Journal of Research - PIMT JRpimtjr.in/wp-content/uploads/2019/11/PIMT-Combined-File-11.2.pdf · INTRODUCTION Financial sector is the backbone of every country. Growth of financial

PIMT

Journal of Research

Volume-11, No.-2 (January to June) 2019 ISSN No: 2278-7925 UGC Care Listed Journal

PATRONS

Sh. Naresh Aggarwal, Chairman

Sh. Raj Kumar Goyal, Secretary

Sh. Pawan Sachdeva, President

EDITOR –IN- CHIEF

Dr. Manisha Gupta, Director

Published By

Punjab Institute of Management & Technology

(Estd. In 1997, Approved by AICTE, New Delhi, Affiliated to IKG PTU, Jalandhar) (Near GPS, Mandi Gobindgarh) Vill. Alour, Khanna -141401, Distt, Ludhiana, Punjab, India

PUNJAB INSTITUTE OF MANAGEMENT & TECHNJOLOGY

(Estd. In 1997, Approved by AICTE, New Delhi, Affiliated to IKG PTU, Jalandhar) (Near GPS, Mandi Gobindgarh) Vill. Alour, Khanna -141401, Distt, Ludhiana, Punjab, India

AIMS AND SCOPE

The PIMT Journal of Research (PIMT JR), a peer-reviewed refereed journal, started in March, 2008 is the half yearly

publication of the Punjab Institute of Management and Technology, Khanna. The main aim of this journal is to

disseminate knowledge and information in the various functional areas of Business, Management, Economics, IT and

Commerce. The journal focuses on pure empirical, applied and interdisciplinary research in different areas. The

journal is intended to provide forum for debate and deliberation for academics, policy planners, and research students

of MBA and MCA programs. The PIMT Journal of Research publishes articles, research papers, abstract of doctoral

dissertations, book reviews, case studies, short communications and bibliography in the main areas of business

management and information technology or allied areas.

EDITORIAL BOARD ISSN No: 2278-7925

PATRONS

Sh. Naresh Aggarwal, Chairman

Sh. Raj Kumar Goyal, Secretary

Sh. Pawan Sachdeva, President

EDITOR –IN- CHIEF

Dr. Manisha Gupta, Director

EDITORIAL TEAM

CMA (Dr.) Rajni Bala, Editor

Dr. Neha Mahajan , Co-Editor

EDITORIAL ADVISORY BOARD

Dr. Rajib Doogar, University of ILLINOIS, USA

Dr. Jeremy Cripps, Heidelberg College, Ohio, USA

Dr. Ravi Sen, Texas Ad M University, USA

Dr. Mahesh Joshi, RMIT University, Melbourne, Australia

Dr. Revti Raman, University of Auckland, Newzeeland

Dr. Khwaja Amjad Saeed, Pro Vice- Chancellor (Retd.), University of Punjab, Lahore, Pakistan

Prof. H.L.Verma , Guru Jambheshwar University of Sciences & Technology, Hissar

Prof. G.S Batra, Punjabi University, Patiala

Prof. R.K.Mittal, GGS Indraprastha University, Delhi

Prof. Ajay K.Rajan, MD University, Rohtak

Prof. D.D. Arora, Kurushetra University, Kurushetra

Prof. Raghbir Singh, GND University, Amritsar

Prof. Yogesh Singh, GGS Indrapstha University, Delhi

Prof. S.K. Chadha, Punjab University, Chandigarh

Prof. M.K. Jain, Kurushetra University, Kurushetra

Prof. P.K Sharma, Director, Kota Open University, Kota (Rj.)

Prof. D.P.S. Verma (Retd.), Delhi University, Delhi

Prof. S.K. Singla, Director, GNA- IMT, Phagwara

Prof. S.L.Gupta, Director, Birla Institute of Technology, Mesra, Ranchi

Dr. Nawab Ali Khan, EX-Dean, Faculty of Commerce, Aligarh Muslim University

Dr. Pooja Mehta, Assistant Professor, IKG PTU, Kapurthala

Dr. Neena Seth Pajni, Principal, GPC, Alour Khanna

Dr. K.K Sharma, Associate Professor, A.S College Khanna

Dr. S.K Mishra, Registrar & Head –Centre of Continuing Education, Dr. B.R Ambedkar National Institute of Technology,

Jalandhar

© 2019.All rights reserved with Punjab Institute of Management & Technology, Vill. Alour, Khanna, Distt. Ludhiana, Punjab, India

Published by Dr. Manisha Gupta, on behalf of Punjab Institute of Management & Technology, Vill. Alour, Khanna Distt. Ludhiana,

Printed by National Press Associates, New Delhi

From the Editor’s Desk

I am pleased to place before the readers this issue (Vol-11, No.2) of PIMT Journal of Research (UGC care

listed Journal), a publication of Punjab Institute of Management and Technology, Village Alour, Khanna.

The response from the contributors of research articles has been overwhelming. The PIMT Journal of

Research presents an academically proficient blending of research articles, short communications, book

reviews and doctoral dissertation abstracts. The significance of management and information technology has

become very well founded all over the world. These fields are witnessing rapid challenges and changes in

the face of globalization forcing researchers, academicians and practicing managers to keep them updated on

the latest advances in the field of Management and IT. To promote exchange of ideas among the scholars

and practicing managers in the field, PIMT has launched the PIMT Journal of Research. The Journal reflects

a keen interest and sustained efforts of researchers, academicians and professionals who have covered wide

spectrum of contemporary issues in the field of Management, Information Technology and its allied areas.

We appreciate the efforts put in by the researchers in terms of quality research work done by them and

versatility in the methodology adopted in their research work.

We also express our gratitude to the reviewers of the various articles and contributors of the doctoral

dissertation abstracts for giving their valuables contributions, comments and the suggestions for the

enrichment of this journal. I thank and look forward to their continued association and support to PIMT

Journal of Research.

Our commitment to the cause of promoting high quality research work in all areas of Business Management

and Information Technology will contribute to enlighten our readers in the times to come.

The Chairman Sh. Naresh Aggarwal, Secretary Sh. Raj Kumar Goyal, President Sh. Pawan Sachdeva and

other members of Governing Council of the Institute have taken the keen interest in this academic endeavor.

I am extremely grateful to them for their continued guidance and support.

Dr. Manisha Gupta

Editor-in-Chief

PIMT, Alour, Khanna

CONTENTS

HOUSEHOLD SAVING AND INVESTMENT BEHAVIOUR: A COMPARISON BETWEEN BUSINESS CLASS AND SERVICE CLASS IN LUDHIANA Dr. Pallavi Dawra 1

CURRENT ACCOUNT DEFICIT OF INDIA: DURING PRE AND POST GLOBAL FINANCIAL CRISES Kiranjot Kaur, Dr. B.S.Bhatia 6

GROWTH PROSPECTS IN EQUITY DERIVATIVE MARKET IN INDIA Dr. Ruchika Jain 13

INSTITUTION APPRECIATION AND CRITICISM: THE CASE OF ETHIOPIAN UNIVERSITIES Endris Nuru Zeleke, Dr. Bharat Bhushan Singla 24

FINTECH (FINANCIAL TECHNOLOGY): A BOON FOR FINANCIAL SECTOR CMA (Dr.) Rajni Bala, CA (Dr.) Sanjeev Bansal, Dr. Anil Angrish 30

A DROWNING SPEED BOAT "THE INDIAN GROWTH STORY" Dr. Monika Chopra 34

A REVIEW STUDY ON INHIBITING FACTORS OF IMPULSE BUYING BEHAVIOR OF ONLINE SHOPPING CUSTOMERS Amanpreet, Dr. Anupama Bains 39

A STUDY OF WELFARE MEASURES ON EMPLOYEE’S MORALE Dr. Gopal Krishan, Veeni 43

AGE AND GENDER EQUALITY IN AUTOMOBILES Dr.K.K.Sharma, Dr. Yashmin Sofat 49

A STUDY ON THE RELATIONSHIP BETWEEN COMPANY CHARACTERISTICS AND EXTENT OF DISCLOSURE IN SMALL-CAP COMPANIES Madhur Joshi, Dr. B S Bhatia 59

A STUDY ON AWARENESS LEVEL OF BANK EMPLOYEES ON SECURITIZATION OF BANKING LOANS IN INDIA Reena Rani, Dr. Manisha Gupta, James Kanda 66

A STUDY OF ECONOMIC AND LEGAL ASPECT OF BITCOIN IN INDIA Mankaj Mehta 73

JOB SATISFACTION OF EMPLOYEES IN SHREE GANESH EDIBLE PVT. LTD. Ritika Sharma 78

IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS: A CASE OF RUSSIAN ECONOMY Dr. Robin Inderpal Singh, CA (Dr.) Sanjeev K. Bansal, Dr. Sandeep K. Bansal 84

TO STUDY THE ROLE OF SPIRITUAL INTELLIGENCE AT WORK PLACE A REVIEW Dr. B.B. Singla, Damanpreet Kaur 90

INTERDEPENDENCE OF PERFORMANCE MANAGEMENT SYSTEM AND EMPLOYEE ENGAGEMENT Ramneek Kaur, Deepika Singla 96

A STUDY ON EFFECT OF REWARD SYSTEM ON THE MOTIVATION LEVEL OF EMPLOYEES Dalbir Kaur 107

IMPACT OF PERFORMANCE APPRAISAL ON EMPLOYEE’S PRODUCTIVITY Ankita 111

A STUDY ON ABSENTEEISM OF WORKERS Manpreet Kaur 115

EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON SCALING AND PERFORMANCE OF SHGs OF UDAIPUR (RAJASTHAN) Dr. Ashish Adholiya, Dr. Santosh Kumar C.S, Shilpa Adholiya 119

PIMT Journal of Research

Volume-11, No.-2 (January to June) 2019 UGC Care Listed Journal

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HOUSEHOLD SAVING AND INVESTMENT BEHAVIOUR:

A COMPARISON BETWEEN BUSINESS CLASS AND SERVICE CLASS IN

LUDHIANA

Dr. Pallavi Dawra*

*Faculty Department of Business Management, PCTE, Ludhiana, Punjab, India

ABSTRACT

This Research studies the saving behavior and investment behavior of the business class and service class

households in Ludhiana (Punjab). It is a comparative study between business class and service class

households. The study focus is on their saving behavior, Motives of saving, Alternatives used to keep saving,

their investment trend in various investment alternatives, factors considered by them at the time of

investment and their source of advice while taking any investment decision. The purpose of the study is to

understand their saving and investment behavior, compare their attitude towards different investment

alternatives and to compare their investment preferences. The study was conducted in Ludhiana (Punjab), A

questionnaire was used to collect all the data about saving and investment behavior of business and service

class households. The results have shown, there is no significant difference between the motives of saving of

business class and service class. There is not much difference between the investment choices of business

class households and service class households. However, their ranking to various investment options differs.

The majority of respondents both in business class and service class do not believe in speculation.

Keywords: Motives, Investment, Behaviour.

INTRODUCTION

Financial sector is the backbone of every country.

Growth of financial sector depends on savings and

investments rate of that economy.

Saving - Savings means the act of refraining from

spending one’s income on consumption. The part of the

income, which is unspent, is called savings.

Saving Behavior – Saving behavior depicts how

people save, it includes their saving needs and

motives. Saving behavior of a person depends on

factors like age, education, family size, asset

ownership, Stage in life cycle, employment

status etc.

Investment – Savings can be idle or active, when

savings are canalized into risk bearing avenues, it

is called investment.

Investment Behavior - Investment avenues for an

individual or family or household are many,

generally known as instruments. The preference

shown by an investor in choosing a particular

instrument is called investment behavior. The

determinants of investment behavior are

sociological and psychological factors.

Sociological factors – Culture, sub culture, social

classes and reference groups

Psychological factors – Personality, attitude,

beliefs and values

Purpose of investment can be related with saving

objective. Each individual investor selects the investment

option for certain time period looking at their personal

financial goals. Investment behavior of an individual

investor reveals how he/she wants to allocate the surplus

financial resources to various instruments for investment

available.

FACTORS CONSIDERED WHILE MAKING AN

INVESTMENT DECISION

I. Risk Tolerance

II. Age

III. Investment objective

IV. Financial literacy

INVESTMENT ALTERNATIVES AVAILABLE IN

INDIA

A. Financial Assets – These do not have physical

presence; it derives its value from contractual

rights and ownership claims. For example, Fixed

deposit, Equity, Insurance, Provident Fund,

Mutual Fund, Pension fund etc.

