evaluate the available alternatives
as comparatively to the customers with having high
degree of impulsiveness.
Amna Sirhindi, (2010), conducted a research study to
evaluate the impact of shipping services and delayed
gratification on the impulsive purchase decision of online
shopping customers. The results of the research study
found that free shipping services attract the customers
and it has positively impact on their purchase decisions.
Delay of possession of good restrains the customers to
make sudden purchase decisions.
Young-Ju Rhee, (2006), studied the factors restraining
the purchase decisions of online shopping customers and
as per the responses of online shopping customers it was
found that customers consider the online shopping as the
easy shopping but the various factors such are quality
website, delayed gratification and privacy concerns are
the factors that restrain the customers to make such
sudden purchase decisions.
Nina Koski, (2004), identified the factors of online
impulse buying behavior that restrain the customers to
make the sudden buying decision. Website quality has
not any positive impact on impulse purchase decisions.
Customers consider online shopping as the convenient
shopping but due to delay in shipping services restrain
them to make purchase decisions through internet as via
online shopping possession of goods does not meet
immediately.
Jacqueline J. Kacen and Julie Anne Lee, (2002),
conducted a research study to understand the buying
behavior of online shopping customers. The study found
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that family boundaries affect the buying behavior of
customers. The research study revealed that customers
living in individual families are more frequent buyers as
comparative to customers living in joint families.
Opinion of family and reference groups does not have
any significant impact on the purchase decisions of
customers.
OBJECTIVE OF THE STUDY
To identify the inhibiting factors that restraining
the customers from impulse online shopping
decisions.
FINDINGS
After studied the literature review it is clearly showed
that customers buying behavior is one of the most crucial
concept to understand which can be understood after
evaluating the number of parameters of impulse buying
behavior of online shopping customers. The research has
been done a very wide range of studies to understand the
buying decisions of online shopping customers. The
undertaken study of literature review indicated that
customers who are highly influence by their families are
very conscious about their shopping decisions. They buy
things as per their family and friends suggestions.
Customers who want to get the possession of the
purchased product soon sometimes get disappointed with
the delivery period of the product. Delayed gratification
has negative impact on impulse buying decision of
internet shopping customers. Online shopping portals are
very wide in numbers that gives the more options to the
customers to select the product with different suitable
offered prices from one to another online shopping portal
that stops the customers to make sudden purchases.
Consumer control also has significant impact on impulse
buying decision of online shopping customers. Number
of available options of products and prices gives the
customers more time to evaluate their desired product
that stops them to make spontaneous buying decision in
the search of desired one deal. In traditional shopping
customer is able to touch the product which is missing in
the buying process of online shopping that creates
negativity in the mind of customer and discourage them
to buy through online shopping portals. Website quality
is also found as the important parameter of online
shopping that can affect the customer positively or
negatively due to its quality and design. Degree of
impulsive is important parameters that can be seen in the
decision making capability of a person. An impulsive
person makes more sudden or impulsive buying decision
due to its degree of impulsiveness in their behaviors.
Conscientious customers found as the aware buyer who
makes buying decisions after evaluating the all available
alternatives and do not associate with the impulse buying
decisions.
CONCLUSIONS
The analysis of the descriptive research study indicated
that there are various motivating and inhibiting factors
that are positively and negatively associated with the
impulse buying decisions. The purpose of the research
study was to indentify the negative parameters that affect
the impulsive buying decision of the online shopping
customers which inhibiting them to make sudden
purchases. After reviewing a number of review studies
which are done in the context of impulse buying
decision of online shopping customers it is found that
delay in delivery, consumer control, family boundaries,
website quality, degree of impulsiveness, more control of
consumer, quality perception, awareness or
conscientiousness of customer and degree of
impulsiveness affects the customers buying decision
negatively and these factors are found as the inhibiting
factors of impulsive purchase decisions.
RECOMMENDATIONS
The research study can be conducted on
traditional shopping.
Smart shopping behavior of customers can be
studied.
Conscientiousness of customers can be studied.
Comparative study of online shopping portals
can be conducted.
Research study can be conducted on the
customer feedback process.
Research study can be conducted on post
purchase behavior of customers.
Customer loyalty can be studied.
Specific online shopping portal can be studied.
The research study can be done in the specific
area or city.
Positive parameters of impulse buying can be
studied in the context of online shopping.
Demographic factors can be identified in the
context of online shopping.
REFERENCES
1. Chakraborty, S.,(2017). An empirical investigation on the
association between consumer online impulsive buying
behavior and website quality- A study with special reference
to Flipkart online store. Imperial Journal of Interdisciplinary
Research (IJIR); Vol-3, Issue-3, ISSN: 2454-1362.
2. Zhang, P. and Fan, Z. (2015). Impact of online reviews on
impulsive buying intention based on regulatory focus
theory. International Conference on Education Technology,
Management and Humanities Science (ETMHS 2015).
Retrieved from the given link: www.atlantis-
press.com/php/download_paper.php?id=1922.
3. Shirmohammadi, M., Ebrahimi, M.R. and Ghane, N.
(2014). Investigating and prioritizing the effective factors on
online impulse buying in electronic commerce (case study:
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discount group sites in Iran). European Journal of Business
and Management; Vol.6, No.4, ISSN: 2222-1905.
4. Turkyilmaz, C.A., Erdem, S. and Uslu, A.(2014). The
effects of personality traits and website quality on online
impulse buying. International Conference on Strategic
Innovative Marketing, IC-SIM 2014.
5. www.sciencedirect.com/science/article/pii/S1877042815012
392.
6. Al Karim, R.(2013). Customer satisfaction in online
shopping: a study into the reasons for motivations and
inhibitions. IOSR journal of business and management,
Vol.11, Issue-6, pp.13-20, ISSN: 2319-7668.
7. Sundstrom, M., Balkow, J., Tjernstorm, M. and Wadenfors,
P. (2013). Impulsive buying behaviour: The role of feelings
when shopping for online fashion. Retrieved from the given
link:www.diva-
portal.org/smash/record.jsf?pid=diva2:887789..
8. Sirhindi, Amna.(2010). A critical review of in-store and
online impulse purchase behavior- Oklahoma state
university.
9.
https://shareok.org/bitstream/handle/11244/.../Sirhindi_okst
ate_0664M_10908.pdf.
10. Wells, J.D., Parboteeah, V. and Valacich, J.S.(2011). Online
impulse buying: Understanding the interplay between
consumer impulsiveness. Journal of the Association for
Information Systems; Vol. 12, Issue. 1, PP.32-56. ISSN:
1536-9323.
11. Tsai, C.(2008). Impulse purchase varied by products and
marketing channels. Journal of International Management
Studies. Retrieved from the given link
www.jimsjournal.org/19%20Tsai%20Chen.pdf
12. Young, J.R.(2006). Online Impulse Buying Behavior with
Apparel Products: Relationships with apparel involvement,
website attributes and product category/price. Retrieved
from the given link:
https://vtechworks.lib.vt.edu/bitstream/handle/10919/39628/
TITLE.pdf?sequence=1
13. Hodge, Rebecca. (2004). Factors influencing impulse
buying during an online purchase transaction- university of
waterloo. Retrieved from the given link:
https://uwspace.uwaterloo.ca/handle/10012/912.
14. Koski, N. (2004). Impulse Buying on the internet:
Encouraging and Discouraging factors. Retrieved from the
given link www.ebrc.info/kuvat/23-35_04.pdf.
REFERRED LINKS
1. www.businessdirectory.com
2. www.wikipedia.org.
3. www.marketbusiness.com
4. www.quora.com
5. www.computerhope.com
6. www.digitalunite.com
7. www.bloggersideas.com
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A STUDY OF WELFARE MEASURES ON EMPLOYEE’S MORALE
Dr. Gopal Krishan*, Veeni
**
*Assistant Professor, Dept. of Political Science, Gobindgarh Public College, Alour, Khanna, Punjab
**Student, A.S. College, Khanna, Punjab, India
ABSTRACT
In today’s era employees plays a vital role in the organisation. All the activities related to the organisation are done
by the employees so every organisation have to pay fair wages and salaries to the employees and workers of the
organisation. The growth of the organisation is totally depending on the performance of the employees. The
performance of the employees are dependent on the organisational environment and consideration given by the
organisation to them and satisfaction level of them. In this paper, the researcher highlights some of the welfare
measures which will help the organisation to increase their productivity. For this purpose, the researcher conduct
study in Kuber Casting Private Limited and sample of 60 employees were taken. To check the reliability of the data
f-test and chi-square test had been applied.
Key words: employee, welfare, morale, satisfaction, growth.
INTRODUCTION
“THE EFFORTS TO MAKE LIFE WORTH
LIVING FOR WORKMEN”
Employee welfare: Employee welfare means everything
from services, facilities and benefits that are provided by
an employer for the benefits and comfort of an employee.
It is undertaken in order to motivate the employees. It
will also raise the level of productivity. Other forms of
employee welfare include housing, health insurance,
stipends, transportation and provision of food etc.
Employee morale: Morale is an employee’s attitude in
the direction of job, employer, and others. Employee
morale as the psychological state with respect to
approval, assurance and decide the things.
Morale
High Low
Employee is satisfied with job Employee is less satisfied with job.
Takes initiatives Unsolved complaints
Focuses on achievement of organizational goals. Strikes
Happy employees Unhappy employees
Contribute high level of productivity Less productivity
High returns to stakeholders and employee loyalty High absenteeism and turnover
Types of employee welfare Employee welfare can be categorized into two types:
Employee welfare
Intramural activities
welfare measures inside the workplace.
for example: medical facilities, compensation for accidents, provision of
canteens, supply of drinking water
Extramural activities
welfare measures outside the workplace.
for example: housing accommodation, indoor and outdoor facilities, recreational
facilities, amusement and sports, educational facilities for adults and children
etc
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REVIEW OF LITERATURE
The present literature review is used to briefly summarize
the past researches’ studies.
K. Logasakthi& K. Raja Gopal (2013) The researcher
things to see the welfare measures were taken in the
compounded business, the representative's fulfillment
levels and to distinguish the general nature of work life
of the workers and employees. The information gathering
was finished on the timetable. Now and again the
individual meeting was required around then of topping
off of questionnaire, to break down, the gathered
information the analyst utilized basic rate examination.
KeerthisriyaDr.Panatulamurali Krishna (2014) The
results indicates that the general mindfulness level of
various arrangements of the Factory Act, it is not highest
but rather an acceptable level, in with these facilities
given by the industries, all the accounts sufficient among
the workers. Security and welfare measured by the
organization which is keeping the employees satisfied. R
Santana Krishnan (2015) In this study the welfare
activities are for the most part impacted by concerned
standards and passing in any country. In India, before the
presentation of welfare and another performance the
states of the work were hopeless, misuse of kid work,
work of long hours, terrible cleanliness and
nonappearance of wellbeing measures are the consistent
elements of industrial facility life in India. This article
highlights the labor welfare measures and programs.
RESEARCH OBJECTIVES
To check the satisfaction level of the employees
with their income received.
To check the satisfaction level of the employees
with job as against to their ages.
To check the significance between the salary
increment and overtime on daily basis.
To check the level of support by management &
co-workers.
RESEARCH METHODOLOGY
Research Empirical
Primary data collection Through structured questionnaire
Secondary data collection From the website of the company and E-journals.
Sampling method Stratified sampling
Sample area Kuber Casting Private Limited
Respondents Employees of Kuber casting private limited
Sample size 60
Scaling technique 5 point likert scale.
Statistical tool F-test, Chi-square test.
ANALYSIS OF DATA:
Table 1: The No. of Employees in accordance with their ages
AGE GROUP NO. OF EMPLOYEES PERCENTAGE (%)
Below 25 18 30%
25-35 25 42%
35-45 13 21%
Above 45 4 7%
Total 60 100%
The above table infers that, most of the employees in the organization are under the age of 25-35 against 13 are under
the age 35-45, 18 of them below the age of 25 and only 4 of the employees are under the age group of above 45.
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Table 2. Monthly income received by the employees
INCOME RECEIVED NO. OF EMPLOYEES PERCENTAGE (%)
5000-10000 12 20%
10000-15000 30 50%
15000-20000 14 23%
Above 20000 04 07%
Total 60 100%
As their salary received, Most of the employees falls in
the category of 10000-15000, against to 23% of the
employees received salary in the category of 15000-
25000, 20% of the employees received salary in the
category of 5000-10000 and only 7% of the employees
receives salary in the category of above 25000.
Table 3 Satisfaction with salary received
Satisfaction level No. of employees Percentage Mean value
Highly satisfied 9 15% 5*9=45
Satisfied 18 30% 4*18=72
Neutral 22 36.67% 3*22=66
Dissatisfied 10 16.67% 2*10=20
Highly dissatisfied 1 1.66% 1*1=1
60 100 204/60=3.4
Table 3 summarized the survey results that indicate the
satisfaction level of employees with respect to income
received in their organization. Five point Likert scale is
used to collect respondent’s feedback on the statement
related to satisfaction with income received. The factors
were rated as follows – 5= highly satisfied, 4= satisfied,
3= neutral, 2= dissatisfied, 1= highly dissatisfied. The
distribution of responses for each item was tabulated as
shown in Table 3. Besides, the mean scores were
calculated for each item.
The findings indicate that 36.67% of the respondents are
neutral with the satisfaction level of income received,
30% of the respondents are satisfied with their income,
16.67% of the respondents are dissatisfied with the
income received, 15% of the respondents are highly
satisfied with the income and 1.66% of the respondents
are highly dissatisfied with the income received.
By applying likert scale, mean value also proofs that
employees are neutral with the satisfaction level with
respect to income
Table 4 Satisfaction with Salary increment
Satisfaction level No. of respondents % Mean value
Highly satisfied 11 18% 5*11=55
Satisfied 16 26% 4*16=64
Neutral 18 30% 3*18=54
Dissatisfied 9 14% 2*9=18
Highly dissatisfied 8 12% 1*8=8
Total 60 100% 199/60= 3.32
Table 4 depicts the survey results that indicate the
satisfaction level of employees with respect to their
increment in salary in their organization. Five point
Likert scale is used to collect respondent’s feedback on
the statement related to Satisfaction with Salary
increment.
The findings indicate that 30% of the employees are
neutral, 26% of the employees are satisfied, 14% of the
employees are dissatisfied, 18% of the employees are
highly satisfied and 12% of the employees are highly
dissatisfied with the salary increment.
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By applying likert scale, mean value also proofs that
employees are neutral with the satisfaction level with
respect to increment in salary.
Table 5 Satisfaction with overtime on daily basis
Satisfaction level No. of respondents % Mean value
Highly satisfied 11 18% 5*11=55
Satisfied 14 23% 4*14=56
Neutral 28 46% 3*28=84
Dissatisfied 7 11% 2*7=14
Highly dissatisfied 0 0% 1*0=0
Total 60 100% 209/60=3.48
Table 5 shows the survey results that indicate the
satisfaction level of employees with respect to overtime
received on daily basis in the organization. Five point
Likert scale is used to collect respondents’ feedback on
the statement related to Satisfaction with Overtime on
daily basis.
The findings indicate that 46% of the employees are
neutral, 23% of the employees are satisfied, 11% of the
employees are dissatisfied,18% of the employees are
highly satisfied with overtime received on daily basis.
By applying likert scale, mean value also proofs that
employees are neutral with the satisfaction level with
respect to overtime received on daily basis.
Table 6 Satisfaction with Support of management
Satisfaction level No. of respondents % Mean value
Highly satisfied 10 16% 5*10=50
Satisfied 13 22% 4*13=52
Neutral 33 55% 3*33=99
Dissatisfied 3 5% 2*3=6
Highly dissatisfied 1 2% 1*1=1
Total 60 100% 208/60=3.47
Table 6 summarized the survey results that indicate the
satisfaction level of employees with respect to support of
management in their organization. Five point Likert scale
is used to collect respondent’s feedback on the statement
related to Satisfaction with Support of management.
The findings indicate that 55% of the employees are
neutral, 22% of the employees are satisfied, 5% of the
employees are dissatisfied, 16% of the employees are
highly satisfied and 2% of the employees are highly
dissatisfied with the support of management.
By applying likert scale, mean value also proofs that
employees are neutral with the satisfaction level with
respect to the support of management.
Table 7 Satisfaction with Support of co-workers
Satisfaction level No. of respondents % Mean value
Highly satisfied 25 42% 5*25=125
Satisfied 12 20% 4*12=48
Neutral 14 23% 3*14=42
Dissatisfied 5 8% 2*5=10
Highly dissatisfied 4 7% 1*4=4
Total 60 100% 229/60=3.82
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Table 7 infers that the satisfaction level of employees
with respect to support of co-workers in their
organization. Five point Likert scale is used to collect
respondent’s feedback on the statement related to
Satisfaction with support of co-workers.
The findings indicate that 23% of the employees are
neutral, 20% of the employees are satisfied, 8% of the
employees are dissatisfied, 42% of the employees are
highly satisfied and 7% of the employees are highly
dissatisfied with support of co-workers.
By applying likert scale, mean value also proofs that
employees are satisfied with the satisfaction level with
respect to the support of co-workers.
HYPOTHESIS TESTING
Age and satisfaction with job.
H.satisfied
(a)
Satisfied
(b)
Neutral
(c)
Dissatisfied
(d)
H.dissatisfied
(e)
Below 25 2 1 10 4 1
25-35 3 5 13 3 1
35-45 2 3 7 1 0
Above 45 2 2 0 0 0
Hypothesis – 1
Let us take the null hypothesis that there is no
significant difference between the age group and the
satisfaction level of the employees with job.
Applying chi-square test:
x2 =11.723 , d.f.= (4-1)(5-1) = 12
at d.f. = 12, x2
0.05= 21.026
Since, calculated x2 value is less than the table value,
therefore hypothesis is accepted. We conclude that there
is no significant difference between the age group and the
satisfaction level of the employees with job.
Salary increment and overtime on daily basis
H. satisfied Satisfied Neutral Dissatisfied H. dissatisfied
Salary increment
11 16 18 9 8
Overtime on daily basis 11 14 28 7 0
Hypothesis – 2
Let us take the null hypothesis that there is no
significant difference between the salary increment and
overtime on daily basis.
Applying F-test
Calculated value: 3.67 for V1= 4, V2 = 4
Table value @ 5% = 6.39
For V1= 4, V2= 4, the table value of F at 5% level of
significant is 6.39. Since the calculated value of F is less
than table value. So, we accept the null hypothesis and
conclude that there is no significant difference between
the salary increment and overtime on daily basis.
Support of management and support of co-workers
H. satisfied Satisfied Neutral Dissatisfied H. dissatisfied
Support of management 10 13 33 3 1
support of co-workers 25 12 14 5 4
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Hypothesis – 3
Let us take the null hypothesis that there is no
significant difference between the support of
management and support of co-workers.
Applying F-test
Calculated value: 2.27 for V1= 4, V2 = 4
Table value @ 5% = 6.39
For V1= 4, V2= 4, the table value of F at 5% level of
significant is 6.39. Since the calculated value of F is less
than table value. So, we accept the null hypothesis and
conclude that there is no significant difference between
the support of management and support of co-workers.
Income received by the employees and satisfaction level of the employees with income
Hypothesis-4
Let us take the null hypothesis that there is no
significant difference between the satisfaction level of the
employees with respect to their income.
By applying chi-square test
x2 = 7.349 , d.f.= (4-1)(5-1) = 12,
at d.f. = 12,
x2
0.05= 21.026
Since, calculated x2 value is less than the table value,
therefore hypothesis is accepted. We conclude that there
is no significant difference between the satisfaction level
of the employees with respect to their income.
FINDINGS
Almost the employees are satisfied with
management support.
Few of the respondents are dissatisfied with the
co-workers support.
KCPL provided good salary package to
employees, which energies them to work more
and reduce the labor turnover.
Most of the employees are satisfied with their job
as against to their ages.
SUGGESTIONS
It will be better if the management provides
incentives to the employees so it will boost their
morale and productivity.
Supervisors should maintain coordinal
relationship with workers.
It will be better if management provide
performance and potential appraisal in regularly.
Job rotation is to be made at least once in three
years.
CONCLUSION
By analysing the summary of the results it is identified
that the welfare and safety measures, which is followed
by organization is neutral and satisfied and they want
some improvements in the system. This project would be
helpful for the industry and also to improve some welfare
and safety measures inside the industry. The strength of
any organization depends entirely on sincere working of
all the employees. The management should take special
care to frame certain policies procedures to improve the
welfare and safety measure of the organizations.
REFERENCES
1. ASWATHAPPA (2005), ”HUMAN RESOURCE
MANAGEMENT”, TATA Mcgraw Hill Publishing New
Delhi
2. S.P.GUPTA (2002), “STATISTICAL METHOD”, Sultan
Chand & Co, New Delhi.
3. C.R.KOTHARI (2004), “RESEAERCH METHHODLOGY”,
(Method & Techniques), New Age International (P) LTD,
New Delhi.
4. K. Logasakthi& K. Raja Gopal (2013)
5. R Santana Krishnan (2015)
Income/satisfaction H.satisfied
Satisfied
Neutral
Dissatisfied H.dissatisfied
Total
5000-10000 1 2 4 3 0 10
10000-15000 4 11 13 6 1 35
15000-20000 2 4 4 1 0 11
Above 20000 2 1 1 0 0 04
Total 09 18 22 10 01 60
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AGE AND GENDER EQUALITY IN AUTOMOBILES
Dr.K.K.Sharma* Dr. Yashmin Sofat
**
*Associate Professor, A. S. College, Khanna, Punjab, India
**Assistant Professor, A. S. College, Khanna, Punjab, India
ABSTRACT
The success of the organization is highly dependent on the sales. The organization has to
implement the effective sales promotion to improve the sales to increase profits. In this paper,
authors attempt to study the sales promotional activities of Bajaj automobiles with reference to
Balaji motors pvt. ltd. The study indicates promotional tools used in the company such as extended
warranty, loyalty card programs, demo bikes availability, discount policy, sound online marketing,
insurance of the new vehicle etc. and check out the effectiveness of each tool so that company can
improve their marketing technique. The research is being carried on various customers of Balaji
motors visited in the showroom. Random sampling is used to collect data from the respondents at
Balaji motors pvt.ltd. A sample of 173 customers is taken as sample respondents for the purpose of
the study. In this paper authors, applied chi square test to check the validity with respect to age and
gender equality on discount policies.
Keywords: Promotional Tools, Effectiveness, Gender Equality.
INTRODUCTION
The Bajaj Group is amongst the top 10 business houses
in India. Its footprint stretches over a wide range of
industries, spanning automobiles (two wheelers
manufacturer and three wheelers manufacturer), home
appliances, lighting, iron and steel, insurance, travel and
finance. The group's flagship company, Bajaj Auto, is
ranked as the world's fourth largest three and two
wheeler manufacturer and the Bajaj brand is well-known
across several countries in Latin America, Africa, Middle
East, South and South East Asia. Founded in 1926, at the
height of India's movement for independence from the
British, the group has an illustrious history. The integrity,
dedication, resourcefulness and determination to succeed
which are characteristic of the group today, are often
traced back to its birth during those days of relentless
devotion to a common cause. Jamna Lal Bajaj, founder
of the group, was a close confidant and disciple of
Mahatma Gandhi. In fact, Gandhiji had adopted him as
his son. His close relationship and his deep involvement
in the independence movement did not leave Jamna Lal
Bajaj with much time to spend on his newly launched
business venture. We are celebrating 125th Birth
anniversary of Shri.Jamnalal Bajaj on 4th of November
2014.
His son, Kamalnayan Bajaj, then 27, took over the reigns
of business in 1942. He too was close to Gandhiji and it
was only after Independence in 1947, that he was able to
give his full attention to the business. Kamalnayan Bajaj
not only consolidated the group, but also diversified into
various manufacturing activities. The present Chairman
of the group, Rahul Bajaj, took charge of the business in
1965. Under his leadership, the turnover of the Bajaj
Auto the flagship company has gone up from INR.72
million to INR. 120 billion, its product portfolio has
expanded and the brand has found a global market. He is
one of India’s most distinguished business leaders, bike
manufacturer India and internationally respected for his
business acumen and entrepreneurial spirit.
LITERATURE REVIEW
Its ultimate goal is to bring the reader up to date with
current literature on a topic and forms the basis for
another goal such as future that may be needed in the
area. Sunil Gupta, (1988) have demonstrated that a
comprehensive model which captures three main
components of consumers buying decision: when, what,
and how much to buy. The model incorporates price and
promotions of the competitive brands as well. He states
that promotional variables (feature, display, price cut)
play a strong role in consumer brand choice decisions
feature and display have some impact on the purchase
time decision, price cut and regular price have almost
none. Blatterg and Nelson, (1990) Effect of sales
promotion as a tool on customer attention to purchase;
one of the most important of channels is sales promotion.
Sales promotion is action-focused marketing events
whose purpose is to have a direct impact on the behavior
of the firm’s consumers. The researcher analyses that
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there are three major types of sales promotion: consumer
promotion, trade promotion and sales force promotion.
Consumer promotions are promotions offered by
manufacturer directly to consumers whereas trade
promotion is benefited for retailers/dealers & sales force
promotion is give benefit to the sales people hence all
three sales promotion programs are similar important for
the companies. Chemung Kumar Nat, (2003) find that
advertising and sales promotion has large impact on the
buying behavior and brands preferences. According to
researcher advertising remind the consumer about the
product. And sales promotion helps the consumer to
purchase the product. Researcher states that the exposure
to advertising is associated with changes in the buying
pattern in so for as the choice of the brand is concerned.
Safi Zimmer,(2008) states that management of sales
promotion and event has directly impact on the profit ,
awareness and image in the mind of the customer. In
retail sector sales promotion tools has impact on the store
traffic with fast movement of the goods. Researcher
states that the use of promotional tools or event depend
on the nature of the product and also the purpose of the
event and promotion. Lisa S. McNeill,(2008)have
demonstrated that no major impact of initial product
price on consumers who likely to feel satisfied or pleased
with price promotion experience. Incomes of the
consumers have impact on the sales promotion. Rebates
and Refunds have an impact of the consumer’s
preferences. Rachel Nazi,(2008) suggest that firms use
games as major type for online sales promotions of
consumer products. In addition firm also use
advertisement programs, contests and sweepstakes for
online sales promotion. For digital product firms take
necessary aspects to make their websites effectives. He
also focuses on the online transaction security and
provides playfulness in websites which make them more
effective. His research work state that firms use aspects
to make websites effective, they do not use many of sales
promotion types for online promotions. Oyedapo
Williams , Akinlabi Babatunde (2012)In this researcher
paper the researcher analyzed that sales promotion is
normally used to boost sales there by increasing the
profit. The most significant sales promotion techniques
that contributed to higher performance in the company
are special sales, price off and coupons. The low
significant techniques are sweepstake and gifts. In the
course of any sales promotion exercise, management
should strategically facilitate the exercises so that
customers do not doubt the reality of the program by
using credible techniques. For instance, very incredible
prize like winning over a thousand brand new
automobiles should be avoided. In addition, the study
found that organization promotion strategies enhance
consumer buying pattern. According to the result,
majority of the respondents accepted the facts that
organization promotion strategies enhance consumer
buying pattern. Alexander Peko(2012)The researcher
states that consumers are always attracted by various
sales promotion tools to try a new product and make an
initial purchase. However, the effects induced by sales
promotion tools need to be sustained by the actual
performance of the products, which should be the
ultimate focus of management to retain loyal consumers
so as to generate stable sales revenues in a longer term.
Sales promotion helps to build brand loyalty by giving
the seller the opportunity to attract a loyal and profitable
set of customers which provides sellers some protections
from competition and greater control in planning their
marketing mix.
RESEARCH METHODOLOGY
NEED OF THE STUDY
The success of the organization is highly
dependent on the sales. The organization has to
implement the effective sales promotion to
improve the sales to increase profits.
Sales promotional activity does not only satisfy
the organizational goal it fulfills customer and
helps in acquiring new customers.
Building an effective sales promotion strategy
helps organization in acquiring new customers.
This study attempts to assess the promotional
activities of the organization.
OBJECTIVES OF THE STUDY
PRIMARY OBJECTIVE
1. To study the sales promotional activities of Bajaj
automobiles with reference to Balaji motors pvt.
ltd.
SECONDARY OBJECTIVE
1. To study the effectiveness of the sales
promotional activities
2. To provide suggestions regarding improvement
in sales promotion techniques.
3. To find out which technique is best suited to the
company and check out which one is more
effective.
SCOPE OF THE STUDY
The study indicates promotional tools used in the
company such as extended warranty, loyalty card
programs, demo bikes availability, discount policy,
sound online marketing, insurance of the new vehicle etc.
and check out the effectiveness of each tool so that
company can improve their marketing technique. The
research is being carried on various customers of Balaji
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motors visited in the showroom. The study will be sales
oriented character of any promotion.
RESEARCH DESIGN: A research design is an
arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the
research purpose with economy in procedure. A good
research design has the characteristics via problem
definition, specific method of data collection analysis.
The research design used for the study is descriptive in
nature. The major purpose of descriptive research is
description of the state of affairs as it exists at present
and includes surveys and fact finding enquiries.
SAMPLING DESIGN: Sampling is a process of a
sufficient number of elements from the population or
characteristics would make it possible for us to
generalize such properties. Random sampling is used to
collect data from the respondents at Balaji motors pvt.ltd.
A sample of 173 customers is taken as sample
respondents for the purpose of the study. The study is
regarding the effectiveness of sales promotion and
advertisement given by Balaji motors.
DATA COLLECTION TECHNIQUES: Information
was collected through both primary and secondary
sources. In some cases the researchers may realize the
need for collecting the first hand information. Thus, the
two methods by which primary data can be collected is
observation and questionnaire. I use questionnaire
method for the purpose of research. And, secondary data
was collected through journals, newspapers and
magazines.
In this study, we have studied 2chi-square test.
