Print : ISSN : 19-512X | Online : ISSN : 2454-6801 THE...

THE INDIAN JOURNAL OF COMMERCE

Quarterly Publication of the Indian Commerce AssociationVol.68 No.4 October-December 2015

Prof. H.K. Singh - Managing Editor

With Vice Chancellor Secretariat at : Maharishi University of Information TechnologyCampus : Sitapur Road (IIM Byepass, Bhitauli Tiraha)Post : Maharishi Vidya Mandir, Lucknow 226013 (U.P.)Visit : www.icaindia.info, www.ijoc.in • Email : [email protected]

Balla Appa Rao and D. Nagayya

R.Ramachandran

Akshita Goyal, Anshuman Kamila and Aishwarya Dayal

Paramveer S. Chundawat

Sathya Swaroop Debasish, Artta Bandhu Jena & Sabyasachi Dey

Vinay K. Srivastava

M.K. Singh & Sonal Sharma

Gnyana Ranjan Bal and Amit Manglani

Parikshat Singh Manhas and Rajani Kumari Sarangal

B. Ramesh and

Savia Mendes

Kumud Chandra Goswami and Sarah Yasmin Hussain

Bhagirath Singh, Manoj Meet and Somya Choubey

Skill Development and Entrepreneurship for Micro and Small Enterprises

Attrition of the Employees in Hotel Industry–A Comparative Analysis

Estimation of the Gravity Model of Trade for India

Critical Analysis of Operational Efficiency of Merger Activity in Banking Industry: A Case Study of HDFC Bank

CRM and its Impact on Customer Loyalty: An Empirical Study on Private Banks in Odisha

Testing Efficiency for S&P Nifty Securities in India

Corporate Social Responsibility for a Sustainable Change: A Case of Hindustan Unilever Limited

Dynamic Relationship Between Stock Price and Exchange Rate Changes: Evidence from Indian Market

Internal Marketing Practices and Employee Job Satisfaction: A Case of Life Insurance

Corporate Social Responsibility: A Comparative Study of Select Public and Private Sector Banks In India

Contribution of Personal Life to the Work Life of the Employees of N.F. Railways

Applicability of Two Factor Theory of Motivation on Private University Teachers : An Empirical Study

Print : ISSN : 19-512X | Online : ISSN : 2454-6801

MANAGING EDITORProf. H.K. SinghVice-Chancellor

Maharishi University of Information Technology, Lucknow, Uttar Pradesh, India

JOINT MANAGING EDITORSDr. Subhash Garg Dr. Ajay Kr. Singh Dr. Sanket VijDean & Director Associate Professor ProfessorCentre for Research, Innovation & Faculty of Commerce and Business Department of Management Training, The IIS University Delhi School of Economics, BPS Mahila Vishwavidyalaya Jaipur, Rajasthan University of Delhi, Delhi Sonepat, Haryana

ASSOCIATE EDITORSDr. S.B. Lall Dr. Meera Singh Dr. Shweta Kastiya Sapan AsthanaVanijya Mahavidyalaya UP Autonomous PG College The IIS University MUITPatna University, Patna Varanasi Jaipur Lucknow

EDITORIAL CONSULTANTS

The Indian Journal of Commerce is published four times in a year i.e., March, June, September and December. The Indian Journal of Commerce is freely distributed to all members.Membership to Indian Commerce Association Individual Institutional Annual Members ` 1,000 ` 1,000 Life Members ` 5,000 ` 25,000Subscriptions/ Membership fee is to be paid in the form of Demand Draft, drawn in favour of 'Indian Commerce Association', payable at Amritsar. Fee can also be directly deposited in Indian Commerce Association Account No: 14572191054283 in Oriental Bank of Commerce (Branch: MAJITHA, AMRITSAR-IFSC code: ORBC0101457). Every member will have to register online on www.icaindia.info/index.php/membership before sending the fee to Dr. Balwinder Singh, Secretary, Indian Commerce Association, Associate Professor, Department of Commerce, Guru Nanak Dev University, Amritsar-143001, Punjab, India.Advertisements : Limited space is available for advertisement on the following rates : Back Cover page Full ` 10,000 Inside Cover page Full ` 5,000 Full Page ` 3,000 Half Page ` 2,000Correspondence: All correspondence regarding publications and advertisement should be addressed to : Prof. H.K. Singh, The Managing Editor, Indian Journal of Commerce, Maharishi University of Information Technology, Campus : Sitapur Road (IIM Byepass Bhitauli Tiraha) Post : Maharishi Vidya Mandir, Lucknow 226 013 (U.P.), Email : [email protected], Web : www.ijoc.inThe views expressed in the articles and other material published in The Indian Journal of Commerce do not reflect the opinions of the ICA.

The Indian Journal of Commerce A Quarterly Refereed Journal

Aims and Objectives : Indian Journal of Commerce, started in 1947, is the quarterly publication of the All India Commerce Association to disseminate knowledge and information in the area of trade, commerce, business and management practices. The Journal focusses on theoretical, applied and disciplinary research in commerce, business studies and management. It provides a forum for debate and deliberations of academics, industrialists and practitioners.

Prof. David RossUniversity of Southern Queensland, AustraliaCurrently in HELP University, MalaysiaProf. Suneel MaheshwariIndiana University of Pennsylvania, Pennsylvania, USAProf. Ing. Elena HorskaProfessor of MarketingSlovak University of Agriculture in Nitra, Slovak RepublicProf. Walter Terry ParrishICE Academy, Smethwick (Birmingham) Campus, United KingdomProf. Doc. Ing. Petr SauerUniversity of Economics, Prague, Czech RepublicProf. M. SaeedMinot State University, North Dakota, USAProf. Andras NabradiUniversity of Debrecen, Debrecen, Hungary Prof. Syed Ahsan JamilDhofar Universtiy, OmanProf. B. Ramesh Ex Dean of Commerce, Goa UniversityDr. Subodh KesharwaniSMS,IGNOU, New DelhiProf. Coskun Can AktanDokuz Eylül University, Izmir, TurkeyProf. R.K. JenaUtkal University, Bhubaneswar, OdishaDr. R.U. SinghMagadh University, BiharProf. Popp JozsefDeputy Director, AERI, Budapest, HungaryProf. Hamid SaremiVice-Chancellor, Islamic Azad University, Quchan, IranDr. Rakesh GuptaGriffith University, Australia

Prof. B.P. SinghChairman, Delhi School of Professional Studies & Research (GGSIP University), Rohini, DelhiProf. L.N. DahiyaMD University Rohtak, HaryanaProf. O.P. RaiBanaras Hindu University (BHU), Varanasi, Uttar PradeshProf. D.P.S. VermaEx Professor, Faculty of Commerce & BusinessDelhi School of Economics, University of Delhi, DelhiProf. P. Purushottam RaoFormerly Professor, Osmania University, HyderabadProf. P.R. AgrawalVice- Chancellor, V.B.S. Purvanchal University, Jaunpur, U.P.Dr. Babban TaywadeDhanwate National College, Nagpur, MaharashtraDr. T.A. ShiwareKPB Hinduja College, Mumbai, MaharashtraProf. K. EresiBangalore University, Bengaluru, KarnatakaProf. K.S. JaiswalMG Kashi Vidyapeeth, Varanasi, Uttar PradeshProf. Sanjay BaijalDDU Gorakhpur University, Gorakhpur, Uttar PradeshProf. Sandip K. BhattSardar Patel University, VV Nagar, Anand, GujaratProf. Umesh HolaniEx Dean of Commerce, Jiwaji University, Gwalior, M.P.Prof. Debabrata MitraNorth Bengal University, Bardwan, West BengalProf. Bhagwan Das FM University, Balasore, Odisha

THE INDIAN JOURNAL OF COMMERCE

Quarterly Publication of the Indian Commerce AssociationVol.68 No.4 October-December 2015

CONTENTS

EDITORIALProf. H.K. Singh

Skill Development and Entrepreneurship for Micro and Small Enterprises 5-12Balla Appa Rao and D. Nagayya

Attrition of the Employees in Hotel Industry–A Comparative Analysis 13-22R.Ramachandran

Estimation of the Gravity Model of Trade for India 23-34Akshita Goyal, Anshuman Kamila and Aishwarya Dayal

Critical Analysis of Operational Efficiency of Merger Activity in Banking Industry: 35-41A Case Study of HDFC BankParamveer S. Chundawat

CRM and its Impact on Customer Loyalty: An Empirical Study on Private Banks in Odisha 42-48Sathya Swaroop Debasish, Artta Bandhu Jena & Sabyasachi Dey

Testing Efficiency for S&P Nifty Securities in India 49-56Vinay K. Srivastava

Corporate Social Responsibility for a Sustainable Change: A Case of Hindustan Unilever Limited 57-63M.K. Singh & Sonal Sharma

Dynamic Relationship Between Stock Price and Exchange Rate Changes: 64-70Evidence from Indian MarketGnyana Ranjan Bal and Amit Manglani

Internal Marketing Practices and Employee Job Satisfaction: A Case of Life Insurance 71-79Parikshat Singh Manhas and Rajani Kumari Sarangal

Corporate Social Responsibility: A Comparative Study of Select Public and 80-85Private Sector Banks In IndiaB. Ramesh and Savia Mendes

Contribution of Personal Life to the Work Life of the Employees of N.F. Railways 86-92Kumud Chandra Goswami and Sarah Yasmin Hussain

Applicability of Two Factor Theory of Motivation on Private University Teachers : 93-98An Empirical StudyBhagirath Singh, Manoj Meet and Somya Choubey

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Our global and political environment is bubbling with great hopes and aspirations of pink health and rising graph of Trade, Industry and Commerce all around. As such, it becomes my humble and honest duty, belonging to the world of academics, to interact and share with some instrumental guidelines for the contributors and participants in the forthcoming issues of the Indian Journal of Commerce.

Research along with its practical implications and usage and utility in the field of business studies has great relevance today. It is therefore, suggested that Papers based on application oriented research are more welcome; especially in the fields of industry, commerce, business studies and management areas. The papers must include tables, diagrams, illustrations and such other tools to support the different and divergent viewpoints. As such, the length of a paper including all these has to be cautiously controlled and should not exceed 20 double space pages. Short communications relating to review articles, report of various conferences, summary/views on several governments' reports, database issues etc. should also not exceed more than 5 double spaced pages and are invited to be published. We also welcome book-reviews and summary of Ph. D. dissertations but not in more than two double spaced pages. Care should be taken that whatever manuscripts are sent for publication in this journal should not have been published elsewhere any time before.

As is the common practice, two copies of the manuscripts typed in double space on A4 size bond paper should be submitted and the electronic version of the paper must accompany 3.5 inch high density floppy diskette in PC compatible WORD 7.0 document format.Papers without floppy/CD will not be accepted. It is informed that all the papers/contributions submitted for publication in the journal will be subjected to peer reviews and the decision of the Editorial Committee will be final.

First page of the Paper should consist of the title of the paper, name(s), of the author(s) along with all the other required details and the abstract should not exceed more than150 words. Second page should start with the title of the paper again to be followed by the text. In the captions for the tables, figures and column headings in the tables, the first letter of the first word should be capitalised and all other words should be in lower case, except the proper nouns. Footnotes in the text should be numbered consecutively in plain Arabic superscripts. All the footnotes, if any, should be typed under the heading 'Footnotes' at the end of the paper immediately after Conclusion.

Follow the Author -date (Harvard) System in-text reference: e.g. Saurabh (2014) observed that….A Study (Shantanu et. L. 2015) found that…..When it is necessary to refer to a specific page(s), cite it in the text as: Saurabh (2014 P. 105) observed that…A study Saurabh 2014a, Saurabh 2014b, Saurabh 2014c, so on and so forth.

It is to be noted that only cited works should be included in the 'References' which should appear alphabetically at the end of the paper. Follow the reference citation strictly in accordance with the following examples.

Book : Singh, H. K. 2015. Mutual Funds Market. New Delhi: Kanishka publishers.

Journal Article : Singh, Meera 2015. Journal of Indian School of Political Economy. Jan-March,2015, Vol-22, Nos 1, pp 34-48.

Government Publication : Government of India, Ministry of Communications, Department of Telecommunications 2015. Annual report. New Delhi.

Chapter in a Book : Gilberto Mendoza, 2015, A Premier on Marketing Channels and Margins. Pages 257-276 in Prices, Products and People (Gregory J. Scott, ed.) London. Lynne Rienner Publishers.

All copyrights are with the Indian Commerce Association and the authors. The authors are responsible for copyright clearance for any part of the content of their articles. The opinions expressed in the articles of this journal are those of the authors, and do not reflect the objectives or opinion of the Association.

All the manuscripts should be sent to Prof. H.K.Singh, Vice-Chancellor and the Managing Editor, The Indian Journal of Commerce, Maharishi University of Information Technology , Sitapur Road, Near IIM, Lucknow, Uttar Pradesh, 226013, Mobile: 09415264509, E-mail: [email protected]

Published by Prof. H. K. Singh on behalf of the Indian Commerce Association

NOTES FOR CONTRIBUTORS

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FROM THE MANAGING EDITOR DESK

It is with the sense of immense delight that we are presenting before you so

promptly, the Volume 68(Oct-Dec 2015 issue) of the Indian Journal of

Commerce. It was really a miracle of iconic coincidence of the independence

of our mother India along with the dawn of the coveted Indian Journal of

Commerce in 1947.We on behalf of the editorial board of the Indian

Commerce Association(ICA) affectionately welcome you all at 68th All India

Commerce Conference being hosted by V.B. University, Hazaribagh from 6-8

November, 2015 and we gracefully congratulate the entire organizing team

for the great success in their endeavour .The world economic spectrum has

undergone under tremendous transformation in the last few years in different aspects. The world

economy is in progression of resurgence and in our country we have witnessed a historic as well as

political transformation followed by revolutionary steps in trade, commerce and industry. Visionary

thrust of Government of India on Make in India ,Swachh Bharat, Namami Gange, Digital India, Skill

Development, Minimum government with Maximum Governance have instilled new roles and

responsibilies for transforming the national scenario from slums to stardom. Famous Poet Bashir

Badr has aptly said, “Zameen maa bhi hai, mehboob bhi hai, beti bhi zameen, chhorke jaoun koi sawal

nahi.” ICA is our Zameen (mother land) for academic purposes and we have to contribute our best for

it.

Present All India Commerce Conference is dedicated to efficacious, substantial and significant topics

such as- (a) Make in India (b) Skill Development (c) Behavioural Finance (d)E-Retailing (e)Social

media and (f) Environmental Management. Make in India is an effective motivational program of the

Government of India to encourage industrial units to manufacture their products in our country.

Hon'ble Prime Minister Narendra Modi ji launched the Make in India program on 25th September,

2014 in a grand function at the Vigyan Bhawan, New Delhi. The Modern world demands skillful

workplace and keeping in to mind this, the Union Budget 2015-16 has made specific provisions for

skill development. Skill Development intends developing the people with the necessary skill sets to

add value for the organization and for their career development. Fostering an attitude of appreciation

for lifelong learning is the key to workplace success. Social Media provides varied and unique

platform that allow people to create, share or exchange information, ideas in virtual communities and

networks, very fastly .Social media can make magnificent contribution to the social good if we are

honest towards our endeavors and have no ulterior motives in discharging our duties.

According to Bhagwad Geeta,“Anasritah karmaphalam, karyamkarma karotiyah, sa samnyasi ca

yogi ca, na niragnir na cakriyah.”This implies that he who performs his bounden duty without

depending on the fruits of action, he is a Sannyasy and a Yogi, not he who is without fire and without

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action. It is a matter of great pride for ICA India has succeeded in getting allotment of a piece of

institutional attractive land at Greater Noida ,measuring 1000 sq. meters and now in near future

ICA building will be in possible due to the active support of all the well-wishers of ICA family.

Along with Prof. M.M. Shah Memorial Award for Excellence in Commerce and Business

Management and BBAY awards, we have started from the 68th AICC, Saurabh Shiware

Memorial Young Researcher Award in the memory of the beloved son of our past president of

ICA Dr. T.A. Shiware.We hope our journal will prove to be a significant academic contribution of

international repute and the research papers published in the journal, which are the outcome of

brain storming of scholarly minds ,will provide ample opportunity for all of us to find solutions

of the problems and guidelines for the business world.

We would also like to extend our sincere thanks to the Past Presidents specially Prof. B.P.Singh,

Prof. P. Purushottam Rao, Prof. B. Ramesh, Prof. B.Taywade, President of ICA Prof. J.K.Parida,

Conference Secretary Prof. M.K. Singh, Office bearers, EC members and life members of ICA for

offering their cooperation's in ways more than one to improve the quality of the journal. You are

cordially invited to browse our new website www.ijoc.in as on the basis of it we have been

allotted e-ISSN NUMBER: 2454-6801 by NISCAIR. We conclude with saying that we do not have

life to be bitter, we only have to learn how to live to be better:

Jameer jinda rakh, Kabeer jinda rakh,Sultan bhi ban jaye, Dil mein fakeer zinda rakh.

(H.K. Singh)

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CONCEPT OF SKILL DEVELOPMENT

One of the expected outcomes of education is skill development. Skills are often

understood in the limited meaning of technical skills like mechanical, communication,

and behavioural skills. What are usually ignored are the intellectual skills, personality

development skills and all other forms of skills needed for group working, team building

and other areas where the individual has to take the initiative to realize a goal.

Intellectual skills form part of learning in all subjects, especially in liberal arts subjects.

In undergraduate colleges, even in professional colleges, and task oriented technical

and vocational training institutions, the focus is currently on knowledge acquisition,

and not so much on practising and acquiring experience in skill development. The

same holds good for management courses such as Master of Business Administration,

Masters courses in Human Resource Management, Financial Management, and

Appraisal of Proposals.

Skill acquisition and developing expertise in putting the skills to use in specific

programmes or activities has to be given greater weightage through practice and exposure

to multiple situations. In each field of work or specialization, the list of skills for which

there is scope for employability as well as in promoting self employment enterprises

needs to be identified, and opportunities given to the students to practise them from a

Key words:

FDI, FDI Culture, Economic

Reforms, Global Investors,

FDI Requirements

Skill Development and Entrepreneurship for Microand Small Enterprises


ABSTRACT

Skill development and Entrepreneurship for gainful self employment is an important direction for the

youth of the country, by taking advantage of demographic dividend of the nation. The task is not one of

providing employment, but increasing the employability of the labour force in the country. Employability

is contingent upon knowledge and skills developed through quality education and training. National

Skill Development Policy was formulated in 2009. This has been revisited in 2015, and made far more

focused and comprehensive towards promoting self employment through productive activities. The

National Skill Development and Entrepreneurship Policy of May 2015 is an integrated approach involving

coordination with Ministries and organizations covering various sectors which are implementing either

skill development or entrepreneurship programmes. These are now made complementary through the

paradigm shift from modular to motivational skills for acquiring expertise, and promoting productive and

innovative ventures in various sectors. The focus is on Micro and Small Enterprises as one important

direction for this programme. Through a well orchestrated structure, coordinated action is being taken

by the Central and State organizations to create innovation driven entrepreneurs. A number of schemes

are in operation for skill development and entrepreneurship. The most recent one is Pradhan Mantri

Kaushal Vikas Yojana started on July 15, 2015. In the micro, small and medium enterprise sector, a

number of schemes are in operation for entrepreneurship development by providing skills and motivation

to set up an enterprise. The article brings out a few suggestions for coordinated action through various

Ministries to accelerate the pace of implementation of the programme.

The Indian Journal of CommerceVol.68, No. 4, October-December 2015

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young age in different institutions in their respective fields

of specialization. As part of the curriculum, spending a

minimum of six months to a year as interns or apprentices

to gain confidence in practising the skills is very necessary

for the candidates. A radical upgradation is to be

encouraged in teaching-learning methods, with the

teacher-oriented system to be replaced by learning-

oriented system. Opportunities are to be given to the

candidates to present their creative ability in the learning

process. Value system has to be made an integral part of

education in a progressive society.

DEMOGRAPHIC DIVIDEND AND NSSO SURVEY

RESULTS

India has a great opportunity to take advantage of the

demographic dividend. It is one of the youngest nations in

the world with more than 62 per cent of the population in

the working age group (15-59 years), and more than 54 per

cent of the population below 25 years of age. The

population is expected to ‘bulge’ across 15-59 age group

over the next decade. It is further estimated that the average

age of the population in India by 2020 will be 29 years as

against 37 years in China and USA, 45 years in West

Europe, and 48 years in Japan. Consequently, while the

global economy is expected to witness a shortage of young

population of around 56 million (Report on Education, Skill

Development and Labour Force, 2013-14). In fact, in the next

20 years, the labour force in the industrialized world will

decline by 4%, while in India, it will increase by 32%. The

country has a big challenge ahead, as it is estimated that

only 2.3% of the total workforce in India has undergone

formal skill training as compared to 68% in UK, 75% in

Germany, 52% in USA, 80% in Japan, and 96% in South

Korea. There is no disputing the fact that the range is of

massive proportions. (Source: NSSO 66th Round 2009-10).

This poses a challenge and an opportunity. To reap this

demographic dividend which is expected to last for the

next 25 years, India needs to equip its workforce with

employable skills and knowledge so that youth can

participate productively to make India a developed country.

The poor skill levels among India’s workforce are

attributed t9o dearth of a formal vocational education

framework with wide variation in quality, high school

dropout rates, inadequate skills training capacity, negative

perception towards skilling, and lack of ‘industry ready’

skills even in professional courses.

The main issue to be addressed is not just providing

employment but simultaneously increasing the

employability of the labour force in India. Employability

is contingent upon knowledge and skill developed through

quality education and training. Thus, any solution to the

problem lies in a well orchestrated education and training

regime that sets out to meet those objectives. The problem

of employability levels owing to poor quality of education

is accentuated by the fact that fewer people opt for higher

education and also for self employment. (Economic Survey

2014-15, Volume 2, Government of India, Ministry of

Finance - 2015).

The National Sample Survey Office (NSSO), New Delhi

released data for 2011-12 from its 68 round on education

and vocational training towards the end of September 2015

(source: The Hindu, September 24, 2015), it is surprising to

note the finding that only one in ten adults reported having

received any vocational training, and the bulk of its was

informal training. The numbers show that among persons

in the 15-59 age group, about 2.2 per cent reported

vocational training. The non-formal variety mainly

comprised the passing down of hereditary skills, or on-

the-job training. Among rural males who received formal

vocational training, the most common field was ‘driving

and motor mechanic work’ while among urban males it

was ‘computer trade’. Among rural females ‘textile–related

work’ was the most common, while among urban females

it was ‘computer trades’. Moreover, the rate of vocational

training has barely increased between 2004-05 when the

data was last collected and 2011-12. This was despite the

fact that the UPA government announced an ambitious

National Skill Policy in 2009, and created a National Skill

Development Coordination Board earlier. There is a lot of

corporate support for this mission. In July 2015, the NDA

government launched the Rs.1,500 crore Skill India

campaign, which aims to train 50 crore people by 2022.

Among those aged 15 and above, the NSS data shows,

only 2.4 per cent had technical degrees, diplomas or

certificates in fields like medicine, engineering or

agriculture. The proportion was 1.1 per cent in rural areas,

and 5.5 per cent in urban areas. Just over 60 per cent of

those aged 5-29 years were currently attending an

educational institution. To supplement household income

was the main reason for more than 70 per cent of males

currently not being enrolled in any educational institution,

while more than half of females not studying said they

had to attend to domestic chores.


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PARADIGM SHIFT FROM MODULAR TO

MOTIVATIONAL SKILLS FOR ENTREPRENEURSHIP

These is need for a paradigm shift from modular to

motivational training and support services for skilling and

entrepreneurship programmes. Earlier the main objective

of the scheme of Modular Employable Skills under Skill

Development Initiative Scheme (SDS) was to provide

employable skills to school leavers, existing workers, ITI

graduates, etc. Priority was given to those above the age of

14 years who have been or withdrawn as child labour to

enable them to learn employable skills in order to get

gainful employment. The focus was on modular skills as

the purpose was to meet the demand for specific skills of a

high order, under a public-private partnership initiative.

Motivational skills on the other hand, are embedded in

attitudes and perspectives of the individual. The sources

of motivation can be internal or external. One can feel

motivated internally when there is a burning desire to

achieve or what is referred to as achievement motivation.

This is the kingpin of entrepreneurship. External

motivation comes from external factors. Motivational skills

are those that enable a person to become motivated and

work towards achieving goals. Entrepreneurship and Skill

Development programmes of varying duration have been

conducted over years under the programmes of the Ministry

of Micro, Small and Medium Enterprises (MSMEs),

Department of Science and Technology (DST), and

Ministry of Food processing for entrepreneurship

development among youth of various backgrounds.

Inclusiveness has been an important objective. In the

present day environment, lot more effort is needed to

coordinate the work of various ministries, and intensify

the task under the National Policy of Skill Development

and Entrepreneurship 2015 of the Ministry of Skill

Development and Entrepreneurship.

VISION AND THRUST AREAS OF THE 2015 POLICY

The Vision of the National Policy for Skill Development

and Entrepreneurship 2015 is “to create an ecosystem of

empowerment by skilling on a large scale at speed with

high standards and to promote a culture of innovation

based entrepreneurship which can generate wealth and

employment so as to ensure Sustainable livelihoods for all

citizens in the country”.

To achieve the Vision, the Policy has four thrust areas. It

addresses key obstacles to skilling, including low

aspirational value, lack of integration with formal

education, lack of focus on outcomes, low quality of training

infrastructure and trainers, etc. Further, the Policy seeks to

align supply and demand for skills by bridging existing

skill gaps, promoting industry engagement,

operationalising a quality assurance framework, leverage

technology, and promoting greater opportunities for

apprenticeship training. Equity is also a focus of the Policy,

which targets skilling opportunities for socially/

geographically marginalized and disadvantaged groups.

Skill development and entrepreneurship programmes for

women are a specific focus of the Policy. In the

entrepreneurship domain, the Policy seeks to educate and

equip potential entrepreneurs, both within and outside

the formal education system. It also seeks to connect

entrepreneurs to mentors, incubators and credit markets,

foster innovation and entrepreneurial culture, improve ease

of doing business and promote a focus on social

entrepreneurship. (National Policy on Skill Development and

Entrepreneurship 2015).

The country presently faces a dual challenge of severe

paucity of highly-trained, quality labor, as well as non-

employability of large sections of the educated workforce

that possess little or no job skills. Ministry for Skill

Development and Entrepreneurship (earlier Department

of Skill Development and Entrepreneurship created in July

2014) has been set up in November 2014 to give fresh

impetus to the Skill India agenda and impart employable

skills to its growing workforce over the next few decades.

Apart from meeting its own demand, India has the potential

to provide skilled workforce to fill the expected shortfall in

the ageing developed world.

Skill development, however, cannot be viewed in isolation.

Skills are fundamental to, but not sufficient for, gaining

decent jobs. Improved productivity through skill

development must be complemented by economic growth

and employment opportunities. Skills need to be an

integral part of employment and economic growth

strategies. Coordination with other national

macroeconomic policies and strategies is, therefore critical.

National Skill Development and Entrepreneurship Policy

of 2015 supersedes the policy of 2009. The objective of this

policy is to meet the challenge of skilling at scale with

speed, standard (quality) and sustainability. It aims to

provide an umbrella framework to all skilling activities

being carried out within the country, to align them to

common standards and link skilling with demand centres.


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In addition to laying down the objectives and expected

outcomes, the policy also identifies the various

institutional frameworks which will be the vehicles to reach

the expected outcomes. Skills development is the shared

responsibility of government, employers and individual

workers, with NGOs, community based organizations,

private training organizations, and other stakeholders

playing a critical role. The policy links skills development

to improved employability and productivity to pave the

way forward for inclusive growth in the country. The skill

strategy is complemented by specific efforts for promoting

Entrepreneurship to create enough opportunities for the

skilled workforce.

The establishment of the National Skills Development

Corporation (NSDC) in 2009 to promote private sector

participation via short duration courses has tied up with

more than 187 training providers, many of whom have

started scaling up their operations. They also supported

and incubated 31 Sector Skills Councils (SSCs) that is

intended to facilitate the much needed participation and

ownership of the industry to ensure needs-based training

programmes. The National Skills Development Agency

(NSDA) is working with the State governments to

rejuvenate and synergise skilling efforts in the State. The

National Skills Qualification Framework (NSQF) has been

anchored at NSDA, and efforts have been initiated to align

all skilling and education outcomes with the competency

based NSQF levels. These efforts build on the legacy of

vocational training infrastructure: close to 12,000 Industrial

Training Institutes and 3,200 polytechnics.

SKILL DEVELOPMENT MISSION

Skill development on a massive scale as a high priority

area was recognized in 2008 with the setting up of a Skill

Development Mission, with a three-tier structure: (1) Prime

Minister’s National Council on Skill Development (NCSD),

(ii) National Skill Development Coordination Board

(NSDCB), (iii) National Skill Development Corporation

(NSDC) established in the Public-Private-Partnership

(PPP) mode in October 2009. The National Council outlined

the core operating principles which, inter alia, advocate

the need for co-created solutions for skill development

based on partnerships between state, civil society and

community leaders. Equitable access to training or

inclusiveness for all youth of India is another benchmark

initiative of the Mission. The National Action Plan for Skill

Development aims at an ambitious goal of developing 500

million skilled and trained technicians in the country by

2022. Entrepreneurship and Skill Development

Programmes (ESDPs) organized by the Union Ministry of

MSME focus on developing entrepreneurial talent and trade

skills for promoting an enterprise. A few other Ministries

and a wide range of training institutions pursue a similar

direction focusing on self employment, along with

acquisition of skills. RUDSETIs (Rural Development and

Self Employment Training Institutes) and Rural

Development Institutes promoted by banks and non-

governmental organizations (NGOs) are popular

particularly for imparting skills in the non-farm sector.

At the state level, a few states have established a Skill

Development Corporation. These include Andhra Pradesh

and Rajasthan. Andhra Pradesh has also set up 17 skill

development centres in 13 districts from 2015 under the

supervision of the State Skill Development Corporation.

Leading Information Technology (IT) companies and major

industrial houses are extending support to this programme

in a number of ways, including sponsoring the Centre

itself. Incubation Centres are also being promoted by the

joint efforts of the State and industrial houses. Finding it

difficult in motivating people to opt for training

programmes in various skills imparted by the Andhra

Pradesh State Skill Development Corporation (APSSDC)

to the capital region of Andhra Pradesh, officials of the

Corporation have decided to set up counseling centres in

the 29 villages that constitute the Capital Region

Development Authority (CRDA). Capital Region cuts

across Guntur and Krishna districts.

The Corporation is planning to start counseling centres in

these villages at suitable locations. There are also plans to

establish Gram Tarang Employability Training Services.

To begin with, they want to start at least six such centres

through which the Corporation will impart training in

skills such as sewing, jute bag manufacturing, and

terracotta jewellery. Besides skilling through training, the

effort is also to help people find market for their products.

They also plan to implement Digital India drive in these

villages. They want to focus on training college students

who in turn will share their knowledge and expertise with

the villagers.

Gram Tarang is a social entrepreneurship initiative in skill

training working in largely an underdeveloped region,

and committed towards providing youth with employable

skills. The expected impact from Gram Tarang is to drive

self sufficiency and inclusive economic participation in


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local communities by ensuring sustainable employment

with an additional focus on empowering women and

marginalized classes, enduring development of local

solutions through micro entrepreneurship. To have a

strong domestic and international presence in training

and skill building, the Corporation has an annual target

to train one lakh people in the State with emphasis on the

poor and marginalized sections of society across the

disadvantaged areas in particular. Training centres are

planned to be set up in various districts in close

consultation with the concerned departments and

organizations of the State and the Centre. (Source: The

Hindu, Vijayawada edition, October 1, 2015).

Among innovative courses introduced recently, mention

may be made of Suryamitra Diploma programme of 3

months duration, organised by the College of Engineering

and Technology of Acharya Nagarjuna University (ANU),

Guntur. The focus is on equipping the students and any

others interested in acquiring skills in installation,

commissioning, sales and service of renewable energy

devices. Candidates with electrical or mechanical

engineering or those with ITI certificate or polytechnic

background are eligible for participation in this

programme. The devices for which training is being

imparted include solar water heater, solar lights, solar

pumps, etc. The programme is funded by National Institute

of Solar Energy and the Union Ministry of Renewable

Energy Resources.

ON-GOING SCHEMES

Under Prime Minister ’s Employment Generation

Programme (PMEGP) launched in 2008, the investment

level (project cost excluding land) for self employment

ventures in industry can go up to Rs.25 lakh, and for

services and businesses up to Rs.10 lakh. The thrust of the

programme is on rural areas and weaker sections

including women. Promoter’s contribution envisaged is

10 per cent in the general category, and 5 per cent in the

special category. Promoting Entrepreneurship

Development Centres (EDCs) through partner institutions

in the Public-Private Partnership (PPP) mode is another

scheme in operation from 2008.

A recent scheme introduced by the Ministry of MSME has

a number of components to help the candidates pursuing

self employment ventures after receiving adequate training

and skill acquisition. ASPIRE is the abbreviation of the

scheme for promotion of Innovation, Entrepreneurship,

and Agro-industry, launched on 18th March 2015. ASPIRE

has the objectives of creating new jobs to reduce

unemployment, promoting entrepreneurship culture

across regions in the country, achieving rural

industrialization in less developed regions as well, and

promoting innovative business solutions, and

strengthening the competitiveness of enterprises. The

scheme provides a framework for promotion of start-up

enterprises in agro and rural industries through forward

and backward linkages. Setting up of business incubators

and technology business centres, and guiding

entrepreneurs from selection of project ideas to the

implementation of the project are all covered at different

stages under this scheme. (www.msme.org)

Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

The scheme was launched on 15th July 2015. The day is

celebrated as National Skills day. The National Skill

Development Corporation (NSDC) is implementing the

scheme with an outlay of Rs.1500 crore for imparting Skill

Training to youth for 24 lakh persons in a year. The scheme

endeavours to encourage acquisition and upgradation of

employable skills among the youth through monetary

rewards, to enhance the productivity of existing work force

and align the training and certification to the needs of

different sectors, and also to become skill provider to

developed and other developing countries. It is streamlined

to ensure standardization of certification. It is

implemented through public - private and public - public

partnerships.

A few special features of the scheme are as follows:

provision of training and certification under Recognition

of Prior Learning (RPL), which will be specifically oriented

for developing skills in specific growth sectors; training

conforming to National Occupational Standards (NOS)

and Qualification Packs (QPs) for specific job roles

formulated by industry – driven bodies – Sector Skills

Councils (SSCs); training targets to be based on skill gap

studies; creating a registry of skills to keep track of available

skill mass, and target to be aligned to demand from various

Central Government’s flagship programmes. Camp-based

approach through Kaushal Melas to be held at the district

level and organizing skill yatras through demonstration

of skills supplemented by communication packages

utilizing mass media and social media are the other

features for pursuing the programme at village, mandal

and district level.


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Mudra Bank

MUDRA Bank – Micro Units Development Refinance

Agency Bank – has been set up as a subsidiary of Small

Industries Development Bank of India. It will be organized

in due course through a statutory enactment of the Pradhan

Mantri MUDRA Yojana (PMMY). The Bank has been

created with a corpus of Rs.20,000 crore, and a credit

guarantee fund of Rs.3,000 crore. The Bank has already

joined hands with 19 State and Regional level coordinators

so as to reach the self employment seekers in the interior

hamlets, facing the ordeal of limited branch presence. The

focus is on banking the unbanked and funding the

unfunded. These include activities and persons in the

unorganized sector such as vegetable vendors, hawkers,

wayside mechanics, and others with skill and

determination, but hardly any resources for organizing

the business.

The Bank will support activities through self help groups

and micro financial institutions, setting benchmarks for

best practices of lending and technology support. Credit

guarantee scheme is also in operation. Three products are

offered at present and more will be evolved in due course

for self employed persons – Shishu for loans up to Rs.

50,000 for start-ups; Kishor – with above Rs.50,000 and

up to Rs.5 lakh for mid-stage needs; Tarun – with above

Rs.5 lakh and up to Rs.10 lakh for growth seekers –

MUDRA card and credit enhancement are on the anvil for

inclusion later. The Bank is visualized as a boon to small

business enthusiasts particularly in rural and interior

parts of the country.

Box 1: Flexible Vocational Training Approach for

Career Development – the Case of an Australian

Institution

M/s. Australian Vocational Training and Employment

Group Pvt. Ltd. (AVTEG), Australia, promotes and

supports sustainable skill development as a strategic tool

for organic growth with competency skill development

programmes designed for specific sectors. They impart cost

effective, advanced learning experience through various

types of skill development initiatives. In India, they have

assisted several organizations by designing skill

development programmes which help to eliminate training

waste, bring training in line with the expectations of local

employers and industry associations, and resolve skilled

workforce shortage problems. AVTEG, being the partner

of Australian Universities, promoting Australian

Education Framework (AEF) having 10 levels, links

vocational and University education qualifications into

one national system. The Vocational skill programmes

encourage lifelong learning, and assist students to plan

their career and learning at whatever stage they are within

their lives and wherever they live; allows students to start

at the level that suits them, and then build up their

qualification as per their needs to develop & change over

time by allowing multiple entry & exit points at each level

of qualification (certificate courses, diploma courses, PG

diploma courses, PG courses, etc); offer recognition of prior

skills & learning to provide qualifications in a flexible and

supportive environment of training, strong labour market

outcomes, enterprise performance, etc. (Source: ni-msme

Bulletin, National Institute of Micro, Small and Medium

Enterprises, Hyderabad, October 2014)

Box 2: Illustrative List of Occupations for which Skill

Training is being Organized in Andhra Pradesh

Duration of Training: 2 to 6 weeks. Post-training support:

Handholding for self employment & placement as interns

is also pursued for select candidates who express keenness

to pursue the trade. Making available loan under various

programmes from institutional sources is also attempted

based on the project profile submitted by the candidate.