B. Physical Assets – These have physical presence.

For example, Real estate, Gold, Diamond,

Platinum etc.

REVIEW OF LITERATURE

Syed et. Al, (2017) concluded in their study that

dependency ratio affects the household savings. So, more

employment opportunities should be created to eliminate



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its negative impact on saving. Household finance

committee report by RBI (2017) has found that the

average Indian household holds 84% of its wealth in real

estate, 11% in gold and 5% in financial assets. Business

Standard (2017) have mentioned in their report that

people are shifting their investments from unproductive

assets like gold to other alternatives since demonetization

in November 2016. Samantaraya and Patra (2014)

mentioned in their study that GDP has favorable effect

on household saving, while inflation puts a negative

impact on it. Chaudhary (2013) has mentioned in his

study that male investors are more satisfied after

investing in shares than mutual funds. Bhushan and

Medury (2013) mentioned in their study that employees

are highly satisfied after investing in fixed deposit,

recurring deposit and life insurance. Samudra and

Burghate (2012) have concluded in their study that not

only income has immediate bearing on investment

choices but also the age group to which the head of the

family belongs, Psychology plays an important role in

investment decisions of the household’s risk-taking

ability. Hira (2012) has found out in his study how,

through financial education, we can improve the

economic performance of individuals in the economy

financial education has to include discussion of attitudes,

values and beliefs that enable people to make financial

decisions that promote long term security for families

and communities. Achar (2012) has mentioned in his

study that apart from risk and return, factors like

marketability, initial investment, tax benefit, loan facility,

institution, past experience, age and needs, social

conditions, and liquidity have great influence on

investment decision. Geetha and Ramesh (2011) have

mentioned in their study that most of the people were not

aware about all the investment options available and they

were not aware of equity, stock market and debentures.

National Council of Applied Economic Research (2011)

has found out in its study that the percentage of investors

in urban area is 20 per cent while in rural areas it is 6 per

cent. Kibet et.al, (2009) mentioned in their study of

household saving determinants in rural areas of Kenya,

that household income, nature of businessmen

occupation, gender, and education level of household

head positively influenced the saving behavior of the

rural households while credit access, age, and

dependency ratio negatively influence household saving.

Benartzi and Thaler (2007) have found out in their study

that Saving for retirement is a difficult problem, and most

employees have little training on it. They are slow to join

advantageous plans; they make infrequent changes; and

they adopt naive diversification strategies. In short, they

need all the help they can get.

OBJECTIVES OF THE STUDY

1. To understand savings and investment behavior

of households in Ludhiana.

2. To compare the attitude of business class and

service class households towards different type

of investment alternatives

3. To compare preference of business class and

service class towards different investment

alternatives.

RESEARCH METHODOLOGY

In order to identify and analyze the saving and

investment behavior of business class and service class

household, a questionnaire has been used for data

collection. In questionnaire various investment

alternatives like post office savings, life insurance,

commercial banks, government securities, Gold, mutual

funds, Real estate etc. have been mentioned and

households have been asked for their preferred

investment alternative and their attitude towards different

types of saving and investment instruments. A sample of

150 respondents has been taken in this study. T test has

been used to determine whether there is statistically

significant difference between motives of savings

between service class and business class.

Hypothesis for Testing

H0: There is no significant difference between motives

of saving of business class and service class

H1: There is significant difference between motives of

saving of business class and service class

Findings of the study

The survey data has shown that there is no significant

difference between the saving motives of business class

and service class in Ludhiana. Following table justify the

same on the basis of T- test.



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Table No.1 Showing Results of T Test to Study Difference between Motives of Savings amongst Service Class

and Business Class

Independent Samples Test

Levene's Test for

Equality of Variances

T test for equality of means

Sr. No. F Sig. t df Sig. (2-tailed)

1 Desire to build reserve for

contingencies

Equal variances assumed 2.896 0.091 -0.888 148 0.376

2 Your desire for future

needs

Equal variances assumed 0.022 0.883 0.712 148 0.477

3 Desire to enjoy enlarged

future income


4 Desire to enjoy

independence and power to

do things


5 Desire to meet gradually

increasing expenses


6 Desire to spend less Equal variances assumed 2.728 0.101 -1.049 148 0.296

7 Desire to pass fortune to

next generation


8 Desire to carry out

speculation business


Table No.2 Showing Acceptance and Rejection of Null Hypothesis for different Motives of Savings

Serial

no.

Null hypothesis P value Results

H01 There is no significant difference between business class and service class’ saving

motive of” Desire to build reserve for contingencies” .376

ACCEPTED


motive of” Desire for future needs”

.477 ACCEPTED


motive of” Desire to enjoy enlarged future income” .182

ACCEPTED


motive of” Desire to enjoy independence and power to do things” .328

ACCEPTED


motive of” Desire to meet gradually increasing expenses”

.959 ACCEPTED


motive of” Desire to spend less”

.296 ACCEPTED


motive of” Desire to pass fortune to next generation”

.249 ACCEPTED


motive of” Desire to carry out speculation business”

.804 ACCEPTED

Majority of the respondents whether from

business class or service consider factors like

safety, Time, Risk, Regular return, premature

withdrawal very important at the time of

investment.



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Neither business class nor service class consider

carrying out speculation business as a motive of

their saving. Majority of business class

households spend first and save the rest of their

income, whereas service class household majorly

save regularly and put money aside each month.

As far as different investment options are

concerned both classes have different preference.

Following table is showing ranking given to

different investment options.

Table 3 Showing Ranking of Investment Options by Business class and Service class

Investment Alternatives Business class Service class

1. Bank 1st most preferred investment option 1

st most preferred investment option

2. Real Estate 2nd most preferred investment option 7th most preferred investment option

3. Gold 3rd most preferred investment option 6th most preferred investment option

4. Government Securities 4th most preferred investment option 2nd most preferred investment option

5. Insurance 5th most preferred investment option 5th most preferred investment option

6. Post Office 6th most preferred investment option 4th most preferred investment option

7. Mutual funds 7th most preferred investment option 3rd most preferred investment option

8. Equity 8th most preferred investment option 8th most preferred investment option

Respondents have ranked bank their most

preferred investment alternative in both business

class as well as in service class. 67% business

class respondents keep their savings in real

estate which shows popularity of this investment

alternative amongst them. 65% of the service

class respondents save their money in insurance.

Post offices are becoming least favorite of both

business class and service class households for

investment. Investment in equity is more popular

among service class households as comparison to

business class households. Real estate

investment is on rising spree among business

class households and on a declining trend among

service class households. Investment in gold has

been seen declining in both business and service

class.

Mutual fund investments are on a rising trend

amongst service class households. Majorly, both

business class and service class respondents take

advice from their spouse and family members

before making any investment decision.

Respondents strongly agree that better servicing

of investors can help to attract more investors

towards investment alternatives. Majority of

respondents agree that bank is a better place of

investment than other investment avenues. They

also strongly agree that household savings can

help the economic development of country.

CONCLUSION & RECOMMENDATIONS

The investors need to be properly taught about various

equity investment and mutual fund investments. The

awareness regarding these avenues of investment should

be created in city of Ludhiana and a positive attitude of

investors has to be made regarding these investment

options. The penetration of financial advisors has to be

increased in the city to tap more investors for making

investments in different avenues. Mutual fund schemes

can be offered to investors according to their investment

objectives considering their safety, risk and premature

withdrawal needs. A great service experience has to be

given to investors in order to attract more investors, so

financial companies should focus on good experience of

investors. People should be encouraged to save more by

showing them the long-term benefit of saving. They

should be persuaded to invest more in different and better

investment alternatives. In this way a boost can be given

to household saving and investments.

There is not much difference between the investment

choices of business class households and service class

households. However, their ranking to various

investment options differ. The majority of respondents

both in business class and service class have disagree on

carrying speculation business being called their motive of

saving, which shows the risk aversion and reason for

their least preference for equity investments.



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REFERENCES

1. Achar, A. (2012). Saving and Investment Behavior of

teachers-An empirical study. International Journal of

Physical and Social Sciences, 2(8), 263-286.

2. Amaresh Samantaraya and Suresh Kumar Patra -

Determinants of Household Savings in India: An Empirical

Analysis Using ARDL Approach

https://www.hindawi.com/journals/ecri/2014/454675/

3. Benartzi, S., & Thaler, R. (2007). Heuristics and biases in

retirement savings behavior. Journal of Economic

perspectives, 21(3), 81-104.

4. Bhushan, P., & Medury, Y. (2013). Gender differences in

investment behaviour among employees. Asian Journal of

research in Business Economics and management, 3(12),

147.

5. Browning, M. (2000). The saving behaviour of a two‐person

household. scandinavian Journal of Economics, 102(2),

235-251.

6. Business standard- http://compete.org.in/indias-evolving-

household-savings/

7. Chaudhary, R. (2013). Investment Behaviour of Engineers

towards Mutual Funds: An Analysis of Gender

Differences. Journal of Social Science and

Humanities, 21(1), 305-314.

8. Geetha, N., & Ramesh, M. (2011). A study on people’s

preferences in Investment Behavior. International Journal

of Engineering and Management Research, 1(6), 285-306.

9. Guariglia, A. (2003). Saving behaviour and earnings

uncertainty: Evidence from the British Household Panel

Survey. In Family, Household and Work (pp. 135-150).

Springer, Berlin, Heidelberg.

10. Hira, T. K. (2012). Promoting sustainable financial

behaviour: implications for education and

research. International Journal of Consumer Studies, 36(5),

502-507.

11. Kibet, L. K., Mutai, B. K., Ouma, D. E., Ouma, S. A., &

Owuor, G. (2009). Determinants of household saving: Case

study of smallholder farmers, entrepreneurs and teachers in

rural areas of Kenya. Journal of Development and

Agricultural Economics, 1(7), 137-143.

12. Live Mint

https://www.livemint.com/Opinion/gfmAEHElVpmjl4xLeZ

rPCI/Our-changing-saving-habits.html

13. Mahambare, V., & Balasubramanyam, V. N. (2000).

Liberalization and savings in developing countries: the case

of India. DISCUSSION PAPER-LANCASTER UNIVERSITY

MANAGEMENT SCHOOL EC.

14. Maini, N., & Sharma, S. (2009). Capital Market Reforms

and Investors’ Satisfaction. The Indian Journal of

Commerce, 62(3), 1.

15. National council of applied economic research- Household

saving and investment report : Evidence from NCAER

household survey- July 2011

16. Prinsloo, J. W. (2000). The saving behavior of the South

African economy. South African Reserve Bank.

17. Report by Household finance committee of RBI (2017)

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/HFC

RA28D0415E2144A009112DD314ECF5C07.PDF

18. Reserve Bank of India report on household saving -

https://www.rbi.org.in/Scripts/PublicationReportDetails.asp

x?ID=662

19. Samudra, A., & Burghate, M. A. (2012). A Study on

investment behaviour of middle class households in

Nagpur. International Journal of Social Sciences and

Interdisciplinary Research, 1(5), 43-54.

20. Scroll.in https://scroll.in/article/852249/indian-households-

are-investing-ever-more-in-stocks-equity-and-mutual-funds-

is-it-sensible

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Household Saving and Investment Behavior among

Different Income Groups in Urban Area of District

Peshawar. iBusiness, 9(04), 188.



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CURRENT ACCOUNT DEFICIT OF INDIA: DURING PRE AND POST GLOBAL

FINANCIAL CRISES

Kiranjot Kaur*, Dr. B.S.Bhatia

**

*Research scholar, RIMT University, Mandi Gobindgarh, Punjab, India

**Pro Vice-Chancellor, RIMT University, Mandi Gobindgarh, Punjab, India

ABSTRACT

BOP has been an important determinant of the economic position of India as it gives the basis of international

transactions and investments. For a growing economy such as India, a persistent deficit in the current account

section of BOP may have an adverse impact on the economy. The long-time negative growth decreases the

economic growth impacting the exports and productive investments impacting employment and currency value of

the domestic economy. This research aims to examine the relationship between current account deficit and

external debt by studying their trends before and after global financial crises. As well as to determine the

significance of long term-short term debt, inflation and foreign exchange rates on current account deficit.