There is significant difference between the age of
respondents and the satisfaction level of
respondents on the discount policy.
There is significant difference between the
gender of respondents and satisfaction level of
the respondents on the discount policy.
LIMITATIONS OF THE STUDY
Following are the limitations of the research work and
survey was conducted over 173 respondents only.
This research work is done with reference to
Goraya city. Hence it has scope of study in other
regions which may result differently.
While conducting survey some respondents
hesitate to respond. It creates problem in research
work to collect data.
The time given for research work was limited.
Information is collected from the customers.
ANALYSIS OF DATA
TABLE 1
AGE OF THE RESPONDENTS
AGE FREQUENCY PERCENT
BELOW 18 33 19.1
19-40 96 55.5
ABOVE 40 44 25.4
TOTAL 173 100
Table 1inferred that 55.5% respondents are from age 19-40years and 25.4% are above 40.19.1% are below 18 years
which mean there is need to attract the customers from above 40 group and below 18 teenagers.
TABLE 2
GENDER OF THE RESPONDENTS
GENDER FREQUENCY PERCENT
MALE 121 69.9
FEMALE 52 30.1
TOTAL 173 100
Table 2 inferred that 70% respondents are male.30% of the respondents are female which means new female
customers can be attracted by adopting sales promotion techniques.
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TABLE 3
OCCUPATION OF THE RESPONDENTS
OCCUPATION FREQUENCY PERCENT
BUSINESS 42 24.3
EMPLOYED 73 42.2
PROFESSIONAL 21 12.1
OTHERS 37 21.4
TOTAL 173 100
Table 3 shows that 42.2% respondents are employed. 24.3% of respondents are from business background.12.1% are
professionals.21.4%are from other background (household). Company has chances to promote sales in professional
respondents group because that area is still unattracted and sales are less.
TABLE 4
MARITAL STATUS OF THE RESPONDENTS
MARITAL STATUS FREQUENCY PERCENT
SINGLE 68 39.3
MARRIED 104 60.1
DIVORCED 1 0.6
TOTAL 173 100
Table 4 inferred that 60.1% respondents are married.39.3% are single.0.6% are divorced. So our product is more
popular among married customer groups.
TABLE 5
INCOME OF THE RESPONDENTS
INCOME FREQUENCY PERCENT
BELOW 25000 24 13.9
25000-35000 21 12.1
35000-50000 19 11
50000-75000 44 25.4
ABOVE 75000 65 36.6
TOTAL 173 100
Table 5 inferred that 36.6% of respondents earns above Rs.75000. 25.4% earns Rs.50000 to Rs.75000.13.9% are
below Rs.25000.12.1% earns Rs.25000to Rs.35000.11% of respondents earns from Rs.35000 to Rs.50000.
TABLE6
VISIT TO SHOWROOM
VISITED BALAJI MOTORS FREQUENCY PERCENT
YES 173 100
NO 0 0
TOTAL 173 100
Table 6 shows that 100% respondents have visited balaji motors showroom which provides evidence about customer
satisfaction with the services.
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TABLE 7
CAME TO KNOW ABOUT US?
CAME TO KNOW ABOUT US FREQUENCY PERCENT
ADVERTISEMENT 35 20.2
FAMILY AND FRIENDS 62 35.8
SOCIAL MEDIA 27 15.6
INTERNET 30 17.3
MAGAZINES 18 10.4
OTHERS 1 0.6
TOTAL 173 100
Table 7 shows that most of the customers came to know about us through family and friends that and other modes of
awareness are not providing that results so there is a need to do more sales promotion through advertisements and
other mediums to catch more customers.
TABLE 8
EXCHANGE OFFERS AND LOYALTY PROGRAMMES
AVAILABILITY FREQUENCY PERCENT
YES 137 79.2
NO 36 20.8
TOTAL 173 100
Table 8 shows that 20.8% of respondents are unaware about any exchange offer and loyalty programs carried in
showroom which is lack of sales promotion and awareness among those group of respondents.
TABLE 9
AVAILABILITY OF DEMO BIKES
AVAILABILITY FREQUENCY PERCENT MEAN SCORE
GOOD 148 85.5 148*3=444
NEUTRAL 24 13.9 24*2=48
BAD 1 0.6 1*1=1
TOTAL 173 100 493/173=2.9
According to the likert scale, the mean rate is 2.99. So, the availability of demo bikes is good in the company. Table 9
shows that 85.5% customers says availability of demo bikes is good whereas 13.9% customers find that availability of
demo bikes is neutral and 0.6% customers says that it is bad and need to improve this technique of sales promotion.
TABLE 10
SATISFACTION LEVEL THROUGH FREE GIFTS
SATISFACTION FREE GIFTS FREQUENCY PERCENT MEAN SCORE
HIGHLY SATISFIED 29 16.8 29*5=145
SATISFIED 65 37.6 65*4=260
NEUTRAL 62 35.8 62*3=186
DISSATISFIED 9 5.2 9*2=18
HIGHLY DISSATISFIED 8 4.6 8*1=8
TOTAL 173 100 617/173=3.7
According to likert scale, the mean score is 3.7 means that customers are satisfied with the delivery of free gifts. Table
10 shows 16.8% of the customers are highly satisfied with the gifts provided at the time of delivery whereas 37.6 are
satisfied, 35.8% are neutral whereas 5.2% are dissatisfied and 4.6% are highly dissatisfied.
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TABLE 11
TEST DRIVE OFFERED
TEST DRIVE OFFERED FREQUENCY PERCENT
YES 156 90.2
NO 17 9.8
TOTAL 173 100
Table 11 shows that the result of this type of sales promotion is quite impressive as shown in the table as 90.2 %
customers finds that test drive is offered and satisfactory.
TABLE 12
ATTRACTIVENESS OF ADVERTISEMENT
ATTRACTIVE FREQUENCY PERCENT MEAN SCORE
EXCELLENT 35 20.2 35*5=175
GOOD 45 26 45*4=180
NEUTRAL 59 34.1 59*3=177
BAD 24 13.9 24*2=48
WORST 10 5.8 10*1=10
TOTAL 173 100 590/173=3.4
According to likert scale, the mean score is 3.4 means the result is neutral. Advertisement may or may not affect the
buying decision of the customer as the result is neutral. Table 12 shows that 20.2% says that ads are excellent, 26%
says good, 34.1% is neutral whereas 13.9% says ads are bad and 5.6%says the ads are worst and not attractive.
TABLE 13
VISIT OUR WEBSITE
VISIT OUR WEBSITE FREQUENCY PERCENT
YES 172 99.4
NO 1 0.6
TOTAL 173 100
Table 13 shows that most of the customers 99.4% of respondents visit our website which shows our website is quite
popular and effective in order to attract customers more.
TABLE 14
SOCIAL MEDIA PAGE
VIEWED FREQUENCY PERCENT
YES 82 47.4
NO 91 52.6
TOTAL 173 100
Table 14 shows that more than half customers never viewed our social media page that is 52.6%. It is not a good sign
of online sales promotion so try to improve the access of social media page, make it more attractive so that customers
also get attracted towards the product.
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TABLE15
PERFORMANCE OF WEBSITE
PERFORMANCE FREQUENCY PERCENT MEAN SCORE
EXCELLENT 57 32.9 57*5=285
GOOD 67 38.7 67*4=268
NEUTRAL 39 23.1 40*3=120
BAD 8 4.6 8*2=16
VERY BAD 1 0.6 1*1=1
TOTAL 172 100 690/172=4
According to likert scale the mean score is 4 means the performance of the website is good. Table 15 shows that
32.9% says website performance is excellent whereas 38.7% finds it good, 23.1% finds it bad whereas 0.6% finds that
it is worst.
TABLE 16
ATTRACTIVENESS OF THE COMPETITION
ATTRACTIVENESS FREQUENCY PERCENT MEAN SCORE
ATTRACTIVE 33 19.1 33*3=99
NEUTRAL 82 47.4 82*2=164
NOT ATTRACTIVE 58 33.5 58*1=58
TOTAL 173 100 321/173=1.85
According to likert scale mean score is 1.85 means that competition attractiveness is neutral and may or may not affect
the buyer decision.Table 16 shows that on the basis of our competition with other dealers 19.1% says that balaji
motors are more attractive whereas 47.4% are having neutral decision and 33.50% finds it not attractive.
TABLE 17
INSURANCE POLICY OF THE NEW BIKES
INSURANCE POLICIES FREQUENCY PERCENT MEAN SCORE
HIGHLY SATISFIED 56 32.4 56*5=280
SATISFIED 75 43.4 75*4=300
NEUTRAL 29 16.8 29*3=87
DISSATISFIED 10 5.8 10*2=20
HIGHLY DISSATISFIED 3 1.7 3*1=3
TOTAL 173 100 690/173=3.99
According to likert scale, mean score is 3.99 means the customers are satisfied with the insurance policy of the new
bikes. Table.17 shows that 32.40% customers are highly satisfied, 43.40% are satisfied, 16.80% are neutral, 5.8% are
dissatisfied and 1.70% is highly dissatisfied with insurance policy.
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TABLE 18
DISCOUNT POLICY
SATISFACTION LEVEL OF RESPONDENT
THROUGH DISCOUNT POLICY
FREQUENCY PERCENT MEAN SCORE
HIGHLY SATISFIED 57 32.9 57*5=285
SATISFIED 54 31.2 54*4=216
NEUTRAL 33 19.1 33*3=99
DISSATISFIED 20 11.6 20*2=40
HIGHLY DISSATISFIED 9 5.2 9*1=9
TOTAL 173 100 649/173=3.75
Likert scale value is 3.75 means that customers are satisfied with the discount policy. Table 18 shows 32.9%
respondents are highly satisfied, 31.20% are satisfied, 19.10% are neutral, 11.60%are dissatisfied and 5.20% are
highly dissatisfied with the discount policy.
TABLE 19
EXTENDED WARRANTY SCHEME
SATISFACTION FREQUENCY PERCENT MEAN SCORE
HIGHLY SATISFIED 69 39.9 69*5=345
SATISFIED 56 32.4 56*4=224
NEUTRAL 36 20.8 36*3=108
DISSATSFIED 5 2.9 5*2=10
HIGHLY DISSATISFIED 7 4 7*1=7
TOTAL 173 100 694/173=4.1
According to likert scale mean score is 4.1 so the customers are highly satisfied with the extended warranty scheme.
Table 19 shows that about 39.90% are highly satisfied, 32.40% customers are satisfied, 20.80% are neutral, 2.9% are
dissatisfied and 4% are highly dissatisfied with the extended warranty scheme of the Balaji motors.
TABLE 20
REFERENCE TO OTHERS
REFERRALS FREQUENCY PERCENT
YES 136 78.6
NO 37 21.4
TOTAL 173 100
Table 20 shows that 78.6% customers will refer others about our services which is quite good for our sales promotion
through referrals.
CHI-SQUARE TEST-1
NULL HYPOTHESIS: There is no significant
difference between the age and satisfaction level of
respondents on the discount policy.
ALTERNATIVE HYPOTHESIS: There is significant
difference between the age and satisfaction level of
respondents on the discount policy
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AGE HIGHLY
SATISFIED
SATISFIED NEUTRAL DISSATISFIED HIGHLY DISSATISFIED TOTAL
18 13 15 2 3 0 33
19-40 26 31 23 11 5 96
ABOVE 40 18 8 8 6 4 44
TOTAL 57 54 33 20 9 173
PVALUE=0.074
Accept null hypothesis
Reject alternative hypothesis
INFERENCE: There is no significant difference
between the age of respondents and satisfaction level of
respondents on discount policy. So we can say that
satisfaction level of the respondents is not affected by the
age of respondents.
DECISION: Accept null hypothesis, since pvalue >0.05
CHI SQUARE TEST-2
NULL HYPOTHESIS: There is no significant
difference between the gender of the respondents and
satisfaction level of respondents on the discount policy
given by the company at the time of sale.
ALTERNATIVE HYPOTHESIS: There is a significant
difference between the gender of the respondents and
satisfaction level of respondents on the discount policy
given by the company at the time of sale.
GENDER HIGHLY
SATISFIED
SATISFIED NEUTRAL DISSATISFIED HIGHLY DISSATISFIED TOTAL
MALE 37 38 25 13 8 121
FEMALE 20 16 8 7 1 52
TOTAL 57 54 33 20 9 173
PVALUE=0.559
REJECT NULL HYPOTHESIS
ACCEPT ALTERNATE HYPOTHESIS
INFERENCES: there is a significant difference between
the gender of the respondents and satisfaction level of
respondents on the discount policy given by the company
at the time of sale that is satisfaction level of respondents
are being affected by the gender of the respondents.
DECISION: accept alternate hypothesis, since p
value>0.0
FINDINGS
From the above study, it is inferred that 55.5%
respondents are from the age 19-40 years.
From the study conducted, it is found that 70%
of the respondents are male.
From the study, it is said that 42% respondents
are employed.
From the above study, it is identified that 60.1%
respondents are married.
From the above study, it is said that 36.6% of the
respondents earns above Rs. 75000
From the above study, it is found that 100%
respondents have visited Balaji motors
showroom.
From the study, it is found that 35.8% of the
respondents came to know through family and
friends.
It is said that 67.1% of the respondents have
known about availability of exchange offers and
loyalty programmes.
From the study it is found that 99.4%
respondents have visited our website and 47.4%
visit social media page.
32.9% are highly satisfied with discount policy.
85.5% are aware of the availability of demo
bikes.
It is found that 37.6% of the respondents are
satisfied through the free gifts.
90.2% says that they are offered with test drive.
It is found that 78.6% refer Balaji motors to
others.
Sales promotion is found to be an important tool
to attract dealers and hence it has helped the
Balaji motors to push its product (bike) in the
market through dealers.
CONCLUSION
It is concluded that the sales promotion is important to
improve the sales of the company and to reach new
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customers. Each and every organization should have a
good strategic plan for their promotion to withstand in
the market of huge competition. The company should
frame the best strategic plan to meet the competition and
fulfill the needs of customers.
RECOMMENDATIONS
Based on the above research work the following
recommendations are made to the Balaji motors:
Balaji motors have to improve its platform to improve
to reach the new customer. Sales promotion schemes
like, seminars for dealers, gifts, exchange etc..
Timely delivery is highly appreciable.
Need to spread business hence need to focus on the
rural areas near by Goraya city.
Company should improve its after sale services.
Improve its strategy to attract new customers.
Provide discount and exchange offers.
Improve online advertisement.
Sales promotion is beneficial for the Balaji motors it
helps to increase the sales of the Bajaj bikes.
Balaji motors uses different types of sales
promotional techniques for its Bajaj bikes like cash
incentives, gifts, price discount, tour, seminars,
exchange offer etc. The researcher found that the free
display material is widely used by the agency for its
sales promotion activity.
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on Consumption: Buying More and Consuming it Faster. J.
Mark. Res. Pp. 390-398.
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Promotion, Publicity and Public Relations on the
Performance of Niger State Transport Authority.” Pak. J.
Soc. Sci. 5(2): 182-186.
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Sales Volume in the Beverage Industry: The case Study
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Cult. Interest. 10 (1) :11- 19.
4. Blattberg CR, Neslin SA(1990). Sales Promotion, Concepts,
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What, and How Much to Buy,” Journal of Marketing
Research, 25 (4), 342-355.
6. Kothari CR(2011). Research Methodology: Methods and
Techniques. Second Ed. India: New Age International
Publishers. P. 223.
7. Kotler P, Armstrong G (2008). Principles of Marketing.
10th Edn., Prentice Hall Inc, New York. P. 502. Kotler
P(1983). Marketing Management Analysis, Planning and
Control. New Jersey, Engel Cliffs Inc. P. 486.
8. Kotler, P. (2006). Marketing Management: 1st Edition,
Pearson Education, New Jersey U.S.A. P. 556. Kotler P,
Armstrong G(2002). Principal of Marketing. 10th Ed. New
Delhi: Prentice Hall of India Private Limited. P. 510.
9. Kotler P(2001). Marketing Management, Prentice-Hall of
India Private Limited New Delhi-110001 millennium
Edition. P. 558
10. Loudon DL, Bitta DAJ(2002). Consumer Behaviour. New
Delhi: Tata McGraw-Hill. Nagar K(2009). Evaluating the
effects of consumer sales on brand loyal and brand
switching segments. VISSION-J. Bus. Perspect. 13(4):35-
48.
11. Odunlami IB, Ogunsiji A (2011). Effect of sales promotion
as a tool on organizational performance. J. Emerg. Trends in
Econ. and manage. Sci. (JETEMS). 2(1):9-13.
12. Ogundele OJK(2009). Management and Organization:
Theory and Behaviour (2nd ed). Lagos: Lagos: Printmat
Ventures. P. 723.
13. APCON. Pauwels K, et al. (2002). The Long Term Effects
of Price Promotions on Category Incidence, Brand Choice
and Purchase Quantity. J. Market. Pp. 27-29.
14. Sudhir, K. (2001), “Competitive Pricing Behavior in the
Auto Market: A Structural Analysis,” Marketing Science,
20 (1), 42-60.
15. Srinivasan SS, et al. (2002). Customer loyalty in e-
commerce: An exploration of its antecedents. J. Retail.
78(1):41-50.
16. Stanton WS(1981). Fundamentals of Marketing. United
Kingdom: Metream HIV Inc. Strategies. Englewood Cliffs,
New Jersey: Prentice Hall.
17. Syeda NZR, et al. (2012). “Short Term and Long Term
Impact of Sales Promotion on Organizations’ Profitability:
A Comparative Study between Convenience and Shopping
Goods.”. Int. J. Bus. and Manage. 7(5): 247-255.
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A STUDY ON THE RELATIONSHIP BETWEEN COMPANY
CHARACTERISTICS AND EXTENT OF DISCLOSURE IN SMALL-CAP
COMPANIES
Madhur Joshi*, Dr. B S Bhatia
**
*Research Scholar, Sri Guru Granth Sahib World University, Fatehgarh Sahib, Punjab, India
**Pro-Vice Chancellor, RIMT University, Mandi Gobindgarh, Punjab, India
ABSTRACT
The corporate reporting practices play a very critical role in increasing trust and confidence of the
stakeholders as well as potential investors in the company, which in turn, helps the company in
attracting long-term financial support on continuous basis for its rapid expansion and growth. Current
study is based on a 15 small-cap companies as sample selected from BSE listed 500 companies for the
period of five years i.e. 2013-14 to 2017-18. The objective of the study was to measure the extent of
disclosure in corporate reports and its relationship with company characteristics and financial
performance. The data collected has been analysed using statistical tools like mean and coefficient of
correlation. The study concludes that there is a positive correlation between extent of disclosure and
company characteristics.
Keywords: Disclosure, Corporate Reporting, Mandatory Disclosure, Voluntary Disclosure, Company
Profile, Company Characteristics
INTRODUCTION
Corporate reporting is one of the means of
communication to its various stakeholders not only
about the financial performance but also its
sustainability. It plays a critical role in increasing the
trust and confidence of the stakeholders as well as the
potential investors, which in turn helps the company in
attracting long term financial support on continuous
basis for its rapid expansion and growth. All public
companies are required to meet the minimum
disclosures; they differ substantially in terms of the
amount of additional information that is disclosed to the
capital markets.
One way to improve the credibility of the company is
through disclosures in annual reports which assist
investors in understanding the business resources and
the way they have been employed. The company has
the discretion to make voluntary disclosures in the
annual report that gives rise to the diversity or variation
of inter-company voluntary disclosure. The current
study focuses on measuring the extent of disclosure and
its association with company specific characteristics.
REVIEW OF LITERATURE
A good number of research studies have been
conducted on Corporate Reporting Practices which are
as follows:
Healy Paul M. & Palepu Krishna G. (2001) conducted empirical research on financial reporting and
voluntary disclosure of information by management.
The research concludes that regulated financial reports
are informative to investors, and degree of
informativeness varies systematically with firm and
economy characteristics. Analysts add value in the
capital market through their analysis of firm‟s financial
reporting decisions, forecasts of future earnings.
Mahajan and Chander (2006) analysed fifty software
companies of India for the period of 2004-05. He
examined extent of disclosure in relation to company
characteristics like age, size, profitability, listing status
and leverage. Study concluded that there is significant
relation of disclosure with size, profitability and audit
firm but no significant relation with age, listing status,
shareholding pattern.
Varghese (2007) studied financial reporting by a
sample of 160 listed companies of India for the period
of 2001-02 to 2003-04. Index of 154 items was
developed for studying strategic and non-strategic
information and its relationship with various company
attributes like size, profitability, nature of industry.
Contemporary issues of disclosure were also cover
under study. The study found that large variations are
there in disclosure of informational items and Indian
companies rarely disclosed futuristic information.
Singh (2009) carried out comparative analysis of large-
cap and mid-cap companies of India for corporate
disclosure practices. This study covered the period of
1999-2000 to 2005-06. He concluded his study that
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large cap companies performed better disclosure
practices than mid cap. He also found that large cap
companies have higher disclosure level in relation to
seven company attributes i.e. total assets, sales, net
profit, age, sectors and listing status.
Despina Galani (2011) assessed the level of disclosure
in the annual reports of 43 non-financial Greek firms
listed at Athens Stock Exchange. 100 mandatory
disclosure items index was developed on the basis of
year 2009 annual reports of selected companies for
measuring the association between extent of disclosure
and few firm characteristics using multiple regression
models. Study found significant positive relationship
with size of the firm whereas other characteristics like
age, profitability, liquidity and board composition were
found to be having insignificant association.
Kaur, Gagandeep (2012) conducted her study on
corporate reporting practices by insurance companies in
India for the period of 8 years i.e. from 2002-03 to
2009-10. This study concluded that mandatory and
voluntary disclosure have significant positive
relationship with size of company and net premium
whereas negative association with net profit of most of
the insurance companies. Corporate governance is
better in general insurance companies as compared to
life insurance companies.
Goyal, Neeraj (2014) studied the environmental
reporting practices in Indian corporate sector. The study
is based on the annual reports of 50 companies, taking
10 companies from five different sectors, for a period
of five years from 2007-08 to 2011-12. Result of the
study showed that highest overall disclosures on
environmental information are in cement sector. Study
also concluded positive correlation of environmental
disclosure with age and size of the company where as
negative correlation with leverage of the company.
Mangla, Deep & Isha (2016) Studied the impact of
company characteristics like Firm‟s size, liquidity,
leverage, profitability and age on extent of disclosure
by listed companies. Correlation and panel data
regression tools have been used to measure the impact.
The results depicted that large size and highly levered
firms have a greater extent of disclosure on the other
hand age of the firm and profitability have significant
and positive relation to the extent of disclosure.
RESEARCH METHODOLOGY
The title of the study is „a study on the relationship
between company characteristics and extent of
disclosure in small-cap companies‟.
1.1. Research Objectives
To measure the extent of disclosure in corporate
reporting by selected BSE listed small cap
companies.
To study the relationship between extent of
disclosure and company characteristics.
1.2. Scope of the Study
The scope of study is limited to corporate annual
reports of listed Indian companies. Fifteen small cap
companies have been selected as sample which belongs
to different industries except financial sector. The study
has examined the corporate reporting practices for five
financial years i.e. 2013-14 to 2017-18.Here Corporate
Reporting items have been divided into Mandatory and
Voluntary disclosure items. There are 135 total number
of items in Corporate reporting index out of which 65
are mandatory items and 70 are the voluntary items.
Further the study has been conducted to evaluate the
relationship of extent of reporting with selected
company characteristics which are as follows:
1. Size of the Company in terms of Total Assets
2. Age of the Company from the Year of
Incorporation
3. Sales Turnover
4. Profitability in terms of Profit for the period before
tax
5. Shareholders‟ Funds
1.3. Population and Sample
The population for this study is all the listed companies
of Bombay Stock Exchange & National Stock
Exchange excluding the financial sector as the reporting
requirements for the financial companies are
specialised and regulated by separate set of regulatory
authorities. Fifteen small-cap companies have been
selected as sample for the purpose of study which
belongs to different industry groups based on the nature
of the company. The sample excludes the financial
sector. Stratified sampling has been used for the study.
Market capitalization is the basis for the selection of
companies. The list of Sample Companies is mentioned
below:
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S. No. Company Sector
1 Dish TV India Ltd. Services
2 Century Textiles &Inds. Ltd. Diversified
3 CESC Ltd. Energy
4 Coromandel International Ltd. Chemicals
5 SRF Ltd. Diversified
6 Jubilant Life Sciences Ltd. Healthcare
7 Sterlite Technologies Ltd. Communication
8 Thermax Ltd. Engineering
9 AIA Engineering Ltd. Metals
10 Graphite India Ltd. Engineering
11 NLC India Ltd. Energy
12 JSW Energy Ltd. Engineering
13 Abbott India Ltd. Healthcare
14 SJVN Ltd. Energy
15 Hexaware Technologies Ltd. Technology
1.4. Data Collection
The Corporate Annual Reports of the selected
companies have been collected for the period of five
years for the purpose of study and these were procured
from respective companies‟ websites.
3.5. Analysis of Data
For the purpose of study, Disclosure Index has been
developed on the basis of content analysis of Corporate
Annual Reports and this Disclosure Index includes
various Voluntary and Mandatory items falling under
each of the reporting segments. Total 135 mandatory
and voluntary items have been selected to develop the
index. If the index item is disclosed in the annual
report, then a score of „1‟ is given and if the item is not
disclosed then „0‟ is given as a score.
1. To measure the Extent of Disclosure following
formula has been used:
Extent of Corporate Reporting (%) =
Total score obtained by particular company
Maximum Score obtainable by the company
2. To study the relationship between extent of
disclosure and company characteristics Co-efficient of
correlation has been used.
4. Results of the Study:
4.1 Measurement of Extent of Disclosure
The company wise disclosure has been calculated by
dividing the score obtained by each company in a
particular year with the maximum score i.e. 135 using
an index of disclosure. The average disclosure score of
five years is calculated for each company and Average
disclosure of fifteen companies is calculated for each
year.
The company-wise analysis of extent of disclosure is as
follows:
Table 4.1.1: Extent of Overall disclosure
Small Cap Companies
Extent of Total Disclosure (%)
2013-
14 2014-15
2015-
16
2016-
17
2017-
18 Average of Disclosure
Dish TV India Ltd. 53 54 56 60 61 57
Century Textiles & Inds. Ltd. 66 70 72 72 73 71
CESC Ltd. 69 70 70 70 72 70
Coromandel International Ltd. 72 71 73 75 76 73
X 100
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SRF Ltd. 61 64 65 69 70 66
Jubilant Life Sciences Ltd. 70 71 71 73 73 72
Sterlite Technologies Ltd. 56 60 61 64 65 61
Thermax Ltd. 76 76 76 76 76 76
AIA Engineering Ltd. 74 75 76 77 77 76
Graphite India Ltd. 72 73 73 76 76 74
NLC India Ltd. 79 80 80 81 82 81
JSW Energy Ltd. 75 75 75 76 76 75
Abbott India Ltd. 67 70 71 75 76 72
SJVN Ltd. 75 76 76 76 76 76
Hexaware Technologies Ltd. 55 57 59 63 64 59
Average Disclosure 68 69 70 72 73 71
Table 4.1.1 shows that the average of combined
disclosure score of all the sample companies has
improved over five years‟ time period i.e. from 68% to
73%. Sterlite Technologies Ltd has shown highest
improvement in extent of disclosure from 56% in 2013-
14 to 65% in 2017-18 followed by Dish TV Ltd, SRF
Ltd. and Hexaware Technologies Ltd. whereas NLC
India Ltd. has scored highest average extent of
disclosure at 81%.
Table 4.1.2: Extent of Mandatory Disclosure Score (%)
Small Cap Companies
Extent of Mandatory Disclosure Score (%)
2013-
14
2014-
15
2015-
16
2016-
17 2017-18 Average Disclosure
Dish TV India Ltd. 82 85 86 91 91 87
Century Textiles &Inds. Ltd. 88 91 92 92 95 92
CESC Ltd. 86 86 86 88 91 87
Coromandel International Ltd. 89 88 91 92 95 91
SRF Ltd. 86 91 91 95 95 92
Jubilant Life Sciences Ltd. 88 89 89 94 94 91
Sterlite Technologies Ltd. 85 91 91 94 95 91
Thermax Ltd. 88 89 89 91 91 90
AIA Engineering Ltd. 88 91 91 92 92 91
Graphite India Ltd. 86 89 89 91 91 89
NLC India Ltd. 92 92 92 95 95 94
JSW Energy Ltd. 89 89 89 91 91 90
Abbott India Ltd. 89 92 92 95 95 93
SJVN Ltd. 92 89 89 91 91 90
Hexaware Technologies Ltd. 86 91 91 95 95 92
Average Disclosure 88 90 90 93 93 91
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Table 4.1.2 shows that the average of mandatory
disclosure score of all the sample companies has
improved over five years‟ time period i.e. from 88% to
93%. Sterlite Technologies Ltd has shown highest
improvement in the extent of mandatory disclosures
from 85% in 2013-14 to 95% in 2017-18 followed by
Dish TV Ltd, SRF Ltd. and Hexaware Technologies
Ltd. whereas NLC India Ltd. has scored the highest
average extent of mandatory disclosures at 94%.