Business advisory services are available from training

institutions, consultancy and advisory services

organizations. In Computer applications and other areas,

there are programmes of shorter as well as longer duration

of one to two years. Advanced certificate course in

computer applications (ACCA) of six months duration,

and PG Diploma in Computer Applications (PGDCA) of

one year duration are offered by a number of specialized

computer institutions.

I. Information Technology (IT) Trades

Digital photography & Videography

Multi-media & animation

Web designing

Internet browsing

Desk Top Publishing (DTP) & Receptionist

SQL Server Data Base Administration

2-D/3-D Animation

CAD with Pro E

CAD/CAM with pro engineers

Hardware & Networking

Printed circuit boards


( 11 )( 11 )( 11 )( 11 )( 11 )

MS Office

Advanced Java

C, C++, and OOPS

Computer accounting with talley

Leather products

Wireman training

Electronic mechanic

Medical transcription

MCP – CCNA

MS centred software Engineering

Linux Administration

II. Other Trades

Designing & making of Artificial Jewellery

UPS inverter repairing

Mobile repairs

2 wheeler maintenance & repairs

Motor winding & pumpset repairs

Electronic gadgets repairs

Food processing

Catering Technology

Dairy based products

Dealership in solar powered equipment

Tea powder packing unit

Mushroom cultivation

Interior design & decoration

Fashion designing

Cosmotology & beautician

Construction workers – electrician,

Mason, painter, decorator

SUGGESTIONS

A few suggestions are offered here to strengthen the skilling

drive as practised by a few Union ministries with focus on

self employment, and in a limited way wage employment.

1. The Ministry of MSME has taken the initiative to

standardize the curricula of skill development

programmes conducted by different institutions

under its purview. The programmes may be

harmonized to enable youth to participate in one

programme relevant to his immediate needs, and

subsequently pursue more advanced programmes

at the same or other institutions in the country.

Linkage of skill development programmes with the

proposed National Vocational Education

Qualification Framework (NVEQF) is planned to

provide certification for these programmes.

Accreditation of programmes from a national body

will benefit the candidates immensely, apart from

improving the standards of instruction and teaching

– learning methodologies followed by various

institutions.

2. The training capacity of the existing training

institutions needs to be augmented, and training

infrastructure also needs to be multiplied to cope

up with the demands of the Skill Development

Mission in various trades. Faculty development

programmes or trainers’ training programmes of a

repetitive nature need to be organized to orient the

faculty with innovative, and modern methods using

Information and Communication Technology (ICT)

tools, with internet, repositories of e-lessons, etc. ICT

can also be used for project work, and case studies,

creating new models in diverse subjects.

3. Ensuring high quality of the programmes conducted

is of utmost importance. Training curricula need to

be standardized for different courses in consultation

with the industry associations and leading

industrial houses. Faculty development

programmes will facilitate upgradation and

reorientation of the course content. Handholding of

trained entrepreneurs for setting up enterprises

through the provisions of Rajiv Gandhi Udyami

Mitra Yojana (RGUMY) with the support of various

implementing agencies will ensure higher success

rate of start-up enterprises.

4. Choice-based credit system in academic institutions

will facilitate youth to identity subjects of interest

and relevance to them apart from the core areas

covered in the course. These can be pursued in the

same institution or in any other nearby institutions.

Providing opportunities for learning and practising

skills in as many diversified areas as possible over

years during the academic career will equip the

youth to be transformed into well rounded

personalities.

CONCLUSION

Skill Development and Entrepreneurship for enterprise

promotion in various sectors by training the youth in

modular and motivational skills is the desirable direction

for developing employable skills among the youth.

Personality development skills should form part of the


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training programmes. The National Policy for Skill

Development and Entrepreneurship 2015 offers an

integrated approach. This strengthens the role of training

and motivational programmes already in operation, and

creation of many more programmes and institutions to be

developed for undertaking the challenging task. Only 2.3%

of the total workforce in the country has undergone formal

skill training in India. As per the NSSO 68th round for the

reference year 2011-12, only 2.2 per cent of persons reported

having received formal vocational training, and 8.6 per

cent reported having received non-formal vocational

training, largely through acquiring hereditary skills or on-

the-job training. Illustrative list of trades is given for

organizing skill-cum-entrepreneurship programmes. The

youth are advised to take advantage of the wide variety of

schemes of short and long duration which are in operation

at the grass roots level. Institutional infrastructure needs

to be considerably strengthened; faculty development

programmes are to be organised; and certification and

standardization are to be introduced in each of the sectors.

Choice-based credit system can give enough motivation to

learn and practise a few skills of the candidate’s choice.

Skill India mission looks ahead for 2020 and beyond to

develop employable youth with necessary knowledge and

skills of benefit to India, and other developed and

developing countries.

REFERENCES

India. Ministry of Micro, Small and Medium Enterprises

(MSMEs) (2012). Report of the working group on

MSMEs growth for the 12th Five Year Plan (2012-17) –

Report of the sub-group on Skill Development and

Training (Chairman of the working group: R.K.

Mathur), New Delhi.

India. Ministry of Skill Development and Entrepreneurship

(May 2015). Draft National Policy for Skill Development

and Entrepreneurship 2015, New Delhi.

Institute of Small Enterprises and Development (ISED)

(2014 and 2015). India Micro, Small and Medium

Enterprises Reports 2014 and 2015, ISED, Kochi

(Kerala).

Yojana (2014). Special Issue on Technology, Innovation,

and Knowledge Economy, November 2014, Vol.58

no.11.

Yojana (2015). Special Issue on Skill India Initiative, October

2015, Vol.59 no.10.

Prof. Balla Appa Rao

UGC Emeritus Professor

Ex-Dean and Head

Dept. of Commerce and Management Studies

Andhra University, Visakhapatnam–03 (Andhra Pradesh)

E-mail: [email protected]

Prof. D. Nagayya

Consultant on Small and Medium Enterprises

Guntur; and Former Director (Industrial Development),

National Institute for Micro, Small and Medium

Enterprises (NI-MSME), Hyderabad.

E-Mail: [email protected]


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INTRODUCTION

Attrition is a separation of employees from an organization, due to resignation, retirement

etc. The organization has no direct role to pay in natural attrition. Attrition may also be

defined as the loss of workforce due to unavoidable circumstances. It refers to” the rate

of change in working staff members of a firm during a definite period” People now look

for job changes. Organizational commitments are at reduced levels these days. So, labour

leave one organization and join another. The rate of turnover, if higher, it indicates

growing dissatisfaction among people of the organization. Attrition may also mean the

instability of employment. Refers to” the rate of change in working staff members of a

firm during a definite period” People now look for job changes. Organizational

commitments are at reduced levels these days. So, labour leave one organization and

join another. The rate of turnover, if higher, it indicates growing dissatisfaction among

people of the organization. Attrition may also mean the instability of employment.

Refers to” the rate of change in working staff members of a firm during a definite period”

People now look for job changes. Organizational commitments are at reduced levels

these days. So, labour leave one organization and join another. The rate of turnover, if

higher, it indicates growing dissatisfaction among people of the organization. Attrition

may also mean the instability of employment.

Attrition is not a new problem and it is has existed earlier and will continue to exist in

any industry. However, there is a limit for everything .It is not easy to find out as to who

contributes and who has the control on the attrition of employees. Various studies/

survey conducted indicates that everyone is contributing to the prevailing attrition. It

does not happen for one or two reasons .The specific reasons for attrition are varied in

nature and it is interesting to know why the people changes job so quickly. Even today,

the main reason for changing job is for higher salary and better benefits. At the same

time the attrition cannot be attributed to employees alone.

Key words:

Attrition, India Tourism

Development Corporation,

Pondicherry Transport

Tourism Development

Corporation, Employees,

Hotel Industry


R.Ramachandran

ABSTRACT

The present study aims to find out the assessing attrition among the employees in hotel industry – a

comparative analysis. Primary data were collected by conducting direct interview using questionnaire.

All the respondents were asked the same questions in the same fashion and they were informed the

purpose of study. The tool of data collection to be used in this study is thro’ structured questionnaire

method; the necessary data is to be collected from 205 samples to be selected randomly in Puducherry

region from August to October 2013. The data will be selected as samples and the data so collected will

be analyzed using the appropriate statistical tools. The secondary data can be collected from the journals,

pamphlets and the concerned websites. For this study the samples were drawn using random sample

method. The data collected through questionnaires have been tabulated and analyzed. Result proves that

respondents differ in their assessing attrition among the employees in hotel industry.


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IDENTIFYING THE CAUSES OF ATTRITION

The tightening labour market for skilled employees and

further growth in the economy is starting to be seen in a

growing level of attrition in organizations. The result will

be increased costs associated with replacing employees

and a negative impact on profitability for those companies

that lose their top talent. The implications for companies

is clear, there will need to be greater focus on attracting

and retaining high quality employees.

Although the increase in available job options provides

employees with alternate employment options it is not the

key driver of why employees quit – it provides the

opportunity to do so without threatening income. This

paper looks at some of the identified causes of turnover in

organizations. Its purpose is to indicate to HR

professionals what may be driving turnover in their own

organizations. However, to be of relevance HR

professionals must identify the causes of turnover in their

own companies.

Some of the major factors affecting attrition include:

• Employee Demographics – how attributes such as

age and years of service can be a determinant of

someone’s likelihood of quitting.

• Organizational Commitment – where employees

that feel more connected to their company are less

likely to quit

• Job Satisfaction – the level of job dissatisfaction is

viewed as a major determinant of an employee’s

intention to quit.

• Promotional Opportunity – internal labour markets

are vital if employees are to believe that they have a

future with their organization.

• Job Motivation – the more important that work is to

a person the less likely that they will look elsewhere

for employment.

• Supervisor Support – employees with a greater level

of supervisor support are more likely to have greater

levels of job satisfaction and are less likely to quit.

• Procedural and Distributive Justice – the HR

processes that exist in a company are a critical

determinant of a persons perception of fairness and

equity. If these are low an employee is far more likely

to leave a company.

Some of these factors can be influenced directly through

HR policies and procedures – such as the development of

internal labour markets, management training for

supervisors and ensuring that processes are fair and

transparent – whilst others require a little more imagination

such as implementing strategies to retain employees at the

5 year hump as an example.

HR STRATEGY AND ATTRITION

One of the fundamental shifts in work culture has been

the demise of the old style ‘implied’ labour contract.

Employee commitment to the organization was not

founded upon a promise of stability of employment,

predictable career paths and incremental salary gains

which are no longer a reality nor are they feasible in today’s

business environment. This style of contract was viewed

as a problem and abandoned during a period of labour

surplus. However, in an environment where a shortage of

skills exists the challenge for HR will be to replace the old

style contract with a new implied contract which will

encourage the organizations ‘value creators’ to be

committed and remain with their organization.

The integration of human resource management into the

business strategy requires an understanding of the causes

and implications of high attrition rates. Many companies

rely on an ‘industrial model’ of service delivery. They have

organized work so as to tolerate low skills and short

employment tenures and concentrate on cutting costs rather

than adding value and failing to compete on quality”. This

low investment in human resources has helped generate

cost savings but has also resulted in high employee

turnover. In managing the attrition rate an organization to

optimal levels the business strategy and the accompanying

costs and benefits associated with attrition should be

accounted for. The plethora of research into the issue of

attrition is indicative of both the significance and the

complexity of the problem. Most studies have, however,

inadequately examined multi-factor explanations, and

have failed to consider turnover process complexities. The

purpose of this study is to develop an understanding of

the causes of turnover that may exist within an

organization.

The analysis presented here provides some practical

implications in terms of influences on turnover rates.


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Traditionally, attrition has been viewed as an individual-

level behaviour explained by individual-level attitudes and

characteristics. However, as strategic human resource

planning grows in importance, organizational turnover

becomes a salient issue for intervention. Although, the

formulation and implementation of human resource

management policy cannot take place without

understanding the causes of an individual’s decision to

quit, the effectiveness of such policy may be enhanced by

understanding the structural content in which individual

turnover decisions are made, as well as the implications

of that decision on the business.

RELATED REVIEW OF PREVIOUS STUDIES

The study needs to understand the gap on research and

hence the following previous studies are gone: Nina

Varghese (2009) on his survey for Federation of Hotels

and Restaurants Association of India (FHRAI) has said

that the hotel industry is facing a manpower crunch

especially at the entry and junior management levels. More

than half of the students, who pass out from catering

institutes, are not interested in getting into the hospitality

industry. He says that about 10,000 catering graduates

come into the job market. Industry sources said that though

there is no official numbers available, these numbers would

have now gone up to about 15,000. These students are

opting for jobs on cruise liners, airlines, which offer

attractive remuneration. Both these industries have the

added incentives of glamour and travel. Lately, call centers

and business process outsourcing centers have also

become an option.

Maritz Hospitality Research Group (2009) on their survey

Surveying more than 1,700 meeting planners, for “2003

Meeting Planners: Choice, Experience, Loyalty Study”

found that establishing a perception of collaborative

partnership between the hotel and the planner throughout

the various phases of the meeting planning process was

crucial to securing future business. Additionally, being

responsive to the planner’s needs and doing simple things

like expressing appreciation for business during the post-

event phase were strongly linked to meeting planner

loyalty. More research showed that a significant

percentage of meetings do not go exactly as planned. The

quality of service a planner received both before and after

a problem occurred was a major factor in recovering from

these types of challenges. When problems occurred, 40

percent of those surveyed were less likely to return and 63

percent were less likely to recommend the property to other

planners. The study showed that even when problems

were fixed, planners often remained dissatisfied. Maritz

interviewed meeting planners in July and August 2003.

They were asked a series of questions about how they

choose a hotel, their experience while at the hotel and the

factors that influence their loyalty to a particular hotel or

brand.

David Radcliffe (2010), the former president of the Greater

Phoenix Convention & Visitors Bureau who heads Project

Attrition suggests packaging guestrooms with meeting

registration and local ground transportation. Incentives

that are offered through hotels and convention bureaus,

such as free or discounted hotel services and amenities,

along with discounts in a destination’s shops, restaurants,

and attractions, also can help bring attendees back into

official room blocks.

“Policies that limit the ability and motivation of attendees

to shop for rooms can help planners negotiate better

attrition clauses in their hotel contracts and thereby reduce

exposure to attrition liability,” said Radcliffe. If planners

hope to improve their block pick-up, they also must place

more financial responsibility for room reservations on

attendees and exhibitors, “A hotel room is generally the

only thing an attendee doesn’t pay for in advance,” he

said, pointing out that groups usually charge attendees

fees to cancel meeting registrations, and airlines charge

passengers fees for changing or canceling flights.

Educating attendees about other benefits block rooms pay

for — such as meeting space and shuttle service — and the

potential attrition liabilities groups face also can improve

block pick-up if combined with incentives, “In some cases,

an explanation is enough to recapture a sizable number of

attendees who were booking around the block,” he said.

“That and other policies seem to be working for some

groups. “In addition to incentives and education for

attendees, Radcliffe said, “The other big issue is just

educating planners to have a close understanding of their

own attendees.”In a half dozen presentations to meeting

planners in the past few months, Radcliffe found few

planners with a solid grip on attendee booking patterns.

“When I asked how many planners faced some attrition-

related problem, close to 100 percent raised their hands,”

he said. “But when I asked how many knew how many of

their attendees booked outside the block, only about 10

percent raised their hands. “The more planners know about

what motivates attendees, the better positioned they’ll be

R.Ramachandran

( 16 )( 16 )( 16 )( 16 )( 16 )

to negotiate good hotel contracts.” Some hotels have

produced and distributed online promotional pieces for

groups, he said, and a handful of hotels create event

websites with registration and room reservations

capabilities. Hotel service and sales staffs are conferring

more frequently with meeting planners about ways to

promote meetings attendance and induce attendees to book

inside room blocks. In addition, convention bureaus are

helping groups that hold city-wide meetings with

marketing materials and are putting together packages of

discounts on local attractions for attendees who book

inside official blocks. “I am optimistic that meeting

planners can reduce attrition liability with the help of

hotels and convention bureaus,” said Radcliffe.

E. Balaji, Executive Director (Staffing Solutions), Ma Foi

Management Consultants (2010) said the hospitality

industry had traditionally found cost effective talent by

grooming entry level intake over the years. He said that

when the industry grows in a scorching pace, it would

find itself in a difficult position to attract cost effective

talent. Hotel management graduates who gain two to three

years experience are also sought after for their people

managing skills. K.C. Tharyan, Executive Director,

Residency Group of Hotels (2011), said according to

information available on the Net, an assistant

housekeeping manager with two to three years experience

on the Cunard lines makes about $1,900 (Rs 82,650) a

month. An assistant purser front desk receptionist for the

same liner, with some experience, will get about $1,650

(Rs 71,775). Recently, Indian Airlines was hiring cabin

crew and the minimum salary offered was Rs 22,000,

including the flying allowance and other benefits such as

gratuity and provident fund.

M.O. Koshy, Vice-President of the Chennai-based GRT

Grand (2011), said that the average starting salary in the

hotel industry would be around Rs 6,000 a month for a

hotel management trainee. The entry level at a call centre

would range from Rs 6,000 to Rs 8,000. But faster

upgrades and promotions in the information technology-

enabled services industry make the difference. In just a

year or two, some of those working in the call centers could

become supervisors and earn over Rs 20,000 per month.

But such quick promotions and salary increases are

unheard off in the old economy jobs, according to industry

sources. They said that some years ago, hotel jobs were

associated with glamour. But now, it’s the money that

matters. Another problem in most of the major metros is

that a large number of hotel rooms are coming into the

market, so the need for trained staff has increased.

Manish Joyal (March, 2012, Caterer and Hotelkeeper),

Human Resource Manager, Chola Sheraton, Chennai

comments, “There are certain modules, which are in place

as far as training but it may not necessarily be to identify

leadership qualities in people. It is a part of the entire

process where we look at the standards of performance by

a team member, analyses his quality, his performance and

then decide on his ability as a leader. While leadership per

se is a vast subject, qualities like assertiveness, self-control,

confidence etc, are the factors which are noted to take a

decision. We conduct tests to get the best out of a member

apart from using technology to judge their capability.”

Vishnuvardhan Bhat (September, 2012, Caterer and

Hotelkeeper), a hospitality consultant, reveals, “In a sense,

great leaders have to be ambidextrous. On one hand, they

have to be able to execute capably within the current

business paradigm, ‘the way we do business.’ On the other

hand, they must be able to reflect on the current paradigm,

find ways to fundamentally improve it, and manage the

large-scale change to a successful conclusion. You need

two hands, and a lot of commitment, to change the

propeller on the airplane in mid-flight, but that capability

is the essence of successful leadership.”Thus, the present

concentrates on attrition of employees’ in hotel industry

with comparative study.

MATERIALS AND METHODS

Research design is purely and simply the framework or

plan for a study that guides the collection and analysis of

the data. The research design indicates the methods of

research i.e. the method of gathering information and the

method of sampling. Primary data were collected by

conducting direct structured interview using questionnaire.

All the respondents were asked the same questions in the

same fashion and they were informed the purpose of study.

OBJECTIVES OF THE STUDY

1. To assess attrition among the employees in hotel

industry – and comparative analysis on government

and private organization.

2. To understand perception and expectation of

employees with regard to the HRD and other related

HR activities.


( 17 )( 17 )( 17 )( 17 )( 17 )

3. To evaluate the reasons for attrition to the

organization.

SAMPLING METHOD

Sampling Method means a few units of population, who

have been chosen for analysis. In practice, appropriate

sample size depends on various factors relating time to

the subject under infestation like time aspect, the cost

aspect the degree of accuracy desired. It is generally said

that if greater degree of accuracy is decided their larger

should be the sample size is 205 in Puducherry region

from August to October 2014. The questions are framed in

way that could be answered on a Likert rating scale

ranging from one to five open-ended questions have also

been included in order to elicit every employees opinion

and suggestion with regard is each of the functions as

clearly mentioned.

The questions are prepared on the different functions

a) Personal Data

b) Reasons Attributable For Joining The Organization

c) Reasons Attributable For Leaving The Organization

d) Impact on training system

RESEARCH INSTRUMENTS

The Questionnaire were used as the research instrument

to contact the research and interviewing method also used

as part of the research study. Contact Method: Personal

Contact Method was used for conducting the survey where

respondents, were interacted directly in order to avoid

many biased answer in collection the data.

LIMITATIONS OF THE STUDY

Though the research has been properly planned and well

executed, there are certain limitations, which are inherent

in nature and are out of the researcher’s control. The

effectiveness of the project is felt only when the results are

read along with the limitations and constraints faced

during the course of this study. The following are the

limitations. Getting timely responses from the respondents

were a difficult task due to the reason for this may be

attributed to their busy schedules.

ANALYSIS AND RESULTS

Table 1 : Educational and Medical Services

Educational and Medical Services

Type of Organization

N Mean SD t-value LS

Sponsoring for Training Program

Government 52 3.23 1.06 1.29 NS

Private 153 3.46 1.32

Children’s Scholarship Government 52 3.19 1.07

2.63 1% Private 153 3.65 1.11

Medical Benefits (Employee’s)

Government 52 3.71 1.29 1.62 NS

Private 153 4.05 1.27

Medical benefits (Dependent’s)

Government 52 3.75 1.22 2.2 5%

Private 153 4.18 1.06

Source: Computed from primary data.

Ho: Government and Private employees do not differ in

their opinion about educational and medical services.

The result proves that, the calculated t-value for children’s

scholarship and medical benefits (dependents) are

significant. In the case of sponsoring for training program

and medical benefit (employees) are not statistically

significant. Hence the stated hypothesis is partially

accepted.

R.Ramachandran

( 18 )( 18 )( 18 )( 18 )( 18 )

Table 2 : Availability Position and Designation

Position and Designation

Type of Organization

N Mean SD t-

value LS

Promotion Benefits Government 52 3.23 1.06

2.2 5% Private 153 3.63 1.20

Transfer Government 52 3.10 1.14

0.73 NS Private 153 2.95 1.37

Demotion and Dismissal Government 52 3.81 1.22

1.20 NS Private 153 4.05 1.27

Designation Available Government 52 3.69 1.20

2.41 5% Private 153 4.14 1.06

Career Development Government 52 3.96 1.31

3.76 1% Private 153 4.69 0.77


Ho: Employees do not differ in their opinion about position

and designation on the basis of type of organization.

The result reveals that regarding promotion benefits,

designation available and career development there is a

significant difference between government and private

organization. In the case of transfer, demotion and

dismissal, there is no significant difference. So, the stated

null hypothesis is partially accepted.

Table 3 : Reason for Attrition due to Stress

Stress Type of

Organization N Mean SD t-value LS

Physical Problem

Government 52 3.37 0.99 1.98 5%

Private 153 3.02 1.34

Psychological Problem

Government 52 3.56 1.13 1.98 5%

Private 153 3.93 1.27

Behavioral Problem

Government 52 3.02 1.15 2.01 5%

Private 153 2.63 1.39


Ho: Employees do not differ in their opinion on early

departure from organization due to stress on the basis of

type of organization.

It is evident from the obtained result that employees differ

in their opinion on early departure from organization –

stress. It is confirmed by the obtained t-values, which are

all significant at 5% and 1% level. So, the stated hypothesis

is rejected.


( 19 )( 19 )( 19 )( 19 )( 19 )

Table 4 : Reasons on Attrition due to Grievances

Grievances Type of

Organization N Mean SD t-value LS

Rumors Government 52 3.81 1.22

1.27 NS Private 153 4.06 1.26

Wages and Supervision

Government 52 3.33 1.04 1.2 NS

Private 153 3.58 1.23

Seniority Discharge Government 52 3.38 0.99

1.3 NS Private 153 3.58 1.20

General Working Condition

Government 52 3.96 1.15 1.07 NS

Private 153 4.16 1.06

Violation of Contract

Government 52 3.42 0.98 1.30 NS

Private 153 3.64 1.21

Change in pay structure

Government 52 3.50 1.04 0.99 NS

Private 153 3.67 1.22

De-motivation Government 52 3.33 0.90

1.50 NS Private 153 3.56 1.16

Employees Safely Measures

Government 52 3.38 1.32 3.20 1%

Private 153 4.05 1.17


Ho: Employees do not differ in their opinion about early

departure from organization grievance on the basis of type

of organization.

It is evident from the obtained result, the calculated t-

values, which are all not significant. Hence the stated

hypothesis is accepted. So, employees do not differ in their

opinion about early departure from organization grievance

on the basis of type of organization.

Path Analysis

A key idea in path analysis is that path effect coefficients

can be used to estimate the empirical correlation among

variables in the system. The figure shows path diagram

representing the causal relationship presumed to

underline the calculations reported in Table 4 and 5. The

path analysis model shows the effect of assessing attrition

employees. The decomposition of the association of the

independent variables with assessing attrition given in

Table 5 reveals the direct and indirect effect among the

hotel industry employees related to assessing attrition.

Table 5 : Decomposition of Association between Dependent and Independent Variables

Type of Effect

Assessing Attrition Direct Effect Indirect Effect Total Effect

Monetary Benefits -0.065 0.449 -0.1042

Educational and Medical Services

0.449 -0.284 0.5772

Social, Welfare and Security Payments

0.228 0.348 0.1538


It is also signifies that among the three groups of sample,

employees’ hotel industry is highly correlated (0.577) with

Assessing Attrition when compared with other. Because

they interact more with the employees. It is revealed that

the employees at hotel industry office operations have

more value creation channels especially communication.

R.Ramachandran

( 20 )( 20 )( 20 )( 20 )( 20 )

Table 6 : The Network Relationship of X2, X

3, and X

4 with X

1

Path direction Path co-efficient

X2 → X1 -0.079

X2→X3→X1 0.452

X3→X1 0.419

X3→X4→X1 -0.282

X4→X1 0.282

Monetary Benefits Educational and

Medical Services

Social, Welfare and

Security Payments

Assessing Attrition

r1 r3

r2

?

? +

+

Input Path Diagram representing a Proposed Causal Model

Monetary Benefits Educational and

Medical Services

Social, Welfare and

Security

Assessing

Attrition

r1=0.334

r2=0.484

=0.292

-0.223 +0.425

+0.182

Output Path Diagram representing a Proposed Causal Model

r3=0.252

Regarding the network relationship the path direction and

path co-efficient are clearly shown. X2 ! X

1 shows negative.

But X2 ! X

3 ! X

1 shows positive and X

3 ! X

1 also positive both

are significant. So Monetary Benefits, Educational and

Medical Services and Social, Welfare and Security

Payments are directly related to attrition. Path diagram

indicates that employees’ Educational and Medical

Services is directly related to attrition. In this analysis, r2 =

0.484 significantly indicates positive and appears with

the similar result that exists. Therefore, it is concluded

that attrition has greater impact in the practice of

commercials hotels. As per the analysis and researcher

has found out the assessing attrition among hotel Industry

in establishing and maximizing the operations in relation

to retention and interaction policies.


( 21 )( 21 )( 21 )( 21 )( 21 )

PROMINENT RESULTS

• Government and Private employees differ in their

opinion about educational and medical services.

• Employees differ in their opinion about position and

designation on the basis of type of organization.

• Employees differ in their opinion on early departure

from organization due to stress on the basis of type

of organization.

• Employees differ in their opinion about early

departure from organization grievance on the basis

of type of organization.

• So Monetary Benefits, Educational and Medical

Services and Social, Welfare and Security Payments

are directly related to attrition. Path diagram

indicates that employees’ Educational and Medical

Services is directly related to attrition.

MANAGERIAL IMPLICATIONS

From the finding, it is recommended that in order to reduce

the percentage of Attrition Rate the following steps are

suggested.

1. Management should ensure a safe and good work

environment.

2. Manpower should be increased in order to reduce

the workload of employees so that their work time

will also be reduced which in turn makes them

happy on spending more time with their family

members.

3. Bonus, Leave/traveling allowances and such things

may be included in their compensation package.

4. Awareness on the facilities available in the

organization must be created by providing them with

respective information in the offer letter while

joining.

5. Employees must be entertained at equal intervals in

order to reduce their stress. They may be taken to

occasional picnics or get together, so that they will

be refreshed and also conflicts among the peers will

also be reduced.

6. Lucrative promotional policies have to design in

order to enhance the employees’ satisfaction level.

Instead of going out for fresh entrants for higher

positions, the existing employees may be promoted

which is benefit for both organization and the

employees as the employee will have prior

knowledge and experience in the same field and the

same organization.

CONCLUSION

“There’s no panacea to the attrition problem. However, a

detailed plan employing many different tactics will help

planners drive attendees and exhibitors back into official

room blocks. Different things will work for different

organizations depending on the relationship the

organization has with its attendees and exhibitors.” Jamie

Romano (2001) for his research about attrition in room

reservation for The Produce Marketing Association (PMA)

said that those who book rooms at its annual convention

within its block must pay for their entire stay upon check-

in, with no refunds for early departures except for

verifiable family or medical emergencies. Thus, PMA does

not lose room nights for early departures.

Those booking sub-blocks of five or more rooms pay a one-

night deposit at cut-off and sign an agreement with PMA

that if they pick up less than 90 percent of their block held

at cut-off and PMA is penalized, they will be invoiced for

the difference. For PMA’s two smaller meetings held

annually, all those attending must pay for the rooms they

reserve within the blocks by cut-off, which is usually about

25 days prior to the start of the meeting. With this policy,

PMA discourages attendees from canceling their

reservations after cut-off. Changes to arrival and departure

dates are not allowed, but guest names can be changed.

Once again, refunds are given only to those with verifiable

family or medical emergencies.

While one might muse that such measures actually could

induce people to book outside the block, PMA implemented

this policy for its smaller meetings in 2001, and since then

pick-up has totaled no less than 85 percent, said Jamie

Romano, the group’s convention and meetings specialist.

By contract, the hotels keep the money from no-shows and

cancellations, plus they can resell the rooms. As a result,

the hotels agree to relieve PMA of attrition damages, an

easy decision since the hotels often make extra money from

the arrangement and there’s little danger that the group

will fail to meet its block commitments.

Sanjeev Sharma (January 2005) in an article for Times

News New Yorkhas written about Attrition Rate that has

caused certain problems to major IT sector and other BPO’s.

R.Ramachandran

( 22 )( 22 )( 22 )( 22 )( 22 )

As the labour market tightens, organizations will be faced

with the prospect of an increase in their staff attrition rates.

The cost of this, not only in replacement costs but also in

lost productivity can be significant. By understanding

which employees are leaving and the reasons why they

choose to leave the HR function can intervene by

implementing strategic policies and practices which will

increase the employees desire to stay with the organization.

The role of HR can be viewed as ‘guardian’ of the firm’s

intellectual assets. This requires policies which are

designed to target value creators by managing out non-

performers and retaining high performers. The issues

raised in this article serve to highlight the need to address

the rising rates of attrition and provide an indication of

why it is that employees quit. Primarily the research

examined indicates that the main drivers of intent to leave

are low levels of commitment, lack of job satisfaction, lack

of procedural and distributive justice and promotional

opportunity.

However, the research makes it clear that there can be no

simple solution. Each company has its own turnover

demographics which indicate that various groups of

employees have different reasons for leaving. Therefore,

each organization will need to research their own attrition

rates and implement policies to address the areas of

concern and which have the greatest impact upon the

business.

REFERENCES

Balaji, Executive Director (Staffing Solutions), Ma Foi

Management Consultants (2010) J. Black Labor In

The South: Richmond, Virginia.

David Radcliffe (2010), Greater Phoenix Convention &

Visitors Bureau who heads Project Attrition,

European Economic Review, June.

Dr. Jaghmohan Negi: Human Recourses Management for

hospitality industry, S.Chand & Co, 1986.

Indian journal of training & development-1999

Koshy, Vice-President of the Chennai-based GRT Grand

(2011). Organizational Culture And Performance,

M.D Publications Pvt. Ltd., 1989.

Luthans F. Organization Behaviour, Tokyo, Mcgraw-Hill

International Book Company, 1981.

Mamoria C.B: Personnel Management, Himalayan

Publishing House 1980.

Manish Joyal (March, 2012, Caterer and Hotelkeeper):

Services Management: An Insight Into Hospitality

Industry.

Maritz Hospitality Research Group (2009), “2003 Meeting

Planners: Choice, Experience, Loyalty Study”,

Perspectives on Labour and Income, Summer

Mohini Sethi. Surgeet Malhan: Catering Management, an

integrated approach, Tata McGraw Hill Publishing

Company.

Nina Varghese (2009) survey for Federation of Hotels and

Restaurants Association of India (FHRAI) Indian

journal of training & development.

Rohan Wickremasinghe: Management Theory And

Practice, By G. A. Cole, Elbs With Dp Publications

Tharyan, Executive Director, Residency Group of Hotels

(2011), Jr. Organization development, New Delhi,

Prentice Hall Of India Pvt. Ltd.

Vaid, K.N., Paresrs on absenteeism, Asia Publishing House,

Bombay, 1967.

Various office records, files & journals of hotels

Venkata Ratnam C.S. & Srivasta B.K. : Personnel

Management & Human Recources, Tata McGraw

Hill Publishing Company, 1980

Vishnuvardhan Bhat (September, 2012, Caterer and

Hotelkeeper), Human Relations And Organization

Behaviour, A Global Prespective, Fourth Edition,

Macmillan India Limited.

Dr. R.Ramachandran

Assistant Professor in Commerce, DDE,

Annamalai University, Annamalai Nagar – 608 002,

Tamilnadu, India

E-mail :[email protected]


( 23 )( 23 )( 23 )( 23 )( 23 )

INTRODUCTION

Foreign Trade is a vital sector of a country’s national economy, and contributes

substantially to the economic welfare of the people and the development of resources.

For an emerging economic powerhouse such as India, foreign trade is not only an

economic feature but a formidable weapon of diplomacy and international influence.

Economically, foreign trade contributes as much as 40.97% to GDP (2011). India’s foreign

trade has accelerated substantially in the past decade, growing faster than that of the

world.

India has emerged as a major stakeholder in world’s trade scenario. Its foreign trade

policy is of great consequence not only for the South Asian region, but for the whole of

globe’s trade participants. It is against this backdrop that we need to study to find out

factors guiding India’s trade, in order to gauge the implications of its trade policy and

to carve out prescriptions for future action.

Although theoretical foundations of foreign trade may be explained using a multitude

of models - comparative advantage, economies of scale, specialisation, inter alia.

However a study of the empirics of trade is better explored using the ‘gravity model’ of

trade. The advantage of using gravity model is that it abstracts away from using a

particular theory of trade in analysing trade between a pair of countries, focusing instead

on basic features such as economic mass, geographical separation, contiguity etc. This

paper looks at the India’s trade with its top 50 trading partners in 2008-09. The choice

of this year is explained by the fact that India’s trade peaked to its highest during this

period, falling prey to global economic downturn thereafter. The paper derives important

insights about India’s foreign trade, leading us to policy conclusions.

The paper is henceforth divided into five parts. The subsequent section sets the

theoretical tone for the exposition. The second section reviews the existing literature on

application of gravity model in empirical inquiries. The third spells out the methodology

Key words:

Gravity model of trade,

free trade agreement,

foreign trade

Estimation of the Gravity Model ofTrade for India


ABSTRACT

The paper tests the validity of the known determinants of a country’s trade with its major trading

partners. The authors first look at the theoretical background for the gravity model and then move on to

the econometric analysis. The four crucial factors like per capita income of the trade partner, distance,

free trade agreements and contiguity have been taken account of in the study. The authors further

decipher their conclusions, which turn out to be slightly off theoretical predictions, by using arguments

like development of technology, faster transportation networks and international bilateral relations. The

paper ends with certain policy suggestions for India in conduct of foreign trade policy.


( 24 )( 24 )( 24 )( 24 )( 24 )

of our study, detailing the data sources used also. The

fourth reports on the econometric assessment of the theory

and interprets the coefficients, giving reasons for their signs

thereof. The fifth closes the paper with conclusions and

policy implications.

CONCEPTUAL FRAMEWORK

The Gravity Model is based on a very basic law of Physics,

known as Newton’s Law of Gravitation. This law states

that the gravitational force between two objects is directly

proportional to their masses, and inversely proportional

to the distance between them.

Analogously, the equation of the Gravity Model of Trade is

as follows:

α β

δ= i i

ij

ij

GY YF

D (1)

whereFij = trade flow between the two countries i and j; G

= proportionality constant; Yi = economic mass of country

i (in terms of Gross Domestic Product {GDP}); Yj = economic

mass of country j (in terms of GDP); Dij = geographical

distance between the two countries i and j, estimated by

the Great Circle formula.

Explanation of the great circle formula: Distance is almost

always measured using the “great circle” formula. This

formula approximates the shape of the earth as a sphere

and calculates the minimum distance along the surface.