Key Words: Foreign exchange rate, Inflation, External Debt, Current account deficit multiple regression analysis

INTRODUCTION

The current account is one of the two components in the

balance of payment and it is the sum of the balance of

trade. It is calculated by subtracting the net value of

export of the country from the import value of the goods

and services. It includes the interest and dividends

received by the country as well. A deficit in the current

account is thus accountable for a trade deficit in the

country (Srikumar, 2013a). Current account deficit as

defined by (Şahin & Mucuk, 2014), is “the measurement

of a country’s trade in which the value of goods and

services it imports exceeds the value of goods and

services it exports” (p. 321).

The formula for current account calculation is:

Current account =change in net official reserves - private

capital flows

The current account deficit is thus dependent on three

factors:

Balance of Trade

Earning from Investment

Cash Transfers Balance of Trade

For a growing economy such as India, a persistent deficit

in the current account section of BOP may have an

adverse impact on the economy. The trends observed in

the Current Account Deficits (CAD) of India over the

decades have been studied by many researchers and

organizations. Current Account of India, declared by the

Reserve Bank of India, shows an average of Rs- 8611

croresfrom 1949 to 2015, reached the highest at Rs

33820.672 croresin Q1 of 2004 and has reached an all-

time low of Rs- 152669.23 crores in Q4 of 2012 (Trading

Economics, 2016). As of Q2 of 2015, the CAD showed

sequential increase to Rs 50143 crores(representing 1.6%

of its GDP), owing to decrease in its trade deficits (as

compared to previous year) of RS 228663.6 crores as

well as marginal improvement in net invisibles.

Furthermore, the Balance of Payments (BoP) in

September quarters stayed in the negative territory due to

drawdown from reserves, but economists have predicted

positive trend for BoP in first half of 2015-2016 with an

accretion of Rs 64808.4 croresto foreign exchange

reserves (Business Standard, 2015).


The study of (Aristovnik, 2006a) focused upon the issue

of excessive external imbalances within the transition

countries. The findings of the study indicated that there

exist a positive and significant relationship between the

external debt and current account balance for selected

European countries. The study applied generalized

method of moments (GMM) to investigate the

relationship. It was found that a 1% point increase in

total external debt led to 0.02-0.04 % point increase in

current account balance in the next year.

(Georgescu, 2007) studied the relationship between CAD

and external debt in Romania using trend analysis for the

period 2003-2007. The study found that high current

account deficit can lead to high external debt. This could

further result in higher risks for sustainability of a

country’s financial position. It was suggested that the

main cause of current account deficit was the trade

balance deficit.



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The study of (Agarwal & Gangal, 2015) examined the

long run and short run causality relationship between

external debts, foreign direct investment and current

account balance in reference to India from 2000-01 to

2012-13. The analysis was done by using Granger

causality and Vector Error Correction models (VECM).

It was assessed that selected variables were integrated of

order 1 that isI(1). Results of VECM models showed that

there was only long run causality relationship between

external debts and current account balance but not in the

short run.

(Karabulut & Şahbaz, 2016) assessed the effect of

exchange rate on current account balance in five

economies, that of Brazil, Turkey, Indonesia, India and

South Africa. The time period used for the analysis was

different for the five countries. It was 1991Q1 – 2016Q1

for Brazil; for Turkey, data was taken for 1987Q1 –

2016Q1; for India, 2004Q1 – 2015Q2; for Indonesia

1990Q1 – 2015Q3 data was considered and for South

Africa the dataset included data for 1980Q1 – 2016Q1.

The authors applied structural VAR (SVAR) model for

the analysis. It was found that an increase in real

exchange rate (depreciation in national currency) led to

decline in current account deficit in case of Brazil,

Turkey and Indonesia whereas there was no relation

found between these two variables in case of India and

South Africa

(Homaifar & Salimullah, 2016)studied factors affecting

U.S. current account deficit empirically by using

quarterly data from January 1973 to April 2013. For the

analysis, the study conducted ordinary least square (OLS)

coefficients, Auto Regressive Moving Average (ARMA)

model, CUSUM test and Quandt Likelihood Ratio (QLR)

test. Findings suggested that increase in GDP growth

rate, inflation rate and a decrease in the interest rate

caused the country's imports to exceed exports which

ultimately led to increase in trade deficit. Moreover,

weightedU.S. dollar index as a measure of exchange rate

did not have any major impact on the CAD.

In a recent empirical study, (Ousseini, Hu, & Aboubacar,

2017) focused on the determinants that impacted current

account balance for West African Economic and

Monetary Union (WAEMU) countries from 1980 to

2013. The study adopted VAR and Granger causality test

for the analysis. It was found that money supply (M2),

real exchange rate, income, inflation, investment, and

house-hold consumption expenditure had an effect on

trade and current account balance.

RESEARCH GAP

The existing literature reveals that there exists a positive

and significant relationship between current account

deficit and external debt and on the other hand, one study

reveals only long run causality relationship between

these two variables. The existing literature further depicts

the significant relation between real exchange rate and

inflation on current account deficit. Whereas, one study

rules out the impact of weighted U.S dollar on CAD. But,

there is lack of research comparing the movement of

external debt and current account balance in two different

phases of developing economy and on the impact of

foreign currencies on CAD of leading trade partners of

India.

RATIONALE FOR THE STUDY

Current account balance is relevant for a country from

macroeconomic policy perspectives. Therefore, it is

important to study the reasons behind the current account

deficit. The other reason behind choosing the study of

current account deficit is due other macroeconomic

changes in around the world. Firstly in the global world

has seen the period of currency depreciation. The

economic slowdown in China, (the world second largest

economy), the increase in the interest rate by the Federal

bank in US, almost after a decade, has led to the

depreciation of the currency such as Chinese Yuan , Euro

along with the Indian Rupee. Thirdly the international

price of the crude oil has been continuously declining

which due to the slowdown and the oversupply by the

OPEC countries, which has significantly affected on the

Indian current account balance. This along with the

research gap as mentioned above provide the rationale of

this study which aims to analyze the impact of macro

economic variables on current account balance and its

trends in two different periods. For, policy makers, this

study will come up with appropriate policies so that

current account deficit in the country can be controlled.

OBJECTIVES OF THE PAPER

To analyze the trends of current account balance

and external debt during pre and post global

financial crises period.

To study the growth and composition of long

term and short term debt.

To examine the impact of long term-short term

debt, foreign exchange rates and inflation on

current account balance.

To suggest the policies to manage current

account deficit.

SCOPE OF THE STUDY

The issue of current account deficit is a contentious and

debatable topic in the context of Indian economy. Both a

persistent high or low CAD impacts the growth and the

flow of funds in the economy adversely. However, when

the CAD is maintained within a threshold, the deficit can

be used to provide the required boost to the economy.

CAD is essential for the growth of the

economy.Conversely, if it goes beyond the threshold, the

economy would not be able to auto-correct and would



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8 | P a g e

require the assistant from the government in form of

corrective policies. With this scenario, the current

research aimed to study the movement of current account

deficit and external debt in pre and post global financial

crises period. During this period growth and composition

of long term and short term debt is examined and impact

of macroeconomic variables on current account deficit is

also determined. The study covers the all the years of pre

and post global financial crises period. Therefore, it takes

into account significant global and national economic

events therein such as global financial crisis of 2008-

2009, sovereign debt crises.


a) Sources of Data

This study is entirely based on the secondary data which

has been collected from the various sources such as the

Data base of Reserve Bank of India, Various government

sources and Published journals and articles.

b) Selection of Time period

The study covers the time period of 15 years. The entire

time period has been divided into two phases. The first

phase is from 2000 – 2007 which has been taken as the

pre- financial crisis period and the second phase is after

2007 – 2015 which has been taken as the post-financial

crisis period. The justification of dividing the period in

two phases is to get the clear idea that how the trends of

current account balance and external debt changed over

the two phases.

c) Data Analysis Procedure

The study intends to analyze the trends of current account

deficit and external debt during pre and post global

financial crises period.For these purpose simple

statistical tools such as trend analysis is used. It is

analytical research in nature.Similarly to examine the

impact of external debt and foreign exchange rates and

inflation on current account balance, the multiple

regression analysis has been conductedby taking the

current account balance as the dependent variable.The

independent variables used were External debt (short

term debt and long term debt) and major foreign

exchange reserves (US dollar, Euro and Yen) and

Inflation

ANALYSIS

d) Trend Analysis

Current account deficit and External debt

The figure below shows the trend of the India’s current

account balance and the total external debt (both the short

term and the long term debt). The current account surplus

during this period is due to huge amount of the capital

inflow in the country through Foreign Direct Investment

and the huge amount of foreign reserve. However after

2007 the current account deficit has been increasing. The

main reason behind the increasing current account deficit

in India is due to the huge import of the gold and other

metals by the Indian consumer and also due to

continuous decline in Indian exports.

Figure 1: Trend Analysis of Current Account Balance and total external debt of India during 2000-2015 (in Rs.

Crore)

Similarly the external debt of India has been

continuously increasing for the entire study period. The

total external debt which was around Rs163001 crores in

1991 has increased to Rs 2978666 crores in 2015. In the

recent time the major increase in the external debt is due

to the external commercial borrowing and the increase in

the NRI deposits. However the Debt-GDP (Gross

Domestic Product) ratio in the recent years has increased.

Current account deficit and External debt before and

after the period of financial crises

One of the objectives of this paper is to examine the

current account balance of India in two different periods.

The first period is from 2000- 2007 which is the period

before the financial crisis. As shown in the figure below

during the pre-crisis period the current account was in

surplus after 2001-2002 till the 2004-2005. After 2005

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Rs crore

Year

Current account deficit and

External debt



PP: 6-12 ISSN No: 2278-7925

9 | P a g e

the current account again runs into deficit and the deficit

continue to decline. On the other hand the total external

debts of India continue to increase. The External debt

was not increasing on the period when the current

account was in surplus. However, the external debt start

rising sharply after 2004- 2005.

Figure 2: Trend Analysis of Current account balance and total external debt of India(2000- 2007) (in Rs. Crore)

The second period is from 2007 -2015 which includes the

global financial crisis of 2007-08. The trend analysis of

the current account and the external debt in this time

period has been shown in the figure below. In this period

the current account deficit and the total external debt both

increases sharply. Only after the 2013 the current account

deficit shows some improvement and there are various

reasons which led to reduction in the current account

deficit.

Figure 3: Trend analysis of Total external debt and Current account balance of India (2007 – 2015) (in Rs. Crore)

The government has increased the tariff on gold import

which has led to a decrease in the import of gold. The

other reason behind the slight improvement in the current

account deficit in 2014-15 is the increase in exports

(because of the currency depreciation and the slowdown

in China). Similarly the decline in the price of crude oil

in the international market has helped to reduce the

import bill for India.

Long term debt and short term debt

In terms of the composition of the total external debt of

India the long term debt is significantly more than short

term debt. As shown in the figure below in 2000 out of

total debt of Rs 4,82,328crores, 97 % of the debt was

long term and the remaining debt was short term.

Figure 4: Long Term debt and Short Term Debt of India (2000-2014) (in Rs. Crore)

-200,000

0

200,000

400,000

600,000

800,000

2000 2001 2002 2003 2004 2005 2006 2007

R

s

c

r

o

r

e

s

Year

Current account balance

total external debt

-1,000,000

0

1,000,000

2,000,000

3,000,000

Rs ( crores)

Year

current account balance

Total externl debt

0

500000

1000000

1500000

2000000

2500000

3000000

20002002200420062008201020122014

Rs ( crores)

Year

Long Term Debt (Rs inCrores)

Short term Debt (Rs inCrores)



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10 | P a g e

However the contribution of short term loans in total debt

has increased over time. During the financial year 2012-

2013, 25 % of the total debt was short term debt, but the

share declined after 2013 to 18% in 2015. The major

components of long term debt include commercial

borrowing, NRI deposits, multilateral and bilateral loans,

export credit and IMF debt.

e) Regression Analysis

Regression analysis was conducted to examine the

impact of external debt and foreign exchange rates of

major currencies and inflation on current account

balance of India for the time period 2000- 2015. The

multiple regressions have been conducted by taking the

current account balance of India as the dependent

variable and external debt and foreign exchanges rates

and inflation as the independent variables. The results are

presented in the table below:

TABLE -1: Regression results for the impact of external debt and foreign exchange rates and inflation on

current account balance

Coefficients

Model

Unstandardized Coefficients

Standardized

Coefficients

T Sig. B Std. Error Beta

1 (Constant) -463648.602 170377.103 -2.721 .024

Long Term Debt .216** .078 .912 2.755 .022

Short term Debt -1.623** .334 -2.156 -4.854 .001

US Dollar 2551.652** 1009.506 .225 2.528 .032

Euro 7459.517** 2484.954 .561 3.002 .015

Yen -2522.308 3175.039 -.158 -.794 .447

Inflation rate 5658.923 8015.913 .096 .706 .498

a. Dependent Variable: Current Account Balance

*significant at 5 % significance level

R2 – 0.94

Adjusted R2 – 0.904

F – Statistic – 0.000

FINDINGS

As shown in the table above the adjusted R – square is

0.904 which shows that 90 % variation in the current

account balance of India is being explained by the

independent variables included in the model. Similarly

the F –statistics is significant at 1 % significance level

which confirms that the cumulative effect is also

significant.