Table 4.1.3:Extent of Voluntary Disclosure Score (%)
Small Cap Companies
Extent of Voluntary Disclosure Score (%)
2013-
14 2014-15
2015-
16
2016-
17 2017-18 Average Disclosure
Dish TV India Ltd. 26 26 27 31 34 29
Century Textiles &Inds. Ltd. 46 50 53 53 53 51
CESC Ltd. 53 54 54 54 54 54
Coromandel International Ltd. 56 56 56 59 59 57
SRF Ltd. 37 39 41 44 46 41
Jubilant Life Sciences Ltd. 53 54 54 54 54 54
Sterlite Technologies Ltd. 29 31 34 37 37 34
Thermax Ltd. 64 63 63 63 63 63
AIA Engineering Ltd. 61 60 61 63 63 62
Graphite India Ltd. 59 59 59 61 63 60
NLC India Ltd. 67 69 69 69 70 69
JSW Energy Ltd. 61 61 61 61 63 62
Abbott India Ltd. 47 49 51 56 57 52
SJVN Ltd. 59 63 63 63 63 62
Hexaware Technologies Ltd. 26 26 29 33 34 29
Average Disclosure 50 51 52 53 54 52
Table 4.1.3 shows that the average of voluntary
disclosure score of all the sample companies has
improved over five years‟ time period i.e. from 50% to
54%. Abbott India Ltd has shown highest improvement
in extent of disclosure from 47% in 2013-14 to 57% in
2017-18 whereas NLC India Ltd. has scored highest
average extent of disclosure at 69% while companies
like Dish TV Ltd, Hexaware Technologies Ltd, Sterlite
Technologies Ltd. & SRF Ltd. have quite low average
extent of disclosure below around 40%.
4.2 Extent of Disclosure and Company
Characteristics
To study the relationship between dependent variable
i.e. total disclosure score and independent variables i.e.
company characteristics like Size of the company, Age,
Profitability, shareholders‟ fund and Sales Turnover
coefficient of correlation was used. The results of
analysis are as follows:
Table 4.2.1: Relationship Between Size of Company and Extent of Disclosure
Size of The company (Total Assets) 2013-14 2014-15 2015-16 2016-17 2017-18
Total Disclosure 0.549 0.535 0.539 0.517 0.526
Voluntary Disclosure 0.508 0.529 0.544 0.503 0.537
Table 4.2.1 shows the above findings of the currently
conducted study which concludes that there is a
Moderate Positive correlation (i.e. in between +0.25 to
+0.75) between total disclosure score and size of the
companies as well as between voluntary disclosure
score and size of the companies.
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Table 4.2.2: Relationship Between Age of the Company and Extent of Disclosure
Age of the Company
(Year of Incorporation) 2013-14 2014-15 2015-16 2016-17 2017-18
Total Disclosure 0.144 0.209 0.274 0.255 0.305
Voluntary Disclosure 0.118 0.174 0.213 0.215 0.212
Table 4.2.2 shows the above findings of the currently
conducted study which concludes that in case of total
disclosure, there is a low degree of correlation (i.e. in
between 0 to +0.25)between total disclosure score and
age of the company in 2013-14 & 2014-15 but later on,
it improves to moderate degree of correlation (i.e. in
between +0.25 to +0.75) from 2015-2016 to 2017-2018.
Whereas in case of voluntary disclosure,there is a low
degree of correlation (i.e. in between 0 to +0.25)
between voluntary disclosure score and age of the
company during all these five years‟ time period.
Table 4.2.3: Relationship Between Sales Turnover of the Company and Extent of Disclosure
Sales Turnover (Revenue Gross) 2013-14 2014-15 2015-16 2016-17 2017-18
Total Disclosure 0.329 0.266 0.289 0.336 0.290
Voluntary Disclosure 0.341 0.315 0.319 0.327 0.236
Table 4.2.3 shows the above findings of the currently
conducted study which concludes that there is a weak
but positive correlation between total disclosure score
and Sales Turnoveras well as between voluntary
disclosure score and Sales Turnover.
Table 4.2.4: Relationship Between Profitability of the Company and Extent of Disclosure
Profitability
(Profit for the period) 2013-14 2014-15 2015-16 2016-17 2017-18
Total Disclosure 0.656 0.537 0.054 0.507 0.549
Voluntary Disclosure 0.599 0.523 0.118 0.460 0.509
Table 4.2.4 shows the above findings of the currently
conducted study which concludes that there is a
positive and moderate correlation between total
disclosure score and profitability of the companiesas
well as between voluntary disclosure score and
profitability of the companiesduring all these five
years‟ time periodexcept in the year 2015-16.
Table 4.2.5: Relationship Between Shareholders’ Fund of the Company and Extent of Disclosure
Total Shareholders' Fund 2013-14 2014-15 2015-16 2016-17 2017-18
Total Disclosure 0.626 0.619 0.545 0.502 0.361
Voluntary Disclosure 0.579 0.612 0.583 0.543 0.415
Table 4.2.5 shows the findings of the current study
that there is a strong and positive correlation between
total disclosure score and total shareholders‟ fundas
well as between voluntary disclosure score and total
shareholders‟ fundduring all these five years‟ time
period except in the year 2017-18.
CONCLUSION
On the basis of the analysis of the data of the 15
selected small-cap companies, the main findings with
regard to two research objectives are as follows:
1. All the 15 companies have more than 80%
average of mandatory disclosures.
2. However, when it comes to voluntary
disclosures, no company out of the 15 selected
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small-cap companies fell in above 80% bracket.
5 companies fell in 60-80% bracket and 7
companies fell in 40-60% bracket and rest of
the 3 companies fell in 20-40% bracket with
regards to extent of voluntary disclosures.
3. But when we look at overall mandatory and
voluntary combined disclosures, we find that
only one company fell in above 80% bracket
and two companies fell in 40-60% bracket
while the rest of the 12 companies fell in 60-
80% bracket with regards to extent of overall
disclosures.
4. An overall positive relationship was found
between the extent of disclosures made by the
company and selected company characteristics
during the chosen five years‟ time period.
5. As per the study, a low degree of coefficient of
correlation was found between extent of
disclosures and two specific company
characteristics i.e. age of the company & sales
turnover. Whereas there is moderate degree of
correlation between extent of disclosures and
two other company characteristics viz. size of
the company & profitability of the
company.Only in case of total shareholders‟
fund, a strong correlation between extent of
disclosures and total shareholders‟ fund was
found.
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University, Aligarh (India)
14. Sengupta, P. R. (2006). Current issues in Corporate
Reporting: Theory and Practice, The Associated
Publishers, ISBN: 8184290179, Vol. I.
15. Suttipun Muttanachai (2012), “Triple Bottom Line
reporting in Annual Reports – A Case Study of
Companies listed on stock exchange of Thailand (SET)”,
Asian Journal of Finance & Accounting, ISSN 1946-052X
2012, Vol. 4, No. 1, Pg.No.69-92.
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Reporting. Association of Chartered Certified
Accountants, June 2013.
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A STUDY ON AWARENESS LEVEL OF BANK EMPLOYEES ON
SECURITIZATION OF BANKING LOANS IN INDIA
Reena Rani*, Dr. Manisha Gupta
**, James Kanda
***
*Assistant Professor, Pyramid College of Business & Technology, Phagwara, Punjab, India
**Director, Punjab Institute of Management & Technology, Alour, Khanna, Punjab, India
***Assistant Professor, GNA University, Phagwara, Punjab, India
ABSTRACT
Securitization has treated as an important technique for dealing with non-performing assets in the world. In
India, there has been a sturdy increase in loan disbursement of banks over the last few years and at the same
time there has been a growing mismatch between the development of credit off take and growth in deposits.
In other words, an increase in demand of credit has led to a decline in the amount of liquidity of banks and
financial institutions. This has ultimately formed a vacuity between the demand and availability of finance.
In this situation, when some conservative techniques of financing are either undesirable, there is an option
of securitization. The term securitization may be known as a design of security in any financial transaction
and the process of securitization helps in improving various performance related measures of the banking
institutions by enhancing the loan portfolio of banking institutions. This paper makes an effort to determine
the concept of securitization and awareness level of the concept in banking industry in India.
Keywords: Securitization, SPV, Originator, Structured Finance, DRT’s, SARFAESI
INRODUCTION
Funding is a major problem in front of all financial
institutions and banks. The banks under the usual scheme
for recovering its loans have huge sum of money blocked
in the figure of uncreative assets. Financial engineers and
investment bankers from all over the world are
continually searching and developing various new types
of financial instruments to deal with the recovery and
scarcity of funds. In the recent scenario, there is
enormously spoken about one technique for solving
liquidity problems of banks i.e. “securitization”. It has
come out as the most eye-catching way for arranging
capital in countries like the US, Europe, Asia and Latin
America. Securitization refers to the conversion of non-
performing assets in securities which are marketable and
more liquid than the original loans or receivables which
results in lower the risk, add liquidity and improve
economic efficiency (Prof. Ian Giddy 2001). It can be
explained as a method by which all homogeneous liquid
assets/loans are clubbed together and shifted to
moneymaking securities and sold to investors through the
capital market operation (Yener Altunbas and Leonardo
Gambacorta 2007). Securitization generally refers to
putting together all assets, those are mainly cash-
producing assets in the form of loans, bonds, and
mortgages and after that these assets issued to the capital
markets in the form of securities backed by these
collateral pools (Gopinath, 2010, BIS Review).
Securitization is the advanced technique in which all
homogenous illicit funds or securities are bundled
together on the originator's balance sheet, and then
convert them into the securities with different risk levels
and then sold into the capital markets to investors who
will buy these securities according to their risk-taking
ability with the help of a special purpose entity (SPV).
These securities can be categorized in the form of
securities backed by its assets (ABS), securities backed
by mortgages (MBS), and securities of infrastructure
financing.
BANKING SECURITIZATION IN INDIA
The Indian banking sector is suffering from the increased
burden of bad loans, which results in a decline of
profitability of its commercial banks particularly public
sector banks. In the beginning of the recuperation of
amount overdue to banks and financial Institution Act
1993, there was an immense expectation in the banking
industry that the majority of the nonperforming assets
shall be easy to recover. This act intended to offer for
prompt adjudication and recuperation of debts due to
banks and financial institutions. But this attempt taken by
the Indian government was not enough to deal with this
problem. Most banks in India follow the conventional
way for the recovery of funds like of borrower default on
loans; banks typically re-negotiate the contract. If re-
negotiation fails, then banks sell the pledged property of
the borrower to recover funds. Apart from this for the
recovery of funds, banks can approach Lok Adalats or
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DRT‟s. Over the years, the percentage of debt recovered
through these modes has steadily decreased as given in
the following table.
Graph 1: Trend in Debt Recovery
(Sources: Statistical Tables relating to banks in India, RBI)
While the total percentage recovered has steadily
decreased, it is clear from the graph given above, that
number of cases of non-performing loans and the amount
involved in these cases referred at DRTs has increased
considerably but no significant increase can be observed
in the amount of loan recovered. Securitization comes as
a technique by which banks can get rid off from their
blocked funds. Its results are increasing by year, but still
banks are relying more on the traditional recovery
channels.
REVIEW OF LITERATURE
Ian M.Ramsay (1993) a detailed study was conducted
on financial innovation, and its impact. He studied that
there were many factors which influenced financial
innovation; legal regulation was a major factor among
them. The author had taken securitization as an example
of showing the effects of regulations on it. In the study, it
showed some regulations which had impeded
securitization in Australia were stamp duty in some states
which needed to be abolished.
Nick Davis (2000) a study about securitization in New
Zealand was conducted. He revealed that there are no
real impediments exists in New Zealand from legal,
regulatory, tax or accounting perspective and its legal
environment easily adopted securitization models from
the US and UK. In New Zealand, there is a possibility for
the use of securitization for enhancing fiscal credibility,
mainly in the area of superannuation where sustainability
and policy credibility is crucial determinants of a
successful policy.
Samuel H. Cox, Joseph R. Fairchild and Hal W.
Pedersen (2000) conducted a detailed study on life
insurance securitization and its economic justification for
insurance risk and the study revealed that insurance risks
are repackaged and sold in the capital markets and
investors can allocate their money over these risks more
economically. Securitization makes insurance policies
more efficient and risk transfer and risk sharing, which
leads to better insurance pricing and lower capital costs
for insurers and re-insurers.
V. Sridhar (2002) studied the present stage of
securitization in India and the need for it to grow in India
and his studied that securitization in India is at the
infancy stage and there is an area like Mortgage-Backed
Securities (MBS) in which it holds greater promise to
develop in the future. But still, there are a lot of complex
securitization transactions which are still a dream in the
field of securitization like securitized papers.
Loutskina Elena (2004) conducted a broad study on the
effect of securitization, which is treated as a substitute for
cash and securities for banks. By securitizing loans,
banks, lending ability will increase because securitization
reduces the sensitivity of banks lending. Securitization
also helps banks to enhance their sources of funds.
Suhas Ketkar and Dilip Ratha (2005) study were
mainly focused to discuss the future flow receivables by
focusing the recent developments. The authors found
after doing the study that securitization of future
receivables is a tremendous way to raise finance for
banks and it is very helpful for developing countries too
for boosting their economy.
6 6
3 4
0
14
10
7
3
24
27 27
16 17
1
22
18
12 10 10
0
5
10
15
20
25
30
2012-13 2013-14 2014-15 2015-16 2016-17
Lok Adalats
DRTs
SARFAESI Act
Total
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J David Cummins (2006) the study is mainly focused on
securitization of life insurance policies, pension funds,
and risks involved in it. The study began with an
indication, and examination of underlying principle for
the constitution of asset-backed securities. According to
the author, securitization was treated as a promising
source for value creation in the insurance industry.
Dorota Krupa and Michal Buszko (2015) a descriptive
analysis of securitization investment funds was done by
authors and they also discussed the potential and
directions of the securitization in Poland. After analyzing
statistical data related to the securitization volume of
various areas, they found that the market of securitization
has high growth potential due to an increase in
outstanding debts.
THE NEED OF STUDY
Till now, there is noteworthy knowledge formed by
many researchers in this topic, but no study so far
conducted to know the knowledge of bankers towards the
technique and its benefits.
RESEARCH METHODOLOGY
Research is about searching for new ideas, hidden or
inherent facts or the search for unidentified entities,
quantities or things.
OBJECTIVES OF THE STUDY
To study the concept of securitization and to
examine the need for securitization in the Indian
banking sector.
To identify factors and the amount of their
significance for the support of securitization in
the Indian Banking industry.
RESEARCH DESIGN: Descriptive
Data collection: Qualitative
Population size: All commercial Banks in India
Sample size: 200 Respondents
Coding of questionnaires: To analyze the results, the
coding has been done for responses received in all
surveys with codes ranging from 5 to 1 with the coding
of 5 for „strongly agreed‟ and coding of 1 for the
„strongly disagreed‟.
STATISTICAL ANALYSIS
Factor Analysis: To achieve the objective of this study
Principal Axis method of Factor analysis is used for
extraction of the factors and subsequently rotated using
the Kesar Varimax Normalized Rotation technique for
getting better interpretable results.
FACTORS AFFECTING SECURITIZATION IN
INDIAN BANKING INDUSTRY
The Indian banking industry is in stress as the volume of
bad loans, frauds and weak profitability are increasing
day by day and these results in limiting bank exposure.
Among all, public sector banks are the main sufferer as
the sector has accumulated nearly 88% of the total non-
performing assets of the banking sector compared to their
70% assets-base. Securitization comes as a tool of
pooling a variety of contractual debts (i.e. residential
mortgage, commercial mortgage, auto loans, credit card
loans, and other non-debt future returns) and promotion
of the related cash flows to the investors in the form of
securities according to their risk preferences. The
securitization market in India is not much popular, but in
coming days we can see even public sector banks using it
as a technique to deal with their bad loans.
Table 1 Rotated Factor Loadings and Communalities using Varimax Rotation
Rotated Component Matrix
Communaliti
es Variable
Component
Factor 1 Factor 2 Factor 3
Provide funds for infrastructure growth in the
country. .901 .090 .033 .821
Alternative Risk transfer, management, and Hedging
Strategy. .879 .088 -.061 .784
Help banks in providing world-class services. .859 .008 .029 .738
Provides with better Asset Liability Management. .852 .076 .122 .747
Provide saving on capital that may assist banks in
meeting regulatory capital requirements. .844 .220 -.031 .763
With interest swaps and turnover, the income of
banks‟ increases by which their profitability goes up. -.097 .955 .018 .922
Banks can become competent to maintain its capital
adequacy norms with the help of securitization, .182 .833 -.026 .727
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which helps to deal high-risk assets by lower-risk
assets.
Banks can obtain a better source of funds. .086 .811 -.062 .669
Allows restructuring of portfolios and of asset
composition. .034 .734 -.107 .551
Can modify and reduce banking capital/solvency risk
requirements. .112 .648 .282 .512
Provides banks with the necessary funding essential
for tapping rural markets. .173 .618 -.124 .427
Helps in Improving Financial indicators like Interest
Income, Total Income, Investment, Net Worth and
Loans.
.016 -.191 .930 .901
Replacement of non-performing assets with liquid
assets which improve the liquidity position of banks. .015 .109 .822 .689
It provides banks with an alternative source for
funding. .043 -.066 .822 .681
Securitization has the potential to lower the funding
cost. -.108 -.130 .808 .682
Banks can generate more credit and be able to shift
from one portfolio of investment to another with
securitization funds.
.113 .134 .795 .662
Eigen Value 3.881 3.763 3.634
% of variance explained 24.259 23.516 22.711
Cumulative % 24.259 47.775 70.485
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser
Normalization
Communality Analysis: The proportion of variation in a
variable explained by all the factors combined is called
communality of the variable/attribute. It is calculated as a
sum of squares of factor loadings for each variable and is
reported in the last column of table 5.2.2. Communality
Analysis indicates that whether the model explains most
of the variation of those variables or not.
The result of the rotating component of „benefits of
securitization to banks‟ identify three important
underlying components which are most correlated. The
first factors with high loadings are „alternative means of
investment‟. The attributes that have high loadings on
this factor are, provide funds for infrastructure growth in
the country (.901), provides risk transfer, management
and hedging strategy (.879), help banks in providing
world-class services (.859), better asset-liability
management (.852). The communality is 24.259 percent,
which means that 24.259 percent of the variance in any
one of the original variables, which is being captured by
extracted factors. The second factor with high loadings is
„alternative funding source‟ with attributes that interest
rate swaps results in an increase in profitability (.955),
banks become able to maintain capital adequacy norms
(.833), banks can obtain a better source of funds (.811),
securitization allows restructuring of portfolios (.734).
The communality of the factors is 23.516 percent, which
means approximately 23.516 percent of the variance in
anyone of the original variable, which is being captured
by extracted factors. The third factor with high loadings
is „securitization helps in improving liquidity.‟ The
attributes that have high loadings on this factor are,
securitization helps in improving financial indicators of
banks like interest income, net worth, and investments
(.930), securitization improve banks‟ liquidity by
converting illiquid funds into liquid (.822), has the
potential to lower funding cost (.808). The communality
of all factors is 22.711 percent.
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Table 2 Rotated Factor Loadings and Communalities using Varimax Rotation
Rotated Component Matrix
Communalities Variable Component
Factor 1 Factor 2
Highly rated and credit improved securities provide safety as well as capital
savings on investment for investors. .936 .039 .877
Investors can select securities with a relatively lower or a higher risk portion, as
per their risk-taking ability. .923 .152 .875
In securitization, additional assurance, and safety provided by the “Pool
Servicer”. .863 .195 .783
Securitization provides an additional option for diversifying its debt portfolio. .495 -.140 .264
Securitization allows investors to structure the timing of their cash flows
according to needs. .136 .892 .814
Provide investors with market-related yields without compromising their credit
yield. .084 .847 .724
Improving Transparency .092 .830 .698
Eigen Value 2.751 2.284
% of variance explained 39.306 32.623
Cumulative % 39.306 71.929
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
The benefits are selected to represent the assorted
components enhancing assorted benefits of securitization
to investors. The first factor that has high loadings is
„Providing investment avenues‟. The attributes that have
high loadings on this factor are, high rated and credit
improved securities provide safety as well as capital
savings on investment for investors (.936), Investors can
select securities according to their risk acceptance level
(.923), securitization investment provides additional
safety by pool servicer (.863) and securitization provide
investors an additional opportunity for diversifying their
funds (.495). The communality of the factors is 39.306
percent, which means approximately 39 percent of the
variance is being captured by extracted factors. The
second factor i.e., „safety to investors‟ and the attributes
that have high loadings are securitization allows
investors to structure the timing of their cash flows
according to needs (.892), make available investors with
market-related yields without compromising their credit
yield (.847) and improves transparency for investors
(.830). The second factor explained 32.623 percent of
variance in the data.
Table 3 Rotated Factor Loadings and Communalities using Varimax Rotation
Rotated Component Matrix
Variable Component
Communalities Factor 1 Factor 2
Foreign investors are disallowed in the Indian securitized instruments. .948 -.034 .901
Transaction costs, transfer fees, and stamp duty are high in securitizations
process. .890 .079 .797
There is an absence of a secondary market in India relating to securitized
instruments. .818 -.029 .671
It is initially complex and time-consuming process. .802 .074 .649
Lack of adequate and affable Legal framework in the country relating to
securitization. .781 -.150 .632
Investors may be slow in accepting these securities because of the lack of -.047 .951 .907
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awareness.
There is low demand from the investor for long tenor receivables and Pension
funds. .061 .828 .689
Lack of transparency due to inadequate disclosures. .188 .764 .620
Lack of adequate laws governing the rights and liabilities of the parties. .061 .659 .438
The lacks of investor base securitization as banks are investing only in
meeting Priority Sector Lending (PSL) -.159 .656 .456
Eigen Value 3.684 3.075
% of variance explained 36.842 30.751
Cumulative % 36.842 67.594
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
The problems are chosen to represent the various
problems faced by banks while implementing
securitization in India. It has been extracted on account
of high loadings of attributes, „lack of securitization
popularity in India‟. The attributes that are correlated and
have higher loadings on this factor are foreign investors
are not allowed to invest in Indian securitization
instruments (.948), the cost of transactions, credit rating
agencies, transfer fees, and stamp duty are high in
securitizations process in India (.890), there is an absence
of a secondary market for securitization instruments
(.818), the process is time-consuming and costly (.802)
The second attributes i.e.‟ lack of interest from the
investors‟ represents the factors with high loadings are a
lack of awareness among investors about the subject of
securitization (.951), low demand from investor for long
tenor receivables and Pension funds (.828), lack of
transparency due to inadequate disclosure (.764). The
second factor explained 30.751 percent of the variance in
the data.
Table 4 Rotated Factor Loadings and Communalities using Varimax Rotation
Rotated Component Matrix
Variable
Component Communalities
Factor 1 Factor 2
Conservative regulations are needed to be abolished from the securitization
market like boundaries on assignments, the prevention of re-securitization,
limitations on insurance and retirement funds, restraining first-loss
provisions, etc.
.951 .057 .908
Securitization will be likely to play a major role in the future development
of the Indian Banking Industry. .897 .258 .871
It is still a need to be applied by public sector banks in India. .040 .920 .847
Tax-related disincentives should be resolved as they are ostracizing
investors like Mutual fund Companies, and banks. .270 .843 .784
Eigen Value 1.784 1.626
% of variance explained 44.603 40.659
Cumulative % 44.603 85.261
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
The variables are chosen to represent the various
components enhancing Future of Securitization in
Banking in India. The result of the rotated component
from under the table identifies two important underlying
components which are most correlated. It has been
extracted on account of high loadings on attributes
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„relaxation of regulations lead to growth‟. The attributes
that are correlated and have higher loadings on this are
Conservative regulations are needed to be abolished from
the securitization market (.951) and securitization will be
likely to play a major role in the future development of
the Indian Banking Industry. The first factor explained
44.603 percent of the variance. The second attribute for
„initiative needs to be taken by the government‟. The
factors those are correlated and have high loadings on
this are securitization needs to be applied by public sector
banks in India (.951) and tax-related disincentives should
be resolved as they are the main hurdles for securitization
growth (.843). The second factor explained 40.659
percent of the variance.
CONCLUSION
This research highlights the possibility that securitization
of loans could be a feasible option to strengthen the
capital position of banks and financial companies
operating in India. In India securitization transactions
have performed well and Indian regulators have played a
key role in ensuring vigorous performance. The Indian
government, along with the central bank of India is
issuing new recommendations to accelerate the use of
securitization among banks and investors and many
recommendations are also done to speed up the growth of
housing finance securitization and retail securitization.
Apart from this, there is a heavy burden of non-
performing assets for commercial public sector banks,
and the top-ranked public sector bank i.e. State Bank of
India is also deciding to enter the securitization market
soon.
REFERENCES
1. RAMSAY IAN M. (1993),”Financial Innovation and
Regulation: The Case of Securitisation” Journal of Banking
and Finance Law and Practice, September, pp 169-174.
Also available at SSRN-id 928795 pdf.
2. Davis Nick (2000),” Securitisation: A Public Policy Tool?”
Treasury Working Paper 00/8.
3. Cox Samuel H., Joseph R. Fairchild and Hal W. Pedersen
(2000),” Article on The Economics of Insurance
Securitisation” September/October pp 48-56, available at
www.contingencies.org.
4. Sridhar V. (2002),” Securitisation in India- Opportunities
and Obstacles- A Discussion Paper” available at Vinod
Kothari.com/wp-content/uploads/2013/12/india-article-
iime.pdf.
5. Elena Loutskina (2004),” Does Securitisation affects Bank
Lending? Evidence from Bank Responses to Funding
Shocks” The Quarterly Journal of Economics, MIT Press,
2004, pp 7.
6. Ketkar Suhas and Dilip Ratha (2005),” Recent Advances in
Future Flow Securitisation” The Financier, Vol. 11/12,
2004-2005 also available at http:/www.the financier.com.
7. Cummins J David (2006),” Securitisation of life insurance
assets and liabilities” The Wharton School, University of
Pennsylvania, Philadephia,3 June 2004, also available at
website http:/ fic.wharton.upenn.edu/fic/paper/04/403.pdf.
8. Krupa Dorota and Michal Buszko,” Securitisation funds in
Poland in Investment Fund Companies Perspective” Dorota
Krupa and Michal Buszko/Procedia Economics and Finance
30 August 2015, pp 379-387 also available at
www.sciencedirect.com.
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A STUDY OF ECONOMIC AND LEGAL ASPECT OF BITCOIN IN INDIA
Mankaj Mehta*
*Assistant Professor, PG Department of Commerce, Multani Mal Modi College, Patiala, Punjab, India
ABSTRACT
Bitcoin is a decentralized virtual cryptocurrency which provide a solution to the double spending problem
without involving any trusted third-party intermediary. The rising craze for bitcoin has come under the
government's lens. Bitcoin can be an easy way to evade tax or snare unsuspecting small investors in ponzi
schemes. The government has begun a crackdown on illegal uses of this unregulated virtual currency. The
present paper aims to study the legal and economic aspects related to Bitcoins in India using secondary data
for the study. The problem with bitcoins is that not all the countries have legalized its use. For consumers,
some countries like Australia, Canada, Finland and Germany have legalized its use and have made it clear to
apply normal earned income rules on Bitcoin, while many countries have yet not made a clear statement with
the legalization and use of bitcoin. Countries like China, Japan etc. have adopted a restrictive approach .On
the hand Thailand has made the use of bitcoins illegal. The non-uniformity in the legalization of bitcoin in
different countries is a major issue. In India the finance minister during his budget speech on February 01,
2018 has cleared that the cryptocurrencies are not recognized as legal tender in India. Moreover the various
government has issued tax notices to the investors of the cryptocurrencies and has also warned its people to
be aware while investments in digital currencies.
Keywords: Bitcoins, Cryptocurrency, Legal
INTRODUCTION
Bitcoin is a decentralized virtual cryptocurrency,
launched in 2009 by an unidentified person known as
Satoshi Nakamoto. It does not rely on any central
services for managing the creation or flow of money. It
relies on cryptographic algorithms in order to prevent
abuse of the system. It is abbreviated as BTC and is
powered by a peer-to-peer network in the public domain
both in terms of issuing and valuation. Bitcoins provide a
solution to the double spending problem without
involving any trusted third-party intermediary. It does
this by distributing the transaction information among all
the users on the network. Every transaction in a bitcoin
economy is contained in a block which also contains the
information about the previous block, forming a block
chain. This block chain is available over the bitcoin
network for users to verify that whether the bitcoin being
transacted has been previously spent or not. The
thousands of users present over the network act as the
intermediary and each user of bitcoin owns a set of
private and public key. Generally used terms related to
bitcoins are Address, Transactions, Block, Wallet, Miner
and Block-chain etc. (“Effect of Bitcoin,” 2017) the
rising craze for bitcoin has come under the government's
lens. Bitcoin can be an easy way to evade tax or snare
unsuspecting small investors in ponzi schemes. The
government has begun a crackdown on illegal uses of
this unregulated virtual currency. There is a suspicion
that some so-called cryptocurrencies and bitcoin
investments may actually have nothing to do with any
block chain-developed virtual currency and are just new
ways devised by scamsters to ride the wave and what
they may be offering could be 'e-ponzi' schemes (“Here's
Why India,” 2017).
OBJECTIVES
This research paper has the following objectives:
1. To study the legal and economic aspects related to
Bitcoins in India.
2. To know about the legal position of Bitcoins in various
countries.
RESEARCH METHODOLOGY
The main objective of the study is to know about the
working of bitcoins and various provisions related to the
bitcoin in India and other countries. The secondary data
has been used for the present paper.
HOW TO INVEST IN BITCOINS
In India, you can purchase Bitcoin from Zebpay
exchange. Zebpay has Android and iPhone app which
lets you link your bank account for quick transfers. You
can buy bitcoins by making a payment to Zebpay's bank
account. You can also withdraw the money to your bank
account, and track data on Bitcoin valuation in the
country. Sandeep Goenka, CEO of Zebpay, one of the
largest bitcoin exchanges in the country had said,
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"Indians are enquiring about bitcoins as an alternative
and safe investment option. They are downloading
Zebpay as they want to experiment with digital
currencies. There has been a 50% increase in Zebpay
downloads (Dhar, 2017)." Officials at Zebpay, India's
leading bitcoin exchange said the industry was adding
near 200,000 users every month with an estimated trade
volume of about 20 billion Indian rupees ($315 million).
Aman Kalra, marketing head of Coinsecure, a bitcoin
exchange in New Delhi, said more than 150 bitcoins
were changing hands every week through its platform.