To calculate great circle distances one needs the longitude

and latitude of the capital or “economic center” of each

economy in the study. Then the following formula is

applied to obtain the distance measure in miles:

Dij = 3962.6 arccos([sin(Yi) · sin(Yj )] + [cos(Yi) · cos(Yj ) ·

cos(Xi “ Xj )]),

where X is longitude in degrees multiplied by 57.3 to

convert it to radians and Y is latitude multiplied by “57.3

(assuming it is measured in degrees West)

The inspiration for our empirical study has been the primer

authored by Keith Head, 2003, titled “Gravity for

Beginners”. This dossier has offered a detailed analysis of

possible explanatory variables for the volume of trade

between any two countries, including a critical review of

these variables and the possible errors that may be

encountered.

To make (1)compatible with econometric estimation, as

OLS may be applied to models which are linear in

parameters, we apply log to both sides of equation (1),

getting the following functional form:

= + α + β − δij i j ijLnF ln G ln Y ln Y ln D , (2)

Where ln G now is the intercept term, and á, â, ä are now

the elasticities of Fij with respect to Y

i, Y

j and D

ij,

respectively.

Adding an error term to (2) makes it a model compatible

with OLS estimation procedures.

LITERATURE REVIEW

Robustness of the Gravity Model: A review of early

contributors to the empirical evidence of the Gravity model

for a period of 10 years (1999-2009) has been made by

Kepaptsoglou et al. (2010). These researchers have put

forward arguments in favour of the robustness and high

explanatory power of the Gravity Model in explaining

policy implications in international trade for a period over

40 years and more. The most common form of data used is

panel data.

Earliest works on the Gravity model date back to 1962, by

Jan Tinbergen, followed by Poyhonen (1963), Anderson

(1979), Caves (1981) and Toh (1982). All of them, in their

works, suggest geographical distance to be an important

determinant of the trade flows between countries, when

using the Gravity Model. These studies quote distance to

have a negative impact on Trade flows. Rightly so, before

the era of technological advancements that led to a

substantial reduction in transaction costs

Subsequent works by Eichengreen and Erwin (1998) and

Rauch (1999) have shown the importance of cultural factors

like common borders, language, etc. in determining the

volume of trade happening between 2 countries. The use

of dummy variables is suggested for capturing these

qualitative characteristics, in an econometric model.

Contiguity and cultural affinity have been empirically

proven to have affected trade in the positive direction.

Many other studies like Balasaa (1966), Balasaa and

Bauwens (1987), Frankel and Rose (1998) conclude the

same.

Recent Works: Looking at another panel data analysis, by

Bhattacharya and Banerjee (2006), which covers 177

countries that India had trade relations with over the period


( 25 )( 25 )( 25 )( 25 )( 25 )

1950 to 2000 at least once, we find that India’s trade

responds less than proportionally to size and more than

proportionally to distance. But yet again we keep in mind

the usage of panel data for this result.

Analogously, Batra (2004) conducts OLS estimation for a

sample of 146 countries, for the year 2000, and gives the

result that India’s trade is positively related to economic

masses of the two countries in question and negatively

related to the distances between these countries.

Empirical work on the Gravity model has also been done

for Pakistan(An Empirical Analysis of Pakistan’s Bilateral

Trade: A Gravity Model Approach by Shaista

Khan,IhtishamulHaq and Dilawar Khan),but here the

results are contrary to what theory would have us believe.

They have found empirically that the Distance (Dij) and

contiguity (border sharing dummy) variables are

insignificant. Despite the fact that they used panel data,

the results have been explained in terms of whether the

relations with the countries sharing a border with them

have been friendly or not. We may be able to say something

similar for India.

RESEARCH PROCESS

APPLICATION

Estimating the gravity equation has the advantage of

estimating trade flows without having to any economic

theory. The reason was obvious; there was no economic

theory then to fall back upon, during the origins of the

gravity model. The reasons for sticking to the gravity model

in the presence of attendant economic theory are the

simplicity and the empirical success of themodel in

explaining the bilateral trade flows.

LIST OF VARIABLES

VARIABLE NAME VARIABLE DESCRIPTION

TYPE OF VARIABLE

l_Distance_by_great_circle_ form

Log of distance between India and the trade partner calculated using great circle formula

Explanatory variable

Contiguity Dummy for trade partners sharing border with India ={1 if border sharing 0 otherwise}


FTA Dummy for trade partners having Free Trade Agreement with India ={1 if FTA exists 0 otherwise}


l_Product_of_per_capita_ GDP

Log of product of Per Capita GDP of India (1224095.295 US Million $ in 20081) and of its trade Partner.


L_Trade_Volume Log of total value of trade between India and its trade partner

Explained Variable

1 Taken from data.worldbank.org

METHODOLOGY

Given the nature of the data that we are working with in

this paper, we consider a setup where we model bilateral

trade of India with the greatest of its trading partners in

the year 2008-09. Indexing the home country by I (for India,

which is the home country in theempirical exercise) and

taking logarithm of the basic gravity model we get:

= + α + β − δij i j ijLnF ln G ln Y ln Y ln D

where

1. Fij= value of trade between India and its trading

partner j in 2008-09 measured in current US $

2. ln G + lnYi= constants, since constant of

proportionality and log of economic mass of India

are constant throughout

3. lnYj= log of economic mass of the trading partner in

2008

4. lnDij=

log of geographical distance between India

and its trading partner, calculated by the Great Circle

Formula

Subsequent studies have suggested addition of dummies

to capture the specific effects of ‘Contiguity/Border

sharing’ and ‘Free Trade Agreement(FTA)’ on the volume

of trade between countries.


( 26 )( 26 )( 26 )( 26 )( 26 )

We have also considered these aspects in this

model.Accordingly, in our study, we have taken log of Trade

volume (sum of value of exports and imports) i.e.

l_Trade_Volume as the dependent variable which is

regressed on log of product of per capita incomes of India

and the jth trade partner in 2008-09 i.e.

l_Product_of_per_capita_GDP, log of the distance between

them i.e. l_Distance_by_great_circle_form and 2 dummies

- one for border sharing with the jth trade partner i.e.

Contiguity {which takes value 1 in case the trade partner

shares border with India, and 0 otherwise} and another

for existence of a preferential/free trade agreement with

the trade partner i.e. FTA. {which takes value 1 in case an

FTA is in force and 0 otherwise.}

We have considered the log of value of trade volume as the

log of sum of values of exports and imports in current US

$ as the dependent variable. Since the aggregate volume of

trade is effectively the sum of both exports as well as

imports, this was deemed proper and appropriate. Data

regarding this was accessed from the Export-Import Bank

of India’s statistics, Department of Commerce, Government

of India.1

Per capita Income is an indicator of the capacity to

participate in world trade - and has both supply and

demand characteristics. An economy that has high per

capita income demands more imports from the rest of the

world. Also per capita income carries the imprints of a

high GDP, and thereby reflects the economy’s production

capability and export potential. Having justified the point

in taking per capita income as a regressor, it is to be noted

that we have taken the log form of product of per capita

incomes of India and its trading partners in 2008-2009.

This is done for the sake of convenience. Therefore, the log

of India’s per capita GDP which would otherwise figure

in the constant has been included in the regressor. The

data pertaining to this statistic has been sourced from the

World Bank. Population figures have also been taken from

the same source.

‘Impedance factors’ include all those elements that affect

trade flows in a negative or positive manner.

Transportation costs are the main resistance factors; these

include actual freight transportation costs, tariffs, quality

of infrastructure2 etc. Typically, these are approximated by

the total distance between the countries’ economic centers, that

is, the great circle distance calculated by the longitudes

and latitudes of centers3. Preference was given to major

trading hubs over capital cities in taking economic centres.

In our case, the distance has been calculated from a

preprogrammed application available on the website listed

here.

Other impedance factors to trade included in our estimated

model are dummies for border sharing nations and countries

with which we have free trade agreements. Data for the border

sharing has been inferred from the map and subsequently

verified from The World Factbookof the CIA. Similarly, data

for existence of a free/preferential trade agreement has

been sourced primarily from the website of the Ministry of

Trade and Commerce, and cross-checked from sundry

sources.

Summary, our model estimated is of the following form:

l_Trade_Volume = A l_Product_of_per_capita_GDP + B

l_Distance_by_great_circle_form + C Contiguity + D FTA

+ ∈

Exclusion of the Constant term: Why was it done?

The proportionality constant is found to be a function of

the ratio between economic mass and distance5, hence

assumed to be subsumed when the economic mass and

distance variables are included. Also, as mentioned earlier,

the factors responsible for the constant term have all been

included as a constant multiplied in the regressors.

The Appendix lists in detail the argument for removal of

constant. However, if a model has no constant, OLS

estimation might lead to inaccurate results. The major

suspect is that expectation of the error term may not be

zero. This necessitated a closer look at the error values.

The same are listed here for ready reference.

uhat1

U ARAB EMTS 2.088410

CHINA P RP 1.454890

U S A 1.307616

SAUDI ARAB 1.504091

GERMANY 1.058840

SINGAPORE 0.725718

IRAN 1.888321

HONG KONG 1.044688

SWITZERLAND 0.620710

KOREA RP -0.219852

AUSTRALIA 0.621105

U K 0.576024


( 27 )( 27 )( 27 )( 27 )( 27 )

JAPAN -0.389631

MALAYSIA 0.036327

NIGERIA 0.514024

KUWAIT 0.556890

BELGIUM 0.642889

INDONESIA 0.524020

NETHERLAND 0.229922

ITALY -0.023361

IRAQ 1.153602

FRANCE 0.101915

SOUTH AFRICA -0.749747

RUSSIA -0.434010

THAILAND -0.259380

VENEZUELA -0.827006

TAIWAN -0.226026

QATAR 0.065756

BRAZIL -0.571325

CANADA 0.082657

EGYPT A RP -0.146458

SPAIN -0.626156

ISRAEL -0.019996

TURKEY -0.393795

BANGLADESH PR -0.323540

SRI LANKA DSR -0.078474

SWEDEN -0.842434

MEXICO -1.643111

JORDAN 0.010652

VIETNAM SOC REP -0.227509

NEPAL -0.295728

OMAN -0.778205

UKRAINE -0.716834

CHILE -1.016031

PAKISTAN IR -0.835622

ANGOLA -1.017945

BAHARAIN IS -1.292109

ALGERIA -1.105301

YEMEN REPUBLC -0.419006

NORWAY -1.124769

The sum of these error terms is 0.205.

Assuming the approximation to 0, we can easily use OLS

method for estimating the model.

A few more caveats are in order, before the econometric

assessment of the model is attempted.

1. Data on GDP of South Korea could not be obtained

on the World Bank’s website and was taken from

tradingeconomics.com/south-korea/gdp.

2. Entry regarding the trade volume of one of the major

trading partners had to be dropped, since the data

source mentioned its name as ‘unspecified’.

ECONOMETRIC ANALYSIS

I. Estimation of Model and Tests

GRAVITY MODEL ESTIMATED IN LOG-LINEAR

FORM

After having explained the various independent variables

considered, it is now time to turn to estimating the

econometric model involved. The software ‘gretl’ was used

to conduct the econometric assessment. The results are

reported as below:

Model: OLS, using observations 1-50

Dependent variable: l_Trade_Volume

Coefficient Std. Error t-ratio p-value

l_Distance_by_great_circle_form

0.73589 0.135793 5.4192 <0.00001 ***

Contiguity 0.173513 0.487582 0.3559 0.72357

FTA 0.796243 0.265687 2.9969 0.00439 ***

l_Product_of_per_capita_GDP

0.131559 0.0705551 1.8646 0.06862 *

Mean dependent var

8.636154 S.D. dependent var

0.939460

Sum squared resid

35.05360 S.E. of regression 0.872946

R-squared 0.990708 Adjusted R-squared

0.990102

F(4, 46) 1226.109 P-value(F) 4.40e-46

Log-likelihood -62.06831 Akaike criterion 132.1366

Schwarz

criterion

139.7847 Hannan-Quinn 135.0491

The coefficients obtained herein are interpreted and

explained later in the document. It is worthwhile, however,

to note here that the obtained is very highly significant,

thus suggesting that the model fitted is an appropriate

one and captures the reality well.

Other tests, as detailed here were conducted to check for

the occurrence of several kinds of commonly encountered

problems in OLS estimation.


( 28 )( 28 )( 28 )( 28 )( 28 )

I.MULTICOLLINEARITY

Variance Inflation Factors

Minimum possible value = 1.0

Values > 10.0 may indicate a collinearity problem

l_Distance_by_great_circle_form 1.940

Contiguity 1.239

FTA 1.673

l_Product_of_per_capita_GDP 1.212

VIF(j) = 1/(1 - R(j)^2), where R(j) is the multiple correlation

coefficient between variable j and the other independent

variables

RESULT: NO EVIDENCE OF MULTICOLLINEARITY

II.HETEROSCEDASTICITY

A) Graphical Method:

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

12 13 14 15 16 17 18 19 20 21

resid

ual

l_Product_of_per_capita_GDP

Regression residuals (= observed - fitted l_Trade_Volume)

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

7 7.5 8 8.5 9 9.5

resid

ual

l_Distance_by_great_circle_form


-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

0 1

resid

ual

FTA


-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

0 1

resid

ual

Contiguity


B) LM TEST FOR HETEROSCEDASTICITY

White’s test for heteroskedasticity

OLS, using observations 1-50

Dependent variable: uhat^2

Omitted due to exact collinearity: X2_X3

coefficient std. error t-ratio p-value

l_Distance_by_gr~ -6.35607 3.82760 -1.661 0.1048

Contiguity -12.1059 9.18429 -1.318 0.1952

FTA 1.37400 6.22667 0.2207 0.8265

l_Product_of_per~ 3.40494 2.09085 1.628 0.1115

sq_l_Distance_by~ 0.753706 0.441447 1.707 0.0957*

X1_X2 2.52369 0.999730 2.524 0.0158**

X1_X3 -0.570798 0.977438 -0.5840 0.5626

X1_X4 -0.384834 0.252521 -1.524 0.1356

X2_X4 -0.496003 0.356249 -1.392 0.1717

X3_X4 0.197935 0.218566 0.9056 0.3707

sq_l_Product_of_~ -0.00730528 0.0340630 -0.2145 0.8313


( 29 )( 29 )( 29 )( 29 )( 29 )

Unadjusted R-squared = 0.536890

Test statistic: TR^2 = 26.844480,

with p-value = P(Chi-square(10) > 26.844480) = 0.002756

RESULT: NO EVIDENCE OF HETEROSCEDASTICITY

III.NORMALITY OF RESIDUAL

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

-2 -1 0 1 2

Density

uhat3

uhat3

N(0.0041141,0.87294)Test statistic for normality:

Chi-square(2) = 2.955 [0.2282]

IV.RESET RAMSEY’s TEST

Auxiliary regression for RESET specification test

OLS, using observations 1-50

Dependent variable: l_Trade_Volume

coefficient std. error t-ratio p-value

l_Distance_by_gr~ 0.402095 2.62979 0.1529 0.8792

Contiguity 0.0446853 0.791317 0.05647 0.9552 FTA 0.490895 2.87820 0.1706 0.8654

l_Product_of_per~ 0.0887890 0.502430 0.1767 0.8605 yhat^2 0.117037 0.828991 0.1412 0.8884

yhat^3 -0.00788944 0.0473724 -0.1665 0.8685

Test statistic: F = 0.221657,

with p-value = P(F(2,44) > 0.221657) = 0.802

RESULT: NO SPECIFICATION ERROR

V.LEVERAGE AND INFLUENCE

0

0.2

0.4

0.6

0.8

1

10 20 30 40 50

leverage

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

10 20 30 40 50

influence

We close this section with submitting the summary

statistics of independent and dependent variables of our

model.

VI. SUMMARY STATISTICS

Summary Statistics, using the observations 1 - 50

Variable

Mean Median Minimum Maximum

l_Distance_by_great_circle_form 8.35419 8.41559 6.78173 9.65869

Contiguity 0.0800000 0.00000 0.00000 1.00000

FTA 0.420000 0.00000 0.00000 1.00000

l_Trade_Volume 8.63615 8.41632 7.32277 10.7845

l_Product_of_per_capita_GDP 16.2359 16.2728 11.6647 20.9882

Variable Std. Dev. C.V. Skewness Ex. Kurtosis

l_Distance_by_great_circle_form 0.601683 0.0720217 -0.200489 -0.0856372

Contiguity 0.274048 3.42559 3.09628 7.58696

FTA 0.498569 1.18707 0.324176 -1.89491

l_Trade_Volume 0.939460 0.108782 0.422654 -0.706809

l_Product_of_per_capita_GDP 1.92047 0.118286 -0.205830 -0.104886

II. RESULTS

A) SLOPE COEFFICIENT OF DISTANCE IS

SIGNIFICANTLY POSITIVE!

The most striking aspect of our finding is the positive

coefficient for geographical distance between India and

its trading partners. This is theoretically contrary to apriori

expectations and deserves attention and explanation.

A possible set of causes behind this ‘anomaly’ is the

following:


( 30 )( 30 )( 30 )( 30 )( 30 )

1. DISTANCE IS NO MORE A PROXY FOR

TRANSACTION COSTS:

Francis Cairncross (2002) suggests, and rightly so, that

internet has revolutionised the way communication and

hence trade takes place. The point of inclusion of distance

in the gravity model is to bring in the concept of

transactions cost in accounting for trade. And internet has

done a lot in beating down these transactions costs. Once

a basic framework for trade ties has been laid and a contract

been reached, subsequent interactions take place primarily

through the web – eliminating the physical separation

between involved parties as an impediment to trade. That

is to say, placing of orders, tracking of consignment and

payment of dues are now highly linked to the internet, no

longer needing physical movement of men or mail. On the

same plank, therefore, location of the parties which are

part of commercial ties globally does not matter in

influencing the volume of trade.

Air reigns over land and water: With the advent of mega

transport planes and other breakthroughs in shipping

lines, the transactions costs in trading with countries far

from India have come down considerably. So, what matters

for trade is specialisation of the country concerned in the

good being traded, regardless of the barriers to trade in

form of transport and transactions costs.

2. THE INTERACTIVE EFFECT OF POLITICS

AND ECONOMICS:

Increasingly, trade has been used as an effective

instrument of foreign policy. Trade is no longer confined

to the economics or cost-accounting framework, but has

transcended such concerns to depend substantially on

diplomatic relations of India with its trading partners. This

has the implication that trade disregards geographical

separation and the consequent CIF (costs-insurance-

freight) charges incurred and is primarily motivated by

diplomatic necessity and will.

For example, USA being too far from India should

predictably have lower value of trade (conditioned for its

large GDP) with India. However, the fact that it is a

superpower and is projected as a strategic partner for India

gives a major boost to trade with USA. An element of

disregard for economic argument can be explained

through an example – USA insists on sale of military

hardware through FMS (Foreign Military Sales – where

the US government selects a vendor and acts as a mediator

in the deals, often weakening India’s bargaining power)

while India would prefer the DCS (Direct Commercial Sales

– where only the private arms vendor, chosen through

competitive bidding, negotiates and hence India has

symmetric powers in bargaining). Despite that major

military purchases – such as C 17 Globemaster and

Hercules C 130 J aircrafts and aircraft engines for Tejas

LCA – were all made with the US.

3. GLOBAL INTEGRATION HELPING TO

REACH THE UNREACHEABLE:

Banerjee and Bhattacharya (2006) state that direction and

quantum of trade through the Gravity Model is an

argument against the working of trade policies. That is, to

say, that trade continues to be guided by conventional

reasons of economic masses of the trading partners and

impeded by the geographical distance between them. This

may have been the case for the period considered in studies

conducted so far, but certainly does not seem to hold for

the period of the current study 2011-12. An explanation

may be adduced as follows [Ministry of Trade and

Commerce, Government of India (2004)]: in the trade policy

announced August 31, 2004 a policy initiative to induce

trade to shift away from conventional trading partners

towards unexplored and untapped markets – such as

Chile, Nigeria, Mexico, Venezuela et al – through hike in

incentives offered under the Focus Market Scheme.

Correspondingly, transactions costs, proxied by the

‘distance’ factor were mitigated, and thereby rendered

distance ineffectual as a barrier to trade between India

and countries listed above.

Similarly, the purview of Market Linked Focus Product Scheme

(MLFPS) was also expanded greatly, bringing into its fold

multiple products such as pharmaceuticals, textiles fabrics,

goods of rubber and glass etc. The perceptible impact of

this program was to catalyse trade with countries such as

Algeria, Nigeria, South Africa, Ukraine, Australia inter

alia, owing to which trade with the countries named above

grew manifolds.

Additionally, other sops to spur trade with countries in

Africa, Latin America and CIS (Commonwealth of

Independent States) under the heads of Market Development

Assistance Scheme and Market Access Initiative Scheme have

greatly offset inherent disadvantage in such markets – viz.

higher trade costs and credit risks – and have led to an

increase in trade with this bunch of countries by over 15%

points from 2001 [EXIM Bank of India (2012)].


( 31 )( 31 )( 31 )( 31 )( 31 )

B) COEFFICIENT OF CONTIGUITY IS

INSIGNIFICANTLY POSITIVE

The coefficient on contiguity is positive, but insignificant.

This is in line with our expectation. Being contiguous to a

country is another way of putting that the transactions

costs involved in trade is small or negligible.

These findings are in stark contrast to those in Banerjee

and Bhattacharya (2006), who found that being contiguous

to India hurts rather than helps in trade. The reason they

cited was that India’s trade with its neighbours was

insignificant. However, it is to be kept in mind that over

time the dynamics have evolved in a way that counters

this trend. Measures such as inception of the Integrated

Check Post at Attari-Wagah Border with Pakistan or

resumption of trade with China through the Nathu-La

pass have helped in realising part of untapped potential

trade with our neighbours. Consequently, partners have

realised the advantages of sharing borders - most

magnificiently evidenced in the case of China.In a study

by Khan,while border sharing boosts trade, the influence

has not been that significant. So proximity is beneficial for

trade but it continues to be dictated by considerations

beyond distance - such as economic potential of the trade

partner, its strategic significance etc.

C) COEFFICIENT FOR F.T.A. IS SIGNIFICANTLY

POSITIVE

The coefficient on dummy for FTA is found to be

significantly positive. This is as one would want to believe.

The empirical evidence on FTA is ambiguous, a majority of

which has been explored in Archana and Srinivasan

(2009). Previous results notwithstanding, FTAs have been

found to have been very potent and powerful in case of

India and its trading partners - that is to say that FTAs

have helped enhance trade with trade partners,

significantly too. This is of special importance in the debate

between multilateral trade liberalisation and selective

signing of FTAs within blocks of countries bound by

common economic interests. For India as well, FTAs seem

to be meeting the objective of giving a fillip to trade with

the concerned trade partner to a large extent.A positive

coefficient on the dummy variableindicating that two

countries, both of which participate in the same preferential

arrangement, trade more with one another than predicted

by their incomes, population, and distance is interpreted

as suggesting that the arrangement is trade-creating for

its members. In a separate study, negative coefficient on a

second dummy variable indicating when only one member

of the pair participates in a particular preferential

arrangement is taken as evidence of trade diversion vis-a-

vis the rest of the world(Eichengreen, B., Irwin, D. (1998).

The role of history in bilateral flows, In: Frankel, J. A. (Eds.),

The Regionalization of the World Economy, University of

ChicagoPress.)

For India, this statement can be applied in the case of Saudi

Arabia which has a bilateral trade agreement with ASEAN.

But Saudi Arabia’s membership in GCC Customs

Union,1981 of which it is a founding member and

PAFTA(Pan Arab Free-Trade Area, 1998)forms a larger %

of Saudi Arabia Trade leaving lesser space for Indian

exchanges. Due to this reason, despite having a bilateral

trade agreement with Saudi Arabia, we haven’t been able

to tap the potential. As seen in the graph below, Indian

Trade with Saudi Arabia is lesser than China (with whom

we also have a bilateral trade agreement like Saudi Arabia)

Policy Analysis

One of the primary purposes of this paper has been to

arrive at some pertinent policy conclusions and

prescriptions, for India’s foreign trade policy. The same

are outlined below:

A. DISCARD DISTANCE, PROMOTE POLICY:

Over the years the trend in international trade has defeated

the function of distance as a deterrent to trade. With

globalization and technological advancement it seems as

though the world has been stitched into a seamless tapestry.

This, coupled with the growing importance of trade in

foreign policy and global diplomacy, gives India reason to

try and expand trade ties with countries yet asuntapped.

Papers such as Batra(2004) have noted a huge unharnessed

potential in trade with countries such as Cambodia,

Kuwait, Qatar and Vietnam. As we’ve shown, distance

between such potential trade partners no longer matters.

So, emphasis should be laid on removing other bottlenecks,


( 32 )( 32 )( 32 )( 32 )( 32 )

such as improving turn-around times at our major ports,

extension of timely credit to exporters, etc. to expand the

reach and influence of ‘Made in India’ products. This,

places great emphasis on policy measures such as fiscal

incentives, institutional changes, procedural

rationalization and generates optimism in the ability of

such steps to overpower the hindrance due to distance.

B. F.T.A. AS A TRADE MULTIPLIER:

Directly flowing from our econometric analysis is the

unambiguous fact that free/preferential trade agreements

significantly boost trade with a trade partner. Therefore it

is imperative that India pursues its pending negotiations

with countries (marked in light green below) on an

immediate and urgent basis to fulfill its objectives of

diversifying trade and emerging as a major regional and

global economic power. Signing of FTAs consistent with

the rules and regulations of the WTO will expand India’s

trade volume and afford India a greater say at multilateral

forums. Initiatives such as trade fairs and road-shows and

cooperation programs, as major planks of FTAs, will go a

long way in this direction.

C. COMMON BORDER IS NO BARRIER:

There has been seen a transition from contiguity being an

impediment (Banerjee and Bhattacharya (2006)) to a

promoter of trade volume. Over the past half a decade, our

borders have become more permeable to merchandise trade

with our neighbours, as the analysis previously pointed

out. But certainly, we still have to walk a long way in

intensifying our economic relations with our neighbours

and reaping the benefits offered by contiguity. As brought

out in Taneja (2006) and Bhattacharya and Bhattacharya

(2007), current levels of trade with our immediate

neighbours China and Pakistan are far from what may be

expected. These are markets in great proximity to India

and most easy to log into. To quote Shashi Tharoor from

his book PaxIndica, “good fences make goodneighbours”

and the latter make great trade partners!

CONCLUSION

In the end, we would like to quote Paul Krugman who

says that world trade is like a moving target and so changes

in the above features of trade help us to explain how

distance no more determines the quantity of trade between

2 nations. After all, the globe is gradually getting

encapsulated in one globule!

Yet there are policy conclusions to be drawn and tactical

knowledge to be gained if we are to gauge the changing

dynamics of world trade and chisel our trade policy

accordingly. A simple empirical exercise such as this is

certainly a lodestone in our economic thinking of trade

policy formulation.

REFERENCES

Anderson, J.E., (1979). A Theoretical Foundation for the

Gravity Equation. The American Economic Review

69(1), 106-116

Archana, V and Srinivasan, TN (2009) India in the Global

and Regional Trade, ICRIER working paper 232

Balassa, B., (1966). Tariff reductions and trade in manufactures

among industrial countries. American Economic

Review 56(3), 466-473.

Balassa, B., Bauwens, L., (1987). Intra-industry Specialization

in Multi-country and Multi-industry Framework. The

Economic Journal 97 (388), 923-939.

Banerjee, T and Bhattacharya R (2006) Does the gravity

model explain India’s Direction of Trade: Panel Data

Approach, WP No 2006-09-01, IIM Ahmedabad

Batra, A., (2004). India’s global trade potential: the gravity

model approach. Working Paper No. 151, Indian

Council for Research on International Economic

Relations.

Bhattacharya, Swapan K.; Bhattacharyay, Biswa N. (2007)

: Gains and losses of India-China trade cooperation: a

gravity model impact analysis, CESifo working paper,

No. 1970


( 33 )( 33 )( 33 )( 33 )( 33 )

Caves, R., (1981). Intra-industry Trade and Market Structure

in the Industrial Countries. Oxford Economic Papers

33 (2), 203-223

Caves, RE (1981) International Trade and Industrial

Organization: Problems, solved and unsolved

Eichengreen, B., Irwin, D. (1998) The role of history in

bilateral flows In: Frankel, J. A. (Eds.), The

Regionalization of the World Economy, University of

Chicago, Press.

EXIM Bank of India (2012) Catalysing India’s Trade and

Investment

Francis Cairncross (2002) The Death of Distances, RSA

Journal Vol 149 No. 5502 (2002) pp 40-42

Frankel, J. A., Rose, A. K., (1998). The endogeneity of the

optimum currency area criteria. The Economic Journal

108(449), 1009-1025

Head, K (2003) Gravity for Beginners

Kepaptsoglou, K., Karlaftis, MG. (2010) The Gravity Model

Specification for Modelling International Trade Flows

and Free Trade Agreement Effects: A 10-year Review of

Empirical Studies.

Khan, S., ul-Haq, I. and Khan, D. (2013) An Empirical

Analysis of Pakistan’s Bilateral Trade: A Gravity Model

Approach. The Romanian Economic Journal, Year

XVI No. 48.

Ministry of Trade and Commerce, Government of India

(2004) Foreign Trade Policy 2004-09

Poyhonen, P. (1963) A Tentative Model for the Volume of Trade

Between Countries

Rauch, J., (1999). Networks versus markets in international

trade. Journal of International Economics 48 (1), 7-

35.

Taneja, N (2006), India-Pakistan Trade, ICRIER Working

Paper no 182

Tinbergen, J (1962) Shaping the World Economy; suggestions

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Weltwirtschaftliches Archive 118 (2), 281-301

Akshita Goyal

Delhi School of Economics

Anshuman Kamila

Delhi School of Economics

E-mail : [email protected]

Aishwarya Dayal.


( 34 )( 34 )( 34 )( 34 )( 34 )

APPENDIX

The constant term in the Gravity model of trade is a complex

function of economic mass of the home country and its

distance from different trade partners.

We know that the flow of trade from a country is eventually

a proportion of total world trade. This proportion is

dependent on the number of goods produced by the nation

and the preference parameter.

( )( )µ

=Σ µℓ ℓ ℓ ℓ

i i ij

ij

j

g , n ,Ds

g ,n ,D

g() is a function of the following variables:

µi :- preference parameter i.e. is a measure of elasticity of

demand for the goods of the country’s goods

ni:- no. of goods by the exporter country

Dij :- Distance between the 2 nations

Assumptions to arrive at a simplified form of the function

g() are as follows :

• All firms are symmetric and of equal size (so the no

of firms is the total economic mass divided by

individual firm size). The more developed is a nation

the firm size is larger

• The free-on-board (origin prices) vary proportionally

to the country’s export prices and the ratio is a

constant k. The relation between the quality adjusted

price and the FOB price is dependent on the distance

as well. The prices rise as the distance increases

because of additional transportation costs

( )

−θ−

σ−= i

1

M Dg( )

gk (2)

On further simplification, the function

whereMi is the economic mass of the exporter country, D is

the geographical distance, q is the exporter firm size and k

is the ratio of the quality adjusted price and the origin

price.

Therefore, finally,

−θ=ij i ij js M D R

whereRj is a function of q and k.

As we know,

From (1), q is a function of Mi

From (2), k is a function of Mi and D

ij


( 35 )( 35 )( 35 )( 35 )( 35 )

INTRODUCTION

Globally, bank mergers have increased for improving the structure and operational

efficiency of the banking industry. This phenomenon of bank merger is relatively recent

one in India. Mergers have gained importance on account of globalization, increasing

competition, technological changes and redefinition of takeovers. There are life cycle

reasons behind merger and acquisitions to seek specialized partner for growth and

achieving expertise of a large firm diversification, etc. In banking sector a large number

of mergers and acquisitions are going to be the order of the day. India is slowly moving

from regime of “large number of small number banks” to “small number of large banks”.

The merger candidates should be evaluated and investigated from the point of view of

number of perspectives. The engineering analysis will help in estimating the extent of

operating economies of scale, while the marketing analysis may be undertaken to

estimate the desirability of the resulting distribution network. However, the most

important of all is the financial analysis or financial evaluation of a target candidate.

Here only financial aspect has been considered. An acquiring firm should pursue a

merger only if operational efficiency of firm is increased. In order to examine the

operational efficiency of HDFC banks pre and post merger CAMEL accounting tool

have been used to achieve this objective of the present research work.

Key words:

CAMEL, Capital Adequacy,

Asset Quality, Management,

Earning and Liquidity

Critical Analysis of Operational Efficiency ofMerger Activity in Banking Industry: A Case Studyof HDFC Bank

Dr. Paramveer S. Chundawat

ABSTRACT

In banking sector a large number of mergers and acquisitions are going to be the order of the day. India

is slowly moving from regime of “large number of small number banks” to “small number of large

banks”. The merger candidates should be evaluated and investigated from the point of view of number of

perspectives. However, the most important of all is the financial analysis or financial operational appraisal

of a target candidate. Here only financial aspect has been considered. An acquiring firm should pursue

a merger only if operational efficiency of firm is increased. In order to examine the operational efficiency

of HDFC banks pre and post merger CAMEL accounting tool have been used to achieve this objective of

the present research work. The objective of present study is to evaluate operating efficiency and difficulties

in banking industry pre and post merger activity The operational efficiency of HDFC bank has been

analyzed through CAMEL technique. The twenty two ratios have been calculated relating to capital

adequacy, asset quality, management, earnings and liquidity. CAMEL model point of view our null

hypothesis is accepted i.e. merger and acquisition does not result in synergy significantly in terms of

operational efficiency and profitability. Because the calculated value of ‘t’ for all twenty two ratios of

CAMEL model for HDFC bank are less than table value. It clearly indicates the difference is due to

sampling fluctuation not due to merger activity.


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REVIEW OF LITERATURE

The issue of impact of mergers on the efficiency of banks

has been well studied in the literature. Most of the literature

related with the impact of mergers on the efficiency of banks

is found in European Countries and US. In India, literature

on bank merger is very scarce. Very few studies have been

conducted with the motive to appraisal of merger and

acquisition in banking industry. The present study makes

notable contribution to the existing literature on

operational efficiency of Indian banking industry.

Manoj P.K. (2010) checked the financial soundness of old

private sector banks operating in Kerala State through most

popular rating model CAMEL. He examined that due to

intense competition in the banking industry in the ongoing

era of financial sector deregulation initiated in the early

1990s, has put added pressure on the survey survival of

the old private sector banks in India. As financial

soundness has become vital for banks in India for their

survival and growth in the ongoing regime, his paper seek

to make a comparative analysis of the financial soundness

of banks in India and to benchmark with best in class.

Prajapat Sadhana (2010) analyzed various motivations

for mergers and acquisitions in the Indian banking sector.

She highlighted that India is slowly but surely moving

from a regime of large number of small banks to small

number of large banks. This paper analyzed some critical

issues of consideration in Indian banking with particular

emphasis on the views of two important stakeholders. She

conducted an event study analysis of banks stock return,

which reveals that in the cost of forced mergers, neither

the bidder nor the target banks shareholders have been

benefited.

Bodla and Richa (2009) analyzed the Indian Banks as per

CAMEL Model so as to catch up the comparative

performance of various banks in terms of their Earning

Quality. The authors concluded that foreign banks have

edge over their domestic counterparts in terms of operating

profits to average working funds ratio, spread to Total Asset

Ratio and Non Interest Income to Total Income Ratio,

Public sector Bank enjoy the same in terms of Net Profits to

Average Assets ratio and Interest Income to Total Income

Ratio. On the whole, the banks operating in India have

shown appreciable improvement in their fee based income.

Mantravadi and Reddy (2007) explained that how size of

the acquired and acquiring firms affect the outcomes of

merger their paper entitled, “Relative size in merger and

operating performance.” This paper studies the impact of

mergers on the operating performance of acquiring

company by examining some pre and post merger financial

ratios with a sample of firms chosen from all mergers

involving public limited and traded companies in India

between 1991 and 2003.

OBJECTIVE

• To critically analyse pre and post merger operational

efficiency in banking industry special reference to

HDFC bank

HYPOTHESIS

H0: Merger does not result in synergy significantly in terms

of operational efficiency

SOURCE OF DATA

This research study is based on secondary data. Secondary

data has been collected through annual reports of the

HDFC sample bank, Bombay stock exchange official

directory, electronic data base ACE ANALYZER MLSU,

UDAIPUR, government publications etc. The present

research work required a variety of data. Websites

likewww.rbi.org.in, http:// www.moneycontrol.com/

stocksmarketsindia/,http://www.bseindia.com/,http://

wwww.indiabulls.com/securities/, etc. have also been

used.

SELECTION OF BANK

HDFC bank has been randomly selected for present

research work because out of eleven banks whose merger

took place in between 1996 to 2008 one bank is selected

through lottery system that was HDFC bank. After

reviewing the existing literature it is found that Times Bank

and centurion Bank of Punjab have been merged with

HDFC bank in 2000 and 2008 respectively. The HDFC –

Times Bank merger took place in the year 2000. It was

driven by the market forces. The merger helped HDFC Bank

to become one of the largest private sector banks in the

Indian banking industry. The Bennett Coleman Group,

which promoted the Times Bank, had about 7.5% shares

in HDFC Bank after the merger. The merged entity

continued to function as HDFC Bank. The merger helped


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HDFC Bank to increase its customer base by 2,00,000. It

also provided cross-selling opportunities to the increased

customer population. The branch network increased from

68 to 107. With this merger, HDFC saved on costs associated

with technology up gradation, as Times Bank had

technology in place. Product complementarily was more

for ATM card networks. HDFC Bank had Visa network

while Times Bank had Master card network. On account

of the merger, the merged bank became part of both the

networks. In 2008 centurion bank of Punjab is also merged

with HDFC Bank.