Results from the regression coefficient shows that

external debt (both long term and short term debt) has

significant impact on the current account balance.

However, long term debt shows positive impact whereas

the short term debt shows negative association with the

current account balance. Among the foreign currencies

US dollar and Euro shows positive and significant effect

on current account balance of India whereas Japanese

Yen and inflation does not show any statistically

significant results. The significant and positive impact of

the long term debt is due to the fact that the long term

debt are mostly taken to invest in the productive projects

where the returns are realized in long run such as

infrastructure, education, health, establishing new

manufacturing units etc. So in the long run the returns

from this project will help to improve the current account

through higher exports and high productivity. On the

other hand the short term debts are generally taken for

short term expenses such as day to day expenses. So the

short term debt only increases the current account deficit

and does not add much value to the economy. Similarly

the positive impact of the US dollar and Euro can be

explained in terms of exchange rate. The depreciation of

Indian rupee in terms of US dollar or Euro makes Indian

goods and services comparatively cheaper for other

countries which may lead to increase in the exports of



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11 | P a g e

India. However depreciation of currency also increase the

import bill as import becomes more expensive.

CONCLUSION

The results shows that the current account balance of the

India has always been in deficit expect for few years. The

latest data suggests that there has been improvement in

the current account balance due to low oil price and some

regulation on imports of metals like gold and silver. The

data for the India’s external debt shows that total external

debt of India has been continuously increasing and long

term debt has contributed the major portion of the

external debt. The main components of India’s long term

debt are the commercial borrowings and NRI deposits.

The exchange rate data shows that Indian rupees has been

depreciating in the recent time against the US dollar and

is expected to fall more in the coming future. Similarly

the result from the regression analysis shows that the

Long term debt , US dollar and Euro has significant and

positive impact on the current account balance of India ,

whereas short term debt adversely affect the current

account balance. The results for Japanese Yen and

Inflation rate do not show any statistically significant

results. On this basis of this research it can be concluded

that external debt and foreign exchanges are the major

determinants of the current account balance in India and

the government of India should focus on reducing the

short term debt and improve the exports from India.

Similarly the dominance of the US Dollar and Euro in the

Indian economy can also be seen as the results shows

significant impact of these currencies on the current

account balance of India.

RECOMMENDATIONS

The pervasive deficit in the current account hurt the

economic growth and corrective policies from the

government act as a tool to help its reduction.

One of the policies to be adopted is the devaluation of the

domestic currency. Devaluation occurs when the

government deliberately reduces the value of its

currency. With devaluation, the price of imports

increases, thus leading to a decline in the import

demands. The domestic manufacturing takes the place of

the imports increasing the production and hence exports

in the economy. Devaluation is only a short-term

measure policy (Central Bank of Kenya, 2011).

Other policy includes the adoption of contractionary

fiscal and monetary policies. Monetary policy measure of

increase in the interest rates and deflationary fiscal policy

of an increase in income tax in the country will contract

the money supply in the economy. Both measures limit th

circulation of money in the economy. The contraction in

the money supply will decrease the spending on the

import goods and promote domestic savings. The saving

would promote investment and promote export

production (Brown E & Bidemi O, 2015).

Further, the imposition of trade restriction as a

government policy or protectionism will make imports

expensive in the country. The trade restriction would

facilitate the domestic industries and provide assistance

to the exporters. The methods of quotas, tariff, subsidy

and other favors to domestic companies would promote

protectionism. These methods reduce the imports and

positively affect the current account and short-term gains

to furnish the CAD (P. Ray, 2015).

The government can also adopt the policy to improve the

competitiveness of the domestic industry. As the

prevailing conditions of free trade and globalization have

made the imposition of import controls difficult and the

policy of deflation pose a risk of recession, the

government leads the policy competitiveness.

Competitiveness in the economy is gained through non-

price factors, such as quality. The tax-relief on research

and development and tax relief on capital investments

into the improvement of skill of the workforce will help

enhancement of competitiveness in the domestic

production and lead to a decrease in CAD (P. Ray, 2015).

REFERENCES

1. Agarwal, A., & Gangal, V. K. (2015). Current Account

Balance, External Debts and Foreign Direct Investment:

Empirical Evidences From India. ZENITH International

Journal of Business Economics & Management Research,

5(8), 51–60.

2. Aristovnik, A. (2006a). How Excessive are External

Imbalances in Selected Transition Countries? Prague

Economic Papers, 15(3), 243–267.

https://doi.org/10.18267/j.pep.287

3. Alam, N., & Taib, F. M. (2013). An Investigation of the

Relationship of External Public Debt With Budget Deficit ,

Current Account Deficit , and Exchange Rate Depreciation

in Debt Trap and Non-Debt Trap Countries. European

Scientific Journal, 9(22), 144–158.

4. Blaise Gnimassoun, & Mignon, V. (2013). Current-account

adjustments and exchange-rate misalignments.

5. BOSE, S., & JHA\, S. (2011). India’s Twin Deficits: Some

Fresh Empirical Evidence. Money & Finance. New Delhi.

6. Brown E, D., & Bidemi O, J. (2015). Fiscal Policy

Measures and Balance of Payments in Nigeria. Journal of

Global Economics, 03(04), 1–6.

https://doi.org/10.4172/2375-4389.1000161

7. Business Standard. (2015). India’s Q2 current account

deficit narrows to $8.2 bn | Business Standard News.

8. Calderon, C. A., Chong, A., & Loayza, N. V. (2002).

Developing Countries Determinants of Current Account

Deficits in Developing Countries. Contributions to

Macroeconomics, 2(1), 1–31.

9. Central Bank Of Kenya. (2011). The Exchange Rate And

The Current Account Deficit Implications.



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10. Georgescu, G. (2007). Current Account Deficits and

Implications on Country Risk of Romania. Romanian

Journal of Economic Forecasting, 4, 88–96.

11. G.Jayachandran (2013). Impact Of Exchange Rate On Trade

And Gdp For India -A Study Of Last Four Decade.

International Journal Of Marketing, Financial Services &

Management Research, 2(9), 154–170.

12. Homaifar, G. A., & Salimullah, A. H. M. (2016). Factors

Affecting U.S. Current Account Deficit : An Empirical

Evidence. Journal of Economics and International Finance,

8(9), 148–154. https://doi.org/10.5897/JEIF2016.0786

13. International Monetary Fund. (2003). The Measurement of

External Debt : Definition and Core Accounting Principles.

14. Karabulut, T., & Şahbaz, A. (2016). Effects of Exchange

Rate on Current Account in Fragile Five: Is the End of QE a

Solution for Chronic Current Account Deficits? Journal of

Asian Development Studies, 5(3).

15. Mehta, M. B., & Kayumi, P. H. F. (2014). Effect Of India ’

s Current Account Deficit On External Debts And Foreign

Exchange Rates. IOSR Journal of Economics and Finance,

1, 54–65.

16. Mohanty, B., & Bhanumurthy, N. R. (2014). Spectrum: A

Journal of Multidisciplinary Research (No. 2014-130). New

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Trade and Current Account Balance Deficit Analysis: A

Panel VAR Approach. Theoretical Economics Letters, 7(4),

834–861. https://doi.org/10.4236/tel.2017.74060

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Account Deficit.

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11th International Academic Conference, 321–330.

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2016 | Data | Chart | Calendar | Forecast.



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GROWTH PROSPECTS IN EQUITY DERIVATIVE MARKET IN INDIA

Dr. Ruchika Jain*

*Assistant Professor, Gobindgarh Public College, Alour, Khanna, Punjab, India

ABSTRACT

The most well-known instruments that permit participants in stock market to oversee hazards in the

securities trading are known as derivatives. Derivatives are the agreements that have no intrinsic worth, yet

get their value from some other resource and such resource is called an underlying asset. In the most recent

decade, many developing economies have begun the introduction of derivative contracts. In India, derivative

trading initiated in June 2000 after SEBI allowed the same with effect from May, 2000. Financial

Derivatives like futures and options in Indian financial exchange have turned out to be significant

instruments of hazard supporting and portfolio expansion. The present paper is an endeavor to look at pre-

crisis and post-crisis development of financial derivative market in India from 2000-01 to 2017-18 and to

investigate the prospects for raising their development in India.

Key words: Derivatives, Intrinsic value, Underlying asset, Portfolio expansion, Financial derivative market.

INTRODUCTION

Global liberalization and financial market integration has

developed fresh investment avnues, which in turn require

the creation of new tools that are more effective in dealin

g with enhanced financial risk (Jain, Khokhwat, 2012).

The economic markets are characterizedby a very high de

gree of volatility. By locking in

asset prices, price risks can be partly or completely transf

erred with the assistance of derivative products (Leo

Melamed, 1998). These are usually not influencing the

changes in underlying asset prices as risk management

tools. By locking up asset prices, however derivative

products minimize the effect of asset price changes on

risk averse investors‟ profitability and cash flow

condition.

A derivative instrument is a monetary arrangement

whose payoffs are dependent upon value of its

underlying asset. A commodity, security, interest rate,

share price index, oil price, currency in circulation,

precious metals or the like may be the underlying asset.

So, a derivative contract gets its value from the

underlying variable. (Hull, 2006, p. 1) describes

derivatives as financial instruments whose value can be

extracted from any related variable. A derivative

instrument does not constitute ownership but rather it is a

pledge to transfer ownership.

In the IMF working paper Robert M Heath (1998)

described a financial derivative as-„Financial derivatives

are avenues connected to a particular financial instrument

or indicator etc. through which particular financial

hazards can be avoided in financial markets on their own.

The value of a financial derivative stems from the price

of an underlying asset or index. No principal amount is

advanced for repayment and no investment revenue is

accrued. Financial derivatives are used for risk

management, hedging, market arbitration and

speculation.

The derivatives market has grown dramatically over the

last three decades. A wide range of derivative contracts

were introduced at exchanges across the world.

Barot,Gajjar (2013) discussed that the factors driving the

growth of financial derivatives are:

1. Increasing fluctuations in financial market asset

prices,

2. Globalization of financial markets world-wide,

3. Significant development in communication

system and huge decline in expenses,

4. Advanced risk management tools provide a

wider selection of risk management policies, and

5. Innovations in derivative market, that combine

the hazards and returns over a big amount of

economic assets lead to greater yields, decreased

risk as well as transactions costs relative to

individual economic assets.


To study pre-crisis and post-crisis growth of

equity derivatives (Futures & Options) in

India.

To explore how to increase volume in equity

derivative market.


Ashutosh Vashishtha and Satish Kumar (2010); Mittal

Parul(2012) addressed India's derivative market growth

and development. The authors reported that NSE

derivative turnover has dominated the equity market



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14 | P a g e

turnover. Dharen k pandey (2011), in his research paper

on „Currency Futures in India‟ concluded that the

currency futures market will grow more rapidly and will

be a good option in near future for all the market

participants and will find its way into Indian economy.

Bhagwat Shree, More Ritesh, Chand Deepak (2012)

analyzed the growth and composition of derivative

market in India pre and post crisis. Malhotra Meenakshi

(2012) traces the origin and growth of commodity

derivatives market. Khakhar Kamlesh & Meetu (2013)

asserted that despite the development in derivative

market, there are a lot of problems such as the absence of

economies of scale, tax and legal hurdles, increased off-

balance sheet exposure of Indian banks requiring an

autonomous regulator etc, that should be addressed

instantly to increase the investors‟ trust in the Indian

derivative market.Hatem Mansali; Wissem Daadaa

(2018) investigated the long-run performance of seasonal

equity offering firms in Tunisia. Robert Jarrow, Scott

Fung, Shih Chuan Tsai (2018) investigated the existence

of market manipulation due to the ability of large traders.