The company has 100,000 registered users and is now
launching a platform to sell ethereum and other digital
currencies (“Government Sends Tax,” 2018).
ECONOMIC IMPACT OF BITCOINS
Alternative currencies such as Bitcoin or the ones backed
by Gold have one feature that is particularly charming in
the post-QE world – the promise of finite supply and nil
dependence on central planners. Such currencies are
supposed to be a free-market counter to „deep state‟
monetary interference. But the concept of a finite
monetary supply system deserves a deeper review. While
the merits are relatively well-known, it is time we look
closer at some demerits of such a fixed supply system.
Many such demerits are well-documented but not
widely-appreciated. There is no fiat currency and central
bankers are jobless. No authority in the world can create
currency out of thin air and indirectly devalue/deflate the
hard-earned currency stashed in our wallet (Sethi, 2017).
On November 8, the day Prime Minister Narendra Modi
announced that Rs 500 and Rs 1,000 banknotes would
cease to be legal tender; bitcoin was priced at about Rs
52,000 on Unocoin and Zebpay. The surge in interest for
the e-currency came as it evolved as an alternative and
safe investment option. Google search data show that
Indians' search for the keyword "Bitcoin" was at its peak
soon after note ban. But increasing demand has also
raised security concerns. Experts say there was a rush
following the cash crackdown announcement as many
traders exchanged their black money against bitcoins.
The demand of the largest and oldest among crypto
currencies is high as it is untraceable by security agencies
and does not require physical storage that can be raided
by authorities (Narayan, 2017). The government has sent
tax notices to tens of thousands of people dealing in
cryptocurrency after a nationwide survey showed more
than $3.5 billion worth of transactions have been
conducted over a 17-month period. The government has
issued repeated warnings against digital currency
investments, saying these were like "Ponzi schemes" that
offer unusually high returns to early investors. But it has
not so far imposed curbs on an industry estimated to be
adding 200,000 users in India every month
(“Government Sends Tax”, 2018).
POSITION OF BITCOINS IN VARIOUS
COUNTRIES
Countries like Australia, United States, Canada etc. have
legalized bitcoins operations within their territories.
While countries like China, Japan etc. have adopted a
restrictive approach. China has restricted only financial
institutions from dealing directly in bitcoins without
making it illegal (Jhala, 2014). Chinese citizens are still
investing in Bitcoin and the cryptocurrency market
despite the government‟s heavy crackdown. In
September 2017, Chinese cryptocurrency exchanges
BTCC China, Huobi and OKCoin were ordered by the
government to shut down their businesses. At one point,
executives of the three cryptocurrency exchanges were
prevented from leaving the country, due to a government
investigation into local cryptocurrency exchanges. In
Hong Kong, it is relatively easy for investors to set up
businesses. With less than $1,000, businesses can be
legally created, which allows the opening of business
bank accounts at Hong Kong-based financial institutions.
Beginning in December 2017, many Chinese investors
moved their funds from their Chinese bank accounts to
Hong Kong bank accounts and started to trade
cryptocurrencies more actively, effectively bypassing
China’s restrictions (Young, 2018). In November 2013,
the United States Senate held a committee meeting to
discuss virtual currencies. It was stated that bitcoin is a
legal means of exchange and that online payment
systems, both centralized and decentralized, offer
legitimate financial services. Further, the Internal
Revenue Service made its position clear on bitcoin in
March 2014 stating that it will consider bitcoin a form of
"property" rather than a currency. Thus, every bitcoin
transaction would be considered as capital gain and
accordingly taxed (Narayan, 2017). While
cryptocurrencies have been a talking point at previous
World Economic Forum conferences, they have come to
the fore in Davos this year. Following a breakout year
which saw Bitcoin rise to an almighty high of $20,000,
alongside the massive growth of other altcoins, it’s
hardly surprising that one of the major talking points at
WEF would be the future of cryptocurrency. UBS
Chairman Axel Weber said as much in an interview with
Bloomberg, saying his firm would not recommend
cryptocurrency adoption or investment to its clients until
there is clarity on future regulatory action. Renowned
American investor Bill Gross suggested that the rise of
bitcoin and crypto currency has signalled a move away
from centralized institutions governing and controlling
money. People seem to be putting their trust in
technology over government-run establishments
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(Jankinson, 2018). Joseph Stiglitz, well-known
economist, is bragging to the Davos crowd that Bitcoin is
used for "secret use cases" & that fiat currency is
superior. My theory is that this type of fear-mongering
actually drives more adoption of Bitcoin &
cryptocurrencies (Jankinson, 2018). Bitcoin’s rise may
reflect, for better or worse, a monumental transfer of
social trust: away from human institutions backed by
government and to systems reliant on well-tested
computer code.
(https://www.nytimes.com/2017/12/18/opinion/bitcoin-
boom-technology-trust.html.) As the 68th US Secretary
of State John Kerry told Cointelegraph earlier this week
at the summit, the sheer value of capital that has been
poured into the overall cryptocurrency market has made
it impossible to ignore.
LEGAL POSITION OF BITCOINS IN INDIA
The main problem with determining the legal status of
how bitcoins should be handled is whether they are a
currency, security, commodity, or something completely
different. While bitcoins are commonly referred to as a
"currency" as they have many common characteristics of
one, the legal definition requires a currency to be issued,
used and accepted by a country, which is not the case
with bitcoin. Another problem with bitcoins is that not all
the countries have legalized its use. For consumers, some
countries like Australia, Canada, Finland and Germany
have legalized its use and have made it clear to apply
normal earned income rules on Bitcoin, while many
countries have yet not made a clear statement with the
legalization and use of bitcoin. On the hand Thailand has
made the use of bitcoins illegal. The non-uniformity in
the legalization of bitcoin in different countries is a major
issue (“Effect of Bitcoin”, 2017). In March, RBI Deputy
Governor R Gandhi warned against crypto-currencies
such as Bitcoin. "They pose potential financial, legal,
customer protection and security-related risks," Gandhi
said. "Payments by such currencies are on a peer-to-peer
basis and there is no established framework for recourse
to customer problems, disputes, etc. Legal status is
definitely not there," he added (Dhar, 2017). As
mentioned above, bitcoins are not authorized as yet but
there is scope for them to be legalized under different
legislations. As per the Foreign Exchange Management
Act, 1999, currency is defined as "all currency notes,
postal notes, postal orders, money orders, cheques, drafts,
travellers cheques, letters of credit, bills of exchange and
promissory notes, credit cards or such other similar
instruments, as may be notified by the Reserve Bank."
According to the definition, RBI has the power to include
bitcoins within the definition of currency. Currency other
than "Indian currency" is termed as "foreign currency",
and regulated by foreign exchange laws. Most likely
bitcoins can be governed by foreign exchange laws.
Further, Bitcoins can also be included within the
definition of "security" which states that "such other
instruments as may be declared by the Central
Government to be securities". Further, the Indian
Copyright Act, 1957, defines the term "computer
programme" as "a set of instructions expressed in words,
codes, schemes or in any other form, including a machine
readable medium, capable of causing a computer to
perform a particular task or achieve a particular result".
Having gone through the various definitions, it can be
concluded that there is enough scope for legalizing
bitcoins. One has to wait and watch as to which approach
the Indian government takes (Jhala, 2014). In the Union
Budget 2018, Finance Minister Arun Jaitley reiterated
that the cryptocurrencies are not recognised as legal
tender. During his budget speech, the Finance Minister
said, “The Government does not consider crypto-
currencies legal tender or coin and will take all measures
to eliminate use of these crypto-assets in financing
illegitimate activities or as part of the payment system.
However, Jaitley also added that the government would
try and explore the blockchain technology, which drives
bitcoin and other crypto-currencies. The recognition of
blockchain technology for future use in the digital
economy has received positive reactions from the
industry. Though the budget does not specifically talk
about how blockchain will be explored, it should be
noted that in digital economy the major use for this has
been around crypto-currencies like Bitcoins (“Budget
2018”, 2018).
CHALLENGES AND ISSUES
The form of cryptocurrencies is not free from some
financial problems and security concerns. I analyzed
several studies and cryptocurrency platforms and also
observed some cryptocurrency selling forums in order to
explore challenges and issues that are exist in such
virtual phenomenon. The main problems and impacts of
cryptocurrency can include:
Security threats: Hackers and malicious users can create
as much as they want from virtual currency if they break
the system and know the method of virtual currency
creations. This will lead to the ability to create fake
virtual currency or steal virtual currency by just changing
the accounts balances. For example, selling in-game
virtual items and virtual currency is against World of
Warcraft (WoW) game policies. Therefore, many users
log into WoW gold selling websites to buy virtual gold in
order to pay for virtual items that they need. Many of
WoW gold selling websites are not reliable and they are
vulnerable to hacking and many users are complaining
about paying real money for nothing or for fake virtual
currency.
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Collapse concerns in cryptocurrency systems:
Unlimited issuing of virtual currency in the variety
virtual communities will lead to economic problems
since its issuing is not based on the demand and supply.
It is possible for some providers such as Second Life to
issue unlimited Linden Dollars and increase their virtual
items prices in order to gain more real revenues. On the
other hand, it will suffer from inflation and economic
issues leading to collapse in the virtual currency system.
Impact on real monetary systems: Since some virtual
currency systems are connected with real world monetary
systems, they may affect the demands and supply
facilities of real world money. For example, enabling
users to purchase virtual and real goods and services with
virtual currency in some platforms may reduce the
demands on real money. Users will no longer depend on
real money to buy what they want and they will use
virtual money instead. On the other hand, some platforms
enable users to exchange their virtual currency with real
currency and this will increase the demands on real world
currency. This fluctuation will affect on the real
monetary systems.
Gold farming risks: Gold farming term is very popular
in China and developing countries. Gold farmers are
players who play in social games such as World of
Warcraft in order to gain gold, which is virtual currency
of the game, and then sell it for real money. The targeted
buyers are the players who do not have enough time to
play and compete for gaining virtual currency. In fact,
huge cash flow is generated from gold farming process
and it is not controlled and regulated. This will increase
fraud and financial risks where virtual currency is
exchanged with real money in unreliable environment.
Fluctuation in virtual currency value: According to
Chow and Guo study, it is observed that when the
popularity of a virtual community drops, the value of its
virtual currency will be devalued. For example, users
who own 1000 units of virtual currency can buy from
variety of 100 items. In case the provider of that virtual
currency drops, users can only buy from 10 items with
their 1000 units since dropping will be reflected in fewer
goods and services especially in closed virtual
communities.
Money laundering: Money laundering is one risk that is
very likely to rise with the use of VC especially with
platforms that enable users to exchange virtual currency
with real money. In practical case occurred in Korea in
2008, the police arrested a group of 14 persons for
laundering $38 million obtained from selling virtual
currency. The group converted the amount of $38
million, which is generated by gold farming, from Korea
to a paper company in China as payments for purchases.
Unknown identity risks: Since creating an account in
most of virtual currency platforms such as social games
and social networks is not authenticated, financial
transactions cannot be monitored very well. Gamers and
users can create more than one account with unknown
identities and use them for illegal transactions. There is
no way to recognize the source of creating or cashing out
the virtual currencies. This leads to inability to track the
transactions in case of money laundering suspicion.
Moreover, unknown identity will enable criminals to get
paid with virtual currency for their crimes.
Black market for cryptocurrency: The financial
position of some social games such as Second Life and
World of War craft are mature enough to create black
market for buying and selling their virtual currency. The
increasing popularity of virtual currency in online
environment has led to a thriving black market for
trading virtual currency with real money. By observing
several social games’ forums, some fraud cases have
been raised and discussed between users. For example,
when a gamer decides to quit from a game, he/she may
want to sell the owned virtual currency by offering them
in the game’s forums. The way of receiving the payments
is risky since many malicious users may not complete the
payment or they dispute after paying. In this case, they
will get their money back plus the virtual currency.
CONCLUSION
Every new currency has to face an uphill battle legally
and technically. Though the bitcoin is a huge step
towards decentralized digital currency but it is not a fiat
currency. Any currency in the world has government or
its institutions‟ backing which the bitcoins lacks. The
value of bitcoins is highly volatile in nature as it has
decreased from $20000 approximately to $ 6000 (The
Guardian). The new head of the Bank for International
Settlements, Agustín Carstens, also said bitcoin
threatened to undermine public trust in central banks and
posed a threat to financial stability, and he signalled a
global clampdown. In India the finance minister during
his budget speech on February 01, 2018 has cleared that
the cryptocurrencies are not recognized as legal tender in
India. Moreover the various government has issued tax
notices to the investors of the cryptocurrencies and has
also warned its people to be aware while investments in
digital currencies. Thus the bitcions are not legal tender
in India.
REFERENCES
1. Effect of Bitcoin in India. (2017, October 17). Retrieved
from https://www.ukessays.com/essays/economics/effect-
bitcoinindia-8223.php
2. Here's why India has decided to crank up its crackdown
against Bitcoins. (2017, December 19). Retrieved from
https://economictimes.indiatimes.com/news/economy/polic
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y/heres-why-india-has-decided-to-crank-up-its-crackdown-
againstbitcoins/articleshow/62131052.cms
3. Dhar, K. (2017, Dec 19). How to buy and sell bitcoins? Are
bitcoins legal in India? Retrieved from
http://www.businesstoday.in/current/economy-politics/how-
to-buy-bitcoins-in-india-sell-legal-in-india-
price/story/253734.html
4. Government sends tax notices to cryptocurrency investors
as trading hits $3.5 billion. (2018, January 19). Retrieved
from https://timesofindia.indiatimes.com/business/india-
business/government-sends-tax-notices-to-cryptocurrency-
investors-astrading-hits-3-5-
billion/articleshow/62570352.cms
5. Sethi, P. (2017, January 8). Are there any effects of the
Bitcoin on the economy? Retrieved from
https://www.quora.com/Arethere-any-effects-of-the-
Bitcoin-on-the-economy
6. Narayan, R. (2017, May 26). What is the future of bitcoin
economy with respect to India? Retrieved from
https://www.quora.com/What-is-the-future-of-bitcoin-
economy-with-respect-to-India
7. Jhala, K. (2014, April 30). India: Bitcoins - Legal Or Illegal
In India?. Retrieved from
http://www.mondaq.com/india/x/310426/Financial+Service
s/Bitcoins+Legal+Or+Illegal+In+India [8]. Young, J.
(2018, January 26). How Chinese Bitcoin Buyers Are
Getting Around Government Ban. Retrieved from
https://cointelegraph.com/news/how-chinese-bitcoin-
buyers-are-getting-around-government-ban#
8. Jankinson, G. (2018, Jan 26). Twitter Reacts to Crypto Fear-
Mongering at Davos WEF. Retrieved from
https://cointelegraph.com/news/twitter-reacts-to-crypto-
fear-mongering-at-davos-wef
9. Budget 2018: Bitcoins, crypto-currencies illegal, but govt to
explore Blockchain. (2018, February 01). Retrieved from
http://indianexpress.com/article/technology/budget-2018-
bitcoins-other-crypto-currencies-illegal-but-govt-to-
exploreblockchain-5047639/
10. Monaghan, Angela. (2018, February 06) Bitcoin price falls
below $6,000 as banker signals crackdown. Retrieved from
https://www.theguardian.com/technology/2018/feb/06/bitco
in-price-crackdown-bis-cryptocurrency.
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JOB SATISFACTION OF EMPLOYEES IN SHREE GANESH EDIBLE PVT. LTD.
Ritika Sharma*
*Student,
A.S. College, Khanna, Punjab, India
ABSTRACT
Job satisfaction is an important factor used to motivate the employees to work harder. It is generally said
that, “A happy employee is a productive employee.” A happy employee is mostly satisfied with his job.
Therefore, job satisfaction can be influenced by the ability of a person to complete the required tasks, the
communication level in the organization and the way of management treats their employees. When a person
says that he has job satisfaction, it means that he really likes his job, feels good about job and values his job
highly. It is the level of contentment a person feels regarding their job. So, job satisfaction is the collection of
feelings and beliefs that people have about their current job. A highly satisfied employee has better physical
and mental well being. The study tries to evaluate how human resource factors affect the satisfaction level of
employees in Shree Ganesh Edible Pvt. Ltd. It also assesses how various factors affect the satisfaction level
of employees in the organization. The study also attempts to finding the challenges faced by employees in the
company and provide some suggestions regarding this.
Keywords: Job satisfaction, motivation, promotion, supervision
INTRODUCTION ABOUT JOB SATISFACTION
It is no doubt that human beings are important assets of
an organization. The thoughts and feelings of the
employees strongly influence their behaviour on the job.
These feelings and thoughts are the part of their mental
state and these feelings are used as inputs to get
decisions. So, it is very essential to understand more
about their conscious states. For efficient and effective
functioning of an organization job satisfaction is of great
significance. As people spend major portion of their lives
in working place or environment and they also want that
proportion of their lives to be pleasant, agreeable and
fulfilling. Job requires interaction with co-workers and
supervisors follow organizational rules and policies,
performance standards, living with working conditions.
Job satisfaction is not same as motivation, although it is
clearly linked with motivation. Job design aims to
increase job satisfaction and performance methods
include job rotation, job enlargement and job enrichment.
Besides these, management style, culture, employee
involvement, empowerment and autonomous workgroups
also influence the satisfaction level of employees.
INTRODUCTION ABOUT SHREE GANESH EDIBLE PVT. LTD.
CIN U15143PB2006PTC029802
Company name Shree Ganesh Edibles Private Limited
Company status Active
RoC RoC- Chandigarh
Registration number 29802
Company category company limited by shares
Class of company private
Date of incorporation 27 February 2006
Company sub category non- government company
Activity Production. Processing, preservation of meat, fish, fruit
vegetables, oils and fats.
MEANING OF JOB SATISFACTION:
Job satisfaction can be defined as a process in which the
employees feel satisfied with their work. It is an end
feeling of an employee after performing his task. The
feeling may be positive or negative depending upon
whether the need of employee is satisfied or not. Job
satisfaction also relates to the working conditions
provided by the employer to the employee like good
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infrastructure, proper working hours, lighting,
ventilation, drinking water and urinal facilities, healthy
relationship with seniors, subordinates and per group and
also with salary packages. All these facilities motivate
the employees to do better work for his organization. So,
job satisfaction refers to the person’s feelings of
satisfaction on the job, which motivate the employee to
work with great zeal, confidence and enthusiasm which
will be helpful for him to attain the set goals of the
organization.
FACTORS INFLUENCING JOB SATISFACTION IN SHREE GANESH EDIBLE PVT. LTD.
ORGANIZATIONAL FACTORS
Salaries and wages: Salary and wages plays an
important role in fulfilling one’s needs.
Promotion chances: Promotion includes
positive changes like: higher salary, less
supervision, status and increased responsibility.
Company policies: Company policies regarding
compensation and benefits also influence
satisfaction level of employees. A feeling of
employee satisfaction is felt by attaining fair and
equitable rewards.
WORK ENVIRONMENT
Supervision: Supervision is the important source
of job satisfaction. In Shree Ganesh Edible
company behaviour of supervisor towards their
employees is fairly fine.
Work group: The nature of work group also
influence the job satisfaction level of employees.
If the co-workers are friendly and co-operative
then the employees are satisfied with their job.
Working conditions: Working conditions
particularly physical environment affects
satisfaction level of employees on the job.
WORK IT SELF
Job scope: Job scope means job content. It
provides the amount of responsibility, feedback
etc.
Autonomy and freedom: Autonomy and
freedom is very important in every organization
to achieve certain specific goals. If there is lack
of autonomy and freedom in any organization it
leads to helplessness and dissatisfaction.
Status: It refers to social status of a person.
Management may create some status symbols in
the organization. In Shree Ganesh Edible Pvt.
Ltd., various status symbols provides to
employees like mobile facility to the managers,
personal car, superior furniture, office, peons etc.
PERSONAL FACTORS
Age: Senior people feel more satisfied with their
job as compared to young employees because
they are more mature and they are realistic rather
than idealistic.
Length of service: Employee with longer tenure
of job feel more satisfied with their job tenure
assures job security to the employees.
Personality: Some personality traits are directly
linked to job satisfaction such as: self- assurance,
self-esteem, maturity, decisiveness, challenge,
responsibility etc.
Education/ intelligence: Too much
education/intelligence i.e. more than the job
required will lead to dis- satisfaction.
REVIEW OF LITERATURE
Gupta and Joshi (2005) concluded in their study that
job satisfaction is an important technique used to
motivate the employees to work harder. It had often
said that, “A HAPPYEMPLOYEE IS A
PRODUCTIVE EMPLOYEE.” Job satisfaction is
ORGANIZATIONAL FACTORS
• Salaries and wags
• promotion chances
• company policies
WORK ENVIRONMENT
• supervision
• work group
• working conditions
WORK ITSELF
• job scope
• autonomy and freedom
• status
PERSONAL FACTORS
• age
• length of service
• personality
• education/ intelligence
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very important because most of the people spend a
major part of their life at their workplace.
Statt (2010) Job satisfaction can be defined also as the
extent to which a worker is content with the rewards he
or she gets out of his or her job, particularly in terms of
intrinsic motivation
Kaliski (2016) Job satisfaction is a worker’s sense of
achievement and success on the job. It is generally
perceived to be directly linked to productivity as well as
to personal well-being. Job satisfaction implies doing a
job one enjoys, doing it well and being rewarded for
one’s efforts. Job satisfaction further implies enthusiasm
and happiness with one’s work. Job satisfaction is the
key ingredient that leads to recognition, income,
promotion, and the achievement of other goals that lead
to a feeling of fulfillment.
George et al., (2017) Job satisfaction is the collection of
feeling and beliefs that people have about their current
job. People’s levels of degrees of job satisfaction can
range from extreme satisfaction to extreme
dissatisfaction. People also can have attitudes about
various aspects of their jobs such as the kind of work
they do, their coworkers, supervisors or subordinates and
their pay.
Aziri (2018) we consider that job satisfaction represents
a feeling that appears as a result of the perception that the
job enables the material and psychological needs.
RESEARCH METHODOLOGY
OBJECTIVES
1. To study the satisfaction level of employees with
respect to gender.
2. To study the satisfaction level of employees with
respect to income.
3. To study the impact of working hours on the
satisfaction level of employees.
Research design Descriptive
Primary data collection Through structured questionnaire, observation, interview
and discussion method
Secondary data collection Through text books, journals, record of Shree Ganesh,
academic reports, internet
Sampling method Convenience sampling
Sampling size 100
Scaling technique 5 point Likert scale, percentage method
Statistical tools Chi- Square test
DATA ANALYSIS AND INTERPRETATION
Table 1
Showing data on the basis of gender
SEX NUMBER OF RESPONDENTS PERCENTAGE (%)
Male 70 70%
Female 30 30%
TOTAL 100 100%
Table 1 depicts that out of 100 employees in the
company, there are 70% male and 30% females are to be
taken for the study.
HYPOTHESIS 1
H0: Let us take null hypothesis that there is no
significance difference between gender and overall
satisfaction level of employees.
Highly
Satisfied
Satisfied Neutral Dis- Satisfied Highly
Dis-Satisfied
Rows Total
Male (observed) 15 25 5 15 10 70
Female (observed) 5 15 5 5 0 30
Column total 20 40 10 20 20 100
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MALE CHI- STATS
Highly satisfied Satisfied Neutral Dis- satisfied Highly dis-
satisfied
Males
(expected)
14 28 7 14 7
(O-E) 1 -3 -2 1 3
(O-E)² 1 9 4 1 9
(O-E)²/E 0.071428571 0.321428571 0.571428571 0.071428571 1.285714286 2.321428571
FEMALE CHI- STATS
Highly satisfied Satisfied Neutral Dis- satisfied Highly
dis- satisfied
Female (expected) 6 12 3 6 3
(O-E) -1 3 2 -1 -3
(O-E)² 1 9 4 1 9
(O-E)²/E 0.166666667 0.75 1.333333333 0.166666667 3 5.416666667
Chi- squared statistic 7.738095283
Degree of freedom 4
Level of significance 0.05
Critical value 9.488
As the chi- statistics (7.738095238) is smaller than the
critical value (9.488) at degree of freedom= 4 and level
of significance= 0.05, hence our hypothesis is accepted.
Therefore, gender and overall satisfaction level are
independent.
Table 2
Showing Income level
INCOME NO. OF RESPONDENTS TOTAL
<10,000 35 35%
10,000-50,000 41 41%
50,000-1,00,000 24 24%
TOTAL 100 100%
Table 2 shows that out of 100 respondents, 35%
employees getting income <10,000. 41% employees are
those who are getting income between 10,000-50,000
and 24% employees getting income between 50,000-1,
00,000.
HYPOTHESIS 2
H0: Let us take null hypothesis that there is no
significance difference between income and overall
satisfaction level of employees.
INCOME HIGHLY
SATISFIED
SATISFIED NEUTRAL DIS SATISFIED HIGHLY DIS
SATISFIED
TOTAL
<10,000 5 20 1 5 4 35
10,000-50,000 4 15 3 14 5 41
50,000-1,00,000 1 5 1 11 6 24
TOTAL 10 40 5 30 15 100
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WHEN INCOME IS <1O, OOO
Highly satisfied Satisfied Neutral Dis- satisfied Highly dis-
satisfied
Income
(expected)
3.5 14 1.75 10.5 5.25
(O-E) 1.5 6 -0.75 -5.5 -1.25
(O-E)² 2.25 36 0.5625 30.25 1.5625
(O-E)²/E 0.642857 2.571428 0.321428 2.88095 0.297619 6.714282
WHEN INCOME IS 1O, OOO-50,000
Highly satisfied Satisfied Neutral Dis- satisfied Highly dis-
satisfied
Income
(expected)
4.1 16.4 2.05 12.3 6.15
(O-E) -0.1 -1.4 0.95 1.7 -1.15
(O-E)² 0.01 1.96 0.9025 2.89 1.3225
(O-E)²/E 0.002439 0.119512 0.4402439 0.234959 0.2150406 1.0121945
WHEN INCOME IS 50,000-1, 00,000
Highly satisfied Satisfied Neutral Dis- satisfied Highly dis-
satisfied
Income
(expected)
2.4 9.6 1.2 7.2 3.6
(O-E) -1.4 -4.6 -0.2 3.8 2.4
(O-E)² 1.96 21.16 0.04 14.44 5.76
(O-E)²/E 0.81666 2.204166 0.0333 2.00555 1.6 6.65968
Chi- squared statistic 14.386
Degree of freedom 8
Level of significance 0.05
Critical value 15.51
As the chi- statistics (14.386) is smaller than the critical
value (15.51) at degree of freedom= 8 and level of
significance= 0.05, hence our hypothesis is accepted.
Therefore, income and overall satisfaction level are
independent.
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Table 3
Showing level of Satisfaction towards working hours
LIKERT SCALE VALUE=4.30
According to likert scale, the mean rate is 4.3. So, the
respondents are highly satisfied with working hours.
Table 3 shows that from 100 respondents 50% are highly
satisfied, 30% are satisfied, 20% are neutral, nobody is
dis satisfied and highly dis satisfied.
FINDINGS
Employees are satisfied with the income pattern
of the company.
Almost all the employees are satisfied with the
working hours of the company.
Equal participation of males and females in the
decision making process of the company.
Employee mostly in 20-30 age groups gets
promotion through better performance in shorter
period.
SUGGESTIONS
Proper rewards must be provided by the
company if employees perform better.
Working environment must be favorable to the
employees.
Managers make cordial relations with the
employees.
Managers adopt some democratic approach also
along with autocratic approach.
CONCLUSION
Findings and suggestions are based on the survey
conducted and these points are to be looked into and
steps are to be taken in this regards for higher growth.
From this analysis, I conclude that the job provides the
opportunity to the employees to exercise his or her skills
at workplace. Number of the employees accepted at times
there is a considerable flexibility in coordinating with
work and they are satisfied with the exciting inter
personal communication. The company follows the
systematic planning and review process to evaluate the
performance of employees. From the analysis, it was also
observed that there is a scope for the improvement of
working conditions in SHREE GANESH COMPANY.
Finally, I would like to conclude that the employees of
this company are satisfied with their work and the
organization.
REFERENCES
1. Economic and Political Weekly; a Sameeksha Trust
Publication; March 19-25, 2005; Vol XL No 12; 1283-12
2. European Journal of work and Organizational Psychology
2005, 14 (3), 209-237, 2005
3. International Journal of educational management 18(2), 87-
92, 2004
4. Journal of managerial psychology; volume 18(4), 368-376,
2003
LEVEL OF SATISFACTION TOWARDS
WORKING HOURS
NO. OF RESPONDENTS PERCENTAGE (%) WEIGHTED MEAN
Highly satisfied 50 50% 5*50=250
Satisfied 30 30% 4*30=120
Neutral 20 20% 3*20=60
Dis – satisfied 0 0% 2*0=0
Highly dis - satisfied 0 0% 1*0=0
TOTAL 100 100 430/100=4.3
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IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS: A CASE OF RUSSIAN
ECONOMY
Dr. Robin Inderpal Singh*, CA (Dr.) Sanjeev K. Bansal
**, Dr. Sandeep K. Bansal
***
*Assistant Professor, PG Department of Commerce, Shree Atam Vallabh Jain College, Ludhiana,
Punjab, India
**Assistant Professor, Dept. of Commerce, IKG Punjab Technical University, Kapurthala, Punjab, India
***Assistant Professor, PG Department of Commerce, Shree Atam Vallabh Jain College, Ludhiana,
Punjab, India
ABSTRACT
Finance is the major economic problem for the developing economies as they do not have the money for the
investments which is necessary for the development of the nation. Developing nations tries to get direct and
indirect investments to solve the finance problems in the form of foreign capital and reform their investment
policies to get the foreign investments in their country. Due to the changes, there has been changes in the of
Foreign Direct Investment inflows in the Russian economy. The study is conducted to know the determinants for
FDI inflow in Russia and its impact on economic growth of the country. The study revealed that R&D GDP is the
determinant which significantly influences the FDI inflows in Russia. It acts as the important macroeconomic
determinants and pull factor of FDI inflows in Russia. It is also revealed in the study that FDI does not play a
significant role in the economic growth in Russia.