Period of Study: A study of four years pre and post merger

of each bank has been taken into account.

Statistical and Accounting Tools & Techniques

In order to analyze financial data simple statistical

techniques mean has been used. The significance of

difference is tested by ‘t’ test. To evaluate the operational

efficiency of banking industry and examine the impact of

merger, CAMEL accounting techniques has been used.

CAMEL model is used for peer comparison and

benchmarking, regulatory reporting and shareholder

reporting purposes. Some banks have also linked these

parameters to the individual performance review process

and compensation of its employees. However these

financial measures are primarily indicators, a post-mortem

view of the business, rather than lead indicators that assess

the bank’s ability to create value in the future domestic

banks are rated on the CAMEL model of while foreign

banks are rated on the CACS (capital adequacy, asset

quality, compliance and systems). Here, the acronym

‘CAMELS’ stands for, Capital Adequacy (C), Asset Quality

(A), Management (M), Earnings (E), Liquidity (L)

CAMEL ANALYSIS OF HDFC BANK

The operational efficiency of HDFC bank has been

analyzed through CAMEL technique. The twenty two

ratios have been calculated relating to capital adequacy,

asset quality, management, earnings and liquidity. The

detail analysis and discussion have been given below:

(i) Capital Adequacy: Capital adequacy is measured

by the ratio of capital to risk-weighted assets

(CRAR). A sound capital base strengthens

confidence of depositors. Higher the value of CRAR,

stronger is considered a bank as it shows high safety

against bankruptcy. CRAR is arrived at by dividing

Tier 1 and Tier 11 and Tier 111 capital by risk

weighted assets.

Table 1 shows different capital adequacy related ratios of

HDFC Bank for pre and post merger periods. HDFC Bank

reported 12.56% total CAR during pre merger period and

on an average HDFC Bank reported 15.64% of total CAR

during post merger period. Significant improvement has

been seen in total CAR ratio during post merger period as

compared to pre merger period. The HDFC Bank could

able to maintain minimum requirement of capital adequacy

ratio throughout the study period. HDFC Bank reported

this ratio on an average 9.26%.

Table 1: Capital Adequacy (C) Related Ratios


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Tier 1 ratio during pre merger period and it enhanced to

11.32% on an average during post merger period. Tier 2

ratio increased to 4.32% in post merger period as compared

to pre merger period i.e. 3.31%. Overall HDFC Bank could

able to improve capital adequacy related ratios during post

merger period as compared to pre merger period. It clearly

indicates that merger activity left positive impact on

performance of capital adequacy ratio of HDFC Bank. No

significant difference has been found in mean values of all

the ratios during pre and post merger period, as it is evident

from ‘t’ value.

(ii) Asset Quality: In order to check the operational

efficiency in terms of asset quality yield on advances,

yield on investment and ROI ratios have been

calculated. Besides this, One of the indicators for

asset quality is the ratio of non-performing loans to

total loans The Net NPA to net advances is more

indicative of the quality of credit decisions made by

bankers. Higher NPA is indicative of poor credit

decision-making.

Figure 2: Asset quality related parameters

Table 2 highlights the asset quality related ratios of HDFC

Bank for 8 years. HDFC Bank generated on an average

13.74% yield on advances during pre merger period, while

in post merger period it generated 13.95% yield on

advances. It seems that there is not significance change in

yield on advances due to merger activity. It is proved by ‘t’

value. During pre merger period HDFC Bank yield at 6.22%

on investment and it slightly improved and reported at

6.98% yield on investments. HDFC Bank reported

approximately 1.4% return on investment throughout the

study period. On an average 1.4% returns on asset have

been noticed during pre merger period and it marked 1.53%

during post merger period. During the entire study period

net NPA to net advances were less than 0.5% except in

2009 (0.63). Due to merger, net NPA to net advances reduce

from 0.4% to 0.33% on an average during post merger period

as compared to pre merger period. Although the feasible

difference is found among all the ratios between pre merger

and post merger, yet it is not significant because the

calculated value of t test is much less than the table value.

(iii) Management:. In order to check the operational

efficiency of management in terms of financial

aspect, the following ratios have been calculated.

Figure 2: Management related parameters

Table 2: Asset Quality (A) Related Ratios


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Table 3 shows management related ratios of HDFC Bank

for both pre and post merger periods. HDFC Bank’s

employees generated ‘ 0.07 million per employee during

pre merger period but it came down to ‘ 0.06 million per

employee during post merger period. HDFC Bank could

able to generate ‘ 6.69 million business per employee during

pre merger period but it came down to ‘ 5.86 million during

post merger period. Although after the merger activity

HDFC Bank could not maintain business per employee

yet significant different is not observed as it is evident by

‘t’ value. During pre merger period the management of

HDFC limited could able to generate 18.35% return on

equity, while it came down to 17.23% in post merger period.

On an average 32.97% net profit growth has been observed

during pre merger period. HDFC Bank reported 34.32%

net profit growth in post merger period. HDFC Bank

recorded on an average 28.78% growth in advances during

pre merger period, while 33.11% growth has been observed

in advances during post merger period. It clearly indicates,

due to merger activity HDFC Bank could enhance in

advances in terms of growth ratio.In order to examine,

whether the difference between pre merger and post merger

period regarding different ratios is significant or not, ‘t’

test has been administered and ultimately it was found

that there was no significance difference between pre and

post merger period.

(iv) Earnings: Earnings of banks has got special

significance in the emerging scenario as the same is

growingly being determined by their non-core

activities like investments, treasury operations,

corporate advisory services and so on. It can be

measured in erms of the following ratios:.

Figure 3: Earning related parameters

Table 4 shows earning related ratios of HDFC Banks for 8

years. Due to merger significant improvement has been

seen in post merger period as compared to pre merger

period. The EPS touched ‘ 55.9 from ‘ 32.47 in post merger

period. HDFC Bank reported 47.3% cost income ratio during

pre merger period and it increased to 49.18% during post

Table 3: Management (M) Related Ratios

Table 4: Earning (E) Related Ratios


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merger period. The HDFC Bank failed to maintain

benchmark of 40% during the entire study period. In pre

merger period interest expended ratio is 45.45% of interest

earned and it increased to 51.18% during post merger

period. It clearly indicates that the spread squeezed during

post merger period and bank could able to generate interest

income @ 6.75% of total funds during pre merger period. It

further enhanced to 7.86% during post merger period. On

an average bank expended 3.08% of total funds in terms of

interest during pre merger period and bank reported 4.05%

interest expended to total funds during post merger period.

Net interest margin in terms of percentage has been

observed in the range of 3.60% to 4.24% during the entire

study period. On an average bank maintained 3.83% net

interest margin during pre merger period and 4.03% in

post merger period.

The calculated value of ‘t’ for all the earning related ratios

are less than the critical value of ‘t’, so it indicates that

there is no significance difference between pre and post

merger period analysis.

(v) Liquidity: Cash maintained by the banks and

balances with central bank, to total asset ratio (LQD)

is an indicator of bank’s liquidity. In general, banks

with a larger volume of liquid assets are perceived

safe, since these assets would allow banks to meet

unexpected withdrawals.

Figure 4: Liquidity related parameters

Table 5: Liquidity (L) Related Ratios

Table 6: CAMEL Ratios of HDFC Bank


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To judge banks liquidity position liquidity ratios are

calculated. All the liquidity related ratios of HDFC Bank

from 2005 to 2012 are given in the above table 5. HDFC

Bank maintained 0.08% cash to total deposit during pre

merger period. In post merger period the bank maintained

0.09% of deposits as cash, with a minor improvement in

cash deposit ratio. On an average HDFC Bank 0.49% of

deposits are invested in pre merger period, while it came

down to 0.37% during post merger period.

The data of HDFC Bank given in table reveals that 6.75%

of total deposits have been used to accommodate the credit

needs of the customers during pre merger period, while it

increased to 7.67% in post merger period. Increment in

this ratio indicates the lower liquidity because higher the

ratio of loans to deposits, lesser the bank will be capable to

make additional loans. HDFC Bank provided 66.21% of

total deposits in terms of credit facility during pre merger

period, while in post merger period this credit deposit ratio

touched mark 75.08%. All the ratios of liquidity shown in

the table explain that there is not significant difference

between pre and post merger situation as it is evident by

‘t’ value. All the five aspects of CAMEL analysis technique

have been elaborated in detail in above explanation. These

five aspects related ratios have been summarized in the

following table 6.

TESTING THE HYPOTHESIS

The above table 6 shows that all the ratios of different

parameters of CAMEL analysis indicate that there is no

significant impact of merger on bank performance. It has

been examined through‘t’ test. All the calculated‘t’ values

of all ratios are less than the critical table value @ 5% level

of significance at 4 d.f. is 3.355. CAMEL model point of

view our null hypothesis is accepted i.e. merger and

acquisition does not result in synergy significantly in terms

of operational efficiency and profitability. Because the

calculated value of ‘t’ for all twenty two ratios of CAMEL

model for HDFC bank are less than table value. It clearly

indicates the difference is due to sampling fluctuation not

due to merger activity.

CONCLUDING REMARK

The capital adequacy ratio group and asset quality related

ratios indicate that HDFC Bank could get benefit from

merger activities but statistically the difference between

pre and post merger is not significant as it is proved from‘t’

test. HDFC Bank could able to improve earnings per share

due to merger activity. Profit per employee and ROE are

declined slightly in post merger period compare to pre

merger period. It may be concluded that HDFC Bank could

not get benefit of merger in terms of effective productivity

of employees. Liquidity position of HDFC Bank is slightly

improved in post merger period.

REFERENCE

Bodla B.S. and Verma Richa (2009), “Earning Quality of

Scheduled Commercial Banks in India: Bank-wise

and Sector-wise Analysis”, Prajnan, Vol. XXXVII,

No.4, January-March 2009.

Manoj P.K. (2010), “Financial Soundness of old private

sector banks in India and benchmarking the Kerala

based OPBs : “A CAMEL Approach”, American

Journal of Scientific Research, ISSN 1450-223 X Issue

11, pp. 132-149.

Mantravadi Pramod and Reddy Vidyadhar (2007),

“Relative Size in Mergers and Operating

Performance: Indian Experience”, Economic and

Political Weekly, September 29, 2007.

Nayak, K.S.B., “Five steps to Successful Mergers and

Acquisitions,” Chartered Secretary, The Institute of

Company Secretaries of India, Vol. _, No. 10, October

2011.

Prajapati Sadhna (2010), “Merger and Acquisition in the

Indian Banking System – An Overview”,

International Journal Shodh Samiksha Aur

Mulyankan, August, ISSN-0974-2832 Vol. II Issue

19 pp. 1-3.

Weston J. Fred, Chung Kwang S., Hoag Susan E., “Mergers,

Restructuring, and Corporate Control,” PHP

Learning Private Ltd., New Delhi.

Dr. Paramveer S. Chundawat

Post Doctoral Research Scholar

Faculty of Management Studies, MLSU,

Udaipur


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INTRODUCTION

In the modern times, the existence of the civilized world cannot be imagined without

banks. The banking activities have become not only an integral part of the human

civilization but also have directed the flow of progress over the lifetime of human

civilization so far. In today’s competitive world, banks, like any other industry, are

struggling hard to maintain the old clientele while attracting new customers. Today’s

banking industry faces several challenges, increased competition, stricter regulation,

and customers who are increasingly sophisticated, price conscious and discriminating

in evaluating banking services (Beckett et al; 2000; Calik and Balta, 2006; Fandos Roig

et al, 2006; Goode and Moutinho, 1995: Ozdemir and Trott, 2009.)

The winner in the Indian banking sector will be the player who can be aware of the

customer, fulfil customer needs and attain high levels of customer retention (Kamath et

al, 2003, PP 85).Berry (1983) viewed relationship marketing as a strategy to attract,

maintain and enhance customer relationships. Relationship marketing is to establish,

maintain and enhance relationships with customers and other partners at a profit, so

that the objectives of the parties are involved are met (Gronroos, 1994). This research

has revealed the importance of customer relationship management. Customer retention

has a significant impact on banks profitability (Newman and Crowling, 1996) a 5

percent increase in customer retention adds 25-150 percent in bottom line (Rosenberg

and Czepiel,1983) small increase in customer retention rates can lead to dramatic

increases in profits (Reichheld, 1996). Hence, adopting customer-centric strategies aimed

at maintaining and enhancing relationship with existing customer is important for the

survival of Indian banks (Roy and Shekhar, 2010).

Key words:

Customer relationship

management, Customer

loyalty, ICICI Bank, HDFC

Bank, factor analysis.

CRM and its Impact on Customer Loyalty: AnEmpirical Study on Private Banks in Odisha


ABSTRACT

The purpose of this paper is to determine the impact of customer relationship management on customer

loyalty. The data was collected from the customers of three private sector banks- ICICI Bank, HDFC Bank

and Axis Bank across the branches located at Bhubaneswar, Cuttack and Puri. The data was collected by

using a structured questionnaire with a five point Likert scale. Statistical tools such as multiple regression,

factor analysis were used for data analysis. The study shows that there is an impact on customer

relationship management and customer loyalty. The study also noticed that banks words and promises

are reliable and the bank is fulfilling its obligation towards the customers. It is also offering them valuable

advice on how to invest is the predominant variable which has impact on customer loyalty. So the

banking sector needs to focus more on these factors, thereby increasing customer loyalty. Hence the

concept of CRM may be emphasized so that the customers are treated royally in relation to banking

services. Thus the banks need to improve the customer satisfaction in the utilization of various modern

banking services and should provide more customer friendly services to make the modern banking

activity a delight for the customer.


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Customer Relationship Management (CRM) is no longer a

new term but a reality for many organizations. The long-

term business relationships provide many potential

benefits for banks and clients. It is generally less costly for

any service firm (bank) to maintain and develop an existing

client relationship (Berry 1983). Berry (1995) stresses that

attracting new customers should be viewed only as an

intermediate step in the marketing process. Bateman &

Snell (2007) observed that CRM is a business process which

results in optimized profitability and revenue generation,

while achieving customer satisfaction. Often also known

as relationship marketing by marketing academicians,

CRM is an information technology assisted process that

establishes a collaborative environment for businesses to

analyze the buying behaviour and product/service

requirements of an individual or group of existing as well

as potential customers.

Customer loyalty is critical to the success of business in

today’s competitive market place, and banks are no

exception (Ehigie 2006) .Customer loyalty is deeply held

commitment to re-buy is or re-patronize a preferred product

(or) service in the future despite there are situational

influence and marketing efforts having the potential to

cause switching behaviour (Oliver, 1999). Some researchers

have argued that the cost of gaining a new customer could

be as high as five to six times the cost of retaining the

existing one. (Desatnick, 1998; Boldgett et al, 1995; Fundin

and Bergman, 2003; Ndubisi, 2003b). Colgate and Hedge

(2001) insisted that losing customer could have a negative

effect on a banks market share. Hence banks should retain

the customers to continue to exist in the banking sectors.

Customer loyalty and retention is the central aim of

relationship marketing and is closely related to company

profitability (Heskelt et al, 2008; Rust and Zahorik, 1993).

Customer loyalty is the feeling of attachment or affection

for a company’s people, products and services (Jones and

Sasser (1995). Customer loyalty has been considered as an

important source of long-term business success (Rust and

Zahorik, 1993) and building a relationship with a

customer is a good way to retain loyal customers in the

long term (Sheaves and Barnes, 1996). According to

Reichheld and Sasser (1990), repeat customer cost less to

serve than new buyers, benefiting firms is cost structure.

Several studies have been conducted in big cities of India

but very few notable works have been done in Odisha.

This study is intended to fill the gap by studying the impact

of CRM on loyalty in the cities of Cuttack, Bhubaneswar

and Puri in the state of Odisha.


The main objectives of this study are:

(i) To provide an insight on CRM and its importance

in the modern banking scenario.

(ii) To measure the impact of various dimensions of

customer relationship management and its impact

on customer loyalty.

RESEARCH METHODOLOGY

In this study a descriptive research design has been

adopted to measure the impact of various dimensions of

customer relationship management and its impact on

loyalty. The targeted population of the present study were

the customers of HDFC Bank, Axis Bank and ICICI Bank

in the cities of Cuttack, Bhubaneswar and Puri. Customers

from these are banks are selected for study because these

three private banks (ICICI, HDFC and Axis) are the leading

private banks in India as per market capitalization

(moneycontrol.com). Judgemental sampling method was

used to collect the data since this study was limited to the

customers of three private banks which have been already

mentioned above. The present study used primary data

collected through a questionnaire method. The

questionnaire items were adopted from different sources.

Communication, Commitment, Competence and conflict

handling was drawn from Dwyer et al., (1987), Anderson

and Weitz (1989), Morgan and Hunt (1994), Gundlach et

al. (1985) and Selnes (1998). Questionnaire item related to

trust were adopted from Churchill and Suprenant (1982),

Crosby et al., (1990) and Moorman et al, (1983).

The questionnaire consists of two parts. The first part

consists of demographic profile of the respondents and

second part consists of various dimensions of customer’s

relationship management and loyalty. The respondents

were asked to answer each statement at five point Likert

Scale. Sampling sizes of 330 questionnaires were

distributed to the respondents, out of which 166 were

assessed as usable, yielding a response rate of 50.30

percent. With this background, this study aims to identify

whether there is any impact of customer relationship

management dimensions on customer loyalty.


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DATA ANALYSIS

Demographic Profile of the Respondents

Table 1 : Demographic profile of Respondents

Variables Categories No. of Respondents

Percentage

Gender

Male 115 69.28

Female 51 30.72

Age 21-30 58 34.94

31-40 47 28.31

41-50 35 21.08

51 and above 26 15.67

Educational Qualification

Graduate 69 41.57

Post Graduate 72 43.37

PhD 15 9.03

Others 10 6.03

Occupation Student 14 8.43

Part time employee 25 15.06

Full time employee 82 49.40

Business 28 16.87

Home maker 17 10.24

Annual Income ( in Rs.)

<2 lakhs per annum 58 40.32

2-5 lakhs per annum 77 43.55

>5 lakhs per annum 31 16.13

Types of Bank account

Current account 29 17.47

Savings account 64 38.55

Fixed deposits 73 43.98

The profile of the sample respondents is shown in table 1

and revealed that 69.28 percent of them were male, 34.94

percent were between 21-30 years old and 43.37 percent

had postgraduate degree as educational qualifications.

49.40 percent of the respondents were full time employees,

43.55 percent have an annual income between Rs.2 lakhs

to Rs. 5 lakhs and 43.98 percent of respondents have fixed

deposits.

RELIABILITY ANALYSIS

Reliability analysis is done to check whether the variable

used to study whether customer relationship management

dimensions would produce consistent results or not. The

calculated Cronbach Alpha cut off rate of 0.70 can prove

good reliability (Hair et al., 2009). The Cronbach Alpha for

the current study was calculated to be 0.783. So it can be

concluded that all the factors used to measure the customer

relationship management are found to be reliable.

FACTOR ANALYSIS (COMPONENT ANALYSIS)

Table No 2 indicates that the analysis of the component

matrix’s of the total four factors and their components. It is

found that the factor loadings of all the components have

been greater than 0.5.

Table 2 : Component Matrix of factors

Component

1 2 3 4

Knowledge about markets 0.795

Confidence in bank’s services

0.779

Customized service to meet

consumer’s needs

0.765

Respect towards customers 0.762

Helps customers to plan their investment

0.754

Open discussing the solutions when the problems arise

0.693

Doing efficient sales promotion activities

0.658

Providing timely and accurate information

0.724

Flexibility in catering to customer’s needs.

0.673

Banks help to avoid conflicts.

0.606

Bank fulfils its promises. 0.567

Offers valuable advice on investment to the customers.

0.531

Tries to solve the conflicts before it creates problems.

0.806

Providing authenticated information.

0.787

Bank fulfils its obligation towards its customers.

0.719

Bank words and promises are kept.

0.792

Banks remain consistent in

providing services to customers.

0.645

Note: - Extraction Method: Principal Component Analysis.

The component matrix shows that knowledge about

markets, confidence in bank services, customized service

to meet consumer’s needs, showing respect towards

customers, helping customers to plan their investment,

openly discussing solution when problem arise and

providing efficient sales promotion can be grouped into

first factor which can be termed as competence. Providing

timely and accurate information, flexibility in catering to

customer’s needs, bank helping to avoid conflicts, bank

fulfils its promises and offering valuable advice on

investment to the customers can be grouped into second

factor which can be termed as relationship

communication. Bank tries to solve conflict before create

problems, providing authenticated information and fulfil

its obligation towards its customers can be put under third

factor which is caring. Banks words and promises are kept

and banks consistent in providing services to customers

can be grouped into fourth factor which is known as trust.


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MULTIPLE REGRESSION ANALYSIS

To identify whether different dimensions of CRM has

strong impact on customer loyalty, multiple regression was

used.

Table 3 : Contribution of variables in the dimensions of

competence Dependent variable: Customer loyalty

scores (Y)

Independent Variables Standardized Co-efficient

t-value

Significant

Constant (a) 1.732 5.081 0.000

Knowledge about markets (X1)

0.475 5.827 0.000

Confidence in bank’s services (X2)

0.386 4.618 0.017

Customized service to meet consumer’s needs (X3)

0.627 8.214 0.000

Respect towards customers (X4)

0.237 3.335 0.029

Helps customers to plan their investment (X5)

0.316 4.183 0.023

Open discussing the solutions when the problems arise (X6)

0.052 1.136 0.275

Doing efficient sales promotion activities (X7)

0.193 2.889 0.043

R2 0.528

Level of significance = 0.05, p < 0.05

The above table (table-3) attempted to explain the

contribution of “competence” dimensions of customer

relationship management to customer loyalty. The

regression equation is given below.

Y = 1.732 + 0.475 (X1) + 0.386 (X2) + 0.627 (X3) + 0.237 (X4)

+ 0.316 (X5) + 0.052 (X6) + 0.193 (X7); Where Y is the

estimated Customer Loyalty Score.

The above equation revealed the variables of “competence”

such as knowledge about markets (X1), Confidence in

bank’s services (X2), Customized service to meet

consumer’s needs (X3) and so on are having an impact on

customer loyalty. Out of the seven dimensions of

competence, the dimension “Customized service to meet

consumers needs (X3)” has been found to have maximum

powerful impact of CRM on customer loyalty since the

coefficient value was found to be 0.627. But however, the

dimension “Open discussing the solutions when the

problems arise (X6)” was the only dimension which was

found to be insignificant where as all the rest six

dimensions of “competence” were significant and R2

indicates 0.528 change in competence explained the

variation of 52.8 percent in customer loyalty.


relationship communication Dependent variable:

Customer loyalty scores (Y)


t-value

Significant

Constant (a) 1.213 4.781 0.000

Providing timely and accurate information (X1)

0.086 1.137 0.165

Flexibility in catering to customer’s needs (X2)

0.254 3.119 0.026

Banks help to avoid conflicts (X3)

0.065 1.141 0.281

Bank fulfils its promises (X4)

0.297 3.256 0.022

Offers valuable advice on investment to the customers (X5)

0.329 4.188 0.018

R2 0.551

Note: Level of significance = 0.05, p < 0.05

The above table attempted to explain the contribution of

“relationship communication” dimensions of customer


regression equation is given below.

Y = 1.213 + 0.086 (X1) + 0.254 (X2) + 0.065 (X3) + 0.297 (X4)

+ 0.329 (X5);

where Y is the estimated Customer Loyalty Score.

The above equation revealed the variables of relationship

communication such as Providing timely and accurate

information (X1), Flexibility in catering to customer’s needs

(X2), Banks help to avoid conflicts (X3), Bank fulfils its

promises (X4) and Bank offering valuable advice on

investment to the customers (X5) are having an impact on

customer loyalty. Out of the five dimensions of relationship

communication, the dimension “Bank offering valuable

advice on investment to the customers (X5)” has been

found to have maximum powerful impact of CRM on

customer loyalty since the coefficient value was found to

be 0.329. But however, the dimensions “Providing timely

and accurate information (X1)” and “Banks help to avoid

conflicts (X3)” were the dimensions of “relationship

communication” which were found to be insignificant

where as all the rest three dimensions of “relationship

communication” were significant and R2 indicates 0.551

change in “relationship communication” explained the

variation of 55.1 percent in customer loyalty.


( 46 )( 46 )( 46 )( 46 )( 46 )


caring Dependent variable: Customer loyalty scores (Y)

Independent Variables

Standardized Co-efficient

t-value

Significant

Constant (a) 1.624 5.262 0.000

Tries to solve the conflicts before it creates problems. (X1)

0.061 1.129 0.211

Providing authenticated information. (X2)

0.074 1.154 0.306

Bank fulfils its obligation towards its customers. (X3)

0.587 7.941 0.000

R2 0.597

Note:Level of significance = 0.05, p < 0.05

The above table (table-5) attempted to explain the

contribution of “caring” dimensions of customer


regression equation for “caring” factor is given below.

Y = 1.624 + 0.061 (X1) + 0.074 (X2) + 0.587 (X3);


The above equation revealed the variables of “caring” such

as “tries to solve the conflicts before it creates problems

(X1)”, “providing authenticated information (X2) and

Banks fulfils its obligation towards its customers (X3)”.

Banks fulfils its obligation towards its customers (X3) has

been found to have maximum powerful impact of CRM on

customer loyalty since the coefficient value was found to

be 0.587. But however, the dimensions “Tries to solve the

conflicts before it creates problems” and “Providing

authenticated information” were found to be insignificant

where as the dimension “bank fulfils its obligation towards

its customers” has been found significant and R2 indicates

0.597 change in “caring” explained the variation of 59.7

percent in customer loyalty.


trust Dependent variable: Customer loyalty scores (Y)


t-value

Significant

Constant (a) 1.957 5.794 0.000

Bank words and promises are kept (X1)

0.606 7.283 0.000

Banks remain consistent in providing services to customers. (X2)

0.359 5.015 0.000

R2 0.632

Note: Level of significance = 0.05, p < 0.05

The above table (table-6 ) attempted to explain the

contribution of “trust” dimensions of customer relationship

management to customer loyalty. The regression equation

for “trust” factor is given below.

Y = 1.957 + 0.617 (X1) + 0.359 (X2);


The above equation revealed the variables of “trust” which

includes “bank words and promises are kept (X1)” and

“banks remain consistent in providing services to

customers. (X2)”. Bank words and promises are kept (X1)

has been found to have maximum powerful impact of CRM

on customer loyalty since the coefficient value was found

to be 0.606. Here both the components of “trust” are found

to be significant and R2 indicates 0.632 changes in “caring”

explained the variation of 63.2 percent in customer loyalty.

IMPLICATIONS OF THE STUDY

This paper attempts highlight the impact of different

dimensions of customer relationship management to

customer loyalty. From the analysis, it is concluded that

bank designs customized service to meet consumer’s needs.

Banks are offering advice to customers on investment,

banks fulfil its obligation towards its customers and bank

words and promises are kept are the predominant

variables which is having maximum powerful impact on

customer loyalty. So the banking sector needs to focus more

attention in the above stated variables, thereby increasing

customer loyalty. In addition to the above stated variables

banks should also focus on the other variables which have

also been found significant in our study. Banks should

also try to improve its functions in the areas of prompt

conflict resolution and providing timely authenticated and

accurate information to the customers because in these

areas the private banks are lacking control as evident from

this research work. Banks should also interact with

customers and should be open to them in discussing

problems and their possible solutions.

CONCLUSION

As we all know that Indian banks are becoming more and

more innovative and gradually dominating the market.

They are capturing market share from their counterpart of

the foreign bank by offering services by an innovative way.

The observation and findings of the study have helped to


( 47 )( 47 )( 47 )( 47 )( 47 )

give useful recommendations to bank. The implementation

of the suggestion can help to improve strategies and build

competencies over that of their competitors as a straight

forward opinion from a sample of customers have been

obtained to make observations. The present study

attempted to assess the impact of various dimensions of

CRM on customer loyalty with reference to private banks

in Odisha. In future, this study can be enhanced by

studying the impact of CRM dimensions of private sector

banks and public sector banks in a comparative manner.

Similarly a study can also be conducted to study about

impact of CRM on customer loyalty of foreign banks and

co-operative banks.

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Dr. Sathya Swaroop Debasish

Reader

Department of Business Administration

Utkal University, Vani Vihar,

Bhubaneswar

Dr. Artta Bandhu Jena

Senior Lecturer

Dept. of Business Management

F.M.University,

Balasore

Mr. Sabyasachi Dey

Lecturer

Ravenshaw Business School

Ravenshaw University

Cuttack


( 49 )( 49 )( 49 )( 49 )( 49 )

INTRODUCTION

The concept of an efficient capital market was first added to the literature of financial

economics in the mid-1960s by Eugene Fama. Put simply, the idea is that the intense

competition in the capital market leads to fair pricing of debt and equity securities.

According to the definition by Fama, a capital market is said to be efficient if security

prices adjust rapidly to the arrival of new information and current prices fully and

instantly reflect the available information about the security. Therefore, no profit

opportunity is left unexploited and nobody is able to get any extra profit by better

forecasting the security prices. A large number of tests on the relevance and applicability

of the random walk hypothesis or weak form of EMH in the USA, UK, Germany, Italy,

Netherlands, Belgium, Switzerland, Sweden, etc., have been performed during the past

four decades. In Fama’s original article he divided the overall Efficient Market

Hypothesis (EMH) into three sub hypotheses (Reilly (2003)).

Weak Form EMH: The weak-form efficient market hypothesis assumes that current

security prices fully reflect all market based information, including the historical

sequences of prices, rates of return, trading volume data, and other market-generated

information , such as odd-lot transactions, bock trades and transactions by exchange

specialists. Because it assumes that current market prices already reflect all past returns

and any other commodities market information, this hypothesis implies that past rates

of return and other market data should have no relationship with future rate of return.

Therefore, this hypothesis contends that an investor should gain little from using any

trading rule that decides whether to buy or sell a security based on past rates of return

or any other past market data.

Semi-strong Form EMH: The semi strong-form EMH asserts that security prices adjust

rapidly to the release of all public information i.e. current security prices fully reflect all

public information. The semi-strong hypothesis encompasses the weak-form hypothesis

Key words:

Customer relationship

management, Customer

loyalty, ICICI Bank, HDFC

Bank, factor analysis.


Vinay K. Srivastava

ABSTRACT

The investment theory in stock market states that it is not possible to beat the market because stock

market efficiency causes existing share prices to always incorporate and reflect all relevant information

and stocks always trade at their fair value on stock exchanges, making it impossible for investors to either

purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to

outperform the overall market through expert stock selection or market timing, and that the only way an

investor can possibly obtain higher returns is by purchasing riskier investments. The present study

tests the weak form of the EMH on the daily closing prices of S&P Nifty securities actively traded on the

NSE over there calendar years. The paper examines autocorrelation and randomness of returns. The

results indicate supportive evidence for the weak form of efficiency of the National Stock Exchange.


( 50 )( 50 )( 50 )( 50 )( 50 )

because all the market information considered by the weak-

form hypothesis such as security prices, rates of return,

and trading volume is made public. Public information

also includes all non-market information which includes

news about the economy, and political news. This

hypothesis implies that investors who base their decisions

on any information after it is made public should not derive

above-average risk-adjusted profits from their transactions,

considering the cost of trading, because the commodity

prices already reflects all such new public information.

1.3 Strong form EMH: The strong-form EMH contends

that security prices fully reflect all information from both

public and private sources. This means that no group of

investors has monopolistic access to information relevant

to the formation of prices. Therefore, this hypothesis

contends that no group of investors should be able to

consistently derive above-average risk-adjusted rates of

return. The strong-form EMH encompasses both the weak-

form and the semi-strong EMH. Further, the strong-form

EMH extends the assumption of efficient markets that

prices adjust rapidly to the release of new public

information to assume the perfect markets, in which all

information is cost-free and available to everyone at the

same time.


The concept of market efficiency is central to finance.

Primarily, the term efficiency is used to describe a market

in which relevant information is impounded into the price

of financial assets. This is the primary focus of the present

study. Sometimes, however economists use this word to

refer to operational or allocational efficiency. Operational

efficiency means the way resources are employed to

facilitate the operation of the market. Allocational efficiency

refers to the way securities are efficiently distributing

among the providers of funds (Dismon-2000). The concept

of market efficiency had been anticipated at the beginning

of the 19th century in the dissertation submitted by

Bachelier (1900). Bachelier had concluded that prices

fluctuate randomly, and later studies by Working (1934)

and Cowles and Jones (1937) were to show that US stock

prices and other economic series also share these

characteristics. These studies were largely overlooked by

researchers until the late 1950s.

First time in the early 1950’s researchers were able to use

the electronic gadgets and computers to study the behavior

of lengthy price series. The assumption of the economist

that the analysis of the economic time series by extracting

from it a long-term movement, or trend, for separate study

and then scrutinizing the residual portion for short-term

study , could not hold for long. Kendall (1953) examined

22 UK stocks and commodity prices. He concluded that in

series of prices which are observed at fairly close intervals

the data move like wandering series. Gradually these

findings were labeled as “Random Walk Theory”. With a

better understanding of price formation in the competitive

markets, the random walk model came to be seen as a set

of observations that can be consistent with the efficient

market.

Samuelson (1956), who proof that properly anticipated

prices fluctuate randomly began with the observation that

in competitive markets there is a buyer for every seller.

Samuelson asserted that the arguments like this are used

to deduce that competitive prices must display price

changes that perform a random walk with no predictable

bias.

Fama (1970) tried to formalize the theory and organize the

growing empirical evidence to support the random walk

hypothesis. He presented the theory of efficient market in

a fair game model, stating that investors should be

confident that a current market price should fully reflects

all available information about a security.

Ramachandran (1985) tested for the weak form of EMH

using weekend prices of 60 scrip’ covering the period 1976-

81. He used filter rule tests in addition to runs and serial

correlation tests, and found support for the weak form of

EMH. For filter rules tests, the filters ranged from 1 per

cent to 49 per cent and assumed transaction costs of 2.5

per cent and carry forward charges of utilizes the carry

forward facility, he compared the filter returns from a buy-

and-hold strategy and a sell-and-hold strategy. He found

that filter rule strategy provided inferior returns.

Chaudhuri (1991a) also tested the log random walk model,

but he reached at different conclusions. He used daily price

quotations of 93 actively traded shares for the period

January 1988 to April 1990 and found that 70 shares had

have significant auto correlation for 1 day lag, 17 shares

were significant for a lag of 2 days or more. The results do

not seem to support the weak form of efficiency. Mittal

(1994-95) examined the weak form efficiency of Indian

Capital Market. Having used daily closing BSE sensitive

index and BSE National Index for the period January to

September 9, 1992, he concluded that share prices in


( 51 )( 51 )( 51 )( 51 )( 51 )

general follow a random behavior in India and are in weak

form of efficiency.

Vaidyanathan and Gali (1994) have tested for the weak

form of efficiency of the Indian Capital Market using the

runs test, serial correlation, and filter rule test based on

daily closing prices of 10 stocks actively trading on BSE.

Evidence from all the three tests supports the weak form of

efficient market hypothesis.

David Walsh (1997) in his study employed variance ratio

test to test the random walk in the Australian Stock

Exchange covering various sampling intervals and data

period during January 1980 to December 1995. His found

that many indices of the stock exchange returned to random

walk during October Crash 1987.

Pant, B. & Bishnoy (2002) studied the behavior of the daily

and weekly returns of five indices of Indian stock market

for random walk during April 1996 to June 2001.They

found that indices of Indian Stock Market did not follow

random walk.

Wayne E. Ferson & Tie Su Andrea Heuson (2005) analysed

in his study the variations occurring in the security returns

over time by comparing them with unconditional data.

They used sum of square decomposition and focused on

monthly stock returns. The semi-strong-form provided

more reliable evidence of time variation in monthly stock

returns than their weak-form tests.

Okpara, G. C. (2010) studied the random walk hypothesis

to explore whether the stock prices fully reflect historical

price or not on Nigerian stock market data. They found

that stock market follows a random walk process and

therefore, the study ruled out the opportunity of making

excess returns in the market.

OBJECTIVE OF THE STUDY

The security market has become one of the investment

sectors against money and forex market. It can also become

one of the investment sectors for the local investors against

other line of investment. Trading in Indian security market

is considered to be as inefficient stock market. In the present

study, the author has tested for the weak form of efficiency

of the S&P Nifty securities in India. That is, we have tested

randomness using the runs test, serial correlation on the

daily closing prices of all stocks actively traded on the

National Stock Exchange.

IMPLICATIONS OF EMH

The major implication of the EMH may be summarized in

the following ways:

For Fundamental Analysis: Fundamental analysis users

earnings and dividends prospects of the firm, expectations

of future interest rates, and risk evaluating of the firm to

determine proper commodity prices. It estimates that the

intrinsic value of a security provides buy or sell decisions

depending on whether the current market price is less than

or greater than the intrinsic value. If the semi strong-form

is true, standard commodity analysis based on the publicly

available information will be useful. It is not enough to do

a good analysis of a firm; you can make money only if your

analysis is better than of your competitors because the

market price will already reflect all commonly available

information.