GROWTH OF DERIVATIVES- PRE AND POST

CRISIS

The Indian Capital Market with its abundant assets has

created a benchmark in the all-inclusive financial

framework and equity derivative market is remarked as

its significant entity. The present study seeks to analyse

the growth of equity derivative market in India. There are

three important phases of the journey of equity

derivatives (Futures & Options) in India since its

inception i.e Pre-crisis (2000-01 to 2007-2008), Post-

crisis-Phase I (2008-09 to 2010-11) and Post-crisis-Phase

II (2011-12 to 2017-18). The reason for dividing the

post-crisis phase into two categories is that firstly in the

year 2008, there was global financial crisis. As a result,

there was downturn in the market in the year 2008-09.

But, somehow even after crisis, the equity derivative

market started recovery. Thenin the year 2011-12, there

was financial crisis. In the year 2016-17, again number of

contracts traded were reduced by 33.3% due to

demonetization of Indian currency.

Table 1.1: Turnover & Contracts traded of Equity Derivatives

Year Total Turnover % Change No. of contracts traded % Change

Pre-Crisis Period

2000-01 2365 - 90580 -

2001-02 101926 4209.76 4196873 4533.33

2002-03 439862 331.55 16768909 299.55

2003-04 2130610 384.38 56886776 239.24

2004-05 2546982 19.54 77017185 35.39

2005-06 4824174 89.41 157619271 104.65

2006-07 7356242 52.49 216883573 37.59

2007-08 13090478 77.95 425013200 95.96

Post-Crisis-Phase I

2008-09 11010482 -15.89 657390497 54.67

2009-10 17663665 60.42 679293922 3.33

2010-11 29248221 65.58 1034212062 52.25

Post-Crisis-Phase II

2011-12 31349732 7.18 1205045464 16.52

2012-13 31533004 0.58 1131467418 -6.11

2013-14 38211408 21.18 1284424321 13.52

2014-15 55606453 45.52 1837041131 43.02

2015-16 64825834 16.58 2098610395 14.24

2016-17 94370301 45.57 1399746129 -33.30

2017-18 164984859 74.83 1913878548 36.73

As shown in the table above, the equity derivative market

has shown a continuous growth except for the year 2008-

09 when it declined by around 16%. The value of

turnover which stood at Rs. 25, 46,982 Crores in 2004

crossed Rs. 5 crores by the end of 2014-15. The previous

recovery of Indian economy from the impacts of



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15 | P a g e

worldwide crisis has resulted to forecasts of a yield to 9%

growth pace in 2003-08 (EPW Reseach Foundation,

2010).

Overall, Equity Derivative market has demonstrated a

Compound Annual Growth Rate of 95% in last 18 years

relative to turnover and 93% relative to quantum of

contracts. In pre crisis period, the CAGR was 100%

relative to turnover and 93% in terms of number of

contracts traded. Whereas, In post crisis-Phase I, the

CAGR is 38% in terms of turnover and 16% relative to

quantum of contracts. In post- crisis-Phase II, the CAGR

is 15% in and 11% respectively.

INDEX FUTURES

NSE began its index future trading on S&P CNX Nifty

Index on June 12, 2000. With the passage of time, index

future trading was also started on many other indices.

Table 1.2

Figure 1.1 show the journey of index future trading at

NSE since June, 2000.

Table: 1.2- Contracts Traded and Trading Volume

Year Index Futures Percentage Share of index

futures in terms of total

Quantum of

contracts

% Change Volume of Trades % Change Quantum of

contracts

Volume of

Trades

(Rs. Crores)

2000-01 90580 - 2365 - 100 100

2001-02 1025588 1032.24 21483 808.37 24.44 21.08

2002-03 2126763 107.37 43952 104.59 12.68 9.99

2003-04 17191668 708.35 554446 1161.48 30.22 26.02

2004-05 21635449 25.85 772147 39.26 28.09 30.32

2005-06 58537886 170.56 1513755 96.04 37.14 31.38

2006-07 81487424 39.20 2539574 67.76 37.57 34.52

2007-08 156598579 92.17 3820667.27 50.44 36.85 29.19

2008-09 210428103 34.37 3570111.4 -6.56 32.01 32.42

2009-10 178306889 -15.26 3934388.67 10.20 26.25 22.27

2010-11 165023653 -7.45 4356754.53 10.73 15.96 14.9

2011-12 146188740 -11.41 3577998.41 -17.87 12.13 11.41

2012-13 96100385 -34.26 2527130.76 -29.37 8.49 8.01

2013-14 105252983 9.52 3083103.23 22.00 8.19 8.07

2014-15 129303044 22.85 4107215.2 33.22 7.04 7.39

2015-16 140538674 8.6 4557113.64 10.95 6.69 7.03

2016-17 66535070 -52 4335940.78 -4.8 4.75 4.59

2017-18 57674584 -13.31 4810454.34 10.94 3.01 2.9



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Figure 1.1: Growth of Index Futures at NSE

As shown in Table 1.2 & Figure 1.1, the index future

trading at NSE has grown from Rs. 2365 crore in 2000-

01 to Rs. 4107215 crore in 2014-15. It means that index

futures have shown a CAGR of 64.43% in terms of

turnover and 62.29% in terms of contracts traded.

The above information also demonstrates a constant

development in the turnover of index futures except in

2008-09 and 2011-12 owing to global financial crisis in

2008 and debt crisis in Euro Zone 2011 respectively. As

a result the CAGR in terms of turnover was reduced to

6.8% in post-crisis phase I and only 3.5% in post-crisis

phase II, although it was 151.79% in before crisis. In

terms of number of contracts also, CAGR was 153.93%

in pre-crisis period but it was -7.78% in post-crisis phase

I and -3.02% in post-crisis phase II. The percentage share

of this product against total turnover of equity derivative

market at NSE shows that in the early years of its

inception, it was the most preferred product in India but

now its share against the total turnover of equity

derivative market has reduced.

Index Options

Index options on S&P CNX Nifty were permitted on

June 4, 2001.The following table and figure depicts the

journey of this product till 2017-18 since its inception.

Table 1.3: Contracts Traded and Trading Volume of Index Options at NSE

Year Index Options Percentage Share of index options in terms of

total

Quantum of

contracts

%

Change

Volume of

Trades

% Change Quantum of

contracts

Volume of Trades

(Rs. Crores)

2000-01 - - - - - -

2001-02 175900 - 3765 - 4.19 3.69

2002-03 442241 151.42 9246 145.58 2.64 2.1

2003-04 1732414 291.73 52816 471.23 3.05 2.48

2004-05 3293558 90.11 121943 130.88 4.28 4.79

2005-06 12935116 292.74 338469 177.56 8.21 7.02

2006-07 25157438 94.49 791906 133.97 11.6 10.77

2007-08 55366038 120.08 1362110.88 72.00 13.03 10.41

2008-09 212088444 283.06 3731501.84 173.95 32.26 33.89

0

1000000

2000000

3000000

4000000

5000000

6000000

0

50000000

100000000

150000000

200000000

250000000

Index Futures Index Futures



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2009-10 341379523 60.96 8027964.2 115.14 50.26 45.45

2010-11 650638557 90.59 18365365.76 128.77 62.91 62.79

2011-12 864017736 32.79 22720031.64 23.71 70.21 72.47

2012-13 820877149 -4.99 22781574.14 0.27 72.54 72.25

2013-14 928565175 13.12 27767341.25 21.88 72.29 72.67

2014-15 1378642863 48.47 39922663.48 43.77 75.04 71.79

2015-16 1623528486 17.76 48951930 22.61 77.36 75.51

2016-17 1067244916 -34.26 72797287 -49.82 76.24 77.14

2017-18 1515034222 41.96 134921876 -45.07 79.16 81.77

Figure 1.2: Growth of index options at NSE

During the early life of equity derivative market in India,

index futures were the most popular product for trading.

But, nowadays, index options are the most preferred

equity derivative product in India as shown by the

highest percentage of share of this product (i.e. 71.79%)

in terms of total turnover of equity derivative market at

NSE. NSE's growth in terms of turnover in index options

ranged from Rs 3,765 crore in 2001-02 to Rs 39,922,663

crore in 2014-15. This demonstrates that index options

have seen a CAGR of 94%in trading quantity in past

fifteen years and a CAGR of 90% in terms of quantum of

traded contracts.

In pre crisis period, the CAGR was 132% relative to

turnover and 127% relative to number of contracts

traded. Whereas, In post crisis-Phase I, the CAGR is 70%

and 45% respectively and In post- crisis-Phase II, it is

15% and 12%.

Stock Futures

Table 1.4 and Figure 1.3 depict the journey of stock

futures at NSE:

0

20000000

40000000

60000000

80000000

100000000

120000000

140000000

160000000

0

200000000

400000000

600000000

800000000

1E+09

1.2E+09

1.4E+09

1.6E+09

1.8E+09

Index Options Index Options



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Table 1.4: Contracts Traded and Trading Volume of Stock Futures at NSE

Year Stock Futures Percentage Share of Stock Futures

Quantum of

contracts

% Change Volume of

Trades

% Change Quantum of

contracts

Volume of Trades

(Rs. Crores)

2000-01 - - - - - -

2001-02 1957856 - 51515 - 46.65 50.54

2002-03 10676843 445.33 286533 456.21 63.67 65.14

2003-04 32368842 203.17 1305939 355.77 56.9 61.29

2004-05 47043066 45.33 1484056 13.64 61.08 58.27

2005-06 80905493 71.98 2791697 88.11 51.33 57.87

2006-07 104955401 29.73 3830967 37.23 48.39 52.08

2007-08 203587952 93.97 7548563.23 97.04 47.9 57.66

2008-09 221577980 8.84 3479642.12 -53.90 33.71 31.6

2009-10 145591240 -34.29 5195246.64 49.30 21.43 29.41

2010-11 186041459 27.78 5495756.7 5.78 17.99 18.79

2011-12 158344617 -14.89 4074670.73 -25.86 13.14 13

2012-13 147711691 -6.715 4223872.02 3.66 13.05 13.39

2013-14 170414186 15.37 4949281.72 17.17 13.27 12.95

2014-15 237604741 39.43 8291766.27 67.53 12.93 14.91

2015-16 234243967 -1.41 7828606.00 -5.58 11.16 12.07

2016-17 173860130 -25.77 11129587.14 42.16 12.42 11.79

2017-18 214758366 23.52 15597519.71 40.14 11.22 9.45

Figure 1.3: Growth of Stock Futures at NSE

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

0

50000000

100000000

150000000

200000000

250000000

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

20

07

-08

20

08

-09

20

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-10

20

10

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20

11

-12

20

12

-13

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-14

20

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-16

20

16

-17

20

17

-18

Stock Futures Stock Futures



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Table 1.4 and Figure 1.3 demonstrate the growth of stock

futures from Rs 51,515 crore in 2001-02 to Rs 8291766

crore in 2014-15 at NSE. Share of stock futures has

decreased over a passage of time. By 2007-08, the

proportion of stock futures was 57.66% which was

comparatively less than the proportion of 61.29% in

2003-04. Since then the share of stock futures has

reduced massively to 9.41% in 2017-18. This depicts that

there was a downturn in participation in the stock futures.

Trends reveal that in terms of turnover, Stock Futures

showed a CAGR of 103% in Pre-crisis and just 13% in

post- crisis era.

Stock Options

NSE started stock option trading on July 2, 2001. The

table and figure below show the journey of this financial

instrument:

Table 1.5: Contracts Traded and Trading Volume of Stock Options at NSE

Year Stock Options Percentage Share of stock options in

terms of total

Quantum of

contracts

% Change Volume of Trades % Change Quantum of

contracts

Volume of Trades

(Rs. Crores)

2000-01 - - - - -

2001-02 1037529 - 25163 24.72 24.69

2002-03 3523062 239.56 100131 297.93 21.09 22.76

2003-04 5583071 58.47 217207 116.92 9.81 10.19

2004-05 5045112 -9.63 168836 -22.27 6.55 6.63

2005-06 5240776 3.88 180253 6.76 3.32 3.74

2006-07 5283310 0.811 193795 7.51 2.44 2.63

2007-08 9460631 79.06 359136.55 85.32 2.23 2.74

2008-09 13295970 40.54 229226.81 -36.17 2.02 2.08

2009-10 14016270 5.42 506065.18 120.77 2.06 2.87

2010-11 32508393 131.93 1030344.21 103.60 3.14 3.52

2011-12 36494371 12.26 977031.13 -5.17 3.03 3.12

2012-13 66778193 82.98 2000427.29 104.74 5.9 6.34

2013-14 80174431 20.06 2409488.61 20.45 6.24 6.3

2014-15 91479209 14.10 3282552.18 36.23 4.98 5.9

2015-16 100299174 9.64 3488173.85 6.26 4.77 5.38

2016-17 92106012 -8.16 6107486 75.09 6.58 6.47

2017-18 126411376 37.24 9655009 58.08 6.60 5.85

This product again has shown a CAGR of 41.61% in

terms of turnover and 37.71% in terms of quantum of

contracts in fifteen years of trading. During pre-crisis

period, the CAGR was 46.26% in terms of turnover and

in post-crisis, it is 65% and 35% in phase I and phase II

respectively. But as far as the percentage share of this

product against total trading in equity derivative market

is concerned, stock options had share of 24.72% in terms

of turnover and 24.69% in terms of quantum of

contractsin 2001-02 but in 2014-15, it has reduced to

4.98% and 5.9% respectively.