Keywords: FDI, GDP, Economic Growth
INTRODUCTION
One of the major developments that have taken place
during the last three decades is the growth of FDI inflows
in the economies of the world. After the replacement of
GATT with WTO and increased influence of
international organizations like IMF and UN, the
economies have become globalized. Due to globalization,
there have been changes in the government policies of
different countries which lead to internationalization,
privatization, liberalization, minimizing the barriers and
upgradation of technologies. With the becoming of world
as global economy, the developing countries with labour
surplus, availability of labour at low rate, higher rate of
returns on investments have started competing with the
developed nations.
Foreign portfolio investments are the investments
through which investments can be made in a foreign
country but there is no control of investor on the
business. Investments in foreign portfolio investment are
made in equity or debt which can be of short, medium or
long term.
The foreign direct investments are the investments made
by a person residing in a foreign country where the
investor has the control over the business and actually
participates in the decision making of the business.
Governments see foreign direct investment as one of the
important sources of capital which can be used for the
development of the economy.
REVIEW OF LITERATURE
To increase the flow of FDI inflows, so far many studies
have been conducted around the globe over the different
period of time for exploring the determinants and impact
of FDI inflows on an economy.
Laskar (2015) in her doctoral dissertation „Determinants
of Trade and FDI flows in the BRICS countries–
Evidences from Gravity Model Analysis‟ explores the
determinants of FDI flows and trade in the BRICS
economies. The period of study is from 2008 to 2012 and
used the Gravity model for the purpose of analysis. The
study found that market size has positive relation with
foreign direct investment flows and trade whereas
distance between the pair countries have negative relation
with foreign direct investment flows and trade in BRICS
economies.
Carp (2013) in her paper „Anaysis of the relationship
between FDI and Economic Growth – Literature Review
Study‟ tried to find out the benefits that host country gets
with foreign capital flows on the economic growth of the
country and found that capital flows have significant
impact on the host country‟s economic growth through
technology transfer, extension of financial markets,
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increase of exports, economy openness and human
capital.
Kaur et al (2013) in their paper „Financial system
development and foreign direct investment: A panel data
study for BRIC countries‟ examined the financial
system‟s impact on the flow of FDI in BRIC countries.
The period of study is from 1991 to 2010 and used panel
data, fixed and random effect analysis. The study found
that capitalizations of stock market and banking sector
size are the factors influencing the foreign direct
investment inflows in BRIC. The study also found that
higher credit to domestic firms by banking sector has
negative impact on FDI inflows.
Assuncao et al (2011) in their paper titled „Location
determinants of FDI: a Literature Review‟ reviewed the
different studies related to FDI to find out the factors
which affect the distribution of FDI inflow in different
parts of the world and found human capital, production
costs, economic stability, infrastructure, political
instability, corruption, institutional quality, openness of
the economy, financial and fiscal incentives, market size
and market growth have significant impact on investors‟
decision related to location.
De Vita and Kyaw (2008) in their research
„Determinants of FDI and portfolio flows to developing
countries: A panel cointegration analysis‟ tried to find
out the important determinants of foreign direct
investment in 32 developing countries. The period of
study is from 1990 to 2004. FMOLS cointegration panel
data technique is used to find out the determinants. The
study found that in context to FDI flows, growth of
domestic productivity is found to be the main
determinant whereas growth of foreign output found to
have significant negative influence on flows of FDI.
Blonigen (2005) in his work „A review of the empirical
literature on FDI determinants‟ investigated the existing
literature and tried to find out the multinational
corporation (MNCs) decision in context of FDI and also
tried to find out how MNCs decide on foreign direct
investment location. The study found that MNC‟s
decision depends on the exchange rate and taxes while
investing in the other country. MNCs see the country
level factors which influence their decision regarding
investments. The study finds no statistically strong
determinants in cross country foreign direct investment
inflows.
OBJECTIVES OF THE STUDY
The objective of the study is to evaluate the impact of
FDI on the economy. To achieve the objectives of the
paper, the study has been done for the period of 1991-
2014.
STUDY PERIOD AND DATA COLLECTION
For the purpose of study, secondary data has been used.
It is a time series data covering the time period from
1991 to 2014. The required data has been collected from
various sources i.e. World Investment Reports,
publications from Federal State Statistics Service
(Rosstat), Russia, United Nations and from websites of
World Bank, IMF, WTO, RBI, UNCTAD, etc. Data
related to variables related to study like total trade i.e.
export and import (TRADEGDP), research and
development expenditure (R&D GDP), financial position
i.e. external debts to exports (FIN. Position), exchange
rate (EXR), foreign exchange reserves (RESERVES
GDP), foreign direct investment (FDI), foreign direct
investment growth rate (FDIG) and level of economic
growth (GDPG) has been collected for time period from
1991 to 2014.
Hypothesis
The present study has been taken up with the following
hypotheses which are formulated as per the group:
H1: There exists a significant relationship between
FDI and each of its determinants in Russia.
H1a : There is a significant relationship
between FDI and FIN Pos
H1b : There is a significant relationship
between FDI and TRADE GDP
H1c : There is a significant relationship
between FDI and RES GDP
H1d : There is a significant relationship
between FDI and R&D GDP
H1e : There is a significant relationship
between FDI and EXR
H2: There exists a significant relationship between
GDP G and FDI G.
Model Building
To evaluate the impact of foreign direct investment
inflows on the Russian Economy, two models have been
formed.
The first model formed is:
Model I……. FDI = f [TRADEGDP, RESGDP,
R&DGDP, FIN. Position, EXR.]
This model is formed to find the determinants of foreign
direct investment that has significant association with
foreign direct investment inflow separately on Russia.
The second model formed is:
Model II……. GDP G = f [FDI G]
In this model, level of economic growth (GDP G) is
taken as the dependent variable of the foreign direct
investment growth (FDI G) which is the independent
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variable. In this, it is found if there is any association of
foreign direct investment Growth (FDI G) with Level of
Economic Growth (GDP G) of Russia. Econometric
techniques were applied using simple and multiple
regression methods.
STATISTICAL ANALYSIS
Statistical analysis of Russia is performed and found that
in Model I, Russia is having a significant relationship
between FDI and determinants of FDI.R&D GDP is the
determinant which significantly influences the FDI
inflows. It acts as the important macroeconomic
determinant and pull factor of FDI inflows in Russia. In
Model II, the study reveals that FDI is not a significant
factor in influencing the level of economic growth in
Russia.
MODEL – I
FDI = f [TRADEGDP, RESGDP,
R&DGDP, FIN. Position, EXR.]
Hypothesis
H1: There exists a significant relationship between
FDI and each of its determinants in Russia.
Table 1: Correlation Matrix of FDI and determinants of FDI
Correlationsa
FDI GDP FIN Pos TRADE
GDP
RES GDP R&D GDP EXR
FDI Pearson
Correlation
1
Sig.
(2-tailed)
N 24
FIN Pos Pearson
Correlation
-.733** -.833** 1
Sig.
(2-tailed)
.000 .000
N 24 24 24
TRADE
GDP
Pearson
Correlation
-.252 -.261 .287 1
Sig.
(2-tailed)
.236 .217 .174
N 24 24 24 24
RES GDP Pearson
Correlation
.234 .261 -.319 -.597** 1
Sig.
(2-tailed)
.271 .218 .128 .002
N 24 24 24 24 24
R&D GDP Pearson
Correlation
.809** .730** -.782** -.247 .463* 1
Sig.
(2-tailed)
.000 .000 .000 .245 .023
N 24 24 24 24 24 24
EXR Pearson
Correlation
.533** .539** -.745** -.115 .576** .778** 1
Sig.
(2-tailed)
.007 .007 .000 .591 .003 .000
N 24 24 24 24 24 24 24
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
a. Stat =Russia
A total of five sub hypotheses are tested with the help of regression analysis and explained statistically.
Table 2: Model Summary: FDI and determinants of FDI
Model Summarya
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .858b .736 .663 14268.83828164 1.868
a. State = Russia
b. Predictors: (Constant), EXR, RES GDP, TRADE GDP, FIN Pos, R&D GDP
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In the above table (Table 2), the R value represents the
association that the dependent variable (FDI) has with all
independent variables or predictors. The R2
value (.736)
depicts the amount of variance explained by all the
independent variables (determinants) accounting in for
Foreign Direct Investment (FDI). In case where the
number of independent variables is more than 1, the
adjusted R square values are considered which come out
to be .663 in this case. The value of adjusted R square
depicts that determinants of FDI influence 66.3% of FDI.
Table 3: ANNOVA Table - FDI and determinants of FDI.
ANOVAa,b
Model Sum of Squares df Mean Square F Sig.
1 Regression 10216770589.471 5 2043354117.894 10.036 .000c
Residual 3664795426.337 18 203599745.908
Total 13881566015.808 23
a. State = Russia
b. Dependent Variable: FDI
c. Predictors: (Constant), EXR, RES GDP, TRADE GDP, FIN Pos, R&D GDP
The above table (Table 3) talks about the significance of
the model. The Significance value (less than .05)
confirms that the model is significant at 95% degree of
freedom. In other words, it depicts that various
determinants of FDI influence FDI. Further, in the
analysis (B) values are calculated to check which
determinant of FDI significantly influences the FDI.
Table 4: Coefficients Summary: FDI and determinants of FDI.
Coefficientsa,b
Model Unstandardized Coefficients Standardized
Coefficients
t Sig. Collinearity Statistics
B Std. Error Beta Tol VIF
1 (Constant) 42695.300 43060.890 .992 .335
FIN Pos. -11839.708 9013.302 -.330 -1.314 .205 .232 4.310
TRADE GDP -104.878 340.627 -.061 -.308 .762 .370 2.701
RES GDP -18149.614 35405.074 -.121 -.513 .614 .263 3.795
R&D GDP 1687.030 462.046 .812 3.651 .002 .297 3.369
EXR -531.304 552.354 -.282 -.962 .349 .171 5.865
a. State = Russia
b. Dependent Variable: FDI
The above table (Table 4) shows that R&D GDP is the
only determinant (p value < .05) which significantly
influences the Foreign Direct Investment in Russia. In
other words we can say that there is only one determinant
of FDI named that R&D GDP influence the FDI in
Russia.
A regression equation thus has been drawn after
eliminating the insignificant variables from the
regression and thus the regression equation can be
written as:
Y = B1X1 +C
FDI = 1687.030 (R&D GDP) + 42695.300
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Table 5: Summary of sub hypotheses formulated
Hypotheses Formulated Status of Acceptance
H1a : There is a significant relationship between FDI and FIN Pos Not Accepted
H1b : There is a significant relationship between FDI and TRADE GDP Not Accepted
H1c : There is a significant relationship between FDI and RES GDP Not Accepted
H1d : There is a significant relationship between FDI and R&D GDP Accepted
H1e : There is a significant relationship between FDI and EXR Not Accepted
MODEL – II
GDP G = f [FDI G]
Hypothesis
H2: There exists a significant relationship between GDP G and FDI G.
Table 6: Correlation Matrix of GDP G and FDI G
Correlationsa
GDP G FDI G
GDP G Pearson Correlation 1
Sig. (2-tailed)
N 24
FDI G Pearson Correlation .262 1
Sig. (2-tailed) .217
N 24 24
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
a. Stat = Russia
Table 7: Model Summary: GDP G and FDI G
Model Summarya
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .262b .068 .026 6.09996112 1.848
a. State = Russia
b. Predictors: (Constant), FDI G
In the above table (Table 7), the R value represents the
association that the dependent variable (GDP) has with
independent variable or predictor. The R2
value (.068)
depicts the amount of variance explained by the
independent variables (FDI G) accounting in for GDP
growth.
Table 8: ANNOVA Table – GDP G and FDI G.
ANOVAa,b
Model Sum of Squares df Mean Square F Sig.
1 Regression 60.140 1 60.140 1.616 .217c
Residual 818.610 22 37.210
Total 878.750 23
a. State = Russia
b. Dependent Variable: GDP G
c. Predictors: (Constant), FDI G
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The above table (Table 8) shows the significance of the
model. The significance value (more than .05) confirms
that the model is not significant at 95% degree of
freedom. In other words, it depicts that FDI Growth does
not scientifically influences GDP Growth. Further, in the
analysis (B) values are calculated to check the level of
insignificance.
Table 9: Coefficients Summary: GDP G and FDI G.
Coefficientsa,b
Model Unstandardized Coefficients Standardized
Coefficients
T Sig. Collinearity Statistics
B Std. Error Beta Tol VIF
1 (Constant) .695 1.410 .493 .627
FDI G .025 .020 .262 1.271 .217 1.000 1.000
a. State = Russia
b. Dependent Variable: GDP G
The above table (Table 9) shows that FDI Growth is the
factor (p value > .05) which does not significantly
influence the GDP Growth in Russia. In other words we
can say that FDI Growth does not significantly influence
the GDP Growth in Russia.
Table 10: Summary of sub hypotheses formulated
Hypothesis Formulated Status of Acceptance
H2 : There is a significant relationship between GDP G and FDI G Not Accepted
CONCLUSION
It has been found that R&D GDP is the determinant
which significantly influences the FDI inflows in Russia.
It acts as the important determinants and pull factor of
FDI inflows in Russia. It is also revealed in the study that
FDI does not play a significant role in the economic
growth in Russia.
REFERENCES
1. Assuncao, S., Forte, R., & Teixeira, A. A.
(2011). Location determinants of FDI: a literature review,
Universidade do Porto, Faculdade de Economia do Porto,
(No. 433) FEP Working Paper.
2. Badar, A.I. (2006), “FDI: A tool For Economic
Development” Foreign Trade Review, Vol. 41, No. 2, pp.
62-81.
3. Banga, R. (2003). Impact of government policies and
investment agreements on FDI inflows. Indian council for
research on international economic relations, (No. 116) 1-
43.
4. Blonigen, B. A. (2005). A review of the empirical literature
on FDI determinants. Atlantic Economic Journal, 33(4),
383-403.
5. Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic
growth? Journal of international Economics, 45(1), 115-
135.
6. Carkovic, M. V., & Levine, R. (2005).Does foreign direct
investment accelerate economic growth?
MoranT.,GrahamE. andBlomströmM. (eds), Does Foreign
Direct Investment Promote Development? Institute for
International Economics and Center for Global
Development, Washington, DC, 195–220.
7. Carp, L. (2013).Anaysis of the Relationship between FDI
and Economic Growth – Literature Review Study. The USV
Annals of Economics and Public Administration, 12(1 (15)),
154-160.
8. De Vita, G., & Kyaw, K. S. (2008). Determinants of FDI
and portfolio flows to developing countries: A panel
cointegration analysis. European Journal of Economics,
Finance and Administrative Sciences, 13(13), 161-168.
9. Humphrey, D. (1960), “Direct Foreign Investment and
Economic Growth”, The Economic Weekly, Vol. 12, No.
23-25, pp. 925-930.
10. Kaur, M., Yadav, S. S., &Gautam, V. (2013).Financial
system development and foreign direct investment: A panel
data study for BRIC countries. Global Business
Review, 14(4), 729-742.
11. Laskar, S. (2015). Determinants of Trade and FDI flows in
the BRICS countries–Evidences from Gravity Model
Analysis (Doctoral dissertation).
12. Mencinger, J. (2003). Does foreign direct investment
always enhance economic growth?. Kyklos, 56(4), 491-508.
13. Namita, R., Anuj, J., Ajay, R., & Rahul, G.
(2012).Relationship of FDI and growth in India: A
diagnostic study. Asian Journal of Management
Research, 2(2), 797-813.
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TO STUDY THE ROLE OF SPIRITUAL INTELLIGENCE AT WORK PLACE
A REVIEW
Dr. B.B. Singla*, Damanpreet Kaur
**
*Assistant Professor School of Management Studies, Punjabi University Patiala, Punjab, India
**Ph .D Research Scholar, School of Management Studies, Punjabi University Patiala, Punjab, India
ABSTRACT
In the long term, spirituality is considered as one of the key success factors of the organization.
Organization requires its employees to be more committed as well as to have a better cohesive
working interrelationship. They are looking for the ways to succeed by using all its potential to
improve job satisfaction, work performance and internal motivation at work place through various
domains of spiritual intelligence. So, SI is set of abilities that individuals used to apply, manifest
and embody spiritual resources qualities in a way to improve their daily functioning and wellbeing.
So the purpose of this paper is “to study the role of spiritual intelligence at work place”. So having
the SI in the workplace, the environment will be more favourable and a favourable working
environment relates to a higher level of productivity.
Key words: Spiritual Intelligence, Job Satisfaction, Work Performance.
INTRODUCTION
In present century when the world economy has been
globalized , organization have to face more complexities,
competition, lifestyle changes, structural changes and
increase of stress day by day in the work place as well as
in social life. These factors also affect the economy,
society, co-operative sector and environment in different
ways. The changes in the work place have witnessed in
the terms of people work and with whom they work. The
pattern of doing work also changes very rapidly. The
workforce is now more diverse not only in the terms of
nationality but also as of age. As with diversity
organizations have to handle different type of issues like
collaboration, co-operation and team work which are
increasing at fast pace. So, giving response to these
issues the organization has to change the condition of
work and employment significantly. The demand of
skilled and multi skilled workforce increases due to
increase in the growth of IT and automation. Therefore,
every organization requires the work force has to be more
committed as well as better cohesive working
interrelationship.
In this era the accelerating pace of company has made
organization more concerned about their productivity and
efficiency. So, every organization is looking for
differentiating itself from other and sustains the
advantage they have. They have started realizing that
considering the emotions of the workforce does not
suffice and only a stronger orientation toward meaningful
existence and purpose of the organization and its people
can overcome today’s complex problems. So competition
in the every organization increased day by day that could
be related to product and services, cost and price,
technological adaptation, quick response and quick
production by companies etc. Because of more
competition in the work environment the employees at
workplace experience a lot of stress due to redesigning of
jobs, deadlines, excessive workloads, job insecurities,
longer working hours and reallocation of roles and
increased responsibilities. So, in other words we can say
that race of excellence has also pushed the work force
into such a difficult situation that people are thinking
nothing but want to competing of each other at any cost.
The result of this is that people are moving from the
cultural roots to managerial skills. Autocratic styles of
management have come back in the work performance.
People are moving away from their emotions or even
they have no care for other emotions and emotional
intelligence and spirituality at work place is also getting
very hard to find.
DEFINING SPIRITUAL INTELLIGENCE (S.I.)
A brief account of definitions proposed by different
authors on spiritual intelligence is given below:
McGuire, M.B (1993) the spiritual intelligence has the
ability of action along with conscious giving dynamics
and movement to the life. Sisk and Torrance (2001)
Spiritual Intelligence can be defined as a deep self-
awareness in which one becomes more and more aware
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of the dimensions of self, not simply as a body, but as the
mind, body and spirit. Gain, M. and Purohit, P. (2006)
consider spiritual intelligence as experienced ability that
gives people the possibility of achieving knowledge and
understanding and provides the basis to achieve
perfection and advancement in life. Spiritual intelligence
is called as multiple ways of understanding and
integration of the interior life (mental and spiritual) with
outer life in the world. Kumar and Mehta (2011)
defined spiritual intelligence as "the capacity of an
individual to possess a socially relevant purpose in life
by understanding 'self' and having a high a high degree of
conscience, compassion and commitment to human
values.
REVIEW OF EXISTING KNOWLEDGE ABOUT
SPIRITUAL INTELLIGENCE
Sudarsih, Puspitasri Nur. E.F, et alt (2018) the main
aim of this study is to investigate the influence of EI and
SI on the employee of performance with motivation as
mediating. The respondents of this study were employees
of Mandarin Sharja and Sinarmas Sharia banks in Jember
and were 103 in no. and the sample was selected through
census sampling technique. Data for this study was
collected through questionnaires interviews. Descriptive
research is used in this study and data was analyzed
through SPSS. The results of this study showed that SI,
EI and motivation have a significant and positive impact
on the employee performance and EI and SI also have the
positive impact on the employee’s motivation.
Jaffar H. A. et alt (2018) conducted a study to
investigate the association between the SI and work
engagement. The study was conducted in Malaysia. The
respondents of this study were Royal Malaysian police
officers and were 372 in numbers. Data collected for this
study was through questionnaires and were analyzed
using PLS –SEM. The results of this study indicate the
positive relationship between three constructs of SI that
are TA,PMP and CET but the non significant relationship
with CET with work engagement. The findings of the
study also showed that SI is the essential factor for the
police officer in increasing their work engagement and
subsequently the increase of loyalty of police officer of
the Malaysia.
Mohsenimaram .M, Naji .S et alt (2018) the main aim
of this study is to explore the relationship of SI and
quality of work life in nurses in the oncology department
of Ahwaz hospitals. The respondents of this study were
nurses were oncology department. Descriptive
correlation research is used for this study sampling was
done through census method. Data collected for this
study this study was through questionnaire method and
were analyzed through mean, standard deviation and t-
test and Pearson and spearman correlation coefficients
were used. The findings of the study showed that there is
a direct relationship between SI and the quality of life
and all of its dimensions.
Haryono .S, Rosady .F et alt (2018) the main aim of
this study is to investigate the effect of EI and SI on job
performance with the mediating role of organization
commitment on the relationship between EI and SI on
performance. The study was conducted in Indonesia. The
respondents of this study were temporary nurses at Abdul
Riva Regional General hospital and were129 in numbers.
Data collected through questionnaires for this study and
was analyzed through SEM (Structural equation
modelling) techniques. The results of this study showed
that EI and SI have positive and significant effect
towards organization commitment. Subsequently
organization commitment has significant and positive
effect on temporary nurses performance.
Abdolshah .M, Khatibi Mohammad .A.S et alt (2018) the main aim of this study is to investigate the factors
that influencing job satisfaction of banking employees.
The study was conducted in Qazvin and Alborz. The
respondents of this study were senior executives of
Asgariyeh and Mehriran Banks. Cross sectional research
is used in this study. Questionnaire is used for data
collection and was analyzed through SPSS. The findings
of the study showed that some variables are respectively
influencing the job satisfaction.
Mohammad Hassan .A .N, et alt (2018) conducted a
study to investigate the job satisfaction among bank
employees. The study was conducted in Malaysia. The
respondents of this study were managerial and non
managerial public bank employees and were 353 in
number. Sample was selected for this study was through
multistage sampling. Data collection of this study was
through questionnaires and was analyzed through t-test
and SPSS. The results of this study showed that intrinsic
and extrinsic factors contribute significantly in improving
job satisfaction in the workplace. So, combining both the
factors as a determinant will help us to increase the
quality of job satisfaction.
Sogolitappeh .N .F, Hedayat . A et alt (2018) the main
goal of this study is to explore the relationship between
SI and EI with resilience. The study was conducted in
Ghorveh city and the respondents for this study were
undergraduate students of Payame Noor University
during 2016-17 academic years. The respondents were
100 in number and were selected through random
sampling. Questionnaires are used for data collection in
this study and were analyzed through descriptive and
inferential statistics. The findings of this study showed
that there is a positive relationship between EI and SI and
resilience has also a significant positive correlation.
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Kumari. J, Kumar .S (2018) the main aim of this study
is to examine and review the effect of SI on the persons
quality of life and how it is beneficial for enhancing the
quality of person’s life in organization. The findings of
this study showed that there is a positive significant
correlation between quality of person’s life and SI.
Jamalnia. S, Javanmadifard .S et alt (2018) conducted
a study to explore the relationship between EI and SI in
patients. The study was conducted in Kermanshah
diabetes research centre. The respondents of this study
were 2 type diabetic patients and were 100 in number.
The samples collected for this study were through
convenient sampling method. Descriptive co relational
research is used in this study. Data collected for this
study were through questionnaires and were analyzed by
SPSS. The results conclude that there is a positive
significant difference between SI and EI and both
compliment to each other in order to increase diabetes.
Dr.Ujjal Mukherjee (2018) the main aim of this study is
to explore the influence of workplace spirituality and
demographic variables on job satisfaction. The study was
conducted India. The respondents of this study were
employees of 3 IT companies and were 255 in number.
Judgemental sampling was used for this research.
Questionnaires were used for data collection and were
analyzed. The findings of this study showed that
workplace spirituality positively related to job
satisfaction which means to enhance in the level of
workplace spirituality can also increase the levels of job
satisfaction.
Dargahi H, Abdochalli K.N.Z, et alt (2017) conducted
a study to investigate the relationship between spiritual
leadership & organization commitment. The study was
conducted in Tehran University and the population of
this study were staffs in the headquarter sections of
medical sciences (TUMS). The sample consisted of this
research was 150 staffs. The research was analytical,
cross sectional and descriptive in nature. Data was
collected through two questionnaires and were analyzed
by spss version 20. Mean t test, Annova mean and
standard deviation for analytical statistics. The results of
this study showed that there was significant relationship
with organization commitment. The author also
concludes that spiritual leadership brings organization
commitment in order to satisfy needs expectations and
show their potential abilities by attempting to achieve
organizational goals.
Dr. Monika R. Seth (2017) conducted a study to
investigate S.I. in students pursuing professional and
non- professional courses. The study was conducted in
Nagpur city. The respondents of this study were 500
professional and non-professional students with the age
range 18-23yrs. In both groups 25 male and 125 female
students and both samples from group were selected
through random techniques. Data was collected through
questionnaires and were analyzed by mean, standard
deviation, t-test and correlation. The results of this study
showed that no significance difference between
professional and non professional group over the level of
spiritual intelligence.
Arsang-Jang .S, Pourmarzi D., et alt (2017) study to
explore the relationship between S.I. and ethical decision
making. The research was conducted in Iran. The
population of this research were nurses of Iran hospitals.
The participants were 376 in number. Proportional
stratified sampling was used for this research .Data was
collected was through structured questionnaires and were
analyzed through descriptive statistics and Pearson
correlation. The results of this study showed that S.I.
plays a positive role in the ethical decision making of
nurses, because nurses face ethical dilemmas that arise
from different different situations involving conflicts and
belief in their routine life. The findings of this study also
showed that overall ethical decision making of nurses
also seems more challenging aspects of their duties.
V Raaj .G, Gunaseelan R.(2017) the main aim of this
study is to investigate the destructive behaviour and its
impact on workplace spirituality. The study was
conducted in Coimbatore, Tamil Naidu. The participants
of this study were 217 respondents who were working in
BPO companies in Coimbatore. The sample used for this
study for choosing participants was through snowball
sampling. Data collected for this study were through
questionnaires and were analysed. The results of this
study show that there is a significant positive and
negative relationship between the variables of destructive
leadership on workplace spirituality.
Renu Sodhi (2016) the main aim of this study is to find
the association between spirituality and emotional
intelligence on the basis of earlier studies that was related
with this topic .The nature for this study was exploratory
and was based on purely secondary data which have been
collected from various books, journals and websites etc
and the sample size was 40 articles from the period 1998
to 2012 .After reviewing literature the study concludes
that emotional intelligence and spirituality both are
interlinked to each other and both have positive impact
on physical and psychological wellbeing and also plays a
better role in the field of organization and education.
Mansouri .M, Khorshidzade .M, Asgari Ali (2016)
conducted a research to examine the relationship between
spiritual intelligence components with the student’s
adjustment components. The participants of this study
were students of Birjand university. The participants
were 210 of them (male & female) enrolled in the year
2011-2012 and were selected randomly for this research
for collecting the data S.I. questionnaire and student
adjustment questionnaires were used and were analyzed.
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The results of this study showed that there is a positive
significant relationship between student adjustment
components and spiritual intelligence components. The
author also concludes that positive and significant
relationship also exists between social adjustment and
spiritual life.
Malik Shaukat .M, Tariq .S (2016) the main aim of this
study is to explore the impact of S.I on organization
performance. The study was conducted in 38 banks
including govt, private and Islamic banks. Respondents
of this study were employees of banks which were
working for last 5 years in these banks. The sample size
for respondents was 300 in number. Primary and
secondary data were used in this research. Data was
analyzed by using spss (16) versions. The results of this
study indicate that there is a positive significant
relationship between S.I and organizational performance.
This research will also motivate the managers to increase
the S.I. of employees to improve the efficiency and
effectiveness.
Korazija .M, Zizek.S.S et alt (2016) conducted a study
to explore the relationship between S.I. and work
satisfaction among leaders and employees. The study was
conducted in Salovenia. The participants of this study
were 100 leaders and 100 employees of largest metal
manufacturing companies in salovenia. For this study
sample were selected through random sampling
technique and were collected through questionnaires and
were analyzed through mean, standard deviations and t-
test. The results of this study showed that there was no
significant relationship between S.I. and work
satisfaction for leaders, but a positive significant
relationship was found between S.I. and workplace
satisfaction for employees.
Tabausa and Jalaei (2015) conducted a study to
investigate the relationship between burnout and spiritual
intelligence and mental stress. The study was conducted
in Golistan province and the participants of this study
were staffs of rural cooperatives organization.
Descriptive correlational survey and applied research was
used for this study showed that positive correlational
between S.I. and mental health and there is a significant
and negative correlation between depression and S.I. and
there is a significant job.
Hossein M. K. (2015) the main aim of this study is to
determine the spiritual intelligence status with its clinical
competence. The research was conducted in Iran and the
participants of this study were 250 nurses in Masahhad
educational hospitals. Multistage sampling was used for
the participant’s selection. Descriptive correlational study
was carried out for this study. Data was collected through
demographic , spiritual intelligence and clinical
competence questionnaires and were analyzed. The
results of this study showed a positive significant
correlation was between spiritual intelligence and clinical
competency. In this research it is also observed that
spiritual intelligence is considered as one of the
important factor in nurses efficacy and success.