For Technical Analysis: Technicians believe that stock

prices exhibit trends that persist across time, whereas the

weak-form EMH states that price data are already reflected

in the stock prices. EMH proponents believe that

information is disseminated rapidly and prices adjust

rapidly to this new information. If prices fully reflect the

available information, technical trading system that relies

on knowledge and use of past trading data cannot be of

value.

For Money Management: Another implication of the EMH

is that the portfolio manager has to perform some tasks in

the efficient market. He has to diversify the portfolio, he

must achieve a level of risk appropriate for the portfolio,

as well as maintain the desired level of risk, and he should

keep the tax situation in mind and he should seek to reduce

the transaction costs to the extent it is possible and

practical.

Market Anomalies: Anomalies refer to the techniques or

strategies that appear to be contrary to an efficient market.

By definition, an anomaly is an exception to a rule or model.

The results from these anomalies are in contrast to what

would be expected in a totally efficient market, and they

cannot easily be explained.


The present study analyses the daily stock price data of

S&P Nifty Company for three calendar years, commencing

January 2011 through December 2013. On computing the

daily stock returns, the weak form of efficient market

Vinay K. Srivastava

( 52 )( 52 )( 52 )( 52 )( 52 )

hypothesis has been tested with the help of non-parametric

runs test and a more scientific autocorrelation and the LJung

Box Q statistics for a higher order serial correlation test. It

is not possible to study the semi-strong and strong-form of

hypothesis easily and accurately. Therefore we went only

for studying the weak-form hypothesis. Initially, the

sample size consisted of all the 50 scrip of S&P CNX Nifty,

which is considered to be the most representative index in

India. However, due to non-availability of daily price data

of three scrip, we had to rely on daily closing price data of

only 47 scrip obtained from the NSE website

(www.nseindia.com). At the outset daily security price

return has been computed through taking the difference

between natural logarithm of average price of a day and

average price of immediate previous day. If somehow data

is not available for the immediate previous day, data for

the prior to that day has been taken into account.

Return = −

tn

t 1

PL

P

Runs Test

A run is a sequence of identical occurrence preceded and

followed by different occurrences or by none at all. The

runs test is prefer to prove the randomness of stock prices

because the test ignores the properties distribution and

more so it is a strong test for randomness in investigating

serial dependence in share price movements. It also

compares expected number of runs from actual number of

runs given a sequence of observations. Runs test examine

whether the value of one observation influences the values

taken by later observations. Actual number of runs can be

compared to the expected number of runs using the

following equation as adopted from Islam et al (2005).

Many statistical tests assume that the observations in a

sample are independent, in other words, that the order in

which the data were collected is irrelevant. If order does

matter, then the sample is not random, and you cannot

draw accurate conclusions about the population from

which the sample was drawn. Therefore, it is prudent to

check the data for a violation of this important assumption.

We can use the Runs Test procedure to test whether the

order of values of a variable is random. The procedure first

classifies each value of the variable as falling above or

below a cut point and then tests to ensure that there is no

order to the resulting sequence. The cut point is based

either on a measure of central tendency (mean, median, or

mode) or a custom value. The number of runs or ‘r ’ is a

statistics with its own special sampling distribution and

its own test. Obviously runs may be of different lengths,

and various numbers of runs can occur in a time series.

Too many or too few runs indicate that something other

than chance was at work when the items were selected

and were not chosen randomly. The sampling distribution

of ‘r ’ can be closely approximated by the normal

distribution if sample size is sufficiently large (Levin

(2002)).

The z-statistics is calculated and in usual fashion the table

values are compared with the calculated values to derive

at a conclusion.

− µ=

rZ

T

Where r = no. of runs

µ= the mean of ‘r’ statistics

T = the standard error of the ‘r’ statistics

Null hypothesis will be accepted if the value of Z statistics

is found more than -1.96 and lesser to + 1.96.

Autocorrelation

Autocorrelation establish the relationship not between two

or more different variables but between successive values

for the same variable. Autocorrelation can be used to

measure the persistence or predictability of market prices

on the basis of past market prices. It is a reliable measure

for testing of either dependence or independence of random

variables in a series. Autocorrelation tests compute the

price changes at different lagged 1;2;3;4;5;6;7;8 time

periods. As defined by Gujarati (2004), auto correlation

has is as “correlation between members of series of

observations ordered in time or space”. The

autocorrelation of a series y at lag k is estimated by:

−

= +

−= +

− −

=

−

∑

∑

T

t t kt k 1

k T2

t kt k 1

(y y) (y y)

r

(y y)

Where w´ is the sample mean of y. T is the sample size.

This is the correlation coefficient for values of the series k

periods apart. If it is nonzero, it means that the series is

first order serially correlated. Autocorrelation has

following hypotheses.


( 53 )( 53 )( 53 )( 53 )( 53 )

If the value of coefficient lie between ± 1.96 1/T means

autocorrelation is significant, null is rejected and values

in that series is not randomized. Non-randomization

finally leads to rejection of weak-form hypothesis.

HYPOTHESIS OF THE STUDY

H0

S&P Nifty company’s securities in India follow a

random walk, i.e. S&P Nifty company’s securities

in India are weak-form efficient;

H1

S&P Nifty company’s securities in India do not

follow a random walk, i.e. S&P Nifty companies

securities in India are not weak-form efficient;

RESULTS AND DISCUSSION

Let us discuss the results and discussion of the present

study in the following sub-headings.

Runs Test

The results of runs test applied to various sample

companies have been presented in Table 1. Total number

of runs is approximately normal. It is evident from the

table that z statistics, which have been computed to test

the significance of the difference between the number of

actual runs and the expected runs, are significant at .01

level in case of only 4 stocks out of 47 (8.5 per cent), while

3 values (6.38 per cent) are so at 0.10 level of significance.

Thus, only 14.89 per cent of the z-values turn as significant

up to 5 per cent level of significance. The table further

pinpoints that of the 47 values of standardized variable z,

27 (i.e. 57.45) per cent) reveal negative signs. The negative

signs of z values indicate that actual numbers of runs have

fallen short of the expected number of runs, but the

differences, between the tow are not significant except in

the aforesaid cases. Thus, the runs test confirms

randomness in about 85 per cent of the companies. To

determine whether day-to-day price changes follow a

random walk, we have also applied runs test to the daily

closing S & P CNX Nifty Index. The results of runs test, as

shown at serial number 48 in Table 1, reject the null

hypothesis of independence, since the standardized

variable z is found significant at 1 per cent level in this

case. Thus, the market index hints that the market is not

efficient.

Table 1: Results of Runs Test

Scrip (Company) Name

Actual No. of Runs

Expected No. of Runs

Z value

2 tailed distribution

(Sign)

ACC Ltd. 386 376.78 0.659 0.510

Ambuja Cements Ltd. 361 376.98 -1.166 0.244

Asian Paints 365 376.26 -0.874 0.382

Axis Bank Ltd. 385 375.94 0.584 0.559

Bajaj Auto Ltd. 365 375.38 -0.873 0.383

Bank of Baroda 393 373.93 1.17 0.242

BHEL 387 377.00 0.733 0.464

BPCL 367 376.93 -0.73 0.466

Bharti Airtel 390 376.4 0.949 0.343

Cairn India Ltd. 385 375.27 0.6 0.549

Cipla Ltd. 375 376.32 -0.146 0.884

Coal India Ltd. 353 375.59 -1.751 0.080

DLF Ltd. 308 310.01 -0.424 0.611

Dr Reddy’s Ltd 62 55.28 1.252 0.211

GAIL India Ltd. 366 376.01 -0.803 0.422

Grasim Industries Ltd. 358 376.73 -1.387 0.166

HCL Technologies Ltd.

337 376.93 -2.915 0.004

HDFC Bank Ltd. 353 376.93 -1.747 0.081

Hero Moto Corp Ltd. 378 375.83 0.076 0.939

HUL 364 376.99 -0.949 0.343

HDFC Ltd 367 376.48 -0.729 0.466

ICICI Bank Ltd. 375 376.45 -0.143 0.886

IDFC Ltd. 378 376.99 0.076 0.939

Indusind Bank Ltd. 380 376.68 0.224 0.823

Infosys Ltd. 352 376.78 -1.81 0.070

ITC Ltd. 349 376.04 -2.039 0.041

Jaiprakash Associates Ltd

382 376.62 0.366 0.715

Jindal Steel & Power Ltd.

342 376.14 -2.55 0.011

Kotak Mahindra Bank Ltd

327 376.68 -3.645 0.000

L & T Ltd. 371 376.62 -0.429 0.668

Lupin Ltd. 381 376.96 0.295 0.768

Mahindra & Mahindra Ltd.

380 377.00 0.438 0.661

Maruti Suzuki India Ltd.

380 373.55 0.224 0.823

NMDC Ltd. 360 375.27 -1.24 0.215

NTPC Ltd. 385 376.47 0.585 0.559

ONGC Ltd. 381 376.23 0.292 0.770

Power Grid Corpo of India

377 376.78 0.003 0.998

Punjab National Bank 379 376.4 0.147 0.883

Ranbaxy Laboratories Ltd.

351 369.24 -1.36 0.174

Reliance Industries Ltd.

388 376.87 0.803 0.422

Sesa Goa Ltd. 359 376.93 -1.309 0.191

State Bank of India 331 375.83 -3.346 0.001

Sun Pharma Ltd. 340 376.96 -2.699 0.007

TCS Ltd. 347 376.32 -2.175 0.030

Tata Motors Ltd. 359 376.5 -1.313 0.189

Tata Power Co. Ltd. 380 376.4 0.219 0.827

Tata Steel Ltd. 374 376.78 -0.219 0.827

Ultra Tech Ltd. 372 376.98 0.076 0.935

S & P Nifty 333 374.28 -3.211 0.001

Serial Correlation or Autocorrelation

The other test for the independence of successive price

change is the autocorrelation test. The results of serial

correlation test have been given in table-2.

Vinay K. Srivastava

( 54 )( 54 )( 54 )( 54 )( 54 )

Table 2 : Serial Correlation Coefficients

Companies Lags

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 BL

A C C Ltd. -0.016 -0.039 -0.017 0.024 0.004 -0.020 0.011 -0.053 0.028 0.031 0.022 -0.029 0.009 0.054 0.023 -0.028 10.569

Ambuja Cements Ltd. 0.007 -0.09* -0.029 0.033 -0.028 0.028 0.006 0.068 -0.013 -0.051 -0.035 -0.007 -0.023 0.007 0.04 0.006 17.162

Asian Paints 0.07 -0.024 -0.029 -0.021 0.056 0.023 0.042 0.019 0.04 0.021 0.006 0.009 0.01 -0.007 0.013 -0.04 12.702

Axis Bank Ltd. -0.009 -0.066 0.036 0.01 -0.032 -67 0.044 0.075* -0.04 -0.009 -0.066 0.036 0.01 -0.032 -0.067 0.044 0.075

Bajaj Auto Ltd. 0.037 -0.019 0.019 -0.052 0.02 0.002 -0.024 -0.025 0.033 0.006 -0.045 -0.017 -0.009 0.015 0.029 -0.076* 22.678

Bank of Baroda -0.112** -0.004 0.045 0.012 -0.007 0.067 0.012 0.006 0.039 -0.053 -0.029 0.027 -0.054 -0.017 0.006 0.044 23.251

BHEL 0.031 -0.121** -0.026 -0.01 0.073* 0.055 -0.03 0.006 -0.052 -0.008 0.025 0.004 -0.016 -0.0465 -0.0415 0.066 29.068**

BPCL 0.062 0.004 -0.066 0.023 0.052 -0.04 0.012 0.002 0.041 0.017 -0.06 -0.013 0.012 -0.009 -0.025 -0.017 15.269

Bharti Airtel 0.011 0.096* -0.055 -0.072* -0.055 -0.035 0.049 0.001 0.033 0.014 0 0.027 -0.06 -0.002 0.032 0.004 19.295

Cairn India Ltd. -0.016 -0.055 -0.003 0.027 -0.027 -0.075* 0.043 0.066 0.009 0.05 0 -0.064 0.044 -0.017 0.006 0.043 20.83

Cipla Ltd. 0.1 -0.072* 0.022 0.029 0.032 0 0.026 -0.004 -0.023 0.036 0.038 -0.041 0.023 0.063 -0.065 -0.067 27.768**

Coal India Ltd. 0.021 -0.0565 -0.017 0.005 0.001 -0.037 -0.086* -0.006 0.062 -0.002 -0.014 -0.029 0.008 0.049 0.005 0.025 15.79

DLF Ltd. 0.069 0.012 0.086* 0.08* 0.018 0.023 0.026 -0.009 -0.041 -0.02 -0.105 -0.026 -0.054 0.053 -0.021 -0.043 26.77**

Dr Reddy’s Ltd 0.06 0.049 -0.026 -0.019 -0.071 0.017 0.031 0.04 -0.012 -0.015 0.039 0.011 -0.021 0.021 0.02 0.016 21.138

GAIL India Ltd. -0.126** -0.027 0.159** -0.06 0.123** 0.0531 -0.025 0.169* -0.166** -0.083* 0.057 0.014 0.017 0.014 -0.062 0.059 16.381

Grasim Industries Ltd. 0.034 -0.129** 0.025 -0.003 -0.005 0.052 -0.04 0.004 0.023 -0.011 0.05 -0.027 -0.124 -0.014 0.069 -0.038 36.717*

HCL Technologies Ltd. .073* .163** 0.054 0.06 0.026 -0.039 0.001 0.031 -0.021 -0.029 -0.009 0.002 -0.04 -0.068 0 -0.069 40.833*

HDFC Bank Ltd. 0.083* -0.029 -0.048 -0.012 -0.096* -0.036 0.118** 0.008 -0.029 0.006 0.041 -0.065 -0.005 0.025 -0.024 -0.027 32.995

Hero Moto Corp Ltd. -0.085* -0.098* 0.03 -0.015 0.021 -0.013 0.007 -0.036 -0.003 -0.024 0.017 -0.014 -0.028 0.008 0 0.047 18.225

HUL 0.007 0.004 0.004 0.006 0.009 -0.004 0.007 -0.011 -0.031 -0.007 -0.005 0.023 0.015 -0.001 0.009 -0.012 1.827

HDFC Ltd 0.043 -0.103* -0.065 -0.034 -0.034 0.004 0.013 -0.004 0.105* -0.011 -0.014 0.005 -0.066 0.022 0.032 -0.035 28.615**

ICICI Bank Ltd. 0.044 -0.04 0.007 -0.017 0.044 0.052 0.011 0.014 0.054 -0.061 0.024 -0.054 -0.02 0.074* -0.012 0.006 19.128

IDFC Ltd. -0.061 -0.034 0.007 -0.016 -0.019 0.005 0.011 0.034 0.009 0.006 -0.016 0.007 0.011 -0.012 -0.022 0.002 7.341

Indusind Bank Ltd. -0.055 -0.075* -0.054 0.002 0.038 0.018 -0.032 0.047 0.008 -0.027 -0.098* 0.026 0.003 0.051 -0.057 -0.032 25.674***

Infosys Ltd. 0.061 -0.075* 0.025 0.022 0.005 0.024 -0.034 -0.05 -0.049 -0.032 0.053 0.016 0.009 0.01 0.090* 0.023 23.399***

ITC Ltd. 0.095* -0.002 0.048 0.033 0.093* 0.022 -0.006 -0.007 -0.002 0.033 0.067 0.088* 0.018 -0.037 -0.042 0.031 30.177**

Jaiprakash Associates Ltd 0.108* -0.064 0.102* 0.084* 0.054 0.019 0.063 0.038 0.028 -0.02 0 0.042 0.048 0.017 0.033 0.042 36.827*

Jindal Steel & Power Ltd. 0.086* -0.095* 0.072* 0.058 0.023 0.002 0.029 0.039 -0.022 0.012 0.052 0.027 -0.052 -0.033 0.07 -0.002 30.946***

Kotak Mahindra Bank Ltd 0.087* -0.095* -0.015 0.039 -0.081* -0.005 0.052 0.043 -0.75* -0.034 0.01 -0.045 -0.009 0.003 -0.02 0.011 29.789***

L & T Ltd. 0.155** -0.049 0.096* -0.01 0.012 0.024 0.037 0.081* 0.038 0.06 0.015 -0.056 -0.015 -0.008 0 -0.016 40.415*

Lupin Ltd. 0.006 -0.042 0.047 -0.022 -0.027 -0.019 -0.011 0.006 0.018 -0.053 -0.028 -0.088* 0.008 0.05 -0.042 -0.005 16.628

Mahindra & Mahindra Ltd. 0.088* -0.074** 0.021 0.095* 0.063 0.041 0.01 0.025 0.096* 0.052 0.014 0.036 0.032 0.064 -0.027 -0.048 36.613*

Maruti Suzuki India Ltd. 0.038 -0.084* 0.05 0.004 -0.047 0.002 0.082* -0.019 0.007 -0.016 0.026 0.043 -0.056 -0.027 0.011 -0.041 21.834

NMDC Ltd. 0.055 -0.003 -0.02 -0.03 -0.049 -0.013 -0.001 -0.015 -0.033 -0.001 0.01 0.026 0.016 0.015 -0.017 -0.013 7.537

NTPC Ltd. 0.026 0.068 -0.021 -0.048 0.043 -0.106* -0.01 -0.027 0.009 -0.007 0.035 0.052 0.022 0.017 -0.046 0.013 22.09

ONGC Ltd. 0.046 -0.081* -0.004 0.02 -0.005 -0.054 -0.041 0.052 -0.028 0.043 0.043 -0.031 0.034 0.024 -0.069 -0.05 23.549***

Power Grid Corpo of India Ltd. 0.02 0.009 0.006 0.037 0.029 0.045 0.01 0.047 -0.015 -0.031 -0.011 0.01 0.006 -0.014 0.028 -0.074* 11.456

Punjab National Bank 0.047 -0.074* 0.055 0.007 -0.011 -0.079* 0.048 0.07 0.013 0.017 -0.026 -0.055 -0.011 -0.009 0 -0.014 21.926

Ranbaxy Laboratories Ltd. 0.105* -0.092* 0.037 0.061 0.004 0.042 0.048 0.078* 0.043 0.018 -0.029 -0.004 0.036 0.062 0.054 -0.077* 39.426*

Reliance Industries Ltd. -0.011 -0.021 0.03 0.003 0.024 -0.022 -0.003 0.012 0.013 -0.005 -0.02 -0.006 0.008 -0.035 -0.009 -0.001 3.778

Sesa Goa Ltd. 0.07 -0.077* -0.002 0.036 0.162** -0.016 -0.088* 0.053 0.01 -0.004 -0.007 -0.113* -0.011 0.005 -0.042 -0.046 50.251*

State Bank of India 0.034 -0.047 0.012 0.059 -0.009 -0.008 0.018 0.008 0.026 0.048 -0.007 -0.013 0.042 0 -0.01 -0.001 10.121

Sun Pharma Ltd. 0.133** -0.149** 0.01 0.049 0.071 0.002 -0.015 -0.001 0.016 0.031 -0.049 0.041 0.046 -0.042 0.024 0.009 43.45*

Tata Consultancy Services Ltd. 0.134** -.0084* -0.05 0.046 .085* -0.043 -0.06 -0.01 0.109* 0.043 -0.031 -0.042 -0.009 0.06 -0.003 -0.025 47.915*

Tata Motors Ltd. 0.055 -0.014 -0.004 -0.027 -0.017 0.006 0.039 0.036 -0.051 -.083* -0.018 -0.049 0.009 -0.009 0.025 -0.025 15.752

Tata Power Co. Ltd. 0.087* -0.047 -0.024 0.017 0.001 -0.01 -0.005 -0.008 0.029 0.067 .113** -0.008 0.032 0.056 -.078* -0.049 31.721**

Tata Steel Ltd. 0.123** -0.032 -0.024 -0.048 -0.031 -0.034 -0.068 0.034 0.047 0.025 -0.01 -0.03 0.015 0.059 0.047 -0.039 29.103**

Ultra Tech Ltd. 0.062 0.004 -0.066 0.023 0.052 -0.04 0.012 0.002 0.041 0.017 -0.06 -0.013 0.012 -0.009 -0.025 -0.017 15.269

S & P Nifty 0.136** -0.062 0.013 0.069 0.076* -0.019 -0.018 0.015 0.042 0.014 0.019 -0.023 0.022 0.058 -0.019 -0.029 31.772**

Note: *Significant at 0.05 level, **Significant at 0.01 level, BL: Box-Ljung Statistics Significant at 0.01, 0.05 and 0.10 level for *, **, and ***respectively.

The autocorrelation of different variables have been

checked through the Box-Ljung test. The results of serial

correlation test have been summarized in Table 3.

Table 3 : Lag-wise number of significant serial

correlation coefficients

Lag Significance at Total (1% & 5%)

Cumulative Total 1% 5%

1 7 9 16 16

2 4 15 19 35

3 1 5 6 41

4 0 4 4 45

5 2 5 7 52

6 0 3 3 55

7 1 3 4 59

8 1 3 4 63

9 1 3 4 67

10 0 2 2 69

11 1 1 2 71

12 1 2 3 74

13 0 0 0 74

14 0 1 1 75

15 0 2 2 77

16 0 3 3 80

Total 19 (2.53) 61 (8.11) 80 (10.64)

Note: This table is derived from results shown in auto

correlation test, Figures in parentheses show percentage

from total coefficients (i.e. 752)

The autocorrelation coefficients were computed up to 16

lags from the return series using SPSS. It is evident from

the results that out of the 752 autocorrelation coefficients

computed, only 61 (8.11 per cent) and 19 (2.53 per cent) are

significant at 5 per cent a 1 per cent level, respectively.

Thus this test gives supportive evidence for the weak form

of efficiency. However, the Box-Ljung statistics are

significant at 1 per cent and 5 per cent level for 10 (21.28

per cent) and 9 (19.15 per cent) series respectively. This

suggests that successive daily price changes are

independent of previous day price changes in case of

approximately f60 per cent price series. These results of

serial correlation test are, by the large in keeping with the

results obtained under runs test. Putting again, both the

tests indicate that successive daily price changes are

independent of previous day price changes. A perusal of

serial correlation coefficients according to number of lags


( 55 )( 55 )( 55 )( 55 )( 55 )

shows that out of 47 coefficients for price changes with

one day lag, 7 are significant at 1 per cent level and 9 at 5

per cent level. With two days lag, 4 coefficients out of 47

are significant at 1 per cent and 15 coefficients at 5 per cent

levels. However, only 6 coefficients with lag 3 are found

significant up to 5 per cent level of significance. In

aggregate, 41 929.08 per cent) coefficients from lag 1 to 3

are significant. A close look at the coefficients up to 3 lags

indicates that 67 coefficients (47.5 per cent) have negative

signs. The above finding also conforms to the random walk

theory. Further, it is noteworthy that merely 13 (3.95 per

cent) serial correlation coefficients are significant at 5

percent level with a lag 10 to 16. It indicates that prices

during the days of successive week are independent of the

price changes during the days of previous week.

CONCLUSION

The present study tasted the efficiency of 47 scrip of S&P

Nifty of national stock exchange in its weak form of efficient

market hypothesis during a period of three years from 2011

to 2013. The research employed the runs test and

autocorrelation test. The results confirmed with each other

that the NSE is efficient in the weak form. The results of the

runs test have given a clear-cut inkling of the existence of

weak form of market efficiency in the Indian securities

market. Similarly, the serial correlation analysis based on

its coefficients confirms the weak form hypothesis of

efficient market. However, the Box-Ljung (BL) statistics

gives mixed conclusions, as forty percent of the BL values

are significant, rejecting the joint hypothesis that all the

serial correlation coefficients are simultaneously equal to

zero. As the above hypothesis is accepted in case of

majority (60%) of the series, we may conclude that

successive price changes are independent of the previous

day price changes. Although, a few lower order serial

correlation coefficients of daily price changes as well as S

& P CNX Nifty disclosed some departure from random

walk hypothesis, the results of runs test conforms to the

results in favor of random-walk theory. The perception

that prices on the NSE fully reflect information reduces

the likelihood of continuously earning extra returns by

forecasting the security prices.

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Character of Stock Market Prices, MIT Press, USA

Pant, B. & Bishnoy. (2002). Testing Random Walk

Hypothesis for Indian Stock Market Indices. Paper

presented at IICM conference. 1-15.

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Cambridge University Press, UK

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11, 577-589

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Probabilities in Stock Market Action, Econometrica,

5, 309-324.

David, W. (1997).Variance Ratio tests of random walks in

Australian Stock Market Indices, University of

Western Australia, working paper,

www.af.ecel.uwa.edu.au/__data/page/9429/97-

074.pdf, pp 1-30.

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Business Disciplines. 3(3), 959-970.

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of Theory & Empirical Work. Journal of Finance,

25(2), 383-417.

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of Finance, 46, 1575-617

Ferson, Wayne E., Andrea H. & Tie S. (2005). Weak-Form

and Semi-Strong-Form Stock Return Predictability

Revisited. Management Science, 51(10), 1582-1592.

Gujarati, D. N. (2004). Basic Econometrics. Tata McGraw-

Hill, Delhi

Islam S, & Watanapalachaikul S. (2005). Empirical Finance:

Modelling and Analysis of Emerging Financial and

Stock Market. Springer, Verlag, Heidelberg.

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Journal of the Royal Statistics Society, Series A, 96,

11-25.

Levin, R. I. & David S. R. (2002). Statistics for Management.

Person Education, Delhi

Vinay K. Srivastava

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Okpara, G. C. (2010). Stock market prices and the random

walk hypothesis: further evidence from Nigeria.

Journal of Economics and International Finance, 2(3),

49-57.

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and Portfolio Management, Cengage Lerning, New

Delhi

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theses, IIM Ahmedabad

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Dr. Vinay K. Srivastava

Associate Professor

Raj Kumar Goel Institute of Technology

Ghaziabad, India

Email: [email protected]


( 57 )( 57 )( 57 )( 57 )( 57 )

INTRODUCTION

CSR is one of the very important aspects of a business concern because business is a

system surrounded by many sub-systems and each sub-system has its own sub-sub

system which makes a business system an entire one. Business system can’t separate it

from its sub systems which comprises of both internal and external environment of

business. Internal environment of business consisted of internal organization structure

and policies, on the other side external environment of business consists of consumers,

competitors, investors, shareholders, lenders, government, taxation authorities, stock

market, and public at large. Business is a part of the society being a profit-making

concern it has some obligation towards the society which ensures its existence in the

long-run. Sustainable development of a society makes a development of a nation possible

and CSR makes it attainable, by setting sustainable development goals by a business

enterprise within the ambit of companies act provisions regarding CSR.

OBJECTIVES OF STUDY

1. To study the concept of CSR

2. To study the significance of Sustainability

3. To study the role of CSR for Sustainability

4. To underline the importance of CSR for the Companies

5. To highlight the challenges of CSR before Corporate Sector

6. To provide recommendations and suggestions for the same

Key words:

Corporate Social

Responsibility,

Sustainability, Companies

Act, Amendment.

Corporate Social Responsibility for a SustainableChange: A Case of Hindustan Unilever Limited


ABSTRACT

Corporate social responsibility the term comprises of corporate means company, social means community

and responsibility means obligation. Several people define this term in a several way. According to the

researchers, the corporate social responsibility is not merely a term; it shows a big responsibility cum

accountability of corporate houses towards the larger sections of the society being a part and parcel of the

society. In order to survive in a long- term in the market, companies have to fulfill their responsibilities

to the society. In an ever changing business environment and with the advent of globalization, the CSR

concept has achieved a greater importance among the corporate sector. The recent amendment in the

Companies Act, 2013 given a due importance to CSR activities by included it in the Schedule VII of the

act. This paper highlights the concept of CSR, the role, challenges before CSR projects and recommendation

for its proper implementation. The researchers, through this paper try to give the sustainability model of

corporate social responsibility by the reviews of CSR literatures. In this paper, the study mainly focuses

on the issue of sustainability for a better tomorrow.


( 58 )( 58 )( 58 )( 58 )( 58 )

What is Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is defined as “the

responsibility of corporate for their impacts on society”.

We can also define CSR as a Strategic Business

Management Concept, and charity, sponsorships or

philanthropy. To achieve CSR, Company requires

integration of social, environmental, ethical concerns into

their business operations and interactions with their

stakeholders.CSR in India has traditionally been seen as a

philanthropic activity. Philanthropic activities are only a

part of CSR, Now; the concept of CSR has changed, it has

moved from philanthropy to strategic business activity

and includes so many projects. The Companies Act, 2013

has introduced the idea of CSR by Schedule VII of the Act,

which lists out the CSR activities

THE COMPANIES ACT, 2013

Corporate Social Responsibility (Section 135)

(1) Every company having net worth of rupees five

hundred crore or more, or turnover of rupees one

thousand crore or more or a net profit of rupees five

crore or more during any financial year shall

constitute a Corporate Social Responsibility

Committee of the Board consisting of three or more

directors, out of which at least one director shall be

an independent director.

(2) The Board’s report under sub-section (3) of section

134 shall disclose the composition of the Corporate

Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee

shall,—

(a) Formulate and recommend to the Board, a

Corporate Social Responsibility Policy which

shall indicate the activities to be undertaken

by the company as specified in Schedule VII;

(b) Recommend the amount of expenditure to be

incurred on the activities referred to in clause

(a); and

(c) Monitor the Corporate Social Responsibility

Policy of the company from time to time.

(4) The Board of every company referred to in sub-

section (1) shall,—

(a) After taking into account the

recommendations made by the Corporate

Social Responsibility Committee, approve the

Corporate Social Responsibility Policy for the

company and disclose contents of such Policy

in its report and also place it on the company’s

website, if any, in such manner as may be

prescribed; and

(b) Ensure that the activities as are included in

Corporate Social Responsibility Policy of the

company are undertaken by the company.

(5) The Board of every company referred to in sub-

section (1), shall ensure that the company spends,

in every financial year, at least two per cent of the

average net profits of the company made during the

three immediately preceding financial years, in

pursuance of its Corporate Social Responsibility

Policy:

Provided that the company shall give preference to the

local area and areas around it where it operates, for

spending the amount earmarked for Corporate Social

Responsibility activities:

Provided further that if the company fails to spend such

amount,

The Board shall, in its report made under clause (o) of sub-

section (3) of section 134, specify the reasons for not

spending the amount.

Explanation— for the purposes of this section “average

net profit” shall be calculated in accordance with the

provisions of section 198.

Schedule VII

COMPANIES ACT, 2013

Activities which may be included by companies in their

Corporate Social Responsibility Policies

Activities relating to: —

(i) Eradicating extreme hunger and poverty;

(ii) Promotion of education;

(iii) Promoting gender equality and empowering

women;

(iv) Reducing child mortality and improving maternal

health;


( 59 )( 59 )( 59 )( 59 )( 59 )

(v) Combating human immunodeficiency virus,

acquired immune deficiency syndrome, malaria and

other diseases;

(vi) Ensuring environmental sustainability;

(vii) Employment enhancing vocational skills;

(viii) Social business projects;

(ix) Contribution to the Prime Minister’s National Relief

Fund or any other fund set up by the Central

Government or the State Governments for socio-

economic development and relief and funds for the

welfare of the Scheduled Castes, the Scheduled

Tribes, other backward classes, minorities and

women; and

(x) Such other matters as may be prescribed.

ROLE OF CSR TO BUSINESS

• Business plays an important role in sustainable

development and CSR activities make it attainable.

• It makes corporate more responsible towards the

society by their consideration towards social and

environmental issues.

• When companies function in an economically,

socially and environmentally responsible manner,

and they do so transparently, it helps them to

succeed, in particular through encouraging shared

value and social permit.

• CSR acts as a driving force for an organization to

improve their actions towards the society.

• It is important for companies to understand the

importance of operating ethically and not just for

earning profits. CSR acts as competitive edge in a

today competitive business environment and

ensures survival of an organization in the long run.

CHALLENGES TO CSR PROJECTS IN INDIA

• Lack of community participation in CSR activities

• Need for capacity building of the local non-

governmental organizations

• Issues of transparency

• Promotion of CSR Activities through media- The role

of media in highlighting good cases of successful

CSR initiatives of companies among the population.

This helps to achieve recognizable factor.

Key Areas to be covered for CSR

• Health • Education • Women Empowerment • Child

Care and Development • Sanitation • Rural Development

• Agriculture • Safety and Security • Employment

• Reformation of Slums

WHAT IS SUSTAINABILITY?

Sustainability can be defined in many ways but the most

common definition is from Our Common Future, also known

as the Brundtland Report. According to this report

Sustainability means “Meets the needs of the present

without compromising the ability of future generations to

meet their own needs” (The classic definition of sustainable

development established by the U.N. Brundtland

Commission in Our Common Future (1987) ) . Sustainability

could be defined as an ability or capacity of something to

be maintained or to sustain itself. Sustainability creates

and maintains the conditions under which humans and

nature can exist in productive harmony, that permit

fulfilling the social, economic and other requirements of

present and future generations. Sustainability is important

to making sure that we have and will continue to have, the

water, materials, and resources to protect human health

and our environment.

Sustainability has emerged as a result of significant

concerns about the unintended social, environmental, and

economic consequences of rapid population growth,

economic growth and consumption of our natural

resources.

Sustainable Development Challenges before CSR

• Impact of Climate Change

• Hunger and Malnourishment

• Health and Safety Income Inequality

• Rapid Urbanization Waste Management

• Energy Requirements Financial System

The corporate managers should keep these key challenges

in mind at the time of formulation of business policies and

procedures in regard to its CSR activities for sustainability.


( 60 )( 60 )( 60 )( 60 )( 60 )

CSR SUSTAINABILITY MODEL

Community Participation: CSR plays a very important

role in community development. Communities availed so

many benefits because of social commitments of the

corporations and thus can influence the corporations.

Their participation in CSR activities helps to develop active

and sustainable communities.

Role of Government: Government performs a significant

role in policy framework of CSR for or to achieve

sustainable development. Government creates a policy

environment which facilitates CSR activities and can make

it mandatory in order to achieve sustainable and inclusive

development of a society. Policy interventions and policy

instruments of government and the corporations need to

be coordinated for the effectiveness of CSR. Thus it helps

to achieve good corporate behavior.

Cooperation of Non-Governmental Organizations:

Increasing number of NGOs associated with the company

for CSR Activities shows their remarkable contribution

towards this area. They have played major role in solving

social and environmental issues.

Media Involvement: Social media plays a key role in how

companies shape their corporate social responsibility

(CSR) policies and present themselves as good corporate

citizens. Social media aid companies in being more socially

responsible. Company can use social media to influence

the behavior of consumers. Social media acts as an

informative mechanism to transmit the important messages

of social and environmental issues to the masses and thus

influence the community at large.

A CASE OF HINDUSTAN UNILEVER LIMITED

INTRODUCTION TO HUL

Hindustan Unilever Limited (HUL) is India’s largest Fast

Moving Consumer Goods Company with a heritage of over

80 years in India and touches the lives of two out of three

Indians. With over 35 brands spanning 20 distinct

categories such as soaps, detergents, shampoos, skin care,

toothpastes, deodorants, cosmetics, tea, coffee, packaged

foods, ice cream, and water purifiers. Its portfolio includes

leading household brands such as Lux, Lifebuoy, Surf

Excel, Rin, Wheel, Fair & Lovely, Pond’s, Vaseline, Lakme,

Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe,

Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s and Pureit.

The Company has over 16,000 employees and has an

annual turnover of INR 27408 crores (financial year 2013

- 2014). HUL is a subsidiary of Unilever, one of the world’s

leading suppliers of fast moving consumer goods with

strong local roots in more than 100 countries across the

globe with annual sales of €49.8 billion in 2013. Unilever

has 67.25% shareholding in HUL.

HUL Contribution to Sustainability Unilever Sustainable

Living Plan

HUL Launched the Unilever Sustainable Living Plan in

2010, as a blueprint for Sustainable Growth. The plan sets

outs three main goals as are:

IMPROVING HEALTH AND WELL BEING

1. Health and Hygiene : Commitment

By 2020, they will help more than a billion people to

improve their health and hygiene. This will help

reduce the incidence of life-threatening diseases like

diarrhea.

Performance

• 303 million people reached by end 2013.

• 183 million people with Lifebuoy;

• 55 million with safe drinking water from Pureit;

• 52 million with toothpaste brands; and

• 13 million through Dove self-esteem programmes.


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2. Improving Nutrition Commitment

By 2020, they will double the proportion of their

portfolio that meets the highest nutritional

standards, based on globally recognized dietary

guidelines. This will help hundreds of millions of

people to achieve a healthier diet.

PERFORMANCE

In 2013 31% of their portfolio by volume met the highest

nutritional standards, based on globally recognized

dietary guidelines.

Reducing Environmental Impact

1. Green House Gases Commitment

Halve the greenhouse gas impact of products across

the lifecycle by 2020. Performance

Greenhouse gas footprint impact per consumer use

has increased by around 5% since 2010.

2. Water Use Commitment

Halve the water associated with the consumer use

of their products by 2020. Performance

Water impact per consumer use has increased by

around 15% since 2010.

3. Waste and Packaging Commitment

Halve the waste associated with the disposal of

products by 2020. Performance

Waste impact has reduced by around 11% since

2010.