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Figure 1.4: Growth of Stock Options at NSE

The precedent above exhibits the prodigious impression

of the crisis on the investment performance of the

investors. The investments were aligned towards high

returns although the period of pre-crisis pictured high

risk but eventually these shifted towards safer index

options in the post crisis years. The primary concern of

investors was Stock as well as index Futures with their

high risk-return profile before the crisis which showcase

the investor‟s priority towards the returns than the risk in

the pre crisis period. Nonetheless, in the post-crisis

period, Index options indicate a rapid increase at the cost

of decline in the stock and the index futures relocated to

the safer derivatives trades. By 2007-08, the share of

index options was 10.41% of total volume of derivatives

trading but in 2008-09 and 2009-10, it represented a

share of 33.89% and 45.45% respectively rising to

71.79% in 2014-15. The extent of increment in index

options can be ascribed to the financial crisis at world

level that made options a favored product of trading as it

safeguarded it in quandary.

PRE-CRISIS: SUPERMACY OF STOCK FUTURES

Single Stock Futures in India captured the top place

among the financial products traded on stock exchanges

of India before crisis. As single stock futures possess

most of the characteristics of Badla trading, market

participants vehemently received their introduction. As a

matter of fact, in its formative days, the trading in stock

futures excelled trading in other available derivative

products as well as the cash segment of NSE. Stock

Futures recommended diverse edges to the investors that

championed the growth of this product in equity

derivatives segment of NSE. It can be attributed to the

following advantages offered by these instruments over

options:

1) Margins: There is no need of ant initial

investment in future contracts. Whereas, the

exchanges need both the buyer and seller to

make a deposit in the form of security known as

margin, which is normally between 10 to 20% of

the value of the contract. This margin can vary

upwards and downwards depending upon the

market conditions. It gives guarantee that

adequate funds are accessible to both sides to

mark to market. Margin rules are stated in terms

of initial margin (which must be deposited with

the broker when entering the contract) plus

upfront margin. If the balance of the account falls

below the initial margin, the broker makes a

margin call upon the individual, who will then

have to readjust the account to the level of initial

margin + upfront margin before trading begins

the next day. This facility of margins makes the

future contract a leveraged derivative product.

2) Cost effective: In comparison to stock options,

the cost of futures contract is less as it is only the

opportunity cost of the funds deposited in the

form of margins. These margins are also settled

at the time of final settlement of the futures

contracts. Whilst, options involve payment of

option premium which is to be paid on

compulsory basis.

3) Short Selling: Short selling is also allowed in

futures. It is advantageous for the traders to opt

this facility as it is inexpensive and less

restrictive regarding the number of contracts with

short position.

Owing to these determinants, the yield of stock futures

sub-segment of equity derivatives exceeded the total

0

2000000

4000000

6000000

8000000

10000000

12000000

0

20000000

40000000

60000000

80000000

100000000

120000000

140000000

20

01

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02

-03

20

03

-04

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04

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20

05

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06

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-17

20

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-18

Stock Options Stock Options



PP: 13-23 ISSN No: 2278-7925

21 | P a g e

yield of the entire cash segment of NSE in the third year

of their introduction itself. However, the relative share of

stock futures at NSE was observing a dwindle, both in

terms of the percentage of the numbers of contracts

traded and percentage share of stock futures turnover in

total turnover. The world financial crisis of 2008

demonstrated a systematic transformation in the avenue

of the stock futures contracts. The provisional

disappointment of the investors from the single stock

futures trading was only due to the distressing effects of

the futures trading aborted on account of global

downturn. Single stock futures have successfully

endeavored to accomplish its foregoing level of contracts

traded but it is also getting a strongrivalry from Index

futures contracts in terms of number of contracts traded.

POST-CRISIS: SUPERMACY OF INDEX

OPTIONS

In the post-crisis scenario, the National Stock Exchange

of India (NSE) has registered an unrivalled ascendancy

of Index Option contracts. This supremacy can be

attached with the following factors:

1) Limited risk: In index options, the downside

risk of losing money invested by the investors is

limited to the option premium paid especially

when the market takes wild approach during the

global financial crisis.

2) Diversification: When the market is volatile

during the global financial crisis, investors desist

additional risk on their investment. Making

investment in stock futures will expose them

with firm-specific risk over and above the market

risk borne by them. Thus, by making investment

in Index based product helps them to reduce the

firm-specific risks by adequate diversification.

3) Exposure to a broad market: Index options

enable investors to gain exposure to a broad

market, with one trading decision and with one

transaction and that too frequently. Since, broad

exposure can be gained with one trade;

transaction cost is also reduced by using Index

Options. As a percentage of the underlying value,

premiums of Index options are usually lower

than those of stock options because stock options

are more volatile than the Index.

4) Emendation in tax treatment: On 1st June,

2008, anamendment was made in the tax-

treatment of option contracts. From this day, the

value of the transaction relating to an option in

securities for the purpose of charging STT was

shifted to the option premium amount for seller

and settlement price for buyer from the earlier

basis of aggregate of the strike price & option

premium only for seller. This alteration in tax

treatment increased the profit margin of the

option seller

4.2 PROSPECTS FOR ESCALATING THE

VOLUMES IN EQUITY DERIVATIVE MARKET

IN INDIA

The secondary goal of the present study is to investigate

the increase of volumes in equity derivative market in

India. The survey of dealers was posed an indeterminate

question in which the participants were asked to denote

the determinants that hinder the increase of volumes in

equity derivative market. The following determinants

were formulated:

Fewer hours to Trade

Taxation Policy

Ingress Obstacles to Domestic Financial

Institutions

Capital Controls for Foreign Participation

High Margins

These determinants were further analyzed on the basis of

secondary data and the plausible share of these in

hampering the increase of volumes in equity derivative

market is detailed as below:

1. FEWER HOURS TO TRADE

The offshore competitive markets are opportunistic to

receive time much higher in comparison to others to trade

the equity derivatives in India. The equity derivatives

market for trade exchange lasts only for 6 hours i.e. from

9:30am to 3:30 pm. The analysis below in the tabular

form showcase the opportunistic favor of time by

offshore competitive markets and the India unfortunately

receives lesser time:

Table 1.6: Hours of trading in various derivative exchanges

Site for Trading Hours for Trading Duration

London Stock Exchange 8:00-16:30 8.30 hrs

Singapore Exchange 9:00-17:00 8 hrs

Hong Kong 9:00-16:00 7 hrs

Dubai 7:00-23.30 16.30 hrs

France 9:00-17:30 8.30 hrs

India 9:00-15.30 6.30 hrs



PP: 13-23 ISSN No: 2278-7925

22 | P a g e

For equity derivative market in India to escalate the time

to trade needs immediate expansion. The reasons for the

same are:

a. India is no doubt witness to the increased

integration of the global markets where

information originating from one country has a

bearing on the markets in other country. To

facilitate the assimilation of any economic

information that may flow in from other global

markets, it is obligatory to ally Indian market

with the International market especially when the

issue of time is considered.

b. Speedy and effectual assimilation of information

increases the efficiency of market with respect to

unearthening cost, lessened volatility and impact

cost. The extension of market hours may help

Indian markets efficiently, benefiting Indian

investors.

c. Essentially Indian markets ought to ally with the

global markets to enhance the interest in trading

that may escalate its participation while

competing with the global exchanges of the

world Increase in trading hours would ensure

better strategies and plan with the amount of the

information received which would otherwise

amputate its planning and witness the execution

of it outside India. Time extension may allow

participants to better seats for longer and also

enables benefit them of market movements

overseas.

2. TAXATION POLICY

Securities Transaction Tax and stamp duty are pertinent

to segment of equity derivatives and append to the cost of

transactions. On all F&O sales transactions, STT is

payable. It represents 0.01% of futures traded prices and

0.017% of options premiums. 0.125% STT is payable by

the customer of an option on the defrayal price.

Although equity derivatives are settled in cash, there is

no room for the relocation of the underlying securities,

stamp duty becomes obligatory. 0.002 percent stamp

duty is relevant to the estimated amount of alternatives

that expire in - the-money and to futures sales. These tax

issues unconstructively influence volumes in Indian

equity derivative market. To increase volumes in this

market, there is a necessity to modify policies of

taxation.

3. INGRESS OBSTACLES TO DOMESTIC

FINANCIAL INSTITUTIONS

In the current scenario of India, the equity derivatives

market experiences participant constriction. Domestic

financial institutions are either debarred or rarely engage

in the market for equity derivatives. The examples are as

follows:

IRDA consented to trade equity derivatives by in

surance companies but had not

endowed clarity to function. Significantly,

insurance companies have no existence in equity

derivatives, even despite the fact that ULIPs are a

noteworthy part of their folder.

RBI prohibits Banks to participate in equity

derivatives.

The participation of foreign intermediaries in

India is prescribed in accordance with FIPB

standards.

Equity mutual funds lack the clarity to operate on

significant sub-components of equity derivatives

trading thus it show lesser participation in equity

derivatives.

4. CAPITAL CONTROLS FOR FOREIGN

PARTICIPATION

Capital controls has hindered the foreign institutional

investor participation and the chaotic conversion into the

new Foreign Portfolio Investor framework.

Two elements of capital controls hamper foreign

participation in Indian equity derivatives markets,, (1)

limitations on access and (2) fragmented markets

LIMITATIONS ON ACCESS

Foreign investors participating in equity derivatives are

classified into (a) SEBI Registered foreign investors and

(b) Unregistered foreign investors. Inventory investors

have to conform to rigorous registration and fulfillment

requirements. The varied rules of participation need to be

followed. There is no clarity regarding applicability of

General Anti-Avoidance Rules (GAAR) and indirect

transfer rules upon them. There is also no immediate

access to the Indian market for unregistered investors

except through PNs.

FRAGMENTED MARKETS

Given that interest of overseas respondents in Indian

equities resides in the returns they can gain on their

investment, they should be able to access equity and

currency markets in an impeccable manner and at the

same time, both for taking positions and for leveraging

and hedging. However, executing a position on a hedged

dollar return engross investment in India's distinct

markets. The costs and frictions of doing this are

composited by diverse rules of access and varieties of

constraints on foreign participants in each of these

markets. The size of positions allowed in exchange

traded equity and currency derivatives as well as the

issuance and subscription of participatory notes poses

problems. This disintegration guarantees that India's

global competitiveness is small as opposed to global

members providing a one-stop shop for all of these



PP: 13-23 ISSN No: 2278-7925

23 | P a g e

commitments, with diminutive or no procedural

disadvantages.

5. HIGH MARGINS

Effectual margins on NSE comprise the initial margin

and margin of severe loss attuned to the danger of T+2

settlement.Offshore replacements, on the other hand, hav

e an initial margin and a safeguard margin indicated for a

n agreement as a set USD value.

The complete margin is 10 percent on the NSE as a prop

ortion of contract size, while it is about 3.3 percent on the

Singapore

Exchange.Higher NSE margins indicate greater transacti

on costs making it less competitive than exchanges like t

he SGX.The reason for greater margins in India is that th

ey were scheduled to reward larger payment systems for

greater insecurity and to reduce counterparty risk. There

is a necessity to re-evaluate margins requisite for higher

levels of competency in the rest of the payments and

settlement systems in India.

CONCLUSION

Equity Derivative Market has experienced an

unprecedented and unjustified boom in its journey of last

18 years. Still, there is an ample of scope for this market

to grow if some hindrances hampering this market are

removed.

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Derivatives”, Pearson Education Inc., (7th Edition).