Kalantarkousheh M.S, Sharghi .N, et alt (2014) conducted a study to investigate the relationship between
S.I. and organization commitment in employees of
Tehran University. The study was conducted in Iran. The
participants of this study were 200 staff members (111
males and 89 females) of Tehran university and were
selected randomly. Descriptive research is used for this
study. The data was collected through structured
questionnaires. Correlation and regression is used for
analyzed the data. The results of this study showed that
amount of S.I. and organization commitment vary
between males and females. In this study the male scored
more in both the variables as compared to females. A
meaningful relationship has been shown between the
spiritual intelligence and organization commitment of
organization employees. The findings of this study also
showed that positive effects of spiritual intelligence in
the promotion of organization’s effectiveness and the
individual growth of employees also considered in this
study.
Akbar Ali .S.R, Abas E . et alt(2014) conducted a study
to examined the relationship between S.I. and
demographic variables and dimensions of burnout and
350 personnel of police staff in sistan-o-Baluchestan. The
samples of this study were collected through convenience
sampling method. Data collected for this study was
through burnout and S.I. questionnaires and were
analyzed with spss17 software, descriptive and inferential
statistics. So the results of this study showed that having
high level of S.I. could also improve job burnout so that
fact suggest to managers to have an eye concern about
education and enhancing S.I.in staff. The findings also
showed that S.I. only had significant correlation with
depersonalization dimension and two emotional
exhaustion and no significant correlation found between
experience, education, income satisfaction and spiritual
intelligence.
Hassan nodehi , mamid Nehardani (2013) the main
aim of this study is to investigate the relationship
between spiritual intelligence and job satisfaction . The
study was conducted in Mashad city . The population
consisted for this study was male and female of sec
school teachers from Mashaad city. 215 samples were
selected from population by using multistage classified
sampling. The methods of this study were descriptive
correlation. Data for this study were collected through
structured questionnaires. The results of this study
indicates that there is a positive relationship between
spiritual intelligence and job satisfaction of high school
teachers and the dimensions of job satisfaction that is
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work itself is also more related. The findings also showed
that gender has significant effect on spiritual intelligence
but no significant effect on job satisfaction schooling and
work experience also has no significant effects on both.
Ajala. ME (2013) conducted a study to investigate the
impact of workplace spirituality on employees well being
at the industrial sector. This study was conducted in
Nigeria. The participants of this study were 275 in
number and these were drawn from three firms
representing three industrial sectors. Data collected for
this study was through questionnaires. Descriptive
research and ex post facto was used for this study. The
findings for this study showed that workplace spirituality
has positive significant impact on the wellbeing of
employees. The author concludes that with employees
wellbeing guaranteed, the workplace spirituality
enhances employee’s morale, productivity and
commitment due to reduction in stress.
Sapta .A, Hermawan A. et alt (2013) examines the
effect of ESQ training to organization commitment and
job satisfaction. Its purpose is also to analyze the effect
of S.I. and emotional intelligence on organizational
commitment and job satisfaction. For this study he uses
the research method of survey with 244 people randomly
and also in depth interview of the management of the
company. In this study the structural equation model and
descriptive analysis is used as analysis tool. The results
of this study indicate that there is a direct effect of S.I.
and E.I. on organizational commitment and job
satisfaction.
CONCLUSION
The most important task of every organization is to get
things done through people and also to achieve it’s and
team’s goal, spiritual intelligence is the important factor.
If the manager of the organization do not maintain or
balance their intelligence quotient skills with spiritual
intelligence like understanding and patience, then the
employees might feel insecure, low confidence,
unappreciated and under estimated. Even at that time
they also seems more dissatisfied, criticized and
disrespected. These negative feelings of employees
results in low productivity, less efficiency, more
absenteeism , more turnover, low morale, lack of
organization commitment and participation in
organization. So as an employee it is very rare to retain
the desired potential in your team, and success of
managers is directly proportional to retaining the
potential employees in manager’s team. Therefore
enhancing spiritual intelligence assist the managers in
motivating their own self confidence and morale which
would help the overall team growth with positive outlook
towards the achievement of organization goals.
The review of related literature reveals that a number of
studies have been carried out on various aspects of
spiritual intelligence in healthcare sector and teaching
sector but a few comprehensive studies on spiritual
intelligence in banking sector could be found which
provide detailed information regarding the spiritual
intelligence of employees in banking sector .The present
paper is a little endeavour to study the role of spiritual
intelligence at workplace. So, skills like Spiritual
intelligence, Emotional Intelligence is of need in every
type of organization specially in banking sector. With
skill competition banks work for longer working hours,
giving better services to their customers which is a
challenging task now a day’s also enhance their job
satisfaction, morale and work performance.
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INTERDEPENDENCE OF PERFORMANCE MANAGEMENT SYSTEM AND
EMPLOYEE ENGAGEMENT
Ramneek Kaur*, Deepika Singla
**
*Research Scholar, School of Management Studies, Punjabi University, Patiala, Punjab, India
**Assistant Professor, PG Deptt. of Commerce, Multani Mal Modi College, Patiala, Punjab, India
ABSTRACT
Employee Engagement is a relatively new construct in academic literature and has been gaining immense
popularity in business practice. The proponents of employee engagement display a strong positive relationship
between employee engagement and organisational success, both at the business and employee levels. High
organisational performance is achieved only when employees at all levels are fully engaged. The purpose of
this research paper is to comprehensively examine those performance management characteristics that
significantly predict employee engagement, thereby promoting organizational success. A comprehensive study
of related literature revealed those characteristics of performance management systems that significantly
impact employee engagement. It was found that participative decision making and recognition that contribute
to empowerment have the greatest positive influence on employee engagement. This will help organisations to
design the performance management systems in a manner that promote employee engagement.
Keywords: Employee Engagement, Performance Management System and Empowerment
INTRODUCTION
The challenge today is not just retaining talented people,
but fully engaging them, capturing their minds and hearts
at each stage of their work lives. Employee engagement
has emerged as a critical driver of business success in
today’s competitive marketplace. Further, employee
engagement can be a deciding factor in organizational
success. Not only does engagement have the potential to
significantly affect employee retention, productivity and
loyalty, it is also a key link to customer satisfaction,
company reputation and overall stakeholder value. Thus,
to gain a competitive edge, organizations are turning to
human resource to set the agenda for employee
engagement and commitment. Furthermore, the
organisational performance is also determined by its
performance management systems. Despite the
importance of these systems many organisations have not
been able to gain maximum benefits from its
implementation. This is mainly due to lack of
information about which characteristics of performance
management systems are most crucial and effective in
producing results. (Janko Kotze, Sanet Van der
Westhuizen, 2014) further elaborated that performance
management characteristics that cultivate a work
environment of empowerment and trust and signal that
managers are supportive of employees improve employee
engagement.
One of the first challenges presented by the literature is
the lack of a universal definition of employee
engagement. (Kahn, 1990) defines employee engagement
as “the harnessing of organization members‟ selves to
their work roles in engagement, people employ and
express themselves physically, cognitively, and
emotionally during role performances”. The cognitive
aspect of employee engagement concerns employees
beliefs about the organisation, its leaders and working
conditions. The emotional aspect concerns how
employees feel about each of those three factors and
whether they have positive or negative attitudes toward
the organisation and its leaders. The physical aspect of
employee engagement concerns the physical energies
exerted by individuals to accomplish their roles. Thus,
according to (Janko Kotze, Sanet Van der Westhuizen,
2014), engagement means to be psychologically as well
as physically present when occupying and performing an
organisational role. Most often employee engagement
has been defined as emotional and intellectual
commitment to the organisation or the amount of
discretionary effort exhibited by employees in their job
(Frank, Finnegan, & Taylor, 2004). Although it is
acknowledged and accepted that employee engagement is
a multi-faceted construct, as previously suggested by
(Kahn, 1990), (Truss, C., Gratton, L., Hope Hailey, V.,
McGovern, P. and Stiles, 1997) define employee
engagement simply as passion for work, a psychological
state which is seen to encompass the three dimensions of
engagement discussed by (Kahn, 1990), and captures the
common theme running through all these definitions.
Thus, after a thorough study and understanding of all the
above definitions it can therefore, be concluded that
employee engagement is the employee’s dedication and
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loyalty towards the organization. It is the time and effort
an employee is ready to expend and find ways to add
value to the organisation. An engaged employee is fully
absorbed in his work with energy and vigor using his
talents to the fullest. Employee engagement is presently
considered as an important source for gaining
competitive advantage and has attained a lot of
significance in the last few decades.
PERFORMANCE MANAGEMENT SYSTEM
Performance management systems are crucial to enhance
organizational performance (Buchner, 2007) and
effectiveness (Cardy, 2004; as cited by (Gruman & Saks,
2011). However, despite the touted benefits of utilizing
performance management systems, 70% of
implementations of these systems fail (McCunn, 1998).
In order to put successful performance management
systems in place, organizations must know what
characteristics of these systems are most instrumental in
producing beneficial organizational outcomes.
Performance management is one component of talent
management and has been defined as the measurement
and management of employee and organizational
performance, with the ultimate goal of improving
organizational effectiveness (DeNisi, 2000). As part of
performance management, managers work together with
their employees to set performance expectations, measure
and review performance results, and reward performance
(DeNisi, 2000). Specifically, performance management
consists of the following elements: setting performance
goals at the organizational, departmental, team, and
individual level, conducting performance appraisals,
developing systems to provide rewards, feedback, and
coaching, and measuring the effectiveness of
performance management systems (Roberts, 2003).
Performance management systems can be defined by
these interrelated and independent performance
management elements that influence one another to
increase employee and organizational performance in
order to ultimately enhance organizational effectiveness.
Each of the elements can be present alone and can be
considered performance management. However,
performance management systems consist of several
performance management elements that work together to
achieve the common goal of improving organizational
performance and effectiveness.
CHARACTERISTICS OF PERFORMANCE
MANAGEMENT SYSTEMS
Performance management system characteristics can be
grouped into four categories: the purpose of the system,
performance measures, activities and structural
characteristics
PURPOSE OF THE PERFORMANCE
MANAGEMENT SYSTEM
The purpose of a performance management system
reflects the main objectives and guiding principles an
organization has for the system to help it gain a
competitive advantage (Dewettnick, 2008). Most
commonly, organizations use performance management
systems for three main purposes: to achieve results,
develop employees, or accomplish administrative
purposes. Performance management systems with a
results oriented purpose focus on performance outcomes
and view employees as a means to achieve organizational
goals, such as increasing revenue or company sales
(Truss, C., Gratton, L., Hope Hailey, V., McGovern, P.
and Stiles, 1997). Performance management systems
with a development oriented purpose focus primarily on
employee development under the assumption that
empowering employees through development leads to
better performance and subsequently a competitive
advantage (Truss, C., Gratton, L., Hope Hailey, V.,
McGovern, P. and Stiles, 1997). Performance
management systems that focus mainly on administrative
purposes provide organizations with valuable
information for human resource-related decisions,
including promotions, pay raises, and terminations
(Biron, M., Farndale, E., & Paauwe, 2011).
PERFORMANCE MANAGEMENT SYSTEM
MEASURES
A critical component of a performance management
system is how performance is evaluated or assessed.
Performance is typically evaluated by use of a
performance measure, which has been defined as “a
variable or metric used to quantify the efficiency or
effectiveness of an action” (Olsen et al 2007). The
relevance of the performance measures to the employee’s
actual job performance is one characteristic of the
performance management system. In addition,
performance can be evaluated by the extent to which
employees demonstrate task performance, display
contextual performance, achieve goals or objectives.
Performance measures can evaluate task or contextual
performance. Task performance refers to how well an
employee performs fundamental technical activities
deemed important to his or her job (Borman, W. C., &
Motowidlo, 1997). Contextual performance, on the other
hand, assesses employees' engagement in extra-role
behaviors that are not directly job-related but improve the
work climate by increasing organizational effectiveness
(Borman, W. C., & Motowidlo, 1997) . Employee
performance can also be evaluated on the achievement of
goals. Performance can be assessed on the extent to
which employees achieve their performance goals or
objectives; these goals or objectives are typically specific
to each employee’s role.
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PERFORMANCE MANAGEMENT SYSTEM
ACTIVITIES
Within performance management systems, organizations
can use a range of activities designed to improve
employee performance. Some activities include clearly
communicating performance expectations to employees
and informing employees why their performance efforts
are important to organizational effectiveness (Biron, M.,
Farndale, E., & Paauwe, 2011). Performance
management activities also include providing coaching,
feedback, recognition, goal setting, identification of
training needs, construction of development plans, and
career planning. Coaching, feedback, and recognition are
activities that happen within performance management
systems. Coaching consists of formal on-going
interactions between employees and their supervisors
with the goal of facilitating individual learning and
behavior changes, as well as providing constructive and
developmental opportunities to help employees learn
how to face complex situations (Lindbom, 2007). Unlike
coaching, which typically focuses on future job
performance, feedback focuses on providing employees
with information about past job performance in order to
reinforce desirable behavior or indicate areas for
improvement (Hillman, L. W., Schwandt, D. R., & Bartz,
1990). Recognition is a type of positive reinforcement
given in response to desirable behaviors designed to
shape and improve performance. The common forms of
recognition include special mention in a meeting, a note
in a company newsletter, or various gifts (III Haines &
St.Onge, 2012).
Performance management systems can include the
activity of setting performance goals for employees for
the position they currently hold (Roberts, 2003). In
addition, performance management systems prove to be a
useful tool to identify areas in which employees need
training to help them achieve their performance goals
(Armstrong & Baron, 2000). Performance management
systems can also incorporate career planning for
employees to help them identify and work toward career
paths (Fey, Bjorkman, & Pavlovskaya, 2000).
STRUCTURE OF PERFORMANCE
MANAGEMENT SYSTEM
The structure of the performance management system
denotes its design and formation. Structural
characteristics of performance management systems
include the number of formal performance reviews, the
number of informal performance reviews, goal
alignment, the presence of a clear link between the
performance management system and the organization’s
rewards system, sources of feedback, and participative
decision making. Some structural characteristics of a
performance management system include the number of
formal and informal performance reviews. Formal
performance reviews refer to planned face-to-face
meetings between employees and their supervisors to
discuss the employee’s job performance or development.
On the other hand, informal performance reviews are
unplanned encounters between a supervisor and his or
her employee to discuss the employee’s job performance
and provide feedback that helps the employee meet
performance expectations set in formal performance
reviews (Dewettnick, K & Dijik, 2013). Goal alignment
and the presence of a clear link between the performance
management system and the organization’s reward
system are two other structural components of
performance management systems. Goal alignment refers
to the extent to which employees’ performance goals are
explicitly aligned with organizational goals and priorities
(Enriquez, V., McBride, J., & Paxton, 2011). The
presence of a clear link between the performance
management system and the rewards system implies that
the system should connect to the organization’s reward
system as a way to differentiate rewards based on the
quality of employee performance (de Waal, A., &
Counet, 2008). The structure of a performance
management system also involves the extent to which it
allows for participative decision making. Participative
decision making refers to the degree to which supervisors
encourage employees to express their ideas and use
employee feedback when making decisions (Arnold,
Beach, & Drasgow, 2018).
REVIEW OF RELATED LITERATURE ON
EMPLOYEE ENGAGEMENT
(Kahn, 1990) in his research article “Psychological
Conditions of Personal Engagement and Disengagement
at Work”, undertook a qualitative study on the
psychological conditions of personal engagement and
disengagement by interviewing summer camp counselors
and staff at an architecture firm about their moments of
engagement and disengagement at work. He defined
disengagement as the decoupling of the self within the
role, involving the individual withdrawing and defending
themselves during role performances. Disengaged
employees displayed incomplete role performances and
were effortless, automatic or robotic. He found that there
were three psychological conditions related with
engagement or disengagement at work: meaningfulness,
safety, and availability. These psychological conditions
are linked to existing theoretical concepts and provide
directions for future research are described.
(Ferguson, 2005) in the research paper on, “Employee
engagement: does it exist, and if so, how does it relate to
performance, other constructs and individual
differences?” reviews the current literature on employee
engagement and considers the various definition and
models of engagement available in the psychological and
business literature. The research aims to clarify the
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construct of employee engagement. Specifically, this
research attempts to develop a scale to measure employee
engagement, establish if employee engagement is uni-
dimensional or multidimensional, determine reliability
and validity of the scale, testing as to whether
engagement shows discriminant validity with respect to
job satisfaction, job involvement, intrinsic motivation,
affective commitment, organisational citizenship
behaviours, establish predictors of employee engagement
and lastly, examine the impact of individual differences
on employee engagement. This research has potential
applications in human resource management for role
definition, support and flexibility.
(Little, Beverly & Little, 2006) in their article on,
“Employee Engagement: Conceptual Issues” explores
the construct of employee engagement. The researchers
have explored questions related to how the construct is
defined and it relation with other existing, well-validated
constructs. The article covers application of the construct
to organisational outcomes. Many organisations now
measure their employees level of engagement and make
an attempt to increase these levels because they believe
that doing so will improve productivity, profitability,
turnover and safety. This article attempted to critically
analyse the positives and negatives of employee
engagement research.
(Vance, 2006) in his article on, “Employee Engagement
and Commitment: A guide to understanding, measuring
and increasing engagement in your organization”
examines the approach adopted by employers and
corporate consultants in defining the term employee
engagement and offers ideas for strengthening employee
engagement. Though different organisations define
engagement differently, some common themes emerge.
These themes include employee’s satisfaction with their
work and pride in their employer, the extent to which
people enjoy and believe in what they do for work and
the perception that their employer values what they bring
to the table. This report provides guidelines for
understanding and measuring employee engagement, and
for designing and implementing effective engagement
initiatives. The report also outlines the way in which
everyday human resource practices such as recruitment,
training, performance management and workforce
surveys can provide powerful levers for enhancing
engagement. The author highlights ten common themes
related to engagement: Pride in employer, satisfaction
with employer, job satisfaction, opportunity to perform
well at challenging work, recognition and positive
feedback for one’s contributions, personal support from
the supervisor, effort more than required, understanding
the link between one’s job and the organisations mission,
prospects for future growth with one’s employer and
intent to stay with one’s employer.
(Christopher, 2007) in his research on, “A new
Measurement Scale for Employee Engagement: Scale
Development, Pilot Test, and Replication”, contradicts
the views of the previous researchers that engagement is
multidimensional and conceptualizes engagement as one-
dimensional. In the first phase of item generation a
preliminary set of scale items were generated using
insights from existing literature and information gained
through semi structured interviews. Individuals
occupying diverse occupations from various
organisations were selected for these sessions. Males (n =
9) and females (n = 9) each represented 50% of the
sample, and the interviewees ranged in age from 26 to 65
years. The findings of the semi structured interviews
indicated that engagement was strongly related to the job
tasks. The consensus was that when the right personal,
task, and contextual elements came together engagement
was the result. Findings indicated that meaningfulness
was strongly correlated with engagement. In conclusion,
the newly developed scale supports the idea that
engagement is a state of aroused, situation specific
motivation that is correlated with both attitudinal and
behavioural outcomes.
(Bhatnagar, 2007) in her paper titled, “Talent
Management strategy of Employee Engagement in Indian
ITES employees: Key to retention, investigate talent
management and its relationship to levels of employee
engagement” uses a mixed method research design. In
the first phase a survey was conducted on a sample of
272 BPO/ITES employees, using Gallup Q12 or Gallup
Workplace Audit. Focus group interview discussion was
based on reasons for attrition and the unique problems of
employee engagement. In the second phase, one of the
BPO organizations from the phase I sample was chosen
at random and exit interview data was analysed using
factor analysis and content analysis. In the first phase low
factor loadings indicated low engagement scores at the
beginning of the career and at completion of 16 months
with the organization. High factor loadings at
intermediate stages of employment were indicative of
high engagement levels, but the interview data reflected
that this may mean high loyalty, but only for a limited
time. In the second phase factor loadings indicated three
distinct factors of organizational culture, career planning
along with incentives and organizational support. The
first two were indicative of high attrition. The study
indicated that a good level of engagement may lead to
high retention, but only for a limited time in the ITES
sector. The need for a more rigorous employee
engagement construct is indicated by the study.
(Markos, Sandhya, 2010) in their paper titled,
“Employee Engagement: The key to improving
performance”, explicates that employee engagement is a
vast construct that touches almost all parts of human
resource management facets. If every part of human
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resources is not addressed in appropriate manner,
employees fail to fully engage themselves in their job in
the response to such kind of mismanagement. The
construct employee engagement is built on the
foundation of earlier concepts like job satisfaction,
employee commitment and organizational citizenship
behaviour. Though it is related to and encompasses these
concepts, employee engagement is broader in scope.
Employee engagement is stronger predictor of positive
organizational performance clearly showing the two-way
relationship between employer and employee compared
to the three earlier constructs: job satisfaction, employee
commitment and organizational citizenship behaviour.
Engaged employees are emotionally attached to their
organization and highly involved in their job with a great
enthusiasm for the success of their employer, going extra
mile beyond the employment contractual agreement.
(Doherty, 2010) in his article titled, “Making employee
engagement an end-to-end practice” aims to assist
businesses of all sizes in employee engagement,
attraction and retention, by demonstrating how
fundamental human resources processes can be
effectively combined with new technologies to make
employee engagement an end-to-end practice. Employers
know that happy and fulfilled employees are more
productive, but attracting and retaining the best talent for
a business involves engaging employees in the long term.
This paper discussed a range of tactics to help ensure
engagement, such as regular appraisals, use of social
networking and the efficient recording of employee
performance and interests, to best optimize the talent
management process. This paper demonstrates how best
to engage employees from before a career even begins,
right up until it ends. It offers guidance on using the
latest techniques and technology to keep employees
engaged and motivated. Employee engagement must
therefore be an end-to-end practice. Motivated and
efficient workforces only happen when respect flows in
all directions through a business, with transparent
processes throughout.
(Thiagarajan, B. & Renugadevi, 2011) in their article
on, “Employee Engagement practices in Indian BPO
Industries- An Empirical Investigation” provide an
introduction to the concept of employee engagement and
key research on engagement related factors in BPO
Industries in India. The authors conducted a literature
search on employee engagement and interviews with 126
executives. The results reveal that, career development,
performance appraisal and motivation factors are
connected to employee engagement. The implications are
that leaders should be educated on engagement, career
development opportunities are particularly important and
that performance improvement should champion work
life balance, these practices are useful to increase
engagement.
(Malhotra, 2012) in her research paper titled, “Employee
Engagement: A conceptual analysis” explores the
historical development of employee engagement using
integrative literature review method. The paper throws
light on the early conceptualisations of employee
engagement followed by the contemporary approach. It
further elaborates on the various models developed by
consultants to understand the role of human resource in
enhancing employee engagement at workplace and
application of the concept at business unit level. Drivers
of employee engagement are also highlighted in this
study. To conclude the author presents implications for
HRD scholars and practitioners.
(Thakur, 2014) in her paper “A Research Paper on the
Effect of Employee Engagement on Job Satisfaction in IT
Sector” seeks to determine the Effect of Employee
Engagement on Job Satisfaction in the IT Sector. Primary
as well as secondary data has been used to carry out the
research. Descriptive Research Design has been used
with a sample size of 120 respondents from the IT
Sector. Correlation and Regression analysis techniques
have been sued for the purpose of analyzing data. The
study has been carried out on officers as well as the
clerks of IT sector. The findings suggest that among the
officers work motivation could be improved through
increasing job authority and accountability. At the
clerical level, rewards and sanctions are significantly
associated with job involvement.
LITERATURE RELATED TO PERFORMANCE
MANAGEMENT SYSTEMS
(Mel & Cochran, 1985) in their study on, “Effect of two
Goal-Setting dimensions on Perceived Intra
Organizational Conflict” attempted to assess the effects
of goal setting upon intra organisational conflict. Non-
supervisory employees of a large utility were
administered a questionnaire containing measures of task
goal attributes, perceptions of inter and intradepartmental
conflict, internal work motivation and intrinsic job
satisfaction. Results suggest that task goal attributes do
influence perceptions of intra organisational conflicts.
Higher levels of goal difficulty and goal clarity were
found to be associated with lower levels of both intra and
interdepartmental conflict. A significant interaction effect
for goal difficulty and clarity on interdepartmental
conflict suggests that individuals who have challenging
goals experience lower interdepartmental conflicts when
goals are clear and specific than when goals are
ambiguous. Individuals who have goals that are not
challenging experience higher inter departmental conflict
when goals are ambiguous than when goals are clear and
specific. Results further suggest that increasing levels of
both types of conflict reduced both internal work
motivation and intrinsic job satisfaction.
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(Motowidlo & Van Scotter, 1994) in their research
paper “Evidence That Task Performance Should Be
Distinguished From Contextual Performance” attempts
to tests the merit of the distinction made by W. C.
Borman and S. J. Motowidlo (1993) between task
performance and contextual performance. Supervisors
rated 421 U.S. Air Force mechanics on their task
performance, contextual performance, and overall
performance. Data on length of air force experience,
ability, training performance, and personality was
available for many of these mechanics. Results displayed
that both task performance and contextual performance
contribute independently to overall performance.
Experience is more highly correlated with task
performance than with contextual performance, and
personality variables are more highly correlated with
contextual performance than with task performance. The
results of the study support the distinction between task
performance and contextual performance and confirm
that performance, at least as judged by supervisors, is
multidimensional.
(Renn & Prien, 1995) in their study on, “Employee
responses to performance feedback from the task: A field
study of the moderating effects of Global Self-Esteem”
examined the moderating effects of global self-esteem on
the relationship between performance feedback from the
task and several work attitudes and behaviours. As
predicted, self esteem interacted with the frequency of
performance feedback from the task to account for
significant amounts of additional variance in job
performance, general job satisfaction, absenteeism, and
job search intentions. Specifically, low self esteem had
lower performance, absenteeism, and job search
intentions than high self esteem in relation to frequent
performance feedback from the task. High self esteem
reported greater job satisfaction than low self esteem in
response to frequent task-derived performance feedback.
The discussion centers on the implications the findings
have for future research and for human resource
management.
(Borman, W. C., & Motowidlo, 1997) in their research
article “Task and Contextual Performance: The Meaning
for Personnel Selection Research” describe and compare
task and contextual performance and discusse the impact
of this distinction on personnel selection research. A
taxonomy of contextual performance containing elements
of organizational citizenship behavior and pro social
organizational behavior is offered. Evidence is presented
demonstrating that supervisors equally consider
subordinate task and contextual performance when
making overall judgments of personnel performance.
This, along with data showing that personality
successfully predicts contextual performance, provides
an alternative explanation for recent meta-analytic
findings that personality correlates moderately with
overall performance. Personality may be predicting the
contextual component of overall performance. Results
from studies using the Hogan Personality Inventory
confirm that correlations between personality and
contextual criteria are higher than correlations between
personality and overall performance. The authors argue
that finding such links between predictors and individual
criterion elements significantly advances the science of
personnel selection.
(Frink & Ferris, 1998) in their article titled,
“Accountability, impression management, and goal
setting in the performance evaluation process” reviews
the past research on accountability, impression
management, goal setting, and performance evaluation.
The authors suggest that accountability conditions may
influence whether goals are used for impression
management or performance-directed purposes. Goal
theory and research suggest that goals typically are
performance-directed, resulting in elevated performance
under certain conditions. Alternatively, impression
management theory might imply that goals may not
always be performance-directed, and the goal-
performance relationship may be decoupled in such
cases. Accountability is proposed as influencing this
relationship in addition to main effects on how people
approach tasks. Two studies tested notions of how
accountability influences task approaches and goal uses a
laboratory experiment with university students, and a
field study of telemarketers. Convergence of results
indicates that participants approached tasks and set goals
differently according to accountability conditions.
Furthermore, the goal-performance relationship
differences reflect the use of goals for performance-
directed purposes under low accountability, and for
impression-management purposes under high
accountability (with no goal-performance relationship),
as predicted.
(Eisenberg, 2001) in his research paper titled, “The
effects of reward schemes, individualism-collectivism and
intrinsic motivation on teams creative performance”
throws light on the detrimental effects of extrinsic
rewarding schemes where intrinsic rewarding schemes
are needed. The objective of the research was to study the
effects of rewards on teams and individuals creative
performance. The nature of the study is exploratory.
According to the author rewards do increase motivation
but beyond a certain optimal level it can decrease
performance. Thus, excessive rewarding is detrimental to
performance. If people are pressuring themselves, in
urgency, anxious in doing their work then we can be sure
that extrinsic rewards are involved. In conclusion
intrinsic motivation is important in learning, adaptation
and cognitive performance. There is nothing wrong in
rewards when administered properly. Only when rewards
were highly salient were found to be detrimental and
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intrinsic rewards played an important role in teams and
individuals creative performance. Individual rewards
worked best for where group interdependence was not
involved and there is dedication, voluntary overtime and
innovation seen under intrinsic reward schemes.
(Roberts, 2003) in his research article “Employee
Performance Appraisal System Participation: A
Technique that Works” emphasises that performance
appraisal is one of the most complex and controversial
human resource techniques. Participatory performance
appraisal is an essential and proven attribute of an
effective performance appraisal system. This article
summarizes the conceptual foundation for participation
including its intrinsic motivational value, the expansion
of available information, and the opportunity to interject
employee voice. The moderating role of goal setting and
feedback in enhancing participation effectiveness is
outlined. The article concludes with factors that attenuate
the effectiveness of participation including lack of
training, absence of rater accountability strategies, and
organizational and supervisory resistance to honest
subordinate feedback.
(London, Mone, & Scott, 2004) in their article titled,
“Performance Management and assessment: Methods for
improved rater accuracy and employee goal setting”
examines the gaps between research and practice in the
areas of rater accuracy and goal setting. Prior research
has shown that human resource managers may
incorrectly believe that training raters to recognize errors
will increase rater accuracy and that employee
participation in goal setting is more effective than
assigning goals. Theory-based research suggests ways to
help raters recognize expected performance and enable
employees to self-regulate their pursuit of goals. The
study describes applications of these findings to
performance management programs and suggested
methods for evaluating their effectiveness once
implemented.