4. Sustainable Sourcing Commitment

By 2020 they will source 100% of agricultural raw

materials sustainably: 10% by 2010; 30% by 2012;

50% by 2015; 100% by 2020.

Performance

48% of agricultural raw materials were sustainably

sourced by the end of 2013, showing continued strong

progress towards interim milestone of 50% by 2015.

Enhancing Livelihoods

1. Fairness in the Work Place

Commitment By 2020, They will drive fairness by

further building human rights across their

operations and advancing human rights in their

extended supply chain, developing a continuous

improvement roadmap and promoting best practice.

They will create a framework for fair compensation,

and help employees take action to improve their

health (physical and mental), nutrition and well-

being. This will reduce workplace injuries and

accidents.

Performance

They will report on this commitment in 2015.

2. Opportunities for Women Commitment

By 2020, they will empower 5 million women by

advancing opportunities for women in their

operations; promoting safety; providing up-skilling;

and expanding opportunities in their retail

operations. Performance


3. Inclusive Business Commitments

By 2020, they will have a positive impact on the

lives of 5.5 million people by improving the

livelihoods of smallholder farmers, improving the

incomes of small-scale retailers and increasing the

participation of young entrepreneurs in our value

chain.

Performance


CONCLUDING REMARKS

The CSR is evolving concept includes corporate

responsibility, corporate accountability, corporate ethics,

corporate governance, sustainability and so on. Growing

recognition of corporate activities of companies and its

significant impact on its employees, customers, community

and environment leads to corporate sector to be more

concerned about its CSR. Effective implementation of

corporate social responsibility requires participation of


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all stakeholders who are directly or indirectly associated

with the company. The company should develop an

organizational culture which has a policy for socially

responsible behavior, and there should be a regular

monitoring mechanism for its continuous improvement.

The organization should evaluate the social and

environmental impact of its activities. The organization

should maintain a record of all its CSR activities for the

purpose of corrective and timely measures. For proper

implementation CSR policy, the organization should follow

inclusive policy. This process ensures the success of CSR.

Socially responsible behavior helps to achieve

sustainability. This in turn ensures the survival of business

in the long run.

RECOMMENDATIONS

• The corporate top level of management should

incorporate sustainable development goals to the

main goals of an organization in order to achieve

sustainability.

• Constitute a separate committee consisted of various

experts from different fields for innovation and

research in the area of sustainability with corporate

social responsibility.

• There must be inclusive policies in a business

enterprise in concerned to social and environmental

issues.

• The corporations has to define their role in regard to

sustainability, a major challenge before corporate

managers to meet the needs of the present generation

without compromising the ability of the next

generations to meet their own needs.

• The corporations should keep in touch with

changing business conditions and change their

plans and policies accordingly.

• Maintain a good and cordial relationship with

employees, customers, investors, suppliers, and

public at large to ensure its success.

• In order to achieve sustainability, a major

transformation is required in terms of leadership

role and approaches to effectively deal with this

global issue.

• Integrated strategy formulation is necessary for

dealing with variety of societal as well as business

issues.

• The corporations should view significant impact of

their business activities socially, economically and

ecologically being a responsible business concern.

• The corporations should be committed to their

social role and responsibility and also obliged for

that.

• Ethical behavior is a prerequisite for strategic CSR

to maintain its corporate identity.

• Corporate social responsibility acts as a movement

for sustainable development, so corporations should

understand the dynamics and set their drivers for

positive and significant results.

• In a global society, accountability is a key challenge

before corporations. CSR requires accountability by

all.

REFERENCES

BOK Derek Curtis (2009), “Beyond the Ivory Tower: Social

Responsibilities of the Modern University”, Harvard

University Press, ISBN: 0674028465,

9780674028463, 328 pages.

D’Amato Alessia Henderson Sybil Florence Sue (2009),

“Corporate Social Responsibility and Sustainable

Business: A Guide to Leadership Tasks and

Functions” Center for Creative Leadership, 102

pages, ISBN 978-1-60491-063-6.

Gabriel Odinioha Justin M., George Wadike (2013), “Social

Responsibility Performance of Educational

Institutions of Higher Learning in Nigeria”,

International Journal of Asian Social Science, Vol.No.3,

Issue No. 3, pp. 552-562.

Hasrouni Layal (2012), Cultivating Values How business

schools can plant the seeds of change, Responsible

Business, July - September, pp.56-65.

Hawkins David E. (2006), “Corporate Social

Responsibility: Balancing Tomorrow’s

Sustainability and Today’s Profitability”, Palgrave

Macmillan, ISBN: 0230625819, 9780230625815, 296

pages.


( 63 )( 63 )( 63 )( 63 )( 63 )

Hohnen Paul (2007), Corporate Social Responsibility An

Implementation Guide for Business, International

Institute for Sustainable Development (IISD), 115

pages, ISBN 978-1-895536-97-3.

Musharbash Deena (2012), “CSR Education in the UAE

Paving the way to sustainable change”, Responsible

Business, July - September, pp.66-67.

Nemerowicz Gloria, Rossi Eugene (2014), “Education for

Leadership and Social Responsibility”, Routledge,

ISBN: 1317856139, 9781317856139, 181 pages.

PWC (2013), Handbook on Corporate Social

Responsibility in India, India, 29 pgs.

Stark Wolfgang, Stockmann Kim & Tewes Stefan, “A Need

To Fill The Gap: Is There Enough Institutional Social

Responsibility (ISR) in German Universites?”

University of Duisburg-Essen, Germany.

Tschopp Daniel (2012), “The Institutional Promotion of

Corporate Social Responsibility Reporting: Second

Tier Institutions”, Las Vegas International Academic

Conference, Las Vegas, Nevada USA.

Tschopp Daniel, Barney Doug, Murphy Patrick Ryan

(2012), “The Institutional Promotion of Corporate

Social Responsibility Reporting: Second Tier

Institutions”, Journal of Academics and Business Ethics,

March, Vol. No. 5, pp. 1-17.

Waddock, Sandra. 2006. “Building the Institutional

Infrastructure for Corporate Social Responsibility.”

Corporate Social Responsibility Initiative, Working

Paper No. 32. Cambridge, MA: John F. Kennedy

School of Government, Harvard University.

Hindustan Unilever Limited (2013), Unilever Sustainable

Living Plan- India Progess 2013.

Hindustan Unilever Limited (2013), Annual Report 2013-

14 - Making Sustainable Living Commonplace.

Prof. (Dr.) M.K. Singh

Head & Dean

University Department of Commerce

and Business Management

Vinoba Bhave University Hazaribag

E-Mail- [email protected]

Dr. Sonal Sharma

Post Doctoral

Fellow University Grants Commission

New Delhi



( 64 )( 64 )( 64 )( 64 )( 64 )

INTRODUCTION

During last few years the linkage between exchange rates and stock prices has received

a significant attention of academician and policy makers, especially after adoption of

floating rate regime and opening of closed economy for cross border transactions.In

Indian context,Adoption of LPG (Liberalisation, Privatisation and Globalisation) Policy

in the year 1991 to save our economy from the great crisis has encouraged more cross-

border transactions. As a corollary,many Indian corporate have started their business

with cross border nations. This resulted their business transactions to be done in more

currencies. As the currency market is extremely volatile and highly unpredictable and

also tricky in nature, it exposes them to currency risk. Prior studies show a mix evidence

of this relationship between exchange rate and stock market. Like Bahmani-Oskooee

and Sohrabian (1992) found there is a bi-directional causality among the S&P 500

index and effective dollar exchange rate but there is absence of long run relationship

between two variables. In another study, Nautiyal and Kavidayal (2014) found that

there is absence of granger causality between these two variables; still these variables

are interrelated both in short run and long run in Indian market. During the Period of

Asian crisis, the stock price and currency depreciation has shown as bi-directional

causality (Granger, Huaong and Yang, 2000). Since then curiosity have raised to find

out both short and long run relation between proposed variables. In an interesting

study by Inci and Lee (2014) which examined the relation between stock return and

exchange rate changes in European countries along with the potential business cycle

effect and asymmetric effect of exchange rate changes on stock returns. Their finding

shows the lagged variables of exchange rate has a significant impact on the stock

prices. Also applying Granger causality test they found bi-directional causality between

these two variables.

In this context, another area of asymmetric cross market volatility spillover has also

received a significant attention these days. The recent fluctuations in exchange rate

Key words:

Exchange rate dynamics,

Indian Stock market, VAR,

Granger Causality, IRFs

Dynamic Relationship Between Stock Priceand Exchange Rate Changes: Evidence from IndianMarket


ABSTRACT

The modern era of finance is inter-twined with Global business pacts and relations. With the ever

increasing global trade and transactions, multi-national corporations are at greater exposure to exchange

rate risk. At the same time, their cross-border transactions also have impact on Stock market returns.

Both the stock prices and exchange rate changes have considerable effect on the corporate’s prospects and

hence, many of the modern day thinkers are trying to establish a relation between these two variables for

precise prediction and outright intelligence for decision-making. The present study tries to examine

relationship between these two variables in context of Indian market. For this, the Nifty Fifty returns

have been examined with three different exchange rates by using VAR, Granger Causality, and Impulse

Response Function.


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have a major effect on trading pattern & direct the

perception of investors due to global competitiveness of

the firms. This change has a major impact on multinational

firms. Also we can say that this exposure is not only limited

to MNCs also to domicile firms. Kanas (2000) finds evidence

of volatility spillover from stock market to exchange rate

changes in five countries US, the UK, Japan, France and

Canada (except Germany out of study of six countries) .

The studies finds that stock return spillover are symmetric

i.e. both good and bad news have same impact. Francis,

Hasan and Hunter (2002) studied volatility between the

equity and currency markets. Also they studied relation

between international equity markets underwent a change

because of changes in the volatility of the currency market.

In bi-directional analysis they found that volatility of

currency market is predicted by equity market but weak

relationship in case of reverse. After the year 1987 the cross-

correlations has been decreased between U.S and other

major equity markets. Dungey and Martin (2007) studied

spillovers and contagion across different equity and

currency markets during the East Asian crisis. By studying

transmission of volatility across the markets the study finds

evidence of larger spillover effect over contagion effect

during East Asian crisis. Another study by Abdalla and

Murinde (1997) found uni-directional causality from

exchange rate to stock prices in case of India, Korea and

Pakistan except Philippines. The similar uni-directional

causality is supported by Kose, Dogany and Karabacak

(2010) in case Turkish financial market.

Similar studies have been made in reference to Indian

market in this regard like, Panda and Deo (2014) studied

the cross market volatility among Indian stock and foreign

exchange market. By taking data from 2nd April 2004 to

30th March 2012,they find the bi-directional volatility

spillover is higher during the post subprime crisis period

as compared to pre-crisis period. Further their study shows

the causality is more significant in case of USD as

compared Euro currency.Apte (2001) studied the volatility

and spillover effect between stock returns and exchange

rates. The findings of the study show that volatility

spillover effect surprises from stock market to foreign

exchange market. Another study by Saha and Chakrabati

(2011) studies the volatility spillover and asymmetric effect

between Indian stock market and foreign exchange market.

They found evidence of volatility spillover among the

market. Also the similar evidence has been found by Ghosh

(2012) in the study of volatility spillover between stock

and foreign exchange market in India. With reference to

causality Nautiyal and Kavidayal (2014) found evidence

of no bi-direction causal relation among the stock market

return and exchange rates

The present paper attempts to revisit the dynamic relation

between stock market and foreign exchange market. We

use daily rate changes of Nifty fifty index and three

exchange rates that are USD, GBP and Japanese YEN. The

dynamic impact of lag exchange rate changes on stock

market has been analysed by estimating VAR. Further

Granger causality has been used to find out causal relation

among stock and foreign exchange market. In addition to

above Impulse response function has been implemented

to examine the shock of error terms of lag variables on

endogenous variables. We found the evidence of dynamic

relationship among exchange rate and stock market. The

results of granger causality shows the presence of bi-

direcational causality among the nifty fifty index and two

exchanges rates i.e. USD and GBP , with an exception to

YEN of uni-directional causality. The contribution of the

study is more significant especially for multi-nationals,

policy makers, and forex dealers who may be engaged in

hedging activities to mitigate their risk.

Dynamic Relationship between Exchange Rate and Stock

Market

The prior studies show a mix evidence of relationship

between exchange rates and stock market. Among different

studies the weak relationship was supported by Griffin

and Stulz (2001) etc. while other studies like Smith (1992)

and Dominguez and Tesar (2006) Doukas et al. (1999)

Canova and De nicolo’ (1995) support the strong

relationship. In this context there are two theories

explaining the relationship:

Classical or Traditional Economic Approach.

The Traditional approach says that the volatility in the

currency market will bring changes in balance of trade

and the gross output of the country. This change will affect

the present and future cash flows of the companies, as

result will affect the share prices. For example, the

depreciation of home currency will encourage the

companies to engage in export oriented activities and raise

the profit and as a consequent the stock price will rise and

vice versa (see for Dornbusch and Fisher, 1980).


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Portfolio Approach of Exchange Rate Determination

As per portfolio balance approach to exchange rate

determination the exchange rate is trade-off between

demand and supply of asset allocation. Thus the change

in demand and supply of asset will change the equilibrium

point of exchange rate. Suppose the stock price of one

individual increases, then it will increase his total wealth

and demand for money, which will give rises to interest

rate. The rising rate will attract more foreign capital. Thus

domestic exchange rate will rise up because of higher

demand. It will cause transformation of return volatility

into volatility spillover (Phylaktis and Ravazzolo, 2002).

As per the support through economic theories, following

the same line with Inci and Lee (2014) we explain the

dynamic relation in the following equation (1).

k

it 1 1 t ij t j itj 0

R SM EX −=

= α + α + β + ε∑

In the above equation itR indicates stock return, tSM is

market return, t jEX − change in exchange rate, itε error

terms. In the equation (1) if we include the lagged variable

of exchange rate changes, then the equation can be rewrite:

k

it 1 1 t ij t j itj 1

R SM EX −=

= α + α + β + ε∑

DATA AND METHODOLOGY

The sample period ranges from 1st April, 2006 to 31st March,

2015. The daily returns of CNX Nifty fifty index has been

taken for the study. Three exchange rates namely USD,

GBP and YEN have been taken from the Bloomberg

database. The data for study have been standardized by

removing all the variables of such period in which any

one variable was found missing. All the variables have

been log-lineared by taking their natural log. The change

for different variables like Stock return( SMR), USD

changes (USDR), YEN changes (YENR) and GBP changes

(GBPR) has been calculated as follows, where Pt price at t

period and Pt-1

price at t-1 period and Ln natural log:

t

t 1

PLn

P −

In order to examine the dynamic relation between the

exchange rate and stock market, Vector Auto Regression

(VAR) estimates has been employed. According to Madalla

(2007), if yt is affected by its lag variables y

t-1, yt

-p, then a

VAR can be written as:

t 1 t 1 p t p ty A y ... A y− −= + + + ε (3)

In equation:3 VAR consists of three endogenous variables

and p lags where ty and its lagged values, and

tε are

1k × vectors and are k k× matrices of

constants to be estimated .In our case by taking lag of Stock

return (SM) and Exchange rate (EX) the following VAR

has been derived:

SM SM EX

(4)

VAR Lag Order Selection Criteria

Lag length on the basis of Schwarz information criterion

(SC) and Hannan-Quinn information criterion (HQ) is

being chosen for the study. Lag length is most important

factor as high lag length indicates more standard error as

it consumes more degree of freedom and lower indicates

biasness in result.

Granger Causality

The granger causality shows causal relationship between

variable. In granger causality we are taking null hypothesis

that there is no casual relation exists between the variables.

Here it will show whether the variables used above are

unidirectional or bidirectional causing each other.

j k j k

it i ij it j ij t j itj 1 j 1

SM SM EX= =

− −= =

= α + γ + β + µ∑ ∑ (5)

j k j k

it 1 ij it j ij t j itj 1 j 1

EX SM SM= =

− −= =

= α + δ + ϑ + ε∑ ∑ (6)

Here, SM is stock return, EX=Exchange rate, itµ and itε

are assumed to be serially uncorrelated with zero mean

and finite co-variance matrix.

Here, Null hypothesis is lagged exchange rates in the

equation is zero that is ij 0β = for J=1, 2 ….k. Here if the

null hypothesis is rejected (i.e. ij 0β ≠ ) then exchange rate

granger causes stock returns. Similarly in second equation

if the ij 0ϑ ≠ then stocks return granger causes exchange

rate.


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Impulse response function

In impulse response we come to know the whether one

variable is affected by the shock of another and when. It

will show the direction of changing of variables. Here, we

can analyze whether there is upward or downward

movement.

RESULT AND DISCUSSION

Unit Root test

Table 1 : Results of Unit Root Test

Variable ADF PP

SMR -44.38904*** -44.32736***

USDR -44.39708*** -44.59556***

GBPR -34.92066*** -44.70390***

YENR -44.35120*** -44.27833***

*** indicates significant @ 1% level

For estimating VAR, it is essential that all the variables

should be stationary. The study test stationarity of different

variables in the basis of ADF and PP test. In the table: 1. we

can see that all variables are stationary at 5% level of

significance. At level the statistical value is less than critical

value so the null hypothesis of non-stationarity has been

rejected in case of all variables, thus all variables are

stationary.

Lag length selection criteria

Table 2 : VAR Lag Order Selection Criteria

VAR Lag Order Selection Criteria

Endogenous variables: LN_SMR LN_USDR LN_YENR

LN_GBPR

Exogenous variables: C

Sample: 3/02/2006 3/31/2015

Included observations: 2200

Lag LogL LR FPE AIC SC HQ

0 40410.47 NA 1.31e-21 -36.73316 -36.72280* -36.72937*

1 40440.60 60.13090 1.29e-21 -36.74600 -36.69422 -36.72708

2 40456.39 31.44964 1.29e-21 -36.74581 -36.65260 -36.71175

3 40473.61 34.22092 1.29e-21* -36.74691* -36.61228 -36.69772

4 40485.66 23.92883 1.30e-21 -36.74333 -36.56727 -36.67900

5 40497.74 23.91619 1.30e-21 -36.73976 -36.52227 -36.66029

6 40513.84 31.83685 1.30e-21 -36.73985 -36.48093 -36.64524

7 40519.39 10.94788 1.31e-21 -36.73035 -36.43001 -36.62060

8 40535.80 32.32876* 1.31e-21 -36.73072 -36.38895 -36.60584

* indicates lag order selected by the criterion

LR: sequential modified LR test statistic (each test at 5%level) FPE: Final prediction error

AIC: Akaike information criterion

SC: Schwarz information criterion

HQ: Hannan-Quinn information criterion

The appropriate lag length is for applying different test

has decided in the basis of Schwarz information criterion

and Hannan-Quinn information criterion. In the above

table we can see that in the basis of SIC and HQ 0 lag is

appropriate for carrying the further analysis.

Granger Causality Test

Table 3 : Results of Granger CausalityENDOGENOUS

VARIABLE LAGGED ENDOGENOUS VARIABLE

SMR USDR GBPR YENR TOTAL

SMR 8.649887** 5.838682* 3.771450 16.66394**

USDR 7.566404** 6.152363** 1.368399 16.27835**

GBP 7.423969** 0.513991 2.754542 9.670856

YENR 4.135515 13.39786** 1.949794 26.65390***

***, **, and * indicates significance at 1%, 5% and 10%

respectively

The table: 3 show granger causality between different

variables. The granger causality shows whether one causes

other or not and also in direction of causality. In case SMR,

there is causal relation with USDR and GBPR. It means

both USDR and YENR causes Stock market return. In case

of USDR, both SMR and GBPR have causal relation. In

case of GBPR only SMR causes it in case of YENR only

USDR causes it. From above table it is clear that there is bi-

directional causality exists between SMR and USDR, SMR

and GBPR, but no causality in case SMR and YENR.

Impulse Response Function

The response of stock market to the shock of USDR can

observe in fig.1. from the period one to three but later on

the response does not seems to be significant. While the

response of stock market to GBP is seen up to fourth period.

Similarly both USDR and GBPR have reacts to the shock

of stock market. The same evidence we can see in granger

causality. Among other variables response seems to be less

significant.


( 68 )( 68 )( 68 )( 68 )( 68 )

-.0005

.0000

.0005

.0010

.0015

.0020

1 2 3 4 5 6 7 8 9 10

Response of LN_SMR to LN_USDR

-.0005

.0000

.0005

.0010

.0015

.0020

1 2 3 4 5 6 7 8 9 10

Response of LN_SMR to LN_YENR

-.0005

.0000

.0005

.0010

.0015

.0020

1 2 3 4 5 6 7 8 9 10

Response of LN_SMR to LN_GBPR

-.0008

-.0004

.0000

.0004

.0008

.0012

1 2 3 4 5 6 7 8 9 10

Response of LN_USDR to LN_SMR

-.0008

-.0004

.0000

.0004

.0008

.0012

1 2 3 4 5 6 7 8 9 10

Response of LN_USDR to LN_YENR

-.0008

-.0004

.0000

.0004

.0008

.0012

1 2 3 4 5 6 7 8 9 10

Response of LN_USDR to LN_GBPR

-.008

-.004

.000

.004

.008

.012

1 2 3 4 5 6 7 8 9 10

Response of LN_YENR to LN_SMR

-.008

-.004

.000

.004

.008

.012

1 2 3 4 5 6 7 8 9 10

Response of LN_YENR to LN_USDR

-.008

-.004

.000

.004

.008

.012

1 2 3 4 5 6 7 8 9 10

Response of LN_YENR to LN_GBPR

-.0004

.0000

.0004

.0008

.0012

.0016

1 2 3 4 5 6 7 8 9 10

Response of LN_GBPR to LN_SMR

-.0004

.0000

.0004

.0008

.0012

.0016

1 2 3 4 5 6 7 8 9 10

Response of LN_GBPR to LN_USDR

-.0004

.0000

.0004

.0008

.0012

.0016

1 2 3 4 5 6 7 8 9 10

Response of LN_GBPR to LN_YENR

Response to Cholesky One S.D. Innovations

Fig.1. Impulse Response Functions


( 69 )( 69 )( 69 )( 69 )( 69 )

CONCLUSION

Our paper re-examines the relationship between Indian

stock market and foreign exchange market. For which the

rate changes of Nifty fifty and three exchange rates (USD,

GBP and YEN). We analyse both uni-directional and bi-

directional relationship between stock price and exchange

rate by applying granger causality. The findings of the

study shows the lagged variables of exchange rate have a

significant impact on stock market. We find evidence of bi-

directional causality exists between stock market and two

exchange rates namely USD and GBP. However there is an

exception to YEN. This may be because the select index

consists only some specific companies, so these companies

may not have significant dealings in this currency. In the

other hand second reason may be the company have

effectively hedged the exposure of dealing in YEN, so any

changes in exchange rate will not affect the profitability of

the companies, thus stock price may not be affected. Also

the study shows the impact shock of errors terms of one to

another through impulse response function. The paper

will significantly contribute to the existing literature in

this context. The study will help to different practitioner

in forex market and regulatory bodiessuch as MNCs,

government, Hedgers and other policy makers. With the

impact of this paper now the policy makers have to frame

forex policies very carefully as it will also affect the stock

market of the country. And especially those companies

having trading in multiple currencies have to carefully

diversify their forex exposure to avoid adverse impact of

exchange rate volatility.

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http://dx.doi.org/10.3390/ijfs1030081

Gnyana Ranjan Bal

Assistant Professor

Dept. of Commerce

Guru Ghasidas Vishwavidyalaya

Bilaspur (C.G.) 495 009

E-mail : [email protected]

Amit Manglani

Assistant Professor

Dept. of Commerce

Guru Ghasidas Vishwavidyalaya

Bilaspur (C.G.) 495 009

[email protected]


( 71 )( 71 )( 71 )( 71 )( 71 )

INTRODUCTION

The service sector is considered as an important wheel of the Indian economy. According

to the Economic Survey for 2013-14, Indian service sector ranks second among the

fastest growing sectors with 9 per cent compound annual growth rate. In GDP 57 per

cent of share is contributed by service sector at factor cost (at current prices). During

1980s, in many countries the deregulation of service sector like in banking,

telecommunication, transport, healthcare, insurance, hospitality and education have

resulted in intensified and stiff competition among various businesses. Insurance

companies being important part of the country service institutions play a significant

role in improving society and accelerating economic activities.

As the employees in service organization have direct contact with their customers. So,

in order to achieve success in such an industry, organization pay particular attention to

their employee needs. Organizations make their profits aligned in accordance with

customer and employees’ satisfaction.

According to Liao (2009) in the recent years, many companies have been seeking to find

a key strategy for creating some methods to tend employees toward customer orientation

and internal marketing is considered as one of the significant strategy. Increased

competition, technological changes, higher expectations of customers as well as

employees and business needs have forced many service organizations to think of

innovative marketing approaches which will lead to higher satisfaction to its internal

and external customers. In order to operate in today’s dynamic environment business

requires the right type of personnel to survive. So, the concept of Internal Marketing and

internal customer satisfaction i.e. employee’s satisfaction arises. With increasing

expansion of service sector, organizations in order to make profits and maintain stable

competitive advantage are seeking new solutions for absorbing and keeping customers.

Key words:

Internal Marketing

Practices, Employee Job

Satisfaction, Life Insurance

Corporation of India

Internal Marketing Practices and Employee JobSatisfaction: A Case of Life Insurance


ABSTRACT

The aim of this study is to examine the relationship and impact of Internal Marketing Practices and

Employee Job Satisfaction in Insurance Corporation of India (LIC). The independent variable is Internal

marketing which is studied through different factors namely Integrated Training and Communication

Programme, Perceived Organizational Support, Motivation System, Holistic Employee Development.

The dependent variable is Employee Job Satisfaction. The sample area of the study was divisional office

and all the branches of LIC operating within Jammu city. Total response rate was 89.167 per cent. The

statistical tools used were Mean, Standard Deviation, Factor Analysis, Correlation and Regression. The

research concluded that Internal Marketing Practices have significant relationship with Employee Job

Satisfaction and have positive impact on the same. Furthermore, the study recommends insurance

industry to prioritize the implementation of Internal Marketing Practices within their organizations as

a prominent tool for achieving higher Employee Job Satisfaction.


( 72 )( 72 )( 72 )( 72 )( 72 )

One of the most important factors for achieving this goal

especially when talking about service organizations is the

quality of services which they offer to their customers

In today’s organizations, Internal Marketing has gained

considerable acceptance as a philosophy and as a

marketing tool. Internal Marketing refers to all the actions

that an organization has to perform in order to develop,

train and motivate its employees, so to enhance the quality

of the services provided to its customers (Chen et al., 2006).

Internal Marketing seeks to improve service performance

by focusing its efforts on employees. Internal Marketing

concept has been studied by various researchers and

adopted by different organizations as a new approach in

their organizations to achieve better performance through

employee satisfaction. This study examines the various

factors of Internal Marketing and impact of same on

Employee Job Satisfaction in context of Insurance Industry

specifically life insurance corporation of India. Findings

of this research will prove to be useful for service managers

in formulating appropriate Internal Marketing strategies

for their organizations and will leads to achieve higher

employee job satisfaction.


Berry (1981) first time introduced the concept of Internal

Marketing and he viewed “employees as customers’’ of

organization and just like external customers, internal

customers needs have to be satisfied. Internal Marketing

refers to all the actions that an organization (i.e., health

care organizations, hospitals, hotels, etc) has to perform

in order to develop, train and motivate its employees, so as

to enhance the quality of the services provided to its

customers (Chen et al., 2006). In addition to this, Woodruffe

(1995) also defined Internal Marketing as treating both

employees and customers with equal importance through

proactive programmes in order to achieve the objectives of

the organization. Varey and Lewis (2000) stated that the

concept of Internal Marketing is evolved from the idea that

employees constitute an internal market within the

organization, which needs to be informed, educated,

trained, rewarded and motivated to meet external

customers’ needs and expectations. Further Longbottom

et al. (2006) stated that the concept of Internal Marketing

notices employees as internal customers and their work

as internal “products” and consequently, dedicates efforts

to the design of products that better satisfy employee needs

and wants. According to Caruana and Calleya (1998)

Internal Marketing addresses all aims of the organization,

while satisfying desires and needs of the internal

customers. In other words, it is the philosophy of treating

the employees as a customer. Zeithaml and Bitner (2000)

quote Internal Marketing as the mechanism for enabling

the delivery of promises that are made via external

marketing. Employee must possess appropriate skills,

abilities, tools and motivation so as to deliver better services

to its customers. Promises can easily be made, but unless

the employees are not properly rewarded for their efforts

these promises may not be kept. Conduit and Mavondo

(2001) have divided Internal Marketing Practices into five

categories: employees’ education, management support,

internal communication, human resources and

employees’ intervention in external communication.

Dinham and Scott (2000) and Koustelios (2001) also

explored numerous factors of Internal Marketing (IM)

related to job satisfaction like vision, commitment,

employee relationship, feedback, employee’s needs,

working environment and training. Bodur (2002) also

suggests that working condition, co-workers, benefits and

training are some of the factors related to employee job

satisfaction. Preston and Steel (2002) wrote about issues

related to Internal Marketing and according to them

recruiting, training, development, team work and

motivating staff are some of the important variables of

Internal Marketing (IM) that has influence on employee

job satisfaction.

Kazemzadeh and Bashiri (2005) also explored the

relationship between Internal Marketing (IM) and

Employee Job Satisfaction. They identified following

variables: employee relationships with staff across different

departments, employee motivation, commitment, loyalty,

wage and salary, other welfare facilities, growth

opportunities, feedback and complaint handling,

organization’s systems and processes. A study (Ha et al.,

2007) found that Internal Marketing as an important

concept, where firms apply marketing tools to attract and

retain the best employees within organization which

enhance the business performance. They identified 12

constructs of Internal Marketing i.e. inter-functional

coordination and integration, customer orientation,

marketing like approach, job satisfaction, empowerment,

employee motivation, quality of service, employee

development, vision of the organization, strategic reward,

internal communication and senior leadership. Long and

Swortzel (2007) and Luthans (1998) also mention five

dimensions of Internal Marketing(IM) that directly

influence Employee Job Satisfaction, comprising attractive


( 73 )( 73 )( 73 )( 73 )( 73 )

benefits, characteristics of job, working environment, team

work and employee relationships. Masroor and Fakir (2009)

in their study examined the level of job satisfaction and

intention to leave among Malaysian nurses and result of

the study concluded that the nursing staffs were

moderately satisfied with supervisor, job variety, closure,

compensation, co-workers and HRM/management polices

and therefore clearly identified a perceived lower level of

their intention to leave the hospital and the job. As cited by

Rajyalakshmi and Kameswari (2012) a study in the retail

stores find out the impact of Internal Marketing factors on

job motivation and satisfaction .The study revealed that

working conditions and hours, hygiene and sanitation,

rest rooms, support from superior and attitude of colleagues

have the highest influence on job motivation and

satisfaction. Panigyrakis and Theodoridis (2009) in their

study reveals that vision, internal communication,

teamwork, quality of job, care about employee, reward

system, feedback, internal procedures and policies, internal

customer relationship with colleagues, senior staff and

other departments play a vital role in Employee Job

Satisfaction and their performance. Kameswari and

Rajyalakshmi (2012) conducted a study in SBI and found

that Internal Marketing dimensions (i.e. work content,

training, recognition, work environment, superior support,

co-worker) had a significant impact on the Employee Job

Satisfaction.

Internal Marketing and Employee Job Satisfaction in

Insurance Sector

A recent study by Martey (2014) in insurance industry of

Ghana explored that internal marketing has a significant

impact on employee’s job satisfaction. Shiua and Yub

(2010) in their study showed a significant correlation

among Internal Marketing, job satisfaction, organizational

culture and performance of non-life insurers in Taiwan.

Abbasi and Salehi (2011) in their research find out

relationship between the Internal Marketing and customer-

orientation with job satisfaction as a mediator. Rahmati et

al. (2013) studied impact of Internal Marketing on customer

loyalty in Iran insurance company. In the same year a study

was conducted by Poor et al. (2013) in Guilan private

insurance companies to evaluate the effect of Internal

Marketing on employee’s behaviour. Research indicated

positive relationship between Internal Marketing and

employee loyalty. Esfahani et al. (2013) examines the

impact of internal marketing on staff job satisfaction in

private insurance company in Isfahan city and results of

the study revealed significant positive effect of Internal

Marketing on personnel’s job satisfaction.

From the above mentioned literature it is concluded that

there exists a relationship between Internal Marketing and

Employee Job Satisfaction. The various Internal Marketing

dimensions were worked upon by different authors in the

past.


To study the relationship and impact of Internal Marketing

Practices on Employee Job Satisfaction in LIC and to

suggest and recommend the effective Internal Marketing

strategies for life insurance companies.

RESEARCH HYPOTHESIS

Based on the above discussion the following hypotheses

are formed:

H1: There is a significant relationship between Internal

Marketing Practices and Employee Job Satisfaction

in Life Insurance Corporation of India (LIC).

H2: Internal Marketing Practices in Life Insurance

Corporation of India (LIC) have a significant impact

on Employee Job Satisfaction.


Population and Sample

The target population of this study was the employees of

Life Insurance Corporation of India (LIC) in Jammu city.

All the three branches and one divisional office of LIC

with in Jammu city were covered in the survey. Total of 120

questionnaires were distributed to the employees of LIC in

Jammu city. Of the 120 questionnaires distributed, 107

questionnaires were returned and 13 questionnaires were

eliminated due to not properly filled. Thus, the overall

response rate was 89.167 per cent (107/120), which was

considered as satisfactory for further analysis. This study

is restrained to one of the largest public sector life

insurance company i.e. LIC. Self structured questionnaire

was developed based on the pervious literature review is

administered to all the employees working in LIC. For data

collection convenient sampling technique is used. The

questionnaire was divided into two sections: Section A

and Section B. Section A includes demographic information

of the employees. Section B has questions relating to

Internal Marketing and Employee Job Satisfaction.


( 74 )( 74 )( 74 )( 74 )( 74 )

Statistical Package for Social Sciences (SPSS) version 16.0

is used.

RESULT AND DISCUSSION

Table1shows the demographic profile of the respondent.

Table:1 Demographic profile of respondents

Variables Frequency

Distribution(N) Percentage

(%)

Gender

Male 68 64

Female 39 36

Age

20-30 years 11 10

31-40 years 21 20

41-50 years 41 38

>50 years 34 32 Marital Status

Married 95 89

Unmarried 12 11 Job Profile

Class I 58 54

Class II 4 4

Class III 43 40

Class IV 2 2

Type of Job

Permanent 107 100

Temporary 0 Educational Qualification

Senior Secondary

7 7

Higher Secondary

14 13

Bachelors Degree 45 42

Masters Degree 41 38

Monthly Income

< Rs.25,000 17 16

Rs.25,001-35,000 13 12

Rs.35,001-45,000 20 19

Rs.45,001-55,000 4 4

> Rs.55,000 53 49

Work Experience

<1 year 3 3

1-5 years 17 16

6-10 years 8 7

11-15 years 5 5

16-20 years 8 7

21-25 years 29 27

>25 years 37 35

With the application of EFA on Internal Marketing scale

one item got deleted thereby retaining 20 items. Four factors

emerge out after applying EFA namely Integrated Training

and Communication Programme, Perceived

Organizational Support, Motivation system and Holistic

Employee Development (see Table 2). Finally internal

marketing scale contains four factors with 69.213 % of

variance explained.

Integrated Training and Communication Programme:-

The factor mean is 3.67.This factor contains 7 items namely

“Training and development programmes are clearly

directed at creating the competencies”, “ If any employee

is shifted from one department to another, the new

supervisor will personally train him/her for pre specified

period of time”, “My company provides us with good

official channels for vertical as well as horizontal

communication”, “When we have any thoughts or

suggestions we can express our opinions through a

specified way”, “The company often announces new

policies to employees by means of different formal

communication”, “Before any change in policy, employees

are informed in advance”. The item “Training and

development programmes are clearly directed at creating

the competencies” has the highest factor loading .780 and

therefore highly associated with this factor. The item

“Before any change in policy, employees are informed in

advance” has the lowest factor loading and therefore least

associated with this factor. The mean value of this factor

ranges from 3.44 to 3.70.The Eigen value of this factor is

10.052 and variance explained is 22.790.

Perceived Organizational Support:-The item “In my

organization superior often pays attention to the family

life of his/her subordinates” is having the highest factor

loading (.860) and the lowest is .581.The communalities of

all the items in this factor are greater than .5. The Eigen

value of this factor is 2.028 with 17.842 % of variance

explained.

Motivation System:- The item “The incentive and reward

systems encourage employees to work together for the

organization” has the highest mean value of 3.5140 with

standard deviation 1.09341. The item “My organization

offers good incentives and rewards to its employees for

better performance” has the lowest mean value.

Holistic Employee Development:- The fourth factor has

mean value 3.4081 with Eigen value 1.064 and 13.807 %

variance explained. Item “Our Company provides enough


( 75 )( 75 )( 75 )( 75 )( 75 )

training and education to its employees to perform their

service role correctly” has the highest factor loading .706

and the item “As an incentive, skill development

programmes are offered to the employees” has lowest factor

loading .568. Item “Prior to any major change in service

rules we were given significant training regarding its

impact on our activities and job description” has the

highest communality value.881 and item “The

measurement system of performance and incentives in our

organization encourage working well” has the lowest

communality value .687.