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Derivatives in the Indian Stock Market: Hedging v/s

Speculation‟, The Indian Journal of Economics, Vol.

LXXXV, No. 340.

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current scenerio & growth, ZENITH International Journal of

Business Economics & Management Research Year : 2012,

Volume : 2, Issue : 8, ISSN : 2249-8826

18. Rajiv Srivastava, (2010) “Derivatives and Risk

Management”, ISBN: 9780198064343, Oxford University

Press.

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“A Framework for Financial Market Development”, IMF

Working Paper IMF Institute.

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Derivatives: Myths and reality”, Indian Journal of Finance,

pp 24-31

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Empirical Investigation of Large Trader Market

Manipulation in Derivative Market”, Review of Derivatives

Research, Volume 21, Issue 2, pp 331-374.

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“Report on Development and Regulation of Derivative

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McGraw–Hill Series. Tata McGraw–Hill.



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INSTITUTION APPRECIATION AND CRITICISM: THE CASE OF ETHIOPIAN

UNIVERSITIES

Endris Nuru Zeleke*, Dr. Bharat Bhushan Singla

**

*Ph.D Scholar, School of Management Studies, Punjabi University, Patiala, Punjab, India

**Asst. Professor, School of Management Studies, Punjabi University, Patiala, Punjab India

ABSTRACT

This study was aimed to assess employees’ appreciation and criticism about their institutions which

help to assess the overall working environment of the institutions. Data collected from academic

staffs of nine universities through open-ended questions was reduced into manageable elements and

the identified elements were grouped together into different categories for data analysis and

discussion. Leadership, working condition, relationship, human development, academic freedom,

monitoring and evaluation, services, administrative staffs, respect and recognition, staffs and

technology were main areas which academic staffs appreciated and criticized. Adoption of new

technology, insufficient fund for research and community service, no respecting and recognition,

less administration support, inadequate service, insufficient facilities and materials were problems

criticized by respondents of academic staffs which should be addressed and solved.

Keywords: Institutional Development, Employees Appreciation, Administrative Staffs.

BACKGROUND OF THE STUDY

For the country strive to move from an agrarian to a

modern economy, education is vital. Modern secular

higher education in Ethiopian was started in 1950 with

the establishment of the University College of Addis

Ababa, now Addis Ababa University. Over the past two

decades the government has been making remarkable

reforms that aimed at expanding and modernizing the

higher education Subsector in Ethiopian. Numbers of

students enrolled in higher education institutions

increased time to time. In line with the expansion of

higher education institutions, the demand for access to

tertiary education has increased significantly in Ethiopia.

Policy issues related to structure, funding, management,

quality, capacity, performance and organisation of work

have raised as demand for access of tertiary education

and training increased (Clarke, Kenny, & Loxley, 2015).

Tertiary education plays important roles for growth and

development a country and specifically for developing

countries, it is the backbone of human resource

development that ensures the effective growth of the

economy. Tertiary education trained qualified labor who

will contribute for the growth of the nation. It trained the

professionals, including doctors, nurses, teachers ,

administrators and the like who will perform and

implement activities in their respective professions to a

nation as well as foster relevant capacities in science,

applied technology and community service. It is

essential for success of any nation which enhances the

economic potential of entire nation leading to the

development of the whole nation (Singh & Singh, 2015).

Therefore, it is important to give emphasized for higher

education institutions of a country and continuously

assess the views of academic staffs about their

institutions.

It is may be important to explore how staffs perceive

their institutions by asking what they appreciate and

criticize about their institutions which may relate with

their activities in their academic career. The place,

conditions and surrounding influences people perform an

activity (Clarke et al., 2015) has an impact on academic

staffs’ performance related to teaching and research.

Effective leadership in higher education institutions also

plays significant role in creating a conducive working

environment for staffs in providing students with quality

of education they deserve (Afnan Al-Shuaiby, 2009 cited

in Shahmandi, Silong, Ismail, Samah, & Othman, 2011).

According to Sakiru, Othman, yero, Abdullahi, & Kia(

2013) performance and achievement require critical

leadership that inspires and leadership occupies a

sensitive position in modern organization which impact

on employees’ productivity. Strong leadership is

demanded in every organization, including public

schools whose aim is to be effective and worthwhile

(Teigland , 1973). New skills and competencies is a key

element of the academic working environment (Clarke et

al., 2015).



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Academic facilities and teaching aid resources/ materials

are one of the important elements that must be must be

available in order to facilitate the teaching and learning

process in higher education institutions. Thus, this is one

of the important area which higher education institutions

should highly invested (Vidalakis, Sun, & Papa, 2013).

Academic staffs want freedom and an absence of

constraints on teaching, publication, control over time

and workload, freedom of speech and expression of

ideas, the challenging of accepted paradigms and

intellectual inquiry and the pursuit of knowledge

(A˚kerlind & Kayrooz, 2003)). Incentives, rewards and

recognitions are also the key factors that influence on

employee motivation (Danish & Usman, 2010) and

motivated employees will strive to achieve greater

organizational efficiency. Workplace relationships

include supervisor-subordinate relationships, peer-worker

relationships, workplace friendships and customer

relationships (Sias, 2008 cited in Abe & Mason, 2016)

which may influence individual employees’ performance

in the organization. Thus, this study tries to assess

employees’ appreciation and criticism about their

institutions which help to assess the overall working

environment of the institutions.

RESEARCH METHOD

To assess academic staffs’ appreciation and criticism

about their institutions the open-ended questions were

asked which are discussed in this section of the chapter.

Academic staffs from nine universities were asked

important questions which inquired them to offer their

overall feelings about their institutions which were

related to positive side they would appreciate and

anything about which they would criticize. Data in the

form of words called qualitative data (Sekaran & Bougie,

2010)and interview notes, answers to open-ended

questions, transcripts of focus groups, transcriptions of

video records, accounts of experiences with a product on

the Internet, news articles and the like are examples of

qualitative data (Sekaran & Bougie, 2010). Therefore,

this part of the study was a qualitative nature which

conducted via open end questions.

A total 98 respondents responds on the open end

questions were used in this study. The aim was to

uncover their opinion and experience / about their

perceptions related to weakens and strength of their

institutions. Respondents were classified into three:

respondents from first generation universities, second

generation universities and third generation universities.

To understand the respondents’ perceptions which they

appreciate and they criticize about their universities’

codes were used. Therefore, ‘FA’ represents respondents

from first generation; ‘SA’ represents respondents from

second generations, while ‘TA’ represents respondents

from third generation universities.

FINDINGS AND DISCUSSIONS

The data collected from academic staffs of nine

universities through the open-ended questions were read

carefully to understand the respondents’ responses, the

data were reduced into manageable elements and the

identified elements were grouped together into different

categories. Then, the key themes were identified which

relate to the academic staffs’ appreciation and criticism

about their institutions and then data analysis and

discussion by means of grouping the data under the

different identified elements was conducted. Finally,

conclusion and recommendation were forwarded based

on the finding of the data analysis.

LEADERSHIP/MANAGEMENT SYSTEM OF THE

INSTITUTION

Today’s to cope with the constant organizational

changes, today’s leaders need to know new knowledge,

abilities and skills (Shahmandi et al., 2011). In case of

higher education, effective leadership in higher

education institutions plays significant role in creating a

conducive working environment for staffs in providing

students with quality of education they deserve(Afnan

Al-Shuaiby, 2009 cited in Shahmandi et al., 2011). Top

management of the institutions plays great role and top

monument of the universities must be included

competent persons who understand their roles and

responsibilities and work hard for the growth and

development of their institutions. And they are

responsible to implement policies and procedures to

achieve goals of their institutions. Hence, they should

have the capability and the ability to run their institutions

in the right direction. They should have knowledge,

skills, abilities and behaviors to providing direction,

implementing plans and motivating employees in order

to create a conducive working environment.

Management of the institutions is one of the areas which

respondents appreciated about their higher education

institutions in first generation universities. Most of the

respondents of the first generation universities believed

that there is a good management system in their

universities. Top management of the universities is

interactive, positive to discuss with employees of their

institutions and work hard to create conducive working

environment. This view supported by the following

quotes:

‘What I appreciate from this university is that:

University’s top managements are easy access and there

is good cooperation and open discussion of top

management with employees.’ (FA 1, 12 years

experience)

‘The top managements of the university are work hand

in hand with staffs, fell responsibility to staffs and work

hard to create conducive working environment. And they



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also welcome any effort from employees that contribute

for the university as well as the community at large…

This is what I appreciate from our university.’ (FA 5, 8

years experience)

From the above, it’s evident that there is a wider issue

which participants of respondent identified as positive

sides of their institutions, including top managements’

good cooperation, open to discuss with employees, their

commitment to create a conducive working environment.

However, most respondents of academic staffs from

second and third generation universities believe that the

management system of their universities is not good

which characterized by lack of management capabilities

and bad employee treatment. This view supported by the

following quotes:

‘I criticize the management system of this university

which employees are treated badly and in some directors

dictators who have no interest to listen staffs.’ (SA 42, 7

years experience)

‘In addition to lack of management capabilities the

management system of our university is very bad which I

criticized.’ (TA 75, 5 years experience)

‘‘Negligent and lack of management commitment is the

negative side of the university which I criticized.’(SA 43,

6 years experience)

Thus, bad employee treatment, management incapability

and dictatorship are the main problems of the

managements of the second and third generation

universities which may impact on employee,

commitment, satisfaction and performance. This is

supported by different studies (Pahi & Ab.Hamid, 2015;

Sakiru et al., 2013; Wallace, de Chernatony, & Buil,

2013). The organization leadership can impact on

employees’ satisfaction as well as on their attitude and

commitment to serve customers. According to (Sakiru et

al., 2013) performance and achievement require critical

leadership that inspires and leadership occupies a

sensitive position in modern organization which impact

on employees’ productivity. Leadership can create an

environment that can change employee attitudes towards

offering better quality service (Pahi & Ab.Hamid, 2015)

and can encourage employees’ commitment (Wallace et

al., 2013). Pahi & Ab.Hamid (2015) found that

leadership is positively related to employees’

commitment to offer quality service. This implies that

effective leadership is very important in an organization

that has an impact on employee performance.

WORKING CONDITION: PHYSICAL

SURROUNDINGS, EQUIPMENTS AND

FACILITIES

According to respondents from first generation

universities, universities are trying to crate positive

working area which they perceived that their universities’

surroundings are clan, their universities fulfill resources/

materials which demanded for the teaching learning

process. This view supported by the following quotes:

‘I appreciate the university’s surrounding which is clean

and the efforts which are taken to fulfill teaching aid

materials or resources like smart board and laptop is the

positive side of this university.’ (FA 5, 8 years

experience)

‘I appreciate fulfilling laboratory materials and use

technology to support the teaching- learning process in

this university.’ (FA 8, 8 years experience). All this

indicted that in first generation universities materials/

resources fulfilled which allowed creating conducive

working environment. However, academic staffs from

second and third generation universities respond that

there is lack of facilities and shortage of materials and

unfair resource distribution are what they criticized. This

view supported by the following quotes:

‘There is Lack of facilities for the teaching learning

process in this university which need to be solved.’ (SA

43, 4 years experience)

‘Shortage of teaching learning materials as well as

unfair distribution of aid materials like personal

computer...’ (SA 44, 8 years experience)

‘Insufficient office, lack of office equipments and internet

problem are what I criticized in this university.’(TA 76, 5

years experience)

‘‘I criticize this university on its commitment on fulfilling

teaching material availability.’ (TA 77, 4 years

experience)

‘Lack of office equipments like table and chair in this

university is what I criticized.’ (SA 45, 3 years

experience)

‘Resource problem related to white board, LCD

projector and Lack of teaching aid materials are the

main areas which need improvement in this university.’

(TA 78, 5 years experience).

This is associated with the working environment of the

organization which help employee to work their job in

appropriate manner. This implies that the lack of

facilities and materials create un-conducive working

environment in the third and second generation

universities which may severely affect employees’

satisfaction and commitment as well as the teaching

learning process at large. Basic facilities that provide

appropriate environments for effective learning,

including functional library facilities, functional lecture

rooms which have a chalkboard, whiteboard, projection

screen, audio-visual equipment, artificial lighting and

electrical outlets, functional seating and desk for each



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student place and functional laboratories and the like.

Therefore, these facilities and equipments should be

fulfilled and managed and managements in higher

education institutions should emphasize to fulfill those

facilities to support the teaching learning process.