(Pittman, 2007) in her research study on, “Antecedents
and Consequences of the Feedback Environment”,
examines possible antecedents and consequences of
feedback environment. The feedback environment
focuses on informal feedback rather than the feedback
associated with formal performance appraisals.
Organisational learning culture, transformational
leadership, and supervisor emotional intelligence were
hypothesized to have a positive impact on the feedback
environment. Regression analysis showed that these
antecedents lead to favorable feedback environment.
Further the feedback environment was hypothesized to
influence employees participation in self development
behaviours by increasing self-determination. The results
of this study contribute to the existing literature by
identifying organisational characteristics that influence
the work environment surrounding feedback.
(Dewettnick, 2008) in his study “Employee performance
management systems in Belgian organisations: purpose,
contextual dependence and effectiveness” proposed that a
performance management systems purpose can be
positioned on a bipolar continuum from a strong
performance orientation to a strong development
orientation. Further, the research article suggested that
performance management system purpose relates to
industry characteristics and also the performance
management system's effectiveness in terms of increasing
performance and fostering employee development and
motivation. The data collected from 319 Belgian
organisations reveal that organisations operating in more
competitive markets tend to have a performance
management system with a stronger performance
oriented purpose, at the expense of a stronger
development-oriented purpose. The findings indicate that
performance management systems with a stronger
development-oriented purpose are more effective in
fostering employee development and motivation. In
contrast, the strength of a performance management
system's with a performance-oriented purpose did not
relate to higher effectiveness in terms of increasing
performance at various levels.
(Perrin, 2009) in his article titled, “Power of recognition
from managers” examines new research on the power of
recognition from managers to accelerate employee
engagement and boost productivity and performance. The
article outlines various studies on how recognition can
boost employee morale. Part one of the research explores
many areas that lead to employee engagement and
presents the detailed analysis of the findings in a tabular
format so as to evaluate the role of recognition in
employee engagement. In this paper, a sample size of
more than 10,000 workers was taken for studying how
recognition of efforts of an employee affects his
productivity and thereby the growth of an organisation.
The findings indicate that effective recognition from
managers encompasses three basic requirements:
inclusiveness, communication, and trust. The study also
reveals that proper recognition and appreciation given to
even less engaged employees can help to boost their
efficiency level.
(Rhodes & Blvd, 2010) in their paper titled, “The
Impact of Rewards Programs on Employee Engagement”
attempts to study the pay practices used by compensation
professional and determine how total rewards programs
and employee engagement are related. The survey with a
sample of 6300 world at work member companies throw
light on the facts that the impact of intangible rewards on
employee engagement is perceived as very high with
work environment or organisation climate rated at 61%
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second only to the nature of the job or quality of work
rated at 69%. 60% of the respondents indicated that they
used variable pay to reward employee engagement. More
than 40% of the respondents believe that base salary
increases, and benefits and perquisites have a high or
very high impact on employee engagement. Moreover,
respondents believe that short-term incentives or bonuses
have an even higher impact on engagement. However,
fewer believe that long-term incentives and financial
recognition have a high impact on engagement. Further,
non-financial total rewards programs receive a relatively
low score at 37%, which is not very encouraging, given
that non-financial recognition programs are often
suggested as ways to motivate and engage employees.
Thus, we can find a relationship between recognition of
employees work and employees productivity in this
paper.
(Chakraborty, Yin, & Zeynep, 2011) in their research
article “Determinants of Performance Management
System in South East Asia” attempts to study the
relationship between determinants influencing the
implementation and effectiveness of performance
management system in an educational institution in
South East Asia. This study specifically examines
organizational factors influencing PMS as well as the
perceived effectiveness of the system. The study also
attempts to examine the relationship between
organizational factors and the perceived effectiveness of
the performance management system. A total of 123
questionnaires were distributed to academic members
across the higher education institution. Factor analysis
was conducted using Principle Component Analysis
(PCA) technique to identify the construct validity of
factors influencing performance management system and
descriptive statistics was used to examine the
effectiveness of performance management system.
Pearson correlation method was used to determine the
relationship between organizational factors and
effectiveness of performance management system. The
results of the study demonstrated that three
organizational factors namely employee involvement,
performance oriented culture and management
commitment influenced performance management
system and its effectiveness at a moderate level.
Furthermore, among these three organisational factors,
performance oriented culture has the strongest
relationship with effectiveness of performance
management system. The results of the study also
suggest that management commitment is still inadequate
and needs to be carefully and strictly taken into account
to increase the effectiveness of performance management
systems.
(Dewettinck & van Dijk, 2013) in their paper “Linking
Belgian Employee Performance Management System
Characteristics with Performance Management System
Effectiveness : Mediating Role of Fairness” proposed a
model in which perceived fairness mediates the
relationship between characteristics of employee
performance management systems and their perceived
effectiveness by employees based on the expectancy
theory, goal setting theory and control theory.
Performance Management System characteristics studied
in this paper are frequency and length of formal reviews,
the frequency of informal reviews and feedback, whether
the formal conversation focused on evaluation or
development and lastly the degree of participation. The
model was tested on a cross-industry sample of 3192
employees in Belgium. The findings of the study indicate
that performance review focus and employee
participation strongly relate to perceptions of appraisal
fairness and performance management system
effectiveness. The frequency of informal performance
reviews is more strongly related to performance
management system effectiveness than the frequency of
formal performance reviews. The findings indicate that
the role and functionality of performance management
systems by showing that the manner in which
performance management systems are shaped and
executed is of fundamental importance for their
effectiveness. Lastly, it is highlighted that the three
motivational theories appear useful for understanding the
consequences of performance management practices on
individual employees.
(Sahin & Yogzat, 2016) in their research article
“Evaluation of Task and Contextual Performance A
Multitrait – Multimethod Approach” aim to investigate
the discriminant and convergent validity of task and
contextual performance, using the scales of Goodman
and Svyantek (1999) with self-ratings and supervisor-
ratings. The total sample included 486 employees and
their supervisors, working in the public hospitals. The
questionnaires were distributed and collected by the
surveyor. Firstly, the authors ran preliminary CFAs to
test the factor structure of task and contextual
performance separately for self-ratings and supervisor
ratings. Then further, they examined the convergent and
discriminant validity of task and contextual performance
by applying the multitrait-multimethod approach. The
results of multitrait-multimethod analysis suggested that
the two performance dimensions (task and contextual
performance) can be differentiated and the measurement
of task and contextual performance is invariant across
self-ratings and supervisor-ratings.
REVIEW OF RELATED LITERATURE ON
PERFORMANCE MANAGEMENT SYSTEM AND
EMPLOYEE ENGAGEMENT
(Gruman & Saks, 2011) in their article on
“Performance Management System and Employee
Engagement” emphasise on the increased importance
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organisations are laying on their performance
management systems to increase employee effectiveness.
They point out that harnessing the performance
management system fully will not only generate higher
employee performance but also promote increased
employee engagement levels. In this article, the authors
present a new model of engagement management for this
purpose. They argue that although performance
evaluation is at the centre of performance management,
the whole process incorporates organizational policies
and design features that interact to influence employee
performance. In essence, this approach to human
resources management is based on the understanding that
patterns of HR activities and factors rather than single
drivers such as performance management contribute to
achieving organisational objectives. Integrating employee
engagement into performance management activity is
proving to be effective in improving organisational
performance. The authors present support to the fact that
performance management and employee engagement are
of corresponding importance within what they term the
engagement management process, which begins with
goal setting and the framing of a psychological contract
between supervisor and employee
(Malhotra, 2014) in her study “Performance
Management System and its relationship with Employee
Engagement in the service industry” aims to identify
ways to effectively implement goal setting, performance
feedback, mentoring and development opportunities for
enhancing employee engagement in various types of
organizations from the service industry. The study is
divided into three phases. Phase one is the study of the
existing practices of Performance Management in
organizations from the service industry. Phase two is the
study to identify the present level of employee
engagement and its relationship with performance
management in selected organisations from the service
industry. In the phase three based on the findings of the
study the researcher identifies training needs and
development opportunities for the employees. For the
purpose of the study both primary and secondary data is
collected. Purposive sampling technique is used and the
researcher has considered completed responses of 200
respondents in each industry. The data is collected using
questionnaires and experience survey. Utrecht Work
Engagement Scale and Performance Management System
Scale (own construct) is used for data collection. The
study examines the relationship between Goal Setting,
Performance Feedback, Mentoring and Development
Opportunities (independent variables) and Vigor,
Dedication and Absorption (dependent variables). The
results of the study indicate a strong correlation between
the independent and dependent variables.
(Arakal & Mampilly, 2015) in their research paper “The
Impact of Performance Management System on
Employee Involvement and Interpersonal Trust: A Survey
among Scientists” examines the phenomenon of
performance management, which holds a significant
place in management literature. The authors attempt to
foresee the impact of performance management system
on employee involvement and interpersonal trust. This
research paper intends to empirically validate the
mediating role of employee involvement in the
relationship between performance management system
and interpersonal trust. Primary data is collected from
150 scientists working in nationalized research and
development organizations in Kerala. It is envisaged that
this research paper will add to the understanding of the
link between performance management system,
employee involvement and interpersonal trust. Partial
Least Squares (PLS) was used to authorize the
relationship among the variables. Findings of the study
are conferred, together with limitations and suggestions
for future research. The results of the empirical study
suggest that there is significant relationship between
performance management system and employee
involvement. The study provides a deeper and richer
understanding in explaining the relationship between
employee involvement and interpersonal trust.
(Everlyne, Mbithi, & Musiega, 2016) in their research
paper “Influence of Performance Management Practices
on Employee Engagement in Public Universities: A Case
of Kibabii University – Kenya” Performance
management practices are considered as one of the most
powerful measures or steps a company can take towards
competitive advantage and high performance. This study
sought to investigate influence of performance
management practices on employee engagement at
Kibabii University. Specifically, the study objectives
were to determine the influence of performance review
on employee engagement at Kibabii University- Kenya.
The research adopted a descriptive research design
because it was used to obtain information concerning the
current status of the phenomena. The target population of
the study composed of 200 academic staff of Kibabii
University. Simple random sampling was used as a
sampling technique. Questionnaires were the main data
collection tool which was self administered and later on
collected for data analysis. Data collected was analysed
by use of descriptive and inferential statistics. The
research revealed that there was a positive correlation
between performance management review and employee
engagement at Kibabii University- Kenya. The study
recommended to the organization to embrace job
engagement by indentifying employees with their jobs.
(Chandra & Saraswathi, 2018) in their journal article
“Impact of Performance Management System on
Employee Performance – A Conceptual Framework for
Organistaions” establishes that Performance
Management System is a key variable which has greater
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impact on Employee Performance and on organizational
performance as well. The aim of this study was to
explore the kind of impact that Performance Management
System will have on Employee performance. This study
reports the theoretical foundations on Performance
Management System and utilized all the three phases of
Performance Management System including developing
and planning performance, managing and reviewing
performance, rewarding performance as independent
variables, so as to develop a research model which can be
replicated and used for further research purposes.
Further, this study provides beneficial insight about
Performance Management System with specific focus on
all the three phases of it and its impact on Employee
performance in-order to identify various weaknesses that
exist generally in the Performance Management System.
CONCLUSIONS
A thorough review of related literature revealed that the
successful implementation of performance management
systems has the potential to increase organizational
performance and effectiveness. It was observed that it is
not the merely conducting performance management
does not contribute to employee engagement, but is the
manner in which it is conducted impacts employee
engagement.
Specifically, organisations should evaluate employees
based on the extent to which they engage in contextual
performance. Contextual performance consists of extra-
role behaviors that help to increase organizational
effectiveness, including tackling a project with
enthusiasm, helping a colleague with their work
assignment, volunteering for extra duties, and
maintaining a positive attitude in the office. To ensure
performance management systems are effective and
increase employee engagement, organisations should also
design their performance management systems to allow
for participative decision making between supervisors
and their subordinates. To ensure employees are
encouraged to voice their ideas about their performance,
managers should receive training and planned
performance reviews and allot times for employees to
voice their thoughts about their performance. Managers
should also receive training on how to listen and
incorporate employees input into the decisions managers
make regarding employees performance, objectives, or
development. While designing their performance
management system organisations should primarily focus
on the results employees achieve, because the review of
literature found that systems with a results oriented
purpose increase employee engagement (Dewettnick,
2008),(Dewettnick, K & Dijik, 2013). Organisations
should heavily focus on performance outcomes and how
employee efforts are helping the organisation meet their
goals.
In addition, few other additional characteristics were
found to significantly predict employee engagement. To
achieve an effective performance management system,
organizations should design their system to evaluate
employee performance on measures that are relevant to
the employee’s job and the extent to which employees
achieve their performance goals or objectives.
Organisations should also implement performance
management system activities that help employees
formulate performance goals for themselves and identify
and work towards their career paths. In addition,
organisations should ensure that performance
management systems are clearly linked with the rewards
system, such that level of performance determined by the
performance management system should dictate the
amount of rewards employees receive (Edward, 2003).
Employees who display high levels of performance
should receive more rewards compared to poor
performers. Lastly, to conclude organizations that are
primarily interested in increasing employee engagement
should design their performance management systems to
emphasize the categories and characteristics that were
found to increase employee engagement.
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Management, 22, 1294–1311.
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A STUDY ON EFFECT OF REWARD SYSTEM ON THE MOTIVATION LEVEL
OF EMPLOYEES
Dalbir Kaur*
*Student, A.S. College, Khanna, Punjab, India
ABSTRACT
This research intends to know the effect of reward system on the motivational level of employees. The
most common problem in organizations today is that they miss the importance of rewards. The
rewards play a key role in the overall success of the organization, rewards helps the organization to
make high returns and a key focus is to make employees motivated by appreciating them and valuing
them with various benefits. For this purpose, researchers has done the research on this topic in the
Lakshmi steel rolling mills, Alour.
Keywords: Rewards, Motivation, Employees, Satisfaction
INTRODUCTION
Reward system is an essential tool that management
should keep in mind to channel the employees’
motivation in desired ways. For management, it is
daunting task to know the employees needs so that they
should retain the employees in the company and motivate
them to perform to high levels. The problem confronting
this research is to appraise the effect of reward system on
the motivational level of employees.
WHY USE OF REWARD SYSTEM?
If the company is distributed the rewards adequately then
it could encourage the employees to become interested in
working at the company and ensures effectiveness of the
organization.
THE TOTAL REWARD SYSTEM
Total rewards system describes the total strategy that
brings together the financial and non-financial rewards.
In this both tangible and intangible rewards are
considered valuable. The aim of the total rewards system
is to increase the impact of rewards on the motivation
level of employees, job engagement and organizational
commitments. The components of the total rewards can
be described in the following figure:
VARIOUS KINDS OF REWARDS
FINANCIAL REWARDS
Salary,Fringe benefits
Promotions, Bonuses or
Share
NON-FINANCIAL REWARDS
learning and development
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REVIEW OF LITERATURE
REWARD SYSTEM HAS BEEN EXAMINED
DIFFERENTLY BY VARIOUS SCHOLARS
MCSHANE (1992) sees organizational rewards system
as those mechanisms which offer money and other
extrinsic and intrinsic rewards to motivate employees
towards fulfilling organizational obligations.
ARMSTRONG (2009) rewards system adopts a total
reward approach, which emphasizes the importance of
considering all aspects of reward as a coherent whole that
is integrated with other human resource initiatives
designed to achieve the motivation, commitment,
engagement and development of employees.
MCSHANE AND VON GLINOW (2000), seniority-
based rewards reduce turnover because the cost of
quitting increases with the employee’s length of service.
They also regarded financial incentives as “that golden
handcuffs”. In that sense that, to them, it discourages
people from leaving the organization.
RESEARCH METHODOLOGY
A descriptive study is chosen to discover answers
to the questions.
A convenience sampling method is used for the
survey.
Researcher used questionnaire method for the
purpose of data collection.
For the study, 50 respondents were selected at
random in the Lakshmi steel rolling mills.
A well structured questionnaire was personally
administrated to the selected sample to collect
the data.
DATA ANALYSIS
TABLE-1
Showing satisfaction of employees with rewards to remove absenteeism
Satisfaction No. of respondents Percentage
Highly satisfied 41 82
Satisfied 06 12
Neutral 00 00
Dissatisfied 03 06
Highly dissatisfied 00 00
50 100
HYPOTHESIS TESTING
CHI-SQUARE TEST
H0: Let us take the null hypothesis that there is no
significance difference between employees’ satisfaction
with rewards and incidence of absenteeism.
H1: Let us take the alternative hypothesis that there is
significance difference employees’ satisfaction with
rewards and incidence of absenteeism.
OBSERVED FREQUENCY
Satisfaction/
Rewards
Highly
Satisfied
Satisfied Neutral Dissatisfied Highly Dissatisfied Total
Profit sharing 09 04 03 05 00 21
Fringe benefits 03 10 09 00 00 22
Bonus 01 04 00 00 00 05
Other incentives 02 00 00 00 00 02
15 18 12 05 00 50
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Expected frequency = Row total x Column total ÷
Grand total
Chi-square=
X2 =
∑ (O-E)2/E
X2 =
the test statistic
∑ = the sum of
O= observed frequencies
E = expected frequencies
∑(O-E)2/E =11.00
Degree of freedom =(c-1) (r-1) =12
5% level of significance=12
Table value =21.026
Interpretation:
As the calculated value (test value) is less than the table
value. Therefore null hypothesis is accepted and
alternative hypothesis is rejected and is concluded that
there is no significant difference between employees
satisfaction with rewards and incidence of absenteeism.
TABLE:2
Showing employees commitment towards their jobs
Satisfaction No. of respondents Percentage
Highly satisfied 15 30
Satisfied 18 36
Neutral 12 24
Dissatisfied 05 10
Highly dissatisfied 00 00
50 100
HYPOTHESIS TESTING
CHI-SQUARE TEST
H0: Let us take the null hypothesis that there is no
significance difference between employees’ satisfaction
with rewards to employees commitment.
H1: Let us take the alternative hypothesis that there is
difference between employees’ satisfaction with rewards
to employees commitment.
OBSERVED FREQUENCY
Satisfaction/rewards Highly satisfied Satisfied Neutral Dissatisfied Highly
dissatisfied
Total
Profit sharing 09 04 03 05 00 21
Fringe benefits 03 10 09 00 00 22
Bonus 01 04 00 00 00 05
Other incentives 02 00 00 00 00 02
15 18 12 05 00 50
Expected frequency= Row total x column total ÷ Grand
total
Chi square =∑ (O-E)2/E
= 77.8112
Degree of freedom= (c-1)(r-1)
5% level of significance=12
Table value=21.026
Interpretation:
As the calculated value is more than the table value.
Therefore null hypothesis is rejected and alternative
hypothesis is accepted. So it is concluded that there is
significance difference between employees commitment.
FINDINGS
Most of the employees are satisfied with rewards
to remove their absenteeism at the company.
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Employees are sometimes not getting rewards
adequately. So it will reduce the employees
commitment towards their job.
Employees get motivated from rewards.
SUGGESTIONS
The research conducted shows the biggest
challenge in motivating the employees is to find
the right balance between the individual based
rewards and company based rewards.
The organization should provide effective
rewards for effective rewards for efficient
performance of employees.
CONCLUSION
As a result of this survey, it shows some that majority of
the employees of firm are satisfied with their job. If the
company is providing rewards adequately and rightfully
then employees shows their commitment and
engagement to their jobs and the company survival
chances becomes more and company will raise and shine.
REFERENCES
1. Mcshane and Von glinow(2000), “Study on seniority based
rewards”.
2. Armstrong(2006), “study on the total rewards system”.
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IMPACT OF PERFORMANCE APPRAISAL ON EMPLOYEE’S PRODUCTIVITY
Ankita*
*Student, A.S College, Khanna, Punjab, India
ABSTRACT
In today dynamic working environment, it is necessary to have a sense of belongingness among employees as
they are the most valuable assets of the company. Performance appraisal should be taken as intrinsic part of
a manager responsibility and not as a time-consuming process. It is a method by which the job performance
of an employee is measured in terms of quality, quantity, cost, behavior and time. It is conducted by self,
peers, seniors and junior. The tools & techniques innovated for measuring human productivity and
performance with respect to the required capability, intellect and experience is under an umbrella named
Performance Appraisal System. It is a systematic means of ensuring that their superiors and staff meet
regularly and have a discussion on the past and present performance. For this purpose, the researcher
conduct study in shri salasar steel structural private limited and sample of 35 employees were taken. To
check the reliability of the data f-test and chi-square test will apply.
Keywords: Appraise, Appraiser, Feedback, Techniques, Performance Appraisal
INTRODUCTION OF PERFORMANCE
APPRAISAL
Performance appraisal is a systematic evaluation of
present potential capabilities and worth of employees by
superior or professional from outside. It is a process of
estimating or judging the value, excellent qualities or
status of a person. Performance appraisal evaluates an
employee’s skills, achievements and growth, or lack
thereof. It is a two dimensional concept-at one end lies
the objectives formulate and implement by the authority,
and at the other end, the targets or performance achieved
by employee individually or in a given group.
Performance appraisals can be either formal or informal.
Usage of former systems involves regular review o n
employee’s performance. Informal appraisals are
unplanned, often just chance statements made in passing
about an employee's performance. Some organizations
use more than one appraisal system for different types of
employees or for different appraisal purposes.
Organizations use a variety of methods for evaluating
employee performance. There are so many types of
performance management methods, understanding of
each method should be there.
REVIEW OF LITERATURE
Grote (2002) describes performance appraisal as a
formal management tool that helps evaluate the
performance quality of an employee.
Wilson and Jones (2008)58 in their article titled
“Reducing job-irrelevant bias in performance appraisals:
compliance and beyond” state that job-irrelevant
discrimination seems as ubiquitous as the performance
appraisals in which it is commonly detected. This paper
explores both compliance-based and more proactive
approaches that deal with the various possible sources of
discrimination in performance appraisal ratings. The
suggestions lead to a code of practice for performance
management in firms across cultures and national
boundaries
Kona Yasoda (2016) detailed the elements of an Ideal
Performance Management System. The important
elements are job descriptions, performance expectations,
appraisals, compensations, disciplinary policies and
commendations. She described globally trending models
like Team Performance Appraisal, 360 Degree
Appraisal, Rank and Yank strategy, the new model and
real-time feedback.
RESEARCH METHODOLOGY
OBJECTIVES OF THE STUDY
To study the need and importance of performance
appraisal policies
To study the performance appraisal implementation and
its effectiveness on employees
To identify the growth opportunities
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RESEARCH EMPIRICAL
Primary data collection Through structured questionnaire
Secondary data collection Through the website of the industry
Sampling method Convenience sampling
Sample size 35
Scaling technique 5 point likert scale
Statistical tools Chi-square test, f-test
FINDINGS AND ANALYSIS
TABLE 1 Satisfaction with policies associated with performance appraisal system
Options No. of responses Percentages
Yes 24 69%
No 11 31%
Total 35 100%
TABLE 1 depicts that 69% of the employees are very
much satisfied with the policies associated with
performance appraisal system as against 31% of the
employees does not satisfied with the policies framed in
regard to performance appraisal system.
Hypothesis 1
Let us take null hypothesis that there is no significant
difference between the satisfaction level of employees
regarding policies associated with performance appraisal
system
Employment level Yes No
Top level 5 2
Middle level 8 2
Lower level 11 7
Employment
status
Comments Observed Expected (O-E) (O-E)2 (O-E)2/E
Top level Yes 5 4.8 0.2 0.04 0.008
No 2 2.2 -0.2 0.04 0.002
Middle level Yes 8 6.86 1.14 1.2996 0.189
No 2 3.14 -1.14 1.2996 0.414
Lower level Yes 11 12.35 -1.35 1.8225 0.148
No 7 5.65 1.35 1.8225 0.323
Total 1.084
x2 = 1.084, degree of freedom= (3-1) (2-1) = 2
at d.f. =2, x2
0.05= 5.99
Since, calculated x2 value is less than the table value,
therefore hypothesis is accepted. We conclude that there
is no significance difference between satisfaction level of
employees with policies associated with performance
appraisal system.
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Table 2 Satisfaction with performance appraisal system
Options No. Of respondents Percentage Mean value
Highly satisfied 9 26% 5*9=45
Satisfied 15 43% 4*15=60
Neutral 7 20% 3*7=21
Dissatisfied 4 11% 2*4=8
Highly Dissatisfied 0 0% 1*0=0
134/35=3.82
TABLE 2 represents that 9 of the employees are highly
satisfied with performance appraisal system, 15
employees are satisfied whereas 7 employees are in a
neutral position as against 4 are dissatisfied and none of
the employee is highly dissatisfied with performance
appraisal system. This shows that the present appraisal
system is having positive impact on the performance of
employees.
Table 3 Satisfaction with growth opportunities
Options No. Of respondents Percentage Mean value
Highly satisfied 9 26% 5*9=45
Satisfied 11 31% 4*11=44
Neutral 9 26% 3*9=27
Dissatisfied 4 11% 2*4=8
Highly Dissatisfied 2 6% 1*2=2
126/35=3.6
TABLE 3 shows that 9 employees are highly satisfied
with the growth opportunities where as 11 of them are
satisfied,9 of the employees are in a neutral state against
4 of the employees are dissatisfied and 2 of them are
highly dissatisfied with the growth opportunities
associated with the growth opportunities.
Hypothesis 2
Let us take null hypothesis that there is no significant
difference between growth opportunities and
performance appraisal system
Highly satisfied Satisfied Neutral Dissatisfied highly dissatisfied
Satisfaction with
growth facilities
9 12 7 4 3
Satisfaction with
performance facilities
11 14 5 3 2
Satisfaction with growth facilities
Satisfaction with performance facilities
Highly satisfied 9 11
Satisfied 12 14
Neutral 7 5
Dissatisfied 4 3
Highly dissatisfied 3 2
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Applying F-test
Calculated value 1.96 for V1= 4, V2 = 4 Table value @
5% = 6.39
For V1= 4, V2= 4, the table value of F at 5% level of
significance is 6.39. Since the calculated value of F is
less than table value. So, we accept the null hypothesis
and conclude that there is no significant difference
between the satisfaction with growth facilities and
satisfaction with performance facilities.
INTERPRETATION
On an average, it can be seen that employees are
very much satisfied with the job facilities
provided to them as it ensures their future
growth in the near future
Employee attitude towards the current appraisal
system is very much satisfactory, so it can be
said that there is a great cooperation between the
management and employees
It can be seen that employees are satisfied with
the policies adopted by the company for
appraising the performance of employees
It can be said that the company provides the
opportunities to grow and excel in the near
future
SUGGESTIONS
Performance appraisal should not be perceived just as a
regular activity but its importance should be recognized
and communicated down the line to all the employees.
New methods of appraisal should be adopted
so that both appraiser and the appraise take
interest in the appraisal process.
New mechanisms should be evolved to
reduce the time factor involved in the
procedure of appraisal. Introducing online-
appraisal can do this
CONCLUSION
The findings in this research have showed that it is
essential to have an effective performance appraisal
system. The system should be free from bias so that
employees are afforded the chance to get a fair appraisal.
Therefore, inaccurate ratings result in frustrated
employees, inappropriate rewards and punishment.
REFERENCES
1. Wilson and Jones “Reducing job-irrelevant bias in
performance appraisals: compliance and beyond”
2. Cederblom in his article titled, “The performance appraisal
interview: a review, implications and suggestions
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A STUDY ON ABSENTEEISM OF WORKERS
Manpreet Kaur*
*Student, A.S. College, Khanna, Punjab, India
ABSTRACT
Employee Absenteeism is one of the most common work place problems facing employers in
today’s workplace. Majority of employee absences due to illnesses but still some studies have
shown that less than one-third of employees from the workplace are related to poor health. Most
employers offer their workers vacation, sick leave, paid-time off.
Keywords: Absenteeism, Employees, Industry, Problem
INTRODUCTION
Absenteeism is one of the real challenges to Indian
industry. It becomes major problem in today’s industry.
Absenteeism causes production loss as well as also
causes reduction of gross national income, when the
gross wages of labourers reduces normally his
purchasing capability. It is the responsibility of the
Human resource department to communicate the
attendance policy clearly to the employees. At the same
time, it has to develop HR policies to raise the motivation
level of employees and decrease absenteeism due to
capable reasons. Traditional methods of absenteeism
control only using disciplinary methodology have ended
being ineffective. Absenteeism causing poor utilization
of plant. India is facing unemployment problem on one
side and the other side abnormal absenteeism in
industries. It is the matter of prime concern for the
superiors and managers. They have to find the ways to
overcome absenteeism.
FEATURES OF ABSENTEEISM
Research studies undertaken by different authors reveal
the following features of absenteeism:
The rate of absenteeism is the lowest on pay day,
it increases considerably on the days following
the payment of wages and bonus.
Absenteeism is generally high among the
workers below 25 years and those above 40 years
of age.
Absenteeism in traditional industries is essential
in character.
The rate of absenteeism works from department
to department within an organization. Generally ,
it is high in the production department.
EFFECTS OF ABSENTEEISM
ON INDUSTRY ON EMPLOYEES
Affect production targets Reduces his earnings
Increase the cost of production Adds his indebtedness
Lowers the profit margin Decreasing the purchasing power
Affects industrial growth Leads to inefficiency in his job
REVIEW OF LITERATURE
A. SUKUMAR (2015) says that absenteeism is harmful
to both the employer and employee as follows: Normal
work- flow in the industry is disturbed, overall
production in the factory goes down, difficulty is faced in
executing the orders in time and casual workers have to
be employed to meet production schedules. Such workers
are not trained properly.