The Pearson correlation is applied between Internal

Marketing Practices and Employee Job Satisfaction. The

R-value (.903) depicts that there is high correlation between

Internal Marketing Practices and Employee Job

Satisfaction. (See Table 3)

Factor ‘Integrated Training and Communication

Programme’ has the highest correlation with ‘Holistic

Employee Development’ followed by ‘Perceived

Organizational Support’ and ‘Motivation System’. The

factor ‘Perceived Organizational Support’ has highest

correlation with ‘Integrated Training and Communication

Programme’ followed by ‘Motivation System’ and ‘Holistic

Employee Development’. The factor namely ‘Motivation

System’ has highest correlation with ‘Perceived

Organizational Support’ followed by ‘Integrated Training

and Communication Programme’ and ‘Holistic Employee

Development ’. The factor ‘Holistic Employee

Development’ has the highest correlation with ‘Integrated

Training and Communication Programme’ followed by

‘Motivation system’. The factor ‘Perceived Organizational

Support’ has the highest correlation with ‘Employee Job

Satisfaction’ (.830).The factor ‘ Motivation System’ and

‘Holistic Employee Development ’ has the lowest

correlation with Employee Job Satisfaction (.710) and (.709)

respectively. The correlation coefficient between Employee

Job Satisfaction and overall factors is (.903) that depicts

high correlation between Employee Job Satisfaction and

overall factors.

The regression analysis was applied between

independent factors namely Integrated Training and

Communication Programme, Motivation System, Perceived

Organizational Support and Holistic Employee

Development and dependent factor namely Employee Job

Satisfaction. The regression results depicts that the R2

value is .689 and adjusted R2 value is .686 in case of model

1.In model 2, the R value is .899 and R2 value is .809 and

adjusted R2 value is .805.In model 3, the R2 value is .830

Table 2. Exploratory factor analysis (EFA) of internal marketing

Factors Variables Variable Mean (VM)

Standard Deviation

(SD)

Factor Loading

(FL)

Commu- nalities

(C)

Factor Mean (MF)

Eigen Value (EV)

Variance Explained

(VE)

Cronbach’s Alpha (CA)

F1

(Integrated Training

And Communication Programme)

IM1 3.7009 1.14278 .656 .613

3.678233

10.052

22.790

.920

IM2 3.8879 1.06689 .780 .809

IM5 3.5047 1.13581 .731 .658

IM6 3.7009 1.08345 .638 .673

IM7 3.7009 1.117738 .724 .716

IM8 3.8037 1.09406 .710 .745

IM9 3.4486 1.10089 .637 .682

F2

(Perceived Organization

Support)

IM10 3.3271 1.02585 .652 .598

3.338017

2.028

17.842

.873

IM17 3.3271 1.07962 .762 .696

IM18 3.4112 .96107 .620 .615

IM19 2.9533 1.08492 .860 .756

IM20 3.5047 1.04947 .652 .642

IM21 3.5047 1.15231 .581 .585

F3

(Motivation System)

IM11 3.2617 1.17631 .771 .707

3.266375

1.391

14.774

.824 IM12 3.5140 1.09341 .693 .699

IM14 3.2150 1.01895 .709 .747

IM16 3.0748 1.11339 .639 .718

F4 (Holistic

Employee Development)

IM3 3.4299 1.21401 .706 .825 3.4081

1.064

13.807

.837 IM4 3.3645 1.16872 .847 .881

IM15 3.4299 1.09124 .568 .687

69.213


( 76 )( 76 )( 76 )( 76 )( 76 )

and adjusted R2 value is .825. In Model 4, the adjusted R2

value is .840 the R2 value is .846 and R value is .920.The

regression analysis result depicts that Internal Marketing

Practices has significant impact (.840) on Employee Job

Satisfaction (see Table 4).

Table 4 : Regression analysis between internal

marketing practices and employee job satisfaction

Model Summary

Model R R

Square

Adjusted R

Square

Std. Error of the

Estimate

1 .830a .689 .686 .49128

2 .899b .809 .805 .38704

3 .911c .830 .825 .36667

4 .920d .846 .840 .35024

a. Predictors: (Constant), F2

b. Predictors: (Constant), F2, F4

c. Predictors: (Constant), F2, F4, F3

d. Predictors: (Constant), F2, F4, F3, F1

TEST OF THE HYPOTHESIS

To test hypothesis (H1) person correlation was applied

between independent factors of IM practices and

dependent variable Employee Job Satisfaction. The result

depicts that there is positive correlation (.903) between

independent factors i.e. Internal Marketing Practices and

dependent factor i.e. Employee Job Satisfaction. The

hypothesis (H1) stands accepted.

To test hypothesis (H2) regression analysis was applied

between independent factors of IM practices and

dependent factor Employee Job Satisfaction. Result depicts

that Internal Marketing practices have a positive impact

on Employee Job Satisfaction. Therefore, the hypothesis

stands accepted as there is a significant positive impact

(.840).

It is clear from the above mentioned results that Internal

Marketing Practices have positive co-relation with

Employee Job Satisfaction and also have significant impact

on Employee Job Satisfaction. Satisfaction of the employees

Table 3. Correlation between internal marketing practices and employee job satisfaction

Factors

Integrated Training

and Communication

programme

Perceived Organization

Support

Motivation System

Holistic Employee

Development

Employee Job

Satisfaction

Over all

factor

Integrated Training

and Communication

programme

Pearson Correlation 1 .644** .571** .752** .790** .889**

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

Perceived Organization

Support

Pearson Correlation .644** 1 .611** .490** .830** .805**

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

Motivation System

Pearson Correlation .571** .611** 1 .537** .710** .807**

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

Holistic Employee

Development

Pearson Correlation .752** .490** .537** 1 .709** .846**

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

Employee Job

Satisfaction

Pearson Correlation .790** .830** .710** .709** 1 .903**

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

Over all Factor

Pearson Correlation .889** .805** .807** .846** .903** 1

Sig. (2-tailed) .000 .000 .000 .000 .000

N 107 107 107 107 107 107

**. Correlation is significant at the 0.01 level (2-tailed).


( 77 )( 77 )( 77 )( 77 )( 77 )

towards superiors support acts as a good motivator leading

to employee involvement and work orientation. Integrated

training and communication programme is another

internal marketing practice that increases satisfaction

among employees. The factor motivation system also exerts

influence on the Employee Job Satisfaction. The factor

holistic employee development has least effect on job

satisfaction of employees.

CONCLUSION AND RECOMMENDATIONS

Results showed that hypotheses of the study i.e. H1 and

H2 were confirmed. Employees have higher level of

satisfaction with their jobs. This research has made an

attempt to enhance the knowledge by examining

relationship between Internal Marketing Practices and

Employee Job Satisfaction and their impact on each other.

In addition to this, research contributes to service

marketing and human resource discipline in insurance

industry to find out the role of internal marketing in

increasing Employee Job Satisfaction. Study focuses on

factors of internal marketing as they have influence on

Employee Job Satisfaction. Contributions made by the

research will be valuable for both academics as well as

managers. Aim of present study is to focus scholarly

attention upon a much deserted area – Internal Marketing

and Employee Job Satisfaction among LIC’s employees

with in Jammu. Currently there is lack of studies in the

state of Jammu & Kashmir. In Indian economy insurance

industry is considered as a significant and rapidly

growing sector and LIC is considered as dominant segment

of the life insurance services provider. So, Insurance

administrators should realize the importance of internal

marketing in insurance industry as it will be helpful for

service employees to increase their job satisfaction. More

of the human resources practices in internal marketing

context should be employed within organization, as they

lead to greater level of satisfaction among employees.

Insurance industry is regarded as high labour intensive

industry, involving very frequent and face to face

interaction with its customers. Satisfied and loyal

employees will be committed to deliver better services to

their customers. Therefore, it is very important for employer

to satisfy its employee .Service managers must involve

themselves in providing better training, support,

motivation and holistic development to encourage their

employees in making better decisions making and better

handling of customers. This will improve employee’s

performance and eventually the satisfaction of the

customers. The result of this study is also consistent with

the result of previous studies (i.e. Hawng and Chi (2005);

Shiua and Yu (2010); Iliopoulos and Priporas (2011);

Abdullah et al., (2011); Khan et al., (2011); Al-Hawary et

al., (2013)). So, managers and policy-makers in service

organizations need to focus upon new ideas of internal

marketing and should apply these quality constructs in

their respective organizations in a more focused and

thorough manner for gaining the greater employee job

satisfaction .

MANAGERIAL IMPLICATIONS

Managers and decision makers of the company must

provide regular training courses and proper

communication system to the employees to make them

satisfied with their jobs. They must concentrate on

developing proficiency of employees and should also

encourage them to be innovative. Managers should design

different training courses that suits their employee’s skill

and his/her interest. In order to achieve greater satisfaction

among employees, managers must conduct timely

meetings with their employees to take notice of their views

and feedbacks and should also consider them. They should

follow a proper communication channel so that when

updated rules and regulations were announced, should

be followed by each employee working in organization.

Managers have to indulge their employees in decision

making process, so that they will better follow the rules

and regulations which will increase their satisfaction and

in turn will provide better services to their customers.

Employees should be asked about the different internal

marketing practices, which should be implemented to

increase their satisfaction.

LIMITATIONS AND FUTURE SCOPE

The study is limited to only one of the leading public sector

insurance company operating in Jammu city. So, its results

cannot be generalized to other service industries. Due to

time and cost constraint, the survey was conducted over

employees of LIC branches operating in Jammu city. So,

sample size considered for the study was very small.

The paper also presents the following avenues for future

researchers. Research should be conducted on other service

organizations. Further research can also be done in

organizations comprising larger number of employee from


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different industries. Future studies can be done in

manufacturing sector as there was hardly any study found

in this sector. Finally, a comparative analysis between the

public sector and private sector insurance companies can

be done that may enhance the generalization of the

findings. As we have identified that variance explained of

all the factor is 69.213 %, we can also add up more factors

in the study.

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Publishing.

Dr. Parikshat Singh Manhas

Director, School of Hospitality &

Tourism Management (SHTM),

Professor, The Business School (TBS)

Associate Dean (SW), University of Jammu, (J&K)

India – 180006

E-mail: [email protected],

Ms. Rajani Kumari Sarangal

UGC NET, JRF, Ph.D. Research Scholar

The Business School (TBS),

University of Jammu, J&K,

India – 180006

E-Mail: [email protected]


( 80 )( 80 )( 80 )( 80 )( 80 )

INTRODUCTION

Banking Sector is considered as the strength of any Economy. The performance of this

sector influences the performance of the entire economy. With the advancement in

information technology and increasing dispersion of mobile in rural and remote areas,

Indian banks have reached to the unreached in last few years. Indian banks have been

giving back to the society through various welfare initiatives, donations and in-kind

support to charities for decades. Again, Social responsibility is not a novel term for the

Indian banking sector. After the enactment, Corporate Social Responsibility (CSR) has

become mandatory for a certain class of companies in India, It has forced the banks to

take their welfare activities more seriously and organize their activities at CSR front.

This paper aims to explore the spending pattern of Indian Banking Sector contributing

towards CSR activities; so as to know how much they have spent and need to spend

further with the mandatory CSR, which has been enforced from 1st April 2014 in India.

LITERATURE REVIEW

Literature has been reviewed to study the influence of CSR activities on the banking

sector. Md. Al Mamun et al. (2013) found that CSR expenditure does not necessarily

have a profit increasing or performance enhancing ability. An increase in CSR

expenditure in Bangladeshi banking industry can be considered as a real commitment

of these firms as corporate citizens to the society. Mona Kamal (2013) results imply a

Key words:

New Company Act 2013,

Net profit, CSR spending,

Public sector banks, Private

sector banks.

Corporate Social Responsibility:A Comparative Study of Select Public and PrivateSector Banks In India

B. Ramesh and Savia Mendes

ABSTRACT

Banking Sector is considered as the strength of any Economy. The performance of this sector influences

the performance of the entire economy. Indian banks have been giving back to the society through

various welfare initiatives, donations and in-kind support to charities for decades. Again, Social

responsibility is not a novel term for the Indian banking sector. After the enactment, Corporate Social

Responsibility (CSR) has become mandatory for a certain class of companies in India, This paper aims to

explore the spending pattern of Indian Banking Sector contributing towards CSR activities; so as to

know how much they have spent and need to spend further with the mandatory CSR, which has been

enforced from 1st April 2014 in India. This will help the bank management to project where they stand

when compared to their peers, thereby helping the CSR stakeholders to understand how Indian banks

have made their CSR spending, and also further aid banks to their future CSR project implementation.

The study is based on secondary data taken from the annual reports of banks, presented in graphs and

tables, collected from 19 banks; further divided into 12 public sector banks and 7 private sector banks in

India. The CSR spending analysis of the 12 banks selected from the public sector reveals that these banks

are not yet prepared for 2% of their three-year average net profit spending on CSR projects. Moreover,

the private sector banks have overall highest contribution in CSR activities as compared to the public

sector banks.


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negative and statistically significant relationship between

CSR-dimensions and banks’ profitability. The negative

signs of the coefficient attached to CSR dimensions were

consistent with the competitive disadvantages argument

by the neoclassical economists in explaining the CSR-FP

link. The empirical outcomes showed a unidirectional

causality from finance to the private sector to both financial

performance and banking density. Sharma (2011) made

an attempt to analyse CSR practices and CSR reporting in

India with special reference to banking sector and

concluded that banking sector in India is showing interest

in mixing sustainability into their business models but its

CSR reporting practices are far away from satisfaction.

Dheeraj Tiwari (2014) highlighted a proposal made by the

government of India to float a company to manage CSR

funds of all central public sector enterprises to ensure

efficient implementation of financial initiatives and free

companies from additional responsibilities under section

25. The unspent amount of the budget allocated for CSR

and sustainability activities for a year will be spent within

two financial years failing it would be transferred to a

sustainability fund. Since the guidelines were issues in

2013, we will have to wait till 2016 for sustainable fund to

take off. Ahmed et al. (2012) suggested that the CSR can

increase both long term profitability and sustainability of

the banks as well as enhance the reputation of the banks.

Margolis et al. (2007) performed various analyses and

found an overall positive effect between CSR and financial

performance. Suman et al. (2011) study reveals increasing

awareness about Corporate Social Responsibility,

Sustainable Development and Non-Financial Reporting

worldwide. The contribution of financial institutions

including banks to sustainable development is paramount,

considering the crucial role they play in financing the

economic and developmental activities of the world. Sanjay

Kanti Das (2012) the development of Corporate Social

Responsibility is very slow in India though it was started

a long time ago. There is a visible trend in the financial

sector in promoting environment friendly, socially

responsible lending and investment practices. Narwal

(2007) made a study to highlight the CSR initiatives taken

by the Indian Banking Industry. The findings suggest that

banks have an objective view-point about CSR activities.

They are concentrating mainly on education, balanced

growth (different strata of society), health, environmental

marketing and customer satisfaction as their core CSR

activities. Sharma (2013) observed that the public sector

banks have an overall highest contribution in CSR

activities, whereas, private sector banks and foreign banks

are still lagging in this area.

HIGHLIGHTS OF NEW COMPANY ACT

2013(SECTION 135): CORPORATE SOCIAL

RESPONSIBILITY

• All companies with a turnover of Rs.1,000 crore and

more – or a net worth of Rs.500 crore and more or

net profit of Rs.5 crore and more – will have to spend

at least two percent of their three-year average net

profit every year on CSR activities; and/or report

the reason for spending or non-expenditure Section

135(1).

• The institutional coverage is Indian Companies and

foreign companies operational in India.

• The activities undertaken by conducting CSR can

be undertaken through a registered society or trust/

NGO or a Section 8 Company or company self under

the Companies Act. However, the implementing

partner should have three years track record.

• Nature of expenditure incurred on specified

activities that are carried out in India will qualify as

CSR expenditure. Expenditure incurred in

undertaking normal course of business will not form

a part of the CSR expenditure. Any expenditure

incurred in providing such training up to a ceiling

of five percent in one financial year is permitted

under the CSR budget.

• Companies need to spend CSR money in project

mode with pre-defined indicators, budget, duration

etc. It is mandatory for companies to disclose their

CSR Policy, programs/projects undertaken and

amount spent in their report and the CSR Rules

provide for a separate format. The report containing

details of such activities and CSR policies have to

be made available on the company’s website for

informational purposes.

• The activities which may be included by companies

in their CSR policies according to Schedule VII

q eradicating extreme hunger and poverty and

malnutrition, promoting preventive

healthcare and sanitation and making

available safe drinking water;

q promotion of education; including special

education and employment enhancing

vocation skills especially among children,

woman, elderly and the differently abled and

livelihood enhancement projects;


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q promoting gender equality and empowering

women; setting up homes and hostels for

women and orphans, setting up old age

homes, day care centres, and such other

facilities for senior citizens and measures for

reducing inequalities faced by socially and

economically backward groups;

q ensuring environmental sustainability

ecological balance, protection of flora and

fauna, animal welfare, agro forestry,

conservation of natural resources and

maintaining of quality of soil, air and water;

q protection of national heritage, art and

culture including restoration of buildings

and sites of historical importance and works

of art; setting up of public libraries; promotion

and development of traditional arts and

handicrafts;

q measures for the benefit of armed forces

veterans, war widows and their dependents;

q training to promote rural sports, nationally

recognized sports, and Paralympic sports

and Olympic sports;

q contribution to the Prime Minister’s National

Relief Fund or any other fund set up by the

Central Government or the State

Governments for socio-economic

development and relief and welfare of the

Scheduled Castes, the Scheduled Tribes, other

backward classes, minorities and women;

q contributions or funds provided to

technology incubators located within

academic institutions which are approved

by the Central Government;

q rural development projects;

q Slum development.

AIM AND OBJECTIVE OF THE STUDY

Keeping in view with the literature review and mandatory

CSR on selected companies in India, the paper aims to

explore the spending pattern of Indian Banking sector

contributing towards CSR activities. The objective is to

identify the present status on CSR spending on Indian

banks and to compare the corporate social responsibility

spending of Public sector & Private sector banks in India.

This will help the bank management to project where they

stand when compared to their peers, to help CSR

stakeholder to understand how Indian banks have made

their CSR spending and aid banks to their future CSR

project implementation.

METHODOLOGY

The study is based on secondary data taken from the

annual reports of banks, presented in graphs and tables,

collected from 19 banks; further divided into 12 public

sector banks and 7 private sector banks in India. The banks

have been selected on their ranking based on Economic

Times and availability of CSR information. The annual

reports with net Profit from Financial year 2010-2011, 2011-

2012, 2012-2013 and 2013- 2014 were considered

(Appendix I). The calculations are based on two percent of

their three-year average net profit to assess the difference

between actual and stipulated spending.

ANALYSIS & DISCUSSION

As seen in the graph 1, the CSR spending analysis of the

12 banks selected from the public sector reveals that these

banks are not yet prepared for 2% of their three-year average

net profit spending on CSR projects. It can perceive that

the top performing banks from the public sector are not

performing effectively in the CSR front. The State Bank of

India has a deficit of Rs 206.97 crore, Bank of Baroda of Rs

94.7 Crore on CSR front. Punjab National Bank, which

ranks third has contributed just Rs 2.94 crore and has a

deficit of Rs. 131.16 crore on CSR. The same is the case

with the rest of the banks in the public sector. They are

lagging behind on CSR front.

The graph 2, again reveals the spending pattern of the 7

banks selected from the private sector based on net profit,

have spent less than 2% CSR. The ICICI bank has emerged

as the best performing bank has deficit of only Rs 15.7

crore on CSR, whereas HDFC bank a deficit of Rs 83.54

crore. The same is the case with the rest of the banks in the

private sector.

The major thrust areas for CSR practice in Indian banks

are common in public and private sector banks. These areas

include children welfare, community welfare, education,


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environment, healthcare, poverty eradication, rural

development, vocational training, women’s

empowerment, protection to girl child and employment.

The most surprising fact that the analysis brings out is

that some of the best performing PSUs have spent less

than 2% of the average net profit of previous three years

with SBI being the highest contributor with Rs. 148.93

crore. ICICI Bank emerges the best performing bank with

spending of close to Rs. 164 crore. It is really a big challenge

to these banks with the New Companies Act 2013. In many

cases, the reporting requirements have been diluted by

excessive descriptive text and avoiding statistics. There

are some banks which are not even meeting the regulatory

requirement.

The table 1 explores the overall CSR spending of the 19

banks. These banks have spent INR 535.85 Crore on CSR

activities in FY 2013-14 and they need to spend almost

three times of this amount viz. INR 1628.1 Crore, in FY

2014-15 to comply with the mandatory CSR clause of the

new Act. From the above discussion it is clear that banks

are not fully involved in the CSR activities. These banks

will have to work thrice on CSR activities for financial

year 2014-2015.

Graph 1

The table 2 exhibits that the 12 public sector banks have

spent just 21.43% in total of the 2% CSR for FY 2012-2013,

whereas the situation is better with the private sector. The

7 private sector banks analysed in this study have spent

just 58.46% in total of the 2% CSR for FY 2013-2014. Private

sector banks have been spending a lot more on CSR, than

their peers in public sector.

Table 1

No. Banks Actual CSR Spending

in 2013-14 (in Cr) 2% of net profit of FY11,

FY12 and FY13(in Cr)

CSR Spending Prerequisite for FY 2014-

15(in Cr)

PUBLIC SECTOR BANKS

1. State Bank of India 148.93 355.9 364.1

2. Bank of Baroda 15.3 110.0 109.0

3. Punjab National Bank 2.94 134.1 121.7

4. Bank of India 7.83 67.2 67.5

5. Union Bank 3.77 58.2 52.3

6. UCO Bank 3.32 18.3 23.5

7. Allahabad Bank 5.34 37.6 35.7

8. Indian Bank 2.42 44.8 37.1

9. IDBI Bank 12.2 50.2 46.6

10. Andhra Bank 2.4 35.7 28.9

11. Corporation Bank 2.71 36.8 25.5

12. Central bank of India 1.59 24.9 7.2

PRIVATE SECTOR BANKS

13. ICICI Bank 164 179.7 227.8

14. HDFC Bank 70.36 153.9 200.2

15. Axis Bank 62.1 126.5 154.6

16. Yes Bank 12.3 29.8 38.0

17. Kotak Mahindra Bank 3.6 31.7 39.0

18. Indusind Bank 12.69 24.3 32.6

19. ING Vysya Bank 2.05 13.6 16.9 TOTAL 535.85 1533.2 1628.2


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Graph 2

Table 2

PUBLIC SECTOR BANKS (in Cr)

2% of Average Net Profit of FY 11, 12 and 13

973.7

Actual CSR Spending in FY 2014 208.75

CSR Spending Prerequisite in FY 2015 919.1

PRIVATE SECTOR BANKS (in Cr)

2% of Average Net Profit of FY 11, 12 and 13

559.5

Actual CSR Spending in FY 2014 327.1

CSR Spending Prerequisite in FY 2015 709.1

SUGGESTIONS

• With the Companies Act 2013, the banks will have

to work thrice on the CSR budgets for FY 2014-2015

than what they have spent in last year.

• The banks will have to assess and measure CSR

activities undertaken and will have to be in project

mode with pre-defined objectives, performance

indicators and an enhanced monitoring and

evaluation plan.

• Banks should look forward at trust formation, NGO

partnering to undertake CSR activities.

• Banks will have to provide appropriate training to

staff on CSR activities.

• These banks will have to streamline their CSR policy

and projects because most of their CSR spending

has been in donation or sponsorship form or

sporadic activities.

• The banks should be more transparent in reporting

CSR activities, by providing statistics and not mere

text and pictured description.

Table 3: BANKS AND THEIR NET PROFITS – FY 2011, 2012, 2013 AND 2014

No. Bank Net Profit (in Cr)

2013-14 (FY14)

2012-13 (FY13)

2011-12 (FY12)

2010-11 (FY11)

PUBLIC SECTOR BANKS

1. State Bank of India 16174 19951 18483 14954

2. Bank of Baroda 5497 4831 6025 5650

3. Punjab National Bank 4690 6521 7037 6563

4. Bank of India 3545 3007 3577 3495 5. Union Bank of India 2068 3064 2712 2955

6. UCO Bank 1724 646 1150 944 7. Allahabad Bank 1636 1552 2162 1930 8. Indian Bank 1475 1826 2267 2634

9. IDBI Bank 1741 2621 2629 2280 10. Andhra Bank 733 1771 1824 1767

11. Corporation Bank 241 1685 1905 1933

12. Central Bank of India -994 1319 758 1659 PRIVATE SECTOR BANKS

13. ICICI 13968 11,396 8,803 6,760

14. HDFC 12772 9750 7513 5819 15. Axis Bank 9348 7552 6287 5135

16. Yes Bank 2326 1925 1450 1092

17. Kotak Mahindra Bank Ltd. 2272 1972 1600 1187

18. Indusind Bank 2128 1576 1192 879 19. ING Vysya Bank 977 901 654 483


( 85 )( 85 )( 85 )( 85 )( 85 )

CONCLUSION

The CSR spending analysis of the selected 19 banks shows

their unpreparedness for 2% of their three-year average

net profit spending on CSR projects yet for the FY 2014-

2015. The analysis further shows, though the Indian banks

are making efforts in the CSR areas, still there is a

requirement of more emphasis on CSR. Moreover, the

private sector banks have overall highest contribution in

CSR activities in comparison to the public sector banks. It

can be inferred from the study that the top performers in

terms of profitability and growth are not toping in the CSR

activities. The banking institution which caters to all

sectors for business and financial products and services

have a lot of the scope to partner their activities for CSR

projects as they are not just limited to a particular

geography or sector.

ACKNOWLEDGMENT

• www.mca.gov.in,

• www.ngobig.org,

• Economic Times (ET 500 ranking),

• www.CSRidentity.com, and

• Websites of the all the banks taken as sample for this

study.

REFERENCES

Ahmed, Homayara Latifa, Alam, Md. Jahangir and Jafar,

Saeed Alamgir Zaman Sawlat Hilmi (2008), A

Conceptual Review on Corporate Governance and

its effect on Firm’s Performance: Bangladesh

Perspective, AIUB Bus Econ Working Paper Series,

Vol.2008- 10, pp.1-24.

Dheeraj Tiwari, (2014), Government plans to form New

Company to manage CSR funds of PSO’s, Economic

Times (19th Feb. 2014), Page 11.

Margolis, J. D., and Walsh, J. P. (2007), Misery loves

companies: Rethinking social initiatives by

business, Administrative Science Quarterly, Vol.48,

pp.268–305.

Md. Al Mamun, Kazi Sohog and Ayesha Akhter (2013), A

Dynamic Panel Analysis of the Financial

Determinants of CSR in Bangladeshi Banking,

Asian Economic and Financial Review, 3(5):560-578

560.

Mona Kamal (2013), The Role of Corporate Social

Responsibility (CSR) in the Egyptian Banking Sector,

http://ssrn.com/abstract=2227621.

Narwal Mahabir. (2007), CSR initiatives of Indian banking

industry, Social Responsibility Journal, Vol.3 (4), pp.

49-60.

Sanjay Kanti Das (2012), CSR Practices and CSR Reporting

in Indian Financial Sector, International Journal of

Business and Management Tomorrow, Vol. 2 No. 9.

Sharma Nishi. (2011), CSR practices and CSR reporting in

Indian banking sector, International Journal of

Advanced Economic and Business Management,

Vol.1 (2), pp.58-66.

Suman Kalyan Chaudhury, Sanjay Kanti Das and Prasanta

Kumar Sahoo (2011), Practices of Corporate Social

Responsibility (CSR) in Banking Sector in India: An

Assessment, Research Journal of Economics,

Business And ICT, Volume-4, Page 76.

Prof. Dr. B. Ramesh

Faculty of Commerce

Goa University, Goa, Former Dean & HOD

Goa University, Goa

Former President - Indian Commerce Association

& Indian Accounting Association.


Ms. Savia Mendes

Research Scholar

Goa University, M.Com., M.Phil.,

Associate. Prof.

Dep. of Com., M.E.S. College of Arts &

Commerce, Zuarinagar, Goa



( 86 )( 86 )( 86 )( 86 )( 86 )

INTRODUCTION

In recent years, work life balance has gained much importance. An employee has a dual

responsibility of maintaining both work at the office/work place and family/personal

life. Time may come when he/she is not able to give the required time and attention to

both at the same time. In such cases he/she faces a ‘role strain’ where performing his/

her duty in one role may lead to conflict in performing his/her duty in the other/s role.

Goode (1960 P. 483-496) put forward the classic theory entitled ‘A Theory of Role Strain’.

He defined role strain as “the felt difficulty in fulfilling role obligations.” Ideally Work-

Life Balance (WLB) can be attained when the employee can balance both the work

domains and non-work domains, without infringing the rights of one for the other. The

employees in N.F.Railways have a serious duty at work, which is linked to the safety

and welfare of the passengers. The smooth running of the trains depends on the vigilance

of the railway employees, where a small mistake due to distraction can cause grave

incidents. However, they have their family obligations and other societal obligations,

which too they need to perform, to lead a balanced life that is satisfying. The interaction

between the two domains and how the personal lives of the employees contribute to

their work life is examined in this study.


Netemyer et al. (1996 P.400-410) has stated that “Two important focal points of adult life

are family and work. However, the role expectations of these two domains are not

always compatible, creating conflicts between work and family life.” They further opined

based on the work of experts (as Frone et al., 1992; Rice et al., 1992) that there is an

Key words:

Personal and work life,

work and non-work

domains.

Contribution of Personal Life to the Work Life ofthe Employees of N.F. Railways


ABSTRACT

Work and non-work domains are two very important domains of an employee’s life. The study focuses on

how personal life can contribute to the work-life of the employees of N.F.Railways. A survey method was

used to collect data. The population (railway employee) in the study area is 1363 and 248 employees are

selected as sample for data collection. Multi-stage stratified proportional probability sampling according

to Pareto principle has been followed. For the executives a census survey has been conducted. It has

been found that 79.03% of the respondents find it difficult to manage their work and non-work domains.

94.90% these respondents who find it difficult to balance their work and non-work domains, attribute

their ability to work well to their personal life. A moderate to strong association has been found between

time available for personal activities after work and the personal life of the employees. The study reveals

that though there is a tug and pull between the work and non-work domains of the employees’ life, still

a very high percentage (84.28%) of the respondents report that their work-life does not suffer due to

their personal activities.


( 87 )( 87 )( 87 )( 87 )( 87 )

“inverse relationship between job satisfaction and WFC

AND FWC”(WFC: Work Family Conflict and FWC: Family

Work Conflict).

Hayman (2005 P85-91) elucidates how ‘work family

conflict’ has been widely circulating in modern

organizational behaviour literature. He emphasizes a

broader term Work Life Balance, which he explained as,

more comprehensive to the “work/non work conflict”. He

is of the opinion that work life balance “offers a more

inclusive approach to the study of work/non work conflict

compared to work family conflict.”

Frone et al. (1997 P.145–167) found “that if the obligations

of one role frequently interfere with the enactment of a

second one, the level of in-role performance associated

with the second role may suffer.” The experts also “suggest

that work-related support may reduce work-to-family

conflict primarily by reducing work distress and work

overload.” They emphasize that work-family interface ‘is

a pivotal concern of both work and family researches.”

They point to modern demographic trends in the work

force as increased number of mothers who are working,

and also dual/single earning people.

In 2000, the UK (United Kingdom) launched the Work-Life

Balance Campaign (P1-11), which gave a thrust to

‘monitoring of work-life balance practices.’ This campaign

encourages employers to introduce practices for their

employees which will help them to balance their work

and private lives more successfully.”

Lu et al. (2008 P.1-21) is of the opinion that according to

prior research by Bruck, Allen & Spector (2002), “the more

time a person spends on the job, the more conflict there is

between work and family.”

Greenhaus & Beutell (1985 P.76-88) in their article put

forward a good definition of work/family conflict, as “a

form of inter-role conflict in which the role pressures from

the work and family domains are mutually incompatible

in some respects.”


• To determine the contribution of personal life to the

work life of the employees of N.F.Railways.

SCOPE OF THE STUDY

The study focuses on the work and non-work domains of

the employees of Tinsukia Railway Division, serving in

Tinsukia and New Tinsukia Railway Station including

the Divisional office, falling under the North East Frontier

Railways.

SIZE OF THE SAMPLE AND SAMPLING FRAME

Multi-stage stratified proportional probability sampling

according to Pareto principle has been followed. The total

population (employee as on 31st January, 2014) in the study

area is 1363 consisting1334 (non-executives) and

29(executives). In total, 10 departments (excluding two i.e.

the Medical and Railway Protection Force) have been

selected for the study covering both executives and non-

executives employees serving in the study area. For the

executives a census survey has been conducted as the size

of the population is not significant. Selection of the different

categories of employees is done randomly from the

employees register maintained in the concerned offices.

DATA COLLECTION AND TOOLS USED

The researchers visited NF Railway offices, railway

stations, sites etc in the study area and distributed the

questionnaires to the employees. Factors considered in the

study are related to work-life balance as personal life and

work life, time available for personal work and balancing

difficulty experienced by the employees. A structured

questionnaire was used based on Likert scale with the

values ranging from 1 to 5 (the options for the answers

ranging from ‘Strongly agree’ to ‘Strongly disagree’). The

questionnaire has been constructed by consulting the work

of Fisher-McAuley2 et al. (2003) and Hayman6 (2005).The

survey was made during May, 2014 to June, 2015.

ANALYSIS AND INTERPRETATION OF DATA

The data collected relating to the work and non-work

domains are of ordinal type as such Somers’d, Kendall’s

tau-b, Spearman’s Rank Correlation and cross-tabulations

(contingency tables), bar chart, line chart, scatter plot,

frequency tabulations etc., have been used to analyse the

data to determine the contribution of the personal life of

the employees to their work-life balance.


( 88 )( 88 )( 88 )( 88 )( 88 )

DETERMINANTS OF WORK-LIFE BALANCE

In this study the factors considered are related to work-life

balance as the personal life and work life of the employees,

time available for personal work and balancing difficulty

experienced by the employees.

Table 1 : Experience in Balancing Work and Non-work

Domains

Sl.No. Balance difficulty level

(clubbed) Frequency Percent

1. Not difficult 49 19.76

2. Neutral 3 1.21

3. Difficult 196 79.03

Total 248 100.0

Source: Field survey.

Table-1 shows that 79.03% (196) of the 248 respondents

report that they find it difficult to manage their work and

non-work domains. Only 19.76% of them (248) report that

they do not find it difficult to manage their work and non-

work domains. The five (5) balance difficulty categories

have been clubbed into three (3) for clarity of analysis and

understanding.

RELATIONSHIP BETWEEN BALANCE DIFFICULTY

AND ABILITY TO WORK WELL DUE TO THEIR

PERSONAL LIFE

Table-2 shows that 79.03% (196) of the 248 respondents

find it difficult to balance their work and non-work

domains. Interestingly, 94.90% (186) out of these 196

respondents who find it difficult to balance their work

and non-work domains attribute their ability to work well

to their personal life. In comparison only 19.76% (49) of

248 respondents do not find it difficult to balance their

work and non-work domains. They too in majority (95.92%,

that is 47 out of 49 respondents), attribute their ability to

work well to their personal life. Both balance difficulty

and ability to work well due to personal life have been

clubbed into three (3) categories for clarity of analysis and

understanding.

TIME FOR PERSONAL LIFE AND ITS IMPACT ON

THE EMPLOYEES’ PERSONAL LIVES

Table-3 shows that 52.82% disagrees and 6.85% strongly

disagrees that time is available for their personal activities

after work. This means that 59.67% (that is 52.82% + 6.85%)

of the 248 respondents do not get enough time for their

personal activities after work. Only 31.45% agrees and

1.61 strongly agrees that they do get time for their personal

activities after work. This means that only 33.06% (that is

31.45% + 1.61%) of the 248 respondents get time for their

personal activities after work.

Table-4 shows that 74.36% (58) of the 78 respondents who

get time for their personal activities after work disagree

that their personal lives suffer due to their work. Whereas,

64.12% (84) out of 131 respondents who do not get enough

time for their personal activities after work agrees that their

personal lives suffer due to their work. This suggests that

there is an association between time available for their

personal activities after work and the personal life of the

employees. It can be understood that overall, 43.15% (that

is 97 + 10 = 107) out of 248 respondents report that their

personal lives suffer due to their work, and 47.18% (that is

101 + 16 = 117) out of the 248 respondents report that their

personal lives do not suffer due to their work.

Table 2 : Cross-tabulation between Balance Difficulty and Ability to Work Well Due to Their Personal Life

Ability to work well due to personal life

(clubbed) Total

Sl.No. Balance difficulty level

(clubbed) Disagree Neutral Agree

1. Not difficult 1 1 47 49

2. Neutral 0 0 3 3

3. Difficult 4 6 186 196

Total 5 7 236 248



( 89 )( 89 )( 89 )( 89 )( 89 )

Table 5 : Association Between Time Available for

Personal Activities After Work and Personal Life.

Sl. no Association

measure Value

Approximate significance

1. Somers' d Symmetric

0.566 .000

Number of cases 248

Source: Field survey

Table-5 shows that the Somers’d symmetrical value is .566,

n = 248, p<.01, suggests that there is a moderate positive

association between time available for personal activities

after work and the employees’ quality of personal lives.