PICOARS AND PAYERS (2009) Unexpected absence
disturbs the efficiency of the group as the jobs are inter-
connected , if single man remains absent without prior
notice the whole operation process is disturbed. This
absenteeism results in production losses because due to
absenteeism, workers cost increases and thus efficiency
of operations is affected. Absenteeism rate can be
calculated for different employees and for different time
period like month & year. The frequency rate reflects the
incidence of absence and usually expressed as the no. of
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separate absence in a given period, irrespective of
absence. The frequency represents the average no of
absence per worker in a given period.
RESEARCH METHODOLOGY
As the main aim is to identify the factors leading to
absenteeism and the relationship between the factors and
absenteeism. The data has been collected through
primary method with the help of questionnaire and for
secondary data books and journals have been referred.
The main objective are to bring out the factors which
affect the working atmosphere of the employees that
drive them to absenteeism and to know the satisfaction
level of workers. It is purely descriptive in nature. This
type of research design framed for the study is
“Descriptive Research”. Convenience sampling method
is used for the survey.
DATA ANALYSIS
Table-1
Showing the impact of age on satisfaction level of safety provision:
Impact of age on satisfaction level No. of respondent Percentage
Low satisfaction 28 56
High satisfaction 22 44
Total 50 100
HYPOTHESIS TESTING
CHI-SQUARE TEST
H0: Let us take the null hypothesis that there is no
significant difference between the age and satisfaction
level for safety provision.
H1: Let us take the alternative hypothesis that there is no
significance difference between the age and satisfaction
level for safety provision.
OBSERVED FREQUENCY
Age/Safety provision Low satisfaction High satisfaction Total
Below 25 years 13 8 21
26-50 years 9 9 18
Above 50 years 3 8 11
Total 25 22 50
Chi - Square = ∑ ( Oi-Ei)2/ Ei
= 4.098
Degree of freedom= (R-1) ( C-1) = 2
5% level of significance=2
Table value= 5.991
Comment: As the calculated value is less than the table
value so null hypothesis is accepted. Therefore it can be
concluded that there is no significant difference between
the age and satisfaction for safety provision.
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Table-2
Showing job satisfaction
Job satisfaction Frequency Rank Percentage Mean score
Strongly agree 16 5 32 80
Agree 24 4 48 96
Neutral 00 3 00 00
Disagree 10 2 20 20
Strongly disagree 0 1 00 00
Total 50 100 196/50=3.92
HYPOTHESIS TESTING
CHI-SQUARE TEST
H0: Let us take the null hypothesis that there is no
significant difference between the experience and job
satisfaction of workers.
H1: Let us take the alternative hypothesis that there is no
significant difference between the experience and job
satisfaction of workers.
OBSERVED FREQUENCY
Experience/
satisfaction
Strongly agree Agree Neutral Disagree Strongly disagree Total
Below 3yrs 06 09 02 02 00 19
3-5 yrs 04 10 06 00 00 20
5-10 yrs 02 05 00 00 00 07
Above10 yrs 04 00 00 00 00 04
Total 16 24 08 02 00 50
Chi-square =∑ (0i-Ei)2/Ei
= 17.11
Degree of freedom=(R-1) (C-1)=12
5% level of significance=12
Total value= 21.026
As the calculated value is less than the table value so null
hypothesis is accepted.
FINDINGS
The study reveals that majority of the employees
take leave for their personal reasons like social
activities.
They have provided adequate welfare facilities.
48% workers are satisfied from their job.
Most of the employees are well known about
their job responsibilities.
SUGGESTIONS
Write attendance policy and clear attendance
expectations.
Offer an attractive salary package. Because
highly paid employees are less likely to be
absent, so offering an attractive compensation
package can build loyalty and reduce
absenteeism.
Small things that can have a big effect and ensure
that your employees are happy to come into the
office. So provide a pleasant working
environment
Consider introducing more predictable working
hours and limiting overtime as these measures
can help to reduce employee absenteeism.
CONCLUSION
The sources of organization in terms of profitability,
efficiency, growth depends on the contribution and
involvement towards objective. The rate of absenteeism
can be reduced with mutual commitment and
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involvement of employer and employee. The provision of
various welfare facilities, work culture, communication,
training and the workers should feel that they belong to
their family.
REFERENCES
1. A.Sukumar (2005) “A study on labour absenteeism in
Ammaru foundries Coimbatore”
2. Picoars and Payers (14 October 2009) “A research study on
absenteeism of employees in industrial sector”
3. Mamoria, Dr C.B. “Dynamics of industrial Relations” by
Himalaya Publishing House, Banglore.
4. Gupta K Shashi and Joshi Rosy (2007) “ Human resource
Management” Fourth revised addition, Kalyani publisher,
New Delhi
5. http://scribd.in
6. http://academia.edu.com
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EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON
SCALING AND PERFORMANCE OF SHGs OF UDAIPUR (RAJASTHAN)
Dr. Ashish Adholiya*, Dr. Santosh Kumar C.S**
, Shilpa Adholiya***
*Assistant Professor, Pacific Business School (Affiliated to Rajasthan Technical University, Kota),
Udaipur, Rajasthan, India
**Research Scholar, Faculty of Management, Pacific Academy of Higher Education and Research University,
Udaipur, Rajasthan, India
***Research Scholar and PGT (Commerce), Central Academy Senior Secondary School, Sardarpura, Udaipur
Rajasthan, India
ABSTRACT
The primary objective of forming the self help groups is to pull the socially deprived class people
into the main stream of the economic development by transforming their capacity through social
mobilization, skill development through self learning programs, self-confidence building through
community action, capacity building and many more. Self help group as an economic development
model can specifically get benefitted from the digitalization. Use of information and
communication technology practices offers technology enabled banking services, online training
and skill development classes promoted and supported by government, broader market penetration
and reach to supply the products, linkage with other SHGs, improved technical aptitude, improved
social inclusion to the members of SHG member which are overall influencing their scaling and
performance. The sample population of the research work is 10 SHGs of rural area (Balicha,
Teetardi, and Bargaon) of Udaipur, Rajasthan. Statistical assessment over dataset initiated after
reliability test and followed by ANOVA and correlation lead into the confirmation that sampled
respondents have positive opinion for social inclusion, skills and aptitude development, market
scale, economic enrichment, financial inclusion, entrepreneurial enrichment, and member
competence enrichment as the measures of SHG scaling and performance and also confirms
positive effect of ICTs on SHG’s scaling and performance. It is also identified that demographic
variables (age, occupation, qualification, and marital status) of respondents also influence their
opinion for the same. Overall study confirmed that ICT activities inclusion had improved SHG
members’ knowledge, understanding, and skills. Study recommends that SHG members should
participate in the skill development activities promoted by government for them either technical or
nontechnical both.
Keywords- Information and Communication Technology (ICT), Self Help Group, Scaling,
Performance, SHG member
INTRODUCTION
Primarily the SHG organizes the deprived class of
society into self-help groups as their members through
some common practices and procedure such as social
mobilization, free training programs for skill
development, capacity building programs, literacy
programs and through other resource supplies too. These
techniques and programs ultimately lead into the
developing and promoting, socio-economic capacity and
ability of the deprived class of the society and also
improve their collective negotiating capacity. The
motivating information and technology advancements are
effectively creating various territories for empowering
rural poor's socio-economic characteristics especially
through empowering farming, forestry service, poultry
farming, fisheries, animal farming/ husbandry and for
improving life standards by giving better wellbeing
services, contemporary advanced medicinal treatment,
and so forth.
Supporting and sustainable employment to maintain the
livelihood in this age when towns and urban areas are
developing quickly can be accomplished through a most
significant driver i.e "Information and Communication
Technology - ICT Driver". ICT has been assuming an
imperative job in the advancement of rural and the semi-
urban India, expanding its development in an uncommon
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way. Technology-enabled services and products have a
great extent impact on everyday life, as it is needed in
networked or community radio or cell phone-based
farmer data services or general health or wellbeing
related arrangements, it is becoming helpful in every
dimension of the daily life (Sambrani, 2016).
Information and Technology trends have broadly
influencing our daily lives by offering us dynamic and
customised information, with special reference to
community radio or mobile phone based farming
information services, health services, payment
transferring services and other related technological
solutions are improving the quality of lives of rural area
people. ICT is significantly and systematically playing its
important role in the growth and advancement of rural
India. In order to keeps the pace of rural poor socio-
economic advancement incorporating the sustainable
livelihood to each rural poor, improved standard of living
and overall development of the villages, wide integration
of technological advancements become necessary and it
can be achieved from the “Information and
Communication Technology” practices and policies
incorporation with the SHGs. It is obviously marked that,
generally of this existing rapid development is only
because of the information and communication
technology practices and processes propagation in all the
scales and class of the society across India. Openings and
benefits are as yet plenteous to scale and incorporate
these advances among the rural populace, with steady
exertion to streamline the procedures and discovering
better approaches to make them moderate to improve the
lives of individuals in India.
The research paper is organized as follows, Section I
contains introduction of information and communication
technology impact on SHG scaling and performance.
Section II contains the related work of technology and
innovation effect on SHG members and overall scaling or
performance of SHG, Section III contains methodology
followed in the research work incorporating geographical
location, research work plan, sample plan, hypotheses
and research objectives, Section IV incorporated
statistical outlook analysis performed over the dataset
procured from the respondents and encoded through
statistical tool IBM SPSS 21.0, and Section V presented
the conclusions and inference drawn and
recommendation proposed.
REVIEW OF LITERATURE
Bhati P. (2017) in her study on “A Comparative Study on
Technology and Innovation among SHG Women of
Selected Villages of Jodhpur” opined that penetration of
information and communication technology had
developed different fields of rural socio-economic
empowerment. The study concluded that use of
information technology and other technological
innovations improved total wellbeing of individual life.
The research work suggested that as technology can
contribute in growth and development of rural poor so
proper awareness and marketing should be done about
the benefits they can draw in their socio-economic
empowerment. It is also suggested that for promoting
technological advancement first penetration of
technology should be done in their skill development
area which would be helpful in their affirmative
acceptance of the technology.
Sambrani (2016) in the study on “A study of information
and communication Technology (ICT) adoption by
SHG’s in banking activities - Dharwad district” opined
that use of advanced ICT tools and practices in the SHGs
is barely available. But, due to lack of proper mechanism
which can meet the requirements of the SHGs and its
members should be developed and promoted by the
financial institutions. Researcher also gave emphasis
over the creating awareness among the SHGs and rural
poor about the technology use and its benefits. In the
conclusive remarks author stated that technology overall
enables efficiency of SHGs and provide assistance in
micro finance handling and in organizing advanced
training sessions.
As one of the noticeable advancement after the
integration of ICT was observed is that prior to the
integration of information and communication
technology process and tools with the SHG platforms,
facilitators have to execute the group meetings on the
basis of his/ her memory of previous meeting minutes or
from the minutes recorded into a series of binders, but
now, with the advent of ICT facilitators can regularly
update facilitation materials, and skill development
training programs as all the related materials would be
available on the smart phones which a common person
carries with them. Except aforesaid issues several other
advance practices can opt by the SHGs by incorporating
ICT tools and practices to improve the scale and
performance in totality such as banking activities of the
group, cross platform and group interaction on web, more
and wider reach to the new suppliers and buyers,
familiarity with technology, quality and timely support of
facilitator and NGOs, development and learning of new
curricular activities, advanced competence building,
more employment generation and many more.
Berad and Nimbalkar (2014) in their study on “Role of
Information Technology for Promoting Women
Empowerment Especially with reference to Members of
Self Help Groups in Ahmednagar District” opined that
awareness for the information and communication
technology tools and practices among SHG members of
the district is found very low. It was identified that SHG
members want to procure complete and detailed
information about the economic, social, national issues,
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government schemes, and many more through
information technology tool especially from internet and
web based mobile applications. The members are
agreeing that use of information technology enabled
services such as internet had help them to boost their
operational activities and offered them e-commerce
platform for trading.
Some other authors emphasized that use of various
technology enabled tools and practices by the SHG
members helped them to know about the effective and
economical marketing practices which escalate the
performance of the group (Sapkal et. al., 2015), ICT tools
and services offers several income generative activities to
small groups and also motivates them for saving by
continuously exposing them to new and small saving
schemes and financial services (Suri et. al., 2016),
technology frameworks and social groups offers multiple
opportunities and modes through which SHG members
can share their problems to multiple other groups and
common people to get the possible and viable solutions,
and lead into making the collective decision. Interaction
with the global groups makes more sensible and reliable
decision, improve skills, abilities, capacities etc. (Haridas
et. al., 2013).
So, it would be very imperative to assess the information
and communication technology effect on SHG scaling
and performance with reference to the SHGs Udaipur
district of Rajasthan. The present study will focus on the
statistical assessment of SHG members’ opinion or
feedback for the effect on information and
communication technology on SHG’s scaling and
performance, and association between the demographic
variables of the SHG member respondents their opinion
for the incorporation of ICT tools and practice for the
growth and expansion of SHG. The geographical scope
and locale of the present research work is rural area
SHGs of Udaipur district of Rajasthan.
RESEARCH METHODOLOGY
Primary objective of information and communication
technology tools and practices introduction in the rural
area is to pull the rural people in the main stream of the
social, political and other developments by offering them
financial liberalization, baking services availability, web
enabled skill development programmes, e-choupal,
mobile phone enabled health services, assistance for
farming, animal husbandry and many more primary
living activities and so forth. Above mentioned studies
by the researchers related to the ICT and SHG confirmed
that there is imperative relationship between the SHG
members advancements, SHG growth and information
and communication technology. So, the present research
work is intended to assess the SHG members’ opinion
about the role of information and communication
technology in the overall development of SHG and its
group members and overall opinion for the ICT role in
scaling and performance of the SHGs of Udaipur district
of Rajasthan. So, the study has following objectives:
1. To study the SHG member respondents’ opinion
for the effect of information and communication
technology on SHG’s scaling and performance.
2. To study the SHG member respondents’ opinion
for the effect of information and communication
technology on them.
3. To study the effect of SHG member respondents’
demographic characteristics on their opinion for
information and communication technology and
overall development of SHGs.
Geographical Scope of the Study: The geographical
location scope of the research work is rural area (Savina,
Balicha, and Bargaon) SHGs of Udaipur district of
Rajasthan. The selection of the study area Udaipur was
based on convenience sampling method. Purposefully the
Primary data of the research work is collected through
the interviews and questionnaires presented to the sample
population or respondents of the study. Purposefully
Udaipur district was chosen for the study because it
offers a good mix of rural, urban and semi urban
population division.
Research Work Plan: The present research work is
intended to assess the SHG member respondents’ opinion
for the role of information and communication
technology tools and practices in scaling and
performance of their SHGs. For the execution of the
aforesaid study objectives, a well structured
questionnaire was present to the sampled SHG members
as the respondents of the research work. The present
research work nature is descriptive and analytical to
reach the significant results and discussions.
Sampling Plan: Multi-stage sampling procedure has
been followed to select the sample for the study.
Sampling traits used are: location, age of the SHGs and
caste composition of membership. As this study has been
done in the Udaipur district of Rajasthan state of India,
the members of the operational self-help groups of the
study area are considered as a population for this study.
Research Hypotheses:
H01: There is no significant effect of information and
communication technology on SHG’s scaling and
performance.
Ha1: There is significant effect of information and
communication technology on SHG’s scaling and
performance.
H02: Demographic characteristics of respondents do not
influence their opinion for information and
communication technology effect on overall development
of SHGs.
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Ha2: Demographic characteristics of respondents
significantly influence their opinion for information and
communication technology effect on overall development
of SHGs.
H03: Information and communication technology
penetration does not affect their level of knowledge, skill
and understanding of SHG functions.
Ha3: Information and communication technology
penetration significantly affect their level of knowledge,
skill and understanding of SHG functions.
DATA ANALYSIS OF INFORMATION AND
COMMUNICATION TECHNOLOGY EFFECT ON
SHG SCALING AND PERFORMANCE:
Reliability Analysis: In order to assess the internal
consistency and reliability of the data set encoded from
the feedbacks given by the SHG member respondents
Cronbach’s alpha (α) test was performed. The threshold
value or score of the test is 0.7, higher values signifies
higher reliability and validity among the indicators and
lower values represents the lower reliability and validity
among the indicators and it is to be ensured for the
dataset that reliability statistic should be greater than
equal to 0.7 as a good criterion of the quality of data.
Table 1: Reliability Test Statistics
Cronbach's Alpha Reliability Value
Cronbach's Alpha (α) Value N of Items
0.796 26
Source: Primary Data
Reliability Statistics for responses of SHG members of
Sampled SHGs as presented in above Table 1 of
reliability test statistics for 26 different data points
revealed that Cronbach’s alpha (α) value is 0.796 which
ensures 79.6% reliability for the collected data and it is
greater than the threshold value 0.7 and confirms as a
good criterion of the quality of data.
Table 2: Scale Statistics of Sampled SHGs’ Member Respondents
Scale Statistics
Mean Variance Std. Deviation N of Items
124.4100 142.210 11.2314 26
Source: Primary Data
Above Table 2 of scale statistics of sampled SHGs’
member respondents revealed that for 26 data point of
questionnaire presented to respondents 124.4100 was
mean score value, 142.210 was variance value and
11.2314 was standard deviation that in total confirms
good coverage and variation for the feedback.
Percentage (%) Distribution Analysis of Demographic
Characteristics of SHG Member Respondents: In
table below count column presents number of
respondents and % column presents number of
respondents belong to a particular class of demographic
characteristics of SHG member respondents. The
statistics helped to assess the domination of particular
class of SHG member respondents over other class based
feedbacks of the respondents.
Table 3: Demographics’ Percentage of Sampled SHGs’ Member Respondents
Demographic Characteristics Count (N) %
Age
< 30 Years 5 16.67%
30-40 Years 15 50.00%
40-50 Years 7 23.33%
> 50 Years 3 10.00%
Total 30 100.00%
Marital Status
Married 17 56.67%
Unmarried 4 13.33%
Widow(er) 4 13.33%
Separated 5 16.67%
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Total 30 100.00%
Educational Status
Illiterate 10 33.33%
Upto Primary 7 23.33%
Upto Middle 5 16.67%
Upto Secondary 2 6.67%
Upto Senior Secondary 3 10.00%
Higher Education 3 10.00%
Total 30 100.00%
Occupational Status
Unemployed 5 16.67%
Agriculture and Allied 9 30.00%
Other than Agriculture 6 20.00%
Petty Businesses 5 16.67%
Other Industry Business 3 10.00%
Others 2 6.67%
Total 30 100.00%
Source: Primary Data
Table 3 of percentage and frequency distribution of
demographic characteristics of sampled SHG members
revealed that out of total sample population of 30 SHG
member respondents, 05 (16.67%) SHG member
respondents were of below 30 year age group, 15
(50.00%) respondents were in between 30 to 40 years, 07
(23.33%) SHG member respondents were in between 40-
50 years, and only 3 (10.00%) respondents were of more
than 50 years of age group. Out of the sampled
population 17 (56.67%) SHG member respondents were
married, 04 (13.33%) SHG member respondents were
unmarried, 04 (13.33%) SHG member respondents were
widow(er) and remaining 5 (16.67%) SHG member
respondents were separated. From the educational
qualification point of view 10 (33.33%) SHG member
respondents were illiterate, 07 (23.33%) SHG member
respondents were up to primary level qualified, 05
(16.67%) SHG member respondents were up to middle
level qualified, 02 (6.67%) SHG member respondents
were up to secondary level qualified and 3 (10.00%)
SHG member respondents were having higher
qualifications. For occupation based percentage
distribution it was found that 5 (16.67%) were
unemployed, 9 (30.00%) were in agriculture and allied
activities, 6 (20.00%) were occupied with other allied
agriculture activities, 5 (16.67%) were working in other
petty businesses, 03 (10.00%) SHG member respondents
were working in other industry businesses and 2 (6.67%)
other was working in other sectors. So, good combination
of demographics variables’ class wise participation of the
SHG member respondents was observed for the study
and it result into good quality of data for future analysis.
ANOVA and Correlation Analysis to Measure
Relationship between Information and
Communication Technology on SHG’s Scaling and
Performance: Information and Communication
Technology enabled government and NGO portals,
websites, applications and other media platforms offers
information and assistance to the rural poor and SHG
members to scale up their knowledge of banking
(financial activities), social involvement, skill based
training, agriculture and allied farming activities,
government schemes, SHG promoting institutes, animal
husbandry and other rural employment generation
activities, marketing and channelizing the distribution of
products and so forth. To measure significance of
difference in the SHG member respondents’ opinion for
the aforesaid benefits, these can scale up and improve the
performance of SHGs. To measure the relationship
significance between respondents’ opinion for the effect
of information and communication technology practices
and processes followed in the SHGs and SHG’s scaling
and performance correlation analysis was performed. The
related hypothesis is stated below here under:
H01: There is no significant effect of information and
communication technology on SHG’s scaling and
performance.
Ha1: There is significant effect of information and
communication technology on SHG’s scaling and
performance.
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Table 4: ANOVA Test to Measure the Impact of Information and Communication Technology on SHG’s
Scaling and Performance
Distinctive SHG Scaling and Performance Variables F-Value P-Value
Social Inclusion 1.431 .089
Skill and Aptitude Development 1.227 .097
Market Scale .978 .106
Economical Enrichment .711 .125
Financial Inclusion .951 .102
Entrepreneurial Enrichment 1.696 .069
Member Competence Enrichment 1.223 .095
Source: Primary Data
So, from the statistics of the ANOVA test to measure the
impact of Information and Communication Technology
on SHG’s Scaling and Performance as presented in Table
4 helped to conclude on the basis of F value and
significance value that for distinctive SHG scaling and
performance variables such as Social Inclusion (1.431,
.089), Skill and Aptitude Development (1.227, .097),
Market Scale (0.978, .106), Economical Enrichment
(0.711, .125), Financial Inclusion (.951, .102),
Entrepreneurial Enrichment (1.696, .069) and for
Member Competence Enrichment (1.223, .095), there is
no significant difference in the SHG member respondents
opinion for the aforesaid scaling and performance
variables. So, it is been accepted and significantly
confirmed by all the respondents that ICT positively
influence SHGs scaling and performance and no
difference for them is observed for the listed issues.
Table 5: Correlation Test to Measure the Impact of Information and Communication Technology on SHG’s
Scaling and Performance
Correlations
SHG’s Scaling and Performance
Information and Communication
Technology
Pearson Correlation .651**
Sig. (2-tailed) .000
N 100
**. Correlation is significant at the 0.01 level (2-tailed).
Source: Primary Data
Correlation test statistics of measuring the impact of
information and communication technology on SHG’s
Scaling and Performance is presented in Table 5. The
statistics of table revealed that Pearson Correlation
between Information and Communication Technology
and SHG’s Scaling and Performance is .651** (Strong
and Positive Relationship), and found significant at 0.01
(2-tailed) levels. So, it could conclude from that Ha1 must
be accepted which ensured that there is significant effect
of information and communication technology on SHG’s
scaling and performance.
ANOVA Analysis to Measure the SHG member
respondents’ opinion for the Impact of Information
and Communication Technology on SHG’s Scaling
and Performance: Demographic variables like Age,
Marital Status, Educational Status, and Occupational
Status influences the SHG’s Scaling and Performance, in
order to assess the significance of difference in the mean
scores of different demographic classes of respondents in
the all the possible combinations of groups ANOVA test
was performed. Hypothesis under examination in this
section is:
H02: Demographic characteristics of respondents do not
influence their opinion for information and
communication technology effect on overall development
of SHGs.
Ha2: Demographic characteristics of respondents
significantly influence their opinion for information and
communication technology effect on overall development
of SHGs.
PIMT Journal of Research
Volume-11, No.-2 (January to June) 2019 UGC Care Listed Journal
PP: 119-126 ISSN No: 2278-7925
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Table 6: ANOVA Test to Measure the Impact of Demographic Variables on Respondents’ opinion for ICT
effect on Overall Development of SHG
Demographics Variables F-Value P-Value Null Hypothesis Result
Age 15.174 .000 Rejected
Occupational Status 17.116 .000 Rejected
Qualification Status 16.123 .000 Rejected
Marital Status 15.221 .010 Rejected
Source: Primary Data
So, from the statistics of the ANOVA test to measure the
impact of demographic variables on respondents’ opinion
for ICT effect on overall development of SHG as
presented in Table 6 revealed on the basis of F value and
significance value that for demographic characteristics
such as age (15.174, .000), occupational status (17.116,
.000), qualification status (16.123, .000), and marital
status (15.221, .000) SHG member respondents are
significantly agreeing that demographic characteristics of
them influence their opinion for ICT effect on overall
development of SHG, and for the responses significant
difference was observed between the mean scores. So, it
could conclude that Ha2 must be accepted that confirms
that demographic characteristics of respondents
significantly influence their opinion for information and
communication technology effect on overall development
of SHGs.
Chi-Square Test to Measure Information and
Communication Technology Penetration effect on
SHG members’ Level of Knowledge, Skill and
Understanding of SHG Functions – This section of the
research paper will present the assessment of relationship
or association between the ICT penetration in SHG
activities and SHG members’ Level of Knowledge, Skill
and Understanding of SHG Functions. To measure this
association between the variables chi-square test was
performed. Hypothesis is to be examined is here under:
H03: Information and communication technology
penetration does not affect their level of knowledge, skill
and understanding of SHG functions.
Ha3: Information and communication technology
penetration significantly affect their level of knowledge,
skill and understanding of SHG functions.
Table 7: Chi-Square Test to Measure Association between the ICT Penetration in SHG and Members’
Knowledge, Skill and Understanding of SHG functions
Financial Literacy/ Competency Variables Chi-Square Value P-Value
Knowledge of SHG Functions 13.256 .000
Understanding of SHG Functions 14.147 .000
Skill for betterment of SHG Functions 14.244 .000
Source: Primary Data
Chi-Square Test statistics of association between the ICT
penetration in SHG activities and SHG members’ Level
of Knowledge, Skill and Understanding of SHG
Functions helped to conclude that chi square and
corresponding p-value for the effect of ICT on
Knowledge of SHG Functions (13.256, .000),
Understanding of SHG Functions (14.174, .000) and on
Skill for betterment of SHG Functions (14.244, .000)
were found lesser to the 0.05 significance level which
helped to conclude that hypothesis Ha3 must be accepted
which confirmed that Information and communication
technology penetration significantly affect their level of
knowledge, skill and understanding of SHG functions. It
was identified that SHG member respondents are
positively agreeing that inclusion of ICT enabled services
and practices with the basic functions of SHG had
improved their overall understanding of SHG function
and result into improved confidence over the same too.
RESULTS AND DISCUSSION
Statistical analysis performed in the previous section of
the research work revealed that a good quality dataset
was produced from the feedback given by sampled SHG
member respondents as the Cronbach’s alpha (α) value
was 0.796, and scale statistics confirmed good coverage
and variation for the feedback and produced imperative
results. A noteworthy relationship was observed from the
respondents’ opinion which helped to accept and
significantly confirm that ICT positively influence SHGs
scaling and performance and no difference for them is
observed for the listed issues. A strong and positive
association was observed between information and
communication technology and SHG’s Scaling and
PIMT Journal of Research
Volume-11, No.-2 (January to June) 2019 UGC Care Listed Journal
PP: 119-126 ISSN No: 2278-7925
126 | P a g e
Performance. In was also found that demographic
characteristics (age, marital status, occupational status,
and qualification status) of respondents significantly
influence their opinion for information and
communication technology effect on overall development
of SHGs. Finally, it was identified that respondents are
positively agreeing that inclusion of ICT enabled services
and practices with the basic functions of SHG had
improved their overall understanding of SHG function
and result into improved confidence over the same too.
The research work points out that a improvement is
observed and confirmed by the SHG members in their
social inclusion practices, skills and aptitude, market
integration, financial inclusion, competence enrichment
after following the practices and tools of information and
communication technology, and the level of agreement
for the aforesaid factors is directly related with the
scaling and performance of the SHG. A string
relationship between the ICT tools and practices and
SHG’s scaling and performance was lead into making the
interpretation that higher would be the adoption rate for
the advanced technology enabled services promoted by
the government for SHG higher would be their growth
and sustainability, so study recommends that SHG
members should actively participated in government
schemes and training program to improve their ICT
acquaintance and competence. It was also identified that
knowledge, skills, aptitude and understanding of the
SHG members or respondents of the study is enriched
through the uses of ICT enabled services and tools, so it
is also recommended that continuous practice over the
ICT enabled services and practices should be performed
by the SHG members as continuous practices leads into
more specific and confined set of knowledge that may be
useful for the overall SHG performance.
REFERENCES
1. Berad R.R., and Nimbalkar S.K. (2014). “Role of
Information Technology for Promoting Women
Empowerment Especially with reference to Members of
Self Help Groups in Ahmednagar District,” IBMRD's
Journal of Management and Research, Vol. 3, Issue 1, pp.
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2. Bhati P. (2017). “A Comparative Study on Technology and
Innovation among SHG women of Selected Villages of
Jodhpur,” Scholarly Research Journal for Interdisciplinary,
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3. Krishnaveni V. and Haridas D.R. (2013), “SHGS and its
Marketing Problems,” Global Journal of Human Social
Science Economics, Vol. 13, Issue 4 (1), pp.7-11 .
4. Sambrani V. N. (2016). “A Study of Information and
Communication Technology Adoption by SHG’s in
Banking Activities - Dharwad District,” International
Journal of Management, Vol. 7, Issue 6, pp. 145-155.
5. Sapkal D.H., and Kherdikar A. (2015). “Information and
Communication Technology (ICT) as a tool for Marketing
Self Help Groups Products,” International Journal in
Management and Social Science, Vol. 3, Issue 7, pp. 258-
267.
6. Suri D.K., and Kaur R. (2016). “Role of Self Help Groups
(SHGs) in poverty alleviation and micro entrepreneurship of
women in Bishnah block of Jammu district,” Asian Journal
of Multidisciplinary Studies Vol. 4, Issue 2, pp. 103-112.
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