Figure-1 shows that a big chunk of those respondents who

get time for their personal activities (non-work domain/

family life) after work disagree that their personal life

suffers. Whereas a big chunk of those who do not get time

for their personal activities after work agree that their

personal life suffers. This supports the finding that there

is an association between time available for personal

activities (non-work domain/family life) after work and

the employees’ personal life.

Figure-1: Relationship Between Time Available for



Table 3 : Frequency Table Depicting Time Available for Personal Activities After Work

Sl.No. Time available for personal

activities after work Frequency Percent

1. Strongly Disagree 17 6.85

2. Disagree 131 52.82

3. Neutral 18 7.26

4. Agree 78 31.45

5. Strongly Agree 4 1.61

Total 248 100.0


Table 4 : Cross-tabulation Between Time Available for Personal Activities After Work and Personal Life.

Sl.No. Time available for personal

activities after work

Personal life suffers due to work

Total Strongly Agree

Agree Neutral Disagree Strongly Disagree

1. Strongly Disagree 9 3 1 3 1 17

2. Disagree 1 84 15 31 0 131

3. Neutral 0 4 4 8 2 18

4. Agree 0 5 4 58 11 78

5. Strongly Agree 0 1 0 1 2 4

Total 10 97 24 101 16 248



( 90 )( 90 )( 90 )( 90 )( 90 )

Figure-2 and Figure-3 shows that there is a monotonic

and non-linear relationship between the time available

for personal activities after work and the personal lives of

the respondents and also that there is a positive

association between the two. As such Spearman’s Rank

Correlation and also Kendall’s tau-b test of association

has been run and the test results are illustrated in Table-6.

Figure 2 : Relationship Between Time Available for



Figure 3 : Association Between Time Available for



Table-6 shows that the Spearman’s rho value = .616, n =

248, p<.01(2-tailed), and Kendall’s tau-b value = 567, n =

248, p<.01 (2-tailed), which indicates that there is a

moderate to strong association between time available for

personal activities after work and the personal life of the

employees.

Table 6 : Association Between Time Available for Personal Activities After Work and Personal Life.

Sl.No. Measures of association

Time available for personal

activities after work

Personal life suffers

1. Kendall’s tau-b

Time available for personal activities after work

Correlation Coefficient 1.000 .567**

Significance (2-tailed) . .000

Number of cases 248 248

Personal life suffers

Correlation Coefficient .567** 1.000

Significance (2-tailed) .000 .


2. Spearman's rho

Time available for personal activities after work

Correlation Coefficient 1.000 .616**

Significance (2-tailed) . .000


Personal life suffers Correlation Coefficient .616** 1.000

Significance (2-tailed) .000 .


**. Correlation is significant at the 0.01 level (2-tailed).



( 91 )( 91 )( 91 )( 91 )( 91 )

Table 7: Frequency Table of Work-life

Sl. No.

Work-life suffers due to personal

activities

No of respondents (Frequency)

Percentage

1. Strongly Agree 4 1.61

2. Agree 20 8.06

3. Neutral 15 6.05

4. Disagree 167 67.34

5. Strongly Disagree 42 16.94

Total 248 100.0


Table-7 shows that 67.34% disagrees and 16.94% strongly

disagrees that their work-life suffers. This together forms a

big chunk (84.28%) of the (248) respondents who report

that their work-life does not suffer due to their personal

activities.

FINDINGS

The study reveals that 79.03% (196) of the 248 respondents

find it difficult to manage their work and non-work

domains. And 94.90% (186) out of these 196 respondents

who find it difficult to balance their work and non-work

domains attribute their ability to work well to their personal

life.

A moderate to strong association has been found between

time available for personal activities after work and the

personal life of the employees {Somers’d symmetrical value

is .566, n = 248, p<.01; Spearman’s rho value = .616, n =

248, p<.01(2-tailed), and Kendall’s tau-b value = 567, n =

248, p<.01 (2-tailed)}. 59.67% of the 248 respondents do

not get time for their personal activities after work. 74.36%

(58) of the 78 respondents who get time for their personal

activities after work disagree that their personal lives suffer

due to their work. Whereas, 64.12% (84) out of 131

respondents who do not get enough time for their personal

activities after work agrees that their personal lives suffer

due to their work. A chunk (47.18%) of the respondents

reported that their personal lives do not suffer due to their

work and a comparatively lower percentage (43.15%) of

the 248 respondents reported that their personal lives

suffer due to their work.

The majority (84.28%) of the (248) respondents are of the

view that their work-life does not suffer due to their

personal activities.

SUGGESTIONS

The employees are continuing their work, even at the

expense of their personal/family life. But it is very

important that a better balance be achieved than at present.

This can lead the employees in working steadily in the

years ahead without being pulled in the work and non-

work conflict, which may ultimately lead to a crisis. This

can be averted, if the management brings about more

employee friendly schemes and also devise ways to

manage the work and non-work domains of the employees

in a better way. In this regard, it may be mentioned that the

work demands/work load of the employees can be better

managed so that they get time for their personal life and

can fulfil their family and social obligations. Some

personal time is also needed for relaxation to refresh one’s

mind and body. A clear mind and a healthy body is a

prerequisite for performing one’s job, specially where a

small mistake can lead to grave consequences. The

management may also offer services as payment of utility

bills, day care of young wards of employees, car pool for

safely bringing children from school, emergency services

as taking dependents to the hospitals in case of the

employee being sent out station for duty.

What we have seen that the railway employees are not

trained up about managing personal and professional

time. This is the most common situation in Assam. The

employer should arrange some kind of training

programme on managing time for work and for personal.

Such kind of training will be benefitted both for the

employers and employees as well. Such programmes on

training will definitely help the both the executives and

other workers too.

CONCLUSION

The study has revealed that there is an ongoing tug and

pull between the work and non-work domains among the

employees of N.F.Railways. A high percentage of the

respondents experienced difficulty in managing their work

and non-work life, but at the same time they attribute their

ability to work well in the current situation due to their

personal life that is their family. Due to their support from

the family members they (the employees) are able to

perform their duties sincerely. It has been found that a big

chunk (59.67%) of the 248 respondents do not get much

time for their personal activities after work. Still then, a

higher percentage (47.18%) reported that their personal


( 92 )( 92 )( 92 )( 92 )( 92 )

lives do not suffer due to their work. Comparatively lower

percentage (43.15%) of the 248 respondents who reported

that their personal lives suffer due to their work. Also, it

has been found that time available for personal activities

impact on the personal lives of the employees. In fact, a

moderate to strong association has been found between

time available for personal activities after work and the

employees’ personal lives (meaning whether personal life

suffers/does not suffer). But a very high percentage

(84.28%) of the (248) respondents reported that their work-

life does not suffer due to their personal activities. The

findings suggest that due to employees’ personal lives they

are able to perform their duties faithfully and with a clear

mind.

REFERENCES

European Foundation for the Improvement of Living and

Working Conditions, 2007, “Work-life balance

attitudes and practices in British workplaces, p.1-

11.” http://www.eurofound.europa.eu, accessed on

24.11.2014.

Fisher-McAuley, Stanton, J.M., Jolton, J.A & Gavin, J. (2003),

“Modelling the relationship between work life

balance and organisational outcomes.” Paper

presented at the Annual Conference of the Society for

Industrial-Organisational Psychology. Orlando, 1-26.

Frone et al., (1997), “Developing and Testing an Integrative

Model of the Work-Family Interface.” Journal of

Vocational Behavior, 50, Article No.VB961577,

pp.145–167.

Goode,W.J.(1960), “ A Theory of Role Strain.” American

Sociological Review, Vol. 25, No. 4, pp. 483-496.

http://www.jstor.org/stable/2092933. Accessed

on 23.06.2014.

Greenhaus , J.H. & Beutell, N. J.(1985), “Sources of conflict

between of work and family roles.” Academy of

Management Review, Vol.10, No.1, pp.76-88. http:/

/www.jstor.org/stable/258214, accessed: 23/06/

2014.

Hayman, J. (2005), “Psychometric Assessment of an

Instrument Designed to Measure Work Life Balance.”

Research and Practice in Human Resource

Management, 13(1), pp85-91. http://

rphrm.curtin.edu.au/2005/issue1/balance.html.

Accessed on 11.12.2013.

Lu,L., Kao, S., Chang, T., & Cooper, C. (2008), “Work/Family

Demands, Work Flexibility, Work/Family Conflict,

and Their Consequences at Work: A National

Probability Sample in Taiwan.” International Journal

of Stress Management, Vol.15, No.1, pp.1-21

(WorkFamily Demands, Work Flexibility,

WorkFamily Conflict, and Their Consequences at

Work A National Probability Sample in Taiwan.pdf).

http://www.web.ba.ntu.edu.tw. Accessed on

19.11.2013.

Netemeyer, R.G, Boles, J.S. & McMurrian, R. (1996),

“Development and Validation of Work-Family

Conflict and Family-Work Conflict Scales.” Journal

of Applied Psychology, Vol. 81. No. 4, pp.400-410.

http://www.psychwiki.com. Accessed on

11.12.2013.

Dr. Kumud Chandra Goswami

Professor

Department of Commerce,

Dibrugarh University, Assam

India

Email:[email protected]

Sarah Yasmin Hussain

Research Scholar

Centre for Management Studies,

Dibrugarh University, Assam

India,

Email: [email protected].


( 93 )( 93 )( 93 )( 93 )( 93 )

INTRODUCTION

In today’s highly competitive business scenario, the human resource is the most critical

resource among all the resources any organization needs to produce. Every organization

wants to achieve success and have desire to get constant progress in their daily business

activities. An organization can have sustainable competitive advantages only when it

possesses a unique human capital. All the other resources such as financial,

technological or physical resources might prove wastage if the firm does not possess an

excellent group of people who will be handling these resources. The current trend in the

world today is highly competitive. Organizations regardless of their size, market share

and technology are facing employees (workers) retention challenges. The human

resource will become richer by passage of time and experience. This of course does not

happen automatically and the organization will have to invest in its human resources

in order to transform them into true resource that will add value to the organization.

There have been various ways to retain employees in job for a longer period of time –

from deferred payment to offer bonus related to their tenure in their job to even tying

them with bond or other types of financial contracts.

These days the management of an organization is facing two main challenges related to

motivation; the first challenge is to motivate workers towards helping the organization

to achieve its goal, while the second is to motivate workers to achieve their own personal

goals. Meeting the needs and achieving the goal of both the management and workers

is often a difficult task in all types of organizations all over the world. Any organization

can neither progress nor achieve success until and unless the employees of the

organization are satisfied with it, are motivated for the task fulfillment and goals

achievement and encouraged. Several studies on motivation and job performance in

India attempt to focus on typical organization like manufacturing sector, local

Key words:

Hygiene Factors, Motivational

Factors, Retention

Applicability of Two Factor Theory of Motivationon Private University Teachers : An EmpiricalStudy


ABSTRACT

Herzberg’s two factors theory describes the concepts of Hygiene/ Maintenance factors and Motivational

Factors/ Motivators were taken as a major component for this study. The purpose of this study is to

assess the applicability of two factor theory of motivation on private university teachers. In this research

paper, various theories based on motivation were taken into consideration. An attempt was made to

check whether all hygiene factors and motivational factors play the similar role in private universities.

This is an empirical study and data were collected through questionnaire using likert scale. Data were

analyzed by using various statistical tools like descriptive statistics, ANOVA and Correlation. The

findings of this study revealed that there is a strong desire of hygiene and motivational factors, which has

been propounded in Herzberg’s two factor theory among private university teachers. Salary and

retention rate are directly correlated. University teachers refrain from long working hour


( 94 )( 94 )( 94 )( 94 )( 94 )

government and construction industry but, very few

researchers had studied various factors at different levels

which influence the behavior of the employees of higher

education particularly in the private universities. This

study is based on the mixed statistical method to evaluate

relationship between motivation and satisfaction level in

employees in private universities in NCR Region including

Delhi and Alwar District.

Four content theories of motivation propounded by various

psychologists such as Maslow need hierarchy theory,

Herzberg’s two factors theory, Alderfer’s ERG theory, Mc

Clelland’s achievement theory which explains various

factors which influences the level of motivation among

working individuals.

Aldefer (1969) too, in the tune of Maslow, proposes that

human needs are arranged in a hierarchical order and

individual progresses from lower level needs to the higher

order needs. However, he condensed the 5 levels of needs

as identified by Maslow into 3 basic categories. Thus, the

existence needs in Alderfer’s ERG model are concerned

with basic survival and sustenance needs and cover both

physiological and physical safety needs in the Maslow

model. The higher order is known as “Relatedness needs”

and concerned with relationship to the social environment

which is equivalent to the need for belongingness in

Maslow model. Growth needs, the last level of needs in

the echelon are concerned with the self-esteem and self

actualization needs in the need hierarchy model.

Douglas McGregor (1960) after analyzing the way

managers behave with their employees concluded that

managers might be categorized on the basis of their

assumptions about the human nature into two distinct

groups. Once set of assumptions called “theory X” by

McGregor, represents the lower order needs whereas

“theory Y” depicts the higher order needs of Maslow needs.

David C McClelland (1988) identified three needs or

motivators- Need for achievement, Need for power, and

Need for affiliation. He believes that each person has a

need for all the three but the people differ in the degree to

which the various need motivate their behavior.

Though the most widely discussed theory of motivation is

propounded by Abraham Harold Maslow (1954). Maslow

suggested that human needs may be categorized in five

broad areas, arranged in a definite order according to their

level of importance for the person or what is called

hierarchy. The foremost level of needs for an individual is

the physiological needs which include hunger, thirst, need

for oxygen, temperature regulation and so on, which are

essential for the survival of organism. Need for rest, sleep,

sensory pleasure, mental behavior and arguably sexual

desire also fall under this category. The next level need is

denoted by the safety needs that include need for safety

and security, freedom from pain or threat of physical attack,

protection from danger. These also include need for

predictability and a sense of security against uncertainty.

The third level is known as social needs. These arise when

physiological and safety needs are satisfied. These needs

include the sense of belongingness, friendliness,

acceptance and rejection. The fourth level as known as the

esteem needs, which include both self-esteem and esteem

from others. Self-esteem involves desire for confidence,

strength, autonomy and achievement. Esteem of other

involves reputation or prestige, status, recognition and

appreciation.

After fulfilling all the above four level of needs an individual

want to attain the highest level of needs in the hierarchy

that is self-actualization needs. It refers to the drive to

become what one is capable of becoming. These may take

many forms, which vary widely from one individual to

another from actualizing one’s potential talent to the

spiritual quest. According to Maslow, once a lower level

need gets reasonably satisfied, it is no longer a motivator

any more. Now the needs in the next higher level of the

hierarchy start to dominant influence on the individual.

This study is based on the Herzberg’s two factor motivation

theory. In 1959, Herzberg modified Maslow’s needs theory

and consolidated two areas of need that motivates

employees. The two factors are:

(i) Hygiene/Maintenance Factors: These were featured

as lower level motivations which consist of company

policy and administration, supervision,

interpersonal relationship between peers,

interpersonal relationship between superiors,

interpersonal relationship between subordinates,

working condition, salary, personal life, status and

security.

(ii) Motivation Factors/Motivators: He emphasized on

higher level factors of motivation and focused on

aspect of work such as achievement, recognition,

advancement, work itself, responsibility and growth

or advancement.


( 95 )( 95 )( 95 )( 95 )( 95 )

The Herzberg theory emphasized on salary, working

conditions, job satisfaction, recognition and achievement

etc. as a factor that play vital role in motivating employees

to commit their effort on the task assigned by the

organization.


Motivation is considered to be a soul achievement of human

resources management practices as almost all the human

resource practices has fundamental aim which includes

job involvement and job satisfaction of an employee and

acquiring high level of work motivation (Jerris, 1999).

In today’s competitive environment, no organization can

sustain without increased workers’ motivation and this

activity has to be continued for a longer period. (Robbins

et. al., 2005) said that employee’s motivation is the

“willingness to exert high level of inspiration to reach

organizational goals, conditioned by the efforts ability to

satisfy some individual need”. This definition clearly states

that motivation is the willingness of employees to perform

work efficiently and voluntarily; this willingness is the

result of need satisfaction and it only comes when they

perceive that their efforts are recognized.

Employee’s motivation can only be attained by realizing

him/her that his/her individual needs or goals are very

crucial for the organizational success and their individual

efforts are aligned with organizational goals or

achievement. Organizations need to explore various

intrinsic and extrinsic motivators for its employees so that

they can contribute in the organizational success in the

long run.

(Nohria, 2008) revealed in a study that motivation is

measured by multidisciplinary indicators like engagement,

satisfaction, commitment and intention to quit.

(Rainey, 2001) emphasizes that work motivation refers to

the level of direction, persistence and excitement of effort

in work settings that a person tries to work hard and well.

Although money is influential factor at every stage but at

the same time it is not necessary that money alone can

increase the level of motivation of every employee, high

achievers they don’t get motivated by money but, they get

motivated by recognition, achievement, advancement,

instant feedbacks, moderate challenging work, etc. that

are primary motivators for the workers inspiration to

perform effectively (Fuhrmann, 2006).


• To identify the prominent factors given by Herzberg

which influences the level of motivation among

teachers in private universities.

• To assess the relationship between employees

remuneration and retention rate in private

universities.

• To assess the relationship between working

conditions and retention rate in private universities.

HYPOTHESES

Keeping in view the objectives, the following hypotheses

have been formulated for the study

H01

There is no significant difference between the means

of various hygiene and motivational factors among

the private university teachers.

H02

There is no direct relationship between salary and

retention rate of employees in private universities.

SCOPE OF THE STUDY

Delhi NCR is considered as an education hub for the

higher education. The people of these areas have more

resources and means for educating their children; hence,

there is a lot of potential for private universities as there

are very few government universities located in these areas.

Alwar district is an ideal district because it is very much

near to the capital of the country. Thus, it has better

connectivity, infrastructure and communication facilities

due to which most of the private universities are interested

to operate their business in this area.

Thus, NCR Region including Delhi and Alwar district

had been selected for the sample study. Many renowned

and reputed private universities like Amity University, ITM

University, Raffles University, NIIT etc. have been covered

for generating the responses. The selection of sample

private universities has done by using convenience

sampling method.

SAMPLING TECHNIQUE

Universe: Private Universities across India.


( 96 )( 96 )( 96 )( 96 )( 96 )

Sampling Unit: Sampling unit is limited to the Delhi NCR

and Alwar district of Rajasthan.

Sample Size: 191 employees (teaching) of various private

universities from the sample region.

Sampling Design: Convenience sampling is adopted on

the ground of availability, convenience to access and level

of participation.

Almost equal numbers of respondents have been taken in

the age group of 25-35, 35-45 and above 45 years across

the different income levels and with different educational

background and qualifications.

DATA COLLECTION

Since the primary objective of this research work is to

identify various factors of motivation among employees

in private universities. The present study is mainly based

on the primary data collected with the help of the

structured questionnaire and disguised interactive method.

All the data for the purpose of the study and deep analysis

had been collected during the field work. Preliminary data

had been collected from 10 randomly selected universities.

During the survey in these areas, the researchers took

interviews on the basis of prepared standard questionnaire

of about 20-25 persons in every university.

Primary Data: The structured questionnaire and disguised

interactive method were used to collect the primary data.

The questionnaire has both open-ended and closed-ended

questions.

Secondary Data: Books, Journals, Magazines, Newsletters

of the various universities and Internet.

DATA ANALYSIS AND INTERPRETATION

The responses were generated from 207 respondents. The

elimination of questionnaire was done for 16

questionnaires as responses were not duly filled. Thus,

the responses in respect of 191 respondents could be

finally taken as sample size. The collected data was put

on Likert Scale as follows- Strongly Agree- 5, Agree- 4,

Neutral-3, Disagree-2, Strongly Disagree- 1. Data has been

analysed using different statistical tools like Descriptive

Statistics, ANOVA & Correlation.

Table 1 : Analysis of various factors of motivation

among employees in private universities

S. No.

Hygiene Factors and Motivators

Mean Std. Dev.

Coefficient of Variance

1 Job Security 4.62 0.69 14.94

2 Salary 4.86 0.80 16.46 3 Quality of

Supervision 4.55 0.66 14.51

4 Working Condition

4.65 0.64 13.76

5 Organization's Policy &Administration

4.61 0.71 15.40

6 Interpersonal Relation

3.91 0.78 19.95

7 Personal Life 3.78 0.84 22.22

8 Autonomy & Responsibility

4.09 0.72 17.60

9 Growth and Advancement

4.32 0.88 20.37

10 Achievement 4.43 0.72 16.25

11 Work Itself 4.00 0.84 21.00

12 Recognition 4.03 0.89 22.08

Table 2 : ANOVA

ANOVA

SS Df Variance F P

Between 230.5483 11 25.6165

45.826 0.0000

Within 1151.664 2060 0.5591

Total 1382.212 2071

Table 1 & 2 shows the descriptive statistics and & ANOVA

results comparing the effects of various Hygiene and

Motivational factors on the employees in Private

Universities. The values of descriptive statistics show that

various factors of motivation explored by Herzberg in the

Two Factor theory are desirable at the workplace in private

universities. This statistics confirms that the hygiene

factors excluding Interpersonal Relationships and

Personal life are used as maintenance factors because

calculated values of mean are extremely high and

coefficient of variance are respectively low. Also the

statistics reveal that the motivational factors are equally

desired at a moderate rate.

The Analysis of variance (ANOVA) is asserting that the p-

value is <0.05. This is evidencing that null hypothesis is

rejected and alternative hypothesis is accepted. The f-value

is prominently greater than the table value which indicates

that there is a significant difference between the means of

mentioned groups.


( 97 )( 97 )( 97 )( 97 )( 97 )

Table 3 : Preference of Hygiene and Motivational

Factor

S.No Factors Frequencies of first preference

1 Hygiene 126

2 Motivational 65

Total 191

* Though the study was taken into consideration for 207

faculty members, but while analyzing the preferences of

hygiene and motivational factors only 191 responded to

the questionnaire where as 16 did not make their

preferences.

Table 4 : Relationship between salary and retention

rate of employees in private universities

R, R-squared value and S.E. Values

Correlation coefficient between salaries and tenure of job

0.9395

R-squared value 0.8826

Standard Error 0.4578

Table-4 depicts the coefficient of correlation between salary

and retention rate of employees in private universities in

the investigated population. Calculated coefficient of

correlation is 0.9395, which indicates that there is a high

degree of positive correlation between salary and retention

rate of employees. It further explains that salary plays an

important role in retaining and motivating the teaching

staff in the private universities. R-squared value which is

0.8826 also supports a proportionate linear relationship

between salary and retention rate. Therefore, second null

hypothesis is rejected, hence there is a direct relationship

between salary and retention rate of employees in private

universities.

FINDINGS AND CONCLUSION

The findings of this study state that hygiene factors such

as salary, job security, working conditions, quality of

supervision, organization’s policy & administration are

highly desirable and have a high degree of influence on

the teaching employees of private university. There is a

neutral view towards interpersonal relationship and

personal life in faculty members of private universities.

Motivational factors such as autonomy & responsibility,

growth and advancement, achievement and recognition

are strongly desirable at the work place. The hygiene

factors have a preference over the motivational factors by

the respondents.

There is a direct relationship between quantum of salaries

and tenure of retention. The retention rate of university

teachers in private universities is very low. Also the

teachers refrain from longer working hours and

unfavorable environment as large number of respondents

have given the above reasons for quitting the previous

colleges/ institutions.

The research also confirms the applicability of Herzberg’s

two factors theory in private universities. In fact, Herzberg

two factors theory is more relevant in current time as the

average respondents respond to the given option “strongly

desirable” in the questionnaire. The results show that the

two factor theory will be more applicable and will be of

great importance in this cut throat competitive world.

SUGGESTIONS

On the basis of the survey and the focus interviews during

the course of study, the researcher offers to make following

suggestions:

• Private universities should focus on maintaining

hygiene and motivational factors so that teachers

can work efficiently and can be able to contribute

towards the growth and development of private

universities.

• Policies regarding rewards and benefits to the

employees should be appropriate as there is a direct

relationship between salary and retention rate in

private universities.

• Private universities should keep in mind the factors

like working hours and conducive environment etc.

while formulating the curriculum of the institution.

• As the study depicts the low level of interpersonal

relationship and personal life activities. Therefore,

the university may give due importance to

interpersonal relationship while framing the policies

for the employees welfare.

REFERENCES

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( 98 )( 98 )( 98 )( 98 )( 98 )

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Prof. (Dr.) Bhagirath Singh

Vice Chancellor

Raffles University, Neemrana

Mr. Manoj Meet

Assistant Professor


Dr. Somya Choubey

Assistant Professor



( 99 )( 99 )( 99 )( 99 )( 99 )

Sr. No. Year Venue of the Conference President

1 1947 Lucknow University, Lucknow Shri. Padmpat Singhania, Kanpur

2 1948 Calcutta University, Calcutta Prof. M.K. Ghose, Allahabad Unvierstiy, Allahabad

3 1949 Aligarh Muslim Unversity, Aligarh Sir Chunnilai B. Meheta, Bombay

4 1950 Allahabad University, Allahabad Prof. B.N. Dasgupta, Lucknow

5 1951 Madras University, Madras Sir R.K.Shanmukham Chetty

6 1952 Delhi Universtiy, Delhi Sri. V.K.R.V. Rao, New Delhi

7 1953 Banaras Hindu Universtiy, Varanasi Sir Shri Ram, Delhi

8 1954 University of Rajasthan, Jaipur Dr. B.R. Mishra, Patna University, Patna

9 1955 Osmania University, Hyderabad Sri, B.L. Jalan, Calcutta

10 1956 Bihar University, Ranchi Dr. S.K. Basu, Calcutta

11 1957 Nagpur Universtiy, Nagpur Sri L.M. Biria, Calcutta

12 1958 Hubli, Dharwad Prof. A.Dasgupta, New Delhi

13 1959 Punjab Universtiy, Chandigarh Sir Jahangir Gandhi, Jamshedpur

14 1960 Jabalpur University, Jabalpur Dr. A.N. Agarwal, Allahabad University, Allahabad

15 1961 Andhra University, Valtair Shir Madan Mohan, R.ruiya, Bombay

16 1962 Mysore University, Mysore Sri K.K. Das, Andhra University, Waltair

17 1963 Agra University, Agra Shri P.L. Tandon, Bombay

18 1964 Poona University, Poona Dr. A. N. Agrawala, Allahabad

19 1965 Vallabhabhai Vidyapith Prof. M.C. Shukla, Delhi

20 1966 Jiwaji University, Gwalior Dr. K.C. Sarkar, Lucknow

21 1967 Gorakhpur University, Gorakhpur Marathwada University, Aurangobad

22 1968 Marathwada Univesity, Aurangabad Dr. R.L. Agarwal, Gorakhpur University, Gorakhpur

23 1969 Ernakulam Shri, R.B. Shah, Calcutta

24 1970 B.Y.K. College, Nasik Shri R.B.Shah, Calcutta

25 1971 Karnataka University, Dharwar Dr. C.B. Gupta, S.R. College, Delhi

26 1972 Burdwan University Shri Kedar Nath Modi, Modinagar

27 1973 Shivaji University, Kolhapur Shri M.R. Tokei, Nagpur

28 1974 Andhra University, Waltair Shri Rama Krishna Bajaj Bombay

29 1975 Banaras Hindu University, Varanasi Prof. K.V. Sivayya, Andhra University, Visakhapatnam

30 1976 Patna University, Patna Prof. S.M. Tiwari, B.H.U., Varanasi

31 1977 University of Rajasthan, Jaipur Dr. N.L. Nadda, Patna University , Patna

32 1978 Gokhale Educational Society, Nasik Prof. Om Prakash, Rajasthan University,

Jaipur

33 1979 Shivaji University, Kolhapur Dr. M.S. Gosavi , Nasik

34 1980 Birla Institute of Technology, Ranchi Prof. A.D. Shinde, Shivaji University, Kolhapur

35 1981 Burdwan University Dr. C.D. Singh, Bhagalpur University, Bhagalpur

36 1982 Ravenshaw College , Cuttack Dr. D.S. Ganguli, Burdwan University

37 1983 Mysore University, Mysore Prof. B.K. Mohanty, Bhubaneshwar

38 1984 L.N.Mithila University, Darbhanaga Prof. B.K. Muniramappa, Mysore University, Mysore

39 1985 Banaras Hindu University, Varanasi Prof. Gopal Lall, L.N. Mithila University, Darbhanga

40 1986 Kerala University, Trivendrum Prof. R.A. Singh, B.H.U., Varanasi

LIST OF PAST PRESIDENTS ICA

( 100 )( 100 )( 100 )( 100 )( 100 )

40 1986 Kerala University, Trivendrum Prof. R.A. Singh, B.H.U., Varanasi

41 1987 Allahabad University, Allahabad Prof. C.P.N. Nair, Trivendrum

42 1988 Birla Institute of Technology, Ranchi Prof. G.C. Agrawal, University of Allahabad, Allabahad

43 1989 University of Jammu, Jammu Prof. B.Narayan, B.I.T.Mesra, Ranchi

44 1990 Aligarh Muslim University, Aligarh Prof. N.S. Gupta , Jammu

45 1991 Bangalore University, Bangalore Prof. Sami Uddin, A.M.U., Aligarh

46 1992 M.D. University Rohtak Prof. K.hanumanthappa, Bangolore (in absence)

47 1993 Kurukshetra University, Kurukshetra Prof. L.N. Dahiya, M.D. University, Rohtak

48 1994 Kakatiya University, Warangal Prof. R.P. Hooda, Kurukshetra University, Kurukshetra

49 1995 University of Rajasthan, Jaipur Prof. A.Shankaraiah, Kakatiya University, Warangal

50 1996 Osmania University, Hyderabad Prof. R.N. Singh, V.C., University of Rajasthan, Jaipur Prof. B.P. Singh (Deemed President)

51 1997 Indian Institute of Business Management, Patna

Dr. D. Obul Reddy, Osmania University, Hyderabad

52 1998 L.N. Mithila University, Darbhanga Dr. U.K. Singh, L.L. B.M., Patna

53 1999 Dr. B.Ambedkar Marathwada University, Aurangabad

Prof. S.Akram, L.N. Mithila University, Darbhanga

54 2001 Aligarh Muslim University, Aligarh Prof. S.S. Mishra, Aurangabad

55 2002 M.L. Sukhadia University, Udaipur Prof. Mahfoozur Rehman, Aligarh

56 2003 KCES’s Institute of Management & Research, North Maharashtra

Prof. I.V.Trivedii, Udaipur University, Jalaon

57 2004 DAVV & Shri Gujarati Samaj MKHS Gujarati Girls College, Indore

Prof. S.G. Deshpande, Jalgaon

58 2005 Mahatama Gandhi Kashi Vidyapith Varanasi

Dr. Ramesh Mangal, Indore

59 2006 Andhra University, Visakhapatham Prof. M.B. Shukla, Mahatama Gandhi Kashi Vidyapith, Varanasi

60 2007 Osmania University, Hyderabad Dr L Venugopal Reddy, Andhra University, Visakhapatham

61 2008 Dhanwate National College, Nagpur Prof. Purushotam Rao, Osmania University, Hyderabad

62 2009 M D S University, Ajmer, Rajasthan Dr B.B.Taywade, Dhanwate National College, Nagpur

63 2010 Goa University, Goa Prof. Bhagirath Singh, M.D.S. University, Ajmer, Rajasthan.

64 2011 Pondicherry University, Pondicherry Prof. B Ramesh, Head & Dean, Goa University, Goa.

65 2012 K. P. B. Hinduja College, Mumbai Prof (Ms) Malabika Deo, Pondicherry University, Puducherry

66 2013 Bangalore University, Bangalore Dr T Shiware, Principal, K P B Hinduja College, Mumbai

67 2014 KIIT University, Bhubaneswar, Odisha Dr Ram Chander Gowda, Bangalore University,Bangalore.

68 2015 S.M. Patel Institute of Commerce, GLS Campus, Ahmedabad

Prof. Jayanta Kumar Parida, Utkal University, Bhubneshwar

Dr. Pushkarnath Professor, Deptt. of Commerce & Management, Gossner College, Ranchi-834008

Dr. Dharmendra K Tiwari Prof. & Dean ,PG Deptt.of Commerce, BKS University, Ara, Bihar

Dr. Sanjay Kr Sinha Head, Department of Financial Studies, VBS Purvanchal University, Jaunpur

Dr. S L Gupta Professor, Department of Management, Birla Institute of Technology, (Deemed University) Campus – Noida

Prof. H Venkateshwarlu Department of Commerce,Osmania University, Hyderabad - 500 007, Andhra Pradesh

Dr. S G Hundekar Professor, Department of Studies in Commerce, Karnatak University, Dharwad-580 003

Dr. T P Madhu Nair Dean, Faculty of Commerce,University of Mumbai, Principal, Nirmala Memorial Foundation College of Comm., Kandivali (East), Mumbai-400 101.

Prof. J P Sharma Department of Economic Administration and Financial Management, University of Rajasthan,Jaipur

Dr. Debabrata Mitra Professor, Department of Commmerce, University of North Bengal, PO. NBU, District Darjeeling-734013 (WB)

Dr. Ran Singh Dhaliwal Professor, School of Management Studies, Punjabi University, Patiala, Punjab

Dr. Sharada Gangwar Professor, Institute for Excellence in Higher Education, Bhopal

Dr. Shashank Bhushan Lall Associate Professor, Vanijya Mahavidyalay, Patna University, Patna

Prof. B. P. Saraswat Professor, Department of Commerce, MDS University, Ajmer

Dr. Sangale Babasaheb Rambhau Professor, BJS College, Wagholi, Pune

Prof. M. Jayappa RBANMS College, Bengaluru

Dr. Ramesh Agadi Professor of Management, Gulbarga University, Gulbarga

Dr. Gurcharan Singh Professor, School of Management Studies, Punjabi University Patiala – 147002, Punjab, India

Dr. Jasveen Kaur Assistant Professor, University Business School, Guru Nanak Dev University, Amritsar-143005

Prof. G P Prasain Department of Commerce, Manipur University,Canchipur, Imphal-795003, Manipur

Dr. Maheshwar Sahu Professor at P.G.Department of Commerce, Utkal University, Bhubaneswar

Dr. Laxman Kisan Karangale B B College, Lonar

Dr. S A Chintaman H K Commerce College, Ahmedabad

Prof. Indrasena Reddy Department of Commerce & Management, Kakatiya University, Warangal-506 009 (A.P).

Dr. M Shivalingegowda Associate Professor, Vidyavardhaka First Grade College,Sheshadri Iyer Road, Mysore-570 001.

Managing Trustee of ICA

Dr. Ajay Singh Associate Professor, Faculty of Commerce and Business, Delhi School of Economics, University of Delhi, Delhi

EXECUTIVE COMMITTEE MEMBERS FOR AICCth

68

Sessions Chairpersons Co-Chairpersons

I BEHAVIOURAL FINANCE : Dr. G. Raju Dr. K. Nirmala EMERGING DIMENSIONS Professor of Commerce, Assistant Professor School of Business Management Department of Commerce, & Legal Studies, University of Bangalore University, Kerala, Kariavattam P.O. Bengaluru 560001 Thiruvananthapuram 6950581, (M) 09481715304/09845415304 Kerala, India [email protected]. (M) 09496254542, [email protected]

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III SOCIAL MEDIA : Dr. A.M. Gurav Dr. Shubhro Michael Gomes HR INTERVENTIONS Professor, Department of Commerce Professor under Colombo Plan & Management, Shivaji University, Gaeddu College Of Business Studies, Vidyanagar, Kolhapur 416004 Royal University Of Bhutan, Gedu, Maharashtra. - 21007Chukha, Bhutan (M) 09850012545 975-16911457 (M) + (Bhutan) +91-9883445529 (India)[email protected]. 123Email: smgomes @gmail.com

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Seminar MAKE IN INDIA : Prof. K. Eresi Dr. Ashish J. Dave THE ROAD AHEAD Former Chairman and Dean Associate Professor Dept. of Commerce, Smt. C.C. Mahila Arts & Sheth Central College Campus, C.N. Commerce College Bangalore University, Visnagar 394315 Mahesana, Bangalore 560001. Gujarat. (M) 09980424926 (M) 09328078001 [email protected] [email protected].

Manubhai M. Shah Memorial Research Gold Medal (Two) EMPIRICAL RESEARCHES IN ENVIRONMENTAL ISSUES VIS-À-VIS INDUSTRILISATION Chairperson Co-Chairperson Dr. Ram Sable Dr. Dalbir Singh Kaushik Professor and Head, Dept. Associate Professor, of Commerce, Former Dean, Dept. of Commerce, Gaur Faculty of Commerce, S.N.D.T. Brahman (PG) College, Women's University, Rohtak, Haryana 124001. Mumbai 4000120. (M) 09017213579 (M) 09890012069, [email protected] [email protected]

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President Prof.Jayanta Kumar Parida, Utkal University, Bhubneshwar, 9437229465. [email protected]

Executive Dr.Ananth M. Deshmukh, Associate Professor, Dept. of Business Mgt., R. T. M. NagpurVice President University, Nagpur, 9823121458. [email protected]

Secretary Dr Balwinder Singh, Associate Professor, Dept of Commerce, Guru Nanak Dev University, Amritsar-143005, Punjab, 9417272232. [email protected]

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