RELATIONSHIPS

In the first and second generation universities there is

healthy interpersonal relationship between employees

and their immediate heads and good teamwork and high

commitment of staffs as well as good staff to staff

relationship. This view supported by the following

quotes:

‘‘Good relationship among staffs and between staffs and

their immediate boss is the positive side of our university.

(SA 46, 5 years experience)’’

‘I appreciate in this university: No bureaucracy.. You

can contact any person in different positions and Smooth

staff management relationship.’(FA 6, 5 years working

experience)

‘Free communication and No bureaucracy in the

university...employees are free to contact freely even the

top management of the university are the positive sides

what I appreciate in this university.’ (SA 47, 6 years

experience).

Relationships between supervisors and subordinates and

among peer-worker determine employees’ productivity.

Thus, good relationship among staffs and between staffs

and their immediate heads is demanded in higher

education institutions to create a conducive working

environment.

HUMAN DEVELOPMENT

Human development is one of the positive sides in the

three generation universities. According to respondents

from all generation universities their universities are

good in human development through sending staffs for

further education and arranging trainings which improve

the staffs’ educational level and enhance their skills and

knowledge. This view supported by the following quotes:

‘What I appreciate in our university is its commitment to

arrange further education for academic staffs.’(SA 48, 7

years experience).

‘Giving opportunities for further education and training

is one of the positive sides of our university.’ (FA 7, 12

years experience)

‘‘Working to send further education is one area I

consider positive side of this university (TA 80, 3 years

experience)

‘Our university is work on staff development through

arranging scholarship opportunities for academic

staffs.’(FA 8, 13 years experience)

Since training and development is essential to enhance

employee performance, universities should enhance the

skills and knowledge of staffs through arranging training

and further education in the country and abroad.

ACADEMIC FREEDOM

Respondents from all generation universities explicitly

explained that there is academic freedom in their

institutions which academic staffs express their views

freely, discuss their subjects freely in the classroom and

perform other academic tasks including assessments

without other interferences. This creates a better working

environment for staffs. This view supported by the

following quotes:

‘What I appreciate in this university is that the

managements are less interfering on staffs activities that

are there is academic freedom in the universities.’ (SA


‘What I appreciate in this university is freedom which

we freely express and discuss different issues in the

university…. and we perform our academic tasks freely.’

(FA 9, 10 years experience)

‘The positive thing I personally appreciate in this

university is the academic freedom.’ (TA 81, 4 years

experience)

Fining of this study indicated that relatively good

academic freedom exists in the higher education

institutions which create a conducive working

environment for academic staffs. According to Moshman

(2017) the academic freedom of individual faculty

members should be respected. Academic institutions are

distinct from a center of propaganda and indoctrination

and what makes an institution genuinely academic is

protecting academic freedom (Moshman, 2017). Thus,

academic freedom should be an integral part of academic

institutions to create conducive working environment.

MONITORING AND EVALUATION

Lack of strong monitoring and evaluation system and less

supervision for activities performed at lower level in the

university is one of weakness of first generation

universities as expressed by respondents of academic

staffs from the first-generation universities. This view

supported by the following quotes:

‘Low management follows up on research and

community service activities are the problem I see in this

university. Most of the research and community service

were not properly conducted and implemented due to

lack of strong monitoring and evaluation system in the

universities.’(FA 10, 14 years experience)



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SERVICES

Most respondents from the three generation universities

believe there are internet and transport problem, as well

as an insufficient cafeteria in their universities which are

associated with service for staffs. This view supported by

the following quotes:

‘Poor internet service, insufficient cafeterias for staffs

are issue I criticized this university.’(TA 82, 7 years

experience)

‘Lack of service related to internet and transport, are

problems of this university.’ (FA 11, 5 years experience)

Problem of service delivery associated with internet,

transportation and cafeteria were identified by

respondents from Ethiopian higher education institutions.

Those services, especially internet service should

improved which is highly supportive the teaching

learning process as well as the researchers conducted by

academic staffs. In today’s rapidly changing and

competitive working environment, it requires learning

continuously new ideas /knowledge and skills.

Importance of internet in education is unquestionable,

which allowed to make the relearning process interesting

and diverse and helped staffs to access different teaching

resources and in their research activities. Thus, higher

education institutions should prioritize investment in

information technology.

ADMINISTRATIVE STAFFS

Respondents of first and third generation universities

respond that the academic staffs criticize administrative

staffs. This view supported by the following quotes:

‘Supportive staffs of our university do not play their role

appropriately to support the academic staffs… this is

what I criticize about this university.’(FA 12, 9 years

experience)

‘No smooth interaction from administrative staffs in this

university.’ (TA 83, 5 years experience)

Administrative staffs who are performing the

management and administration, related to human

resources, administrative organization, financial affairs,

libraries, information, general services, as well as any

process of administrative management should be trained

appropriately and should have a smooth relationship with

academic staffs. Thus, continuous training for

administrative staffs in universities increases their

professional competences and abilities.

RESPECT AND RECOGNITION

According to most respondents from the second and third

generation universities, academic staffs are not respected

and rewarded and motivated. Generally, they perceived

that the managements of their university aren’t care about

employees. This view supported by the following quotes:

‘Academic staffs are not respected, staffs promotion and

motivation is almost no in our university.’ (SA 50, 6

years experience)

‘Most of people in different management level are

dictators they are not deal with polite way.’(TA 84, 6

years experience)

‘Management of the university never cares about the

employee and less concern for employees and Poor

rewarding system. These are what I criticize this

university.’ (TA 85, 5 years experience)

Danish & Usman (2010) finds out that there is a

relationship between rewards recognition and incentives,

and employee motivation and satisfaction. Better

rewards and recognition increases employee motivation

and enhance employee satisfaction all of which

contribute to for the greater the levels of performance and

productivity (Baskar & Rajkumar, 2015). Thus,

employees should be treated as an important asset,

respected, rewarded and motivated to utilize their

efficiency and effectiveness.

RESEARCH AND COMMUNITY SERVICE

Respondents expressed that availability of research and

community service funding is inadequate, which hinder

them to participate in conducting research and

community service activities.

‘One of the main things I strongly criticized in this

university is lack of research and community service fund

which hider us to conduct research and community

services projects.’ (SA 51, 8 years experience)

STAFFS

According to respondents of academic staffs’ second

generation universities composed of young qualified

energetic staffs who work hard for the success of their

universities. This view supported by the following

quotes:

‘In this university I appreciate that staffs are energetic

and qualified to perform their jobs.’ (SA 52, 9 years

experience)

‘Young staffs are the positive side of this university.’(SA


TECHNOLOGY

According to respondents of academic staffs of the

second generation universities, their universities are

limited in adapting new technology for teaching learning

process. This view supported by the following quotes:



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‘‘I criticize this university in using technology…in this

university there is poor culture of using technology like

smart board’ (SA 54, 7 years experience)

‘…..Our University is limited in adapting technology for

education.’ (SA 55, 6 years experience)

CONCLUSION

The problems in the higher education institutions rose by

academic staffs including adoption of new technology,

insufficient fund for research and community service, no

respecting and recognition, less administrative support,

inadequate service, insufficient facilities and materials

should be addressed and solved.

Generally, from the finding of this study it can be

conclude that hat there is good management system in

first generation universities, but not good management

system in second and third generation universities,

facilities and resources/ materials were fulfilled in first

generation universities, but not second and third

generation universities, good training and development

and academic freedom but insufficient service of

cafeteria, internet and transport as well as insufficient

fund for research and community service in all three

generation universities, unsupportive administrative

staffs and not respected and rewarded and motivated

staffs in second and third generation universities and

young qualified energetic staffs but limited adaption of

new technology in second generation universities.

RECOMMENDATIONS

Teaching related activities should adequately fund and

managements in higher education institutions should

supported the teaching aspects of academic staffs’ role,

academics staffs should get appropriate supports to

support their research and community service related

activities and the institutions should support their staffs

on research and community services, management of the

higher education institutions would create networking

and collaboration with international higher education

institutions to enhance their capacity in relation to

education quality and research, Provide administrative

supports to academic staffs that will help them directly

with their academic work, there is a need for more

investment in facilities and materials which required and

supports the academic staffs’ activities, the higher

education institutions should have clear reward and

motivation system and all academic staffs should be

respected and recognized, the higher education

institutions should create a working environment to

satisfy their staff, the higher education institutions need

to develop couture of integration, collaboration and

working together through good interpersonal

relationship, technology should adapt in higher education

institutions to fit itself with changes in the world and

employees should be treated as an important asset,

respected, rewarded and motivated to utilize their

efficiency and effectiveness.

REFERENCES

1. A˚ kerlind, G. S., & Kayrooz, C. (2003).

Understanding academic freedom: The views of

social scientists. Higher Education Research &

Development, 22(3), 327-344.

2. Abe, I. I., & Mason, R. B. (2016). The role of individual

interpersonal relationships on work performance in the

South African retail sector. Problems and Perspectives in

Management, 14(2), 192–200.

3. Baskar P., & Prakash Rajkumar. K. R. (2015). A Study on

the Impact of Rewards and Recognition on Employee

Motivation. International Journal of Science and Research,

4(11), 1644–1648.

4. Clarke, M., Kenny, A., & Loxley, A. (2015). Creating a

supportive working environment for academics in higher

education: country report Ireland. M. Clarke, A. Kenny and

A. Loxley, Creating a Supportive Working Environment for

Academics in Higher Education: Country Report Ireland,

Irish Federation of University Teachers and Teachers’

Union of Ireland.

5. Danish, R. Q., & Usman, A. (2010). Impact of reward and

recognition on job satisfaction and motivation: An empirical

study from Pakistan. International journal of business and

management, 5(2), 159-167

6. Danish, R. Q., & Usman, A. (2010). Impact of reward and

recognition on job satisfaction and motivation: An empirical

study from Pakistan. International journal of business and

management, 5(2), 159-167

7. Moshman, D. (2017). Academic Freedom as the Freedom to

do Academic Work. AAUP Journal of Academic Freedom,

8, 1–14.

8. Pahi, M. H., & Ab. Hamid, K. (2015). How leadership

styles influence commitment to service quality (CSQ): A

Case Study of Hospitals of Sindh Pakistan. Mediterranean

Journal of Social Sciences, 6(6),282-295

9. Sakiru, O., Kolapo, Othman, J., yero, A., Abdullahi, M., &

Kia, N. (2013). Relationship between leadership and

employee productivity in an organization. IOSR Journal of

Business and Management, 9(4), 62–66.

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business A skill-buliding approach (5th ed.). John Wiley

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& Othman, J. (2011). Competencies, roles and effective

academic leadership in world class university. International

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and Dissertations, Iowa State University.



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FINTECH (FINANCIAL TECHNOLOGY): A BOON FOR FINANCIAL SECTOR

CMA Dr. Rajni Bala*, CA (Dr.) Sanjeev Bansal

**, Dr. Anil Angrish

***

*Assistant Professor, PIMT, Alour Khanna, Punjab, India

**Assistant Professor, PTU, Jalandhar, Punjab, India

***Associate Professor, NIPER, Chandigarh, India

ABSTRACT

Digitization has a strong impact on the financial services industry. One major reason is that financial

products are almost exclusively based on information. Examples are payment transactions or credit

contracts which, in contrast to purchasing a car, do in most cases not include any physical components.

Another reason is that most processes are almost entirely implemented without any physical interaction such

as for example online payment or stock trading – exemptions are some physical forms of interaction such as

client advisory. Due to recent developments in information technology (IT), the ongoing process of

digitization is not only leading to an increasing automation of processes, but to a fundamental

reorganization of the financial services value chain with new business models (e.g., robo-advisors) and new

actors entering the market (e.g., Apple). The term “financial technology” or short “fintech” reflects this.

This concept is often seen as marriage of financial services and information technology.

Keywords: Fintech, Financial technology, Digitization, Innovation, Financial Service Industry.

INTRODUCTION

Fintech is basically an amalgam of two words i.e.

Financial + Technology. It is concerned with the use of

technology in the economic industry, i.e. financial

services, banking etc. in order to provide clients with the

finest possible services and also with a lot of time

savings. It is used in the economic industry for more

consumer-oriented services. According to a global

accounting firm‟s Global Fintech Report 2017, the

Fintech space is currently “all about innovation,

disruption and transformation, and will undoubtedly

impact and shape the way financial institutions around

the world operate.” Fintech today have become a global

phenomenon with mind boggling innovations attracting

huge investments worldwide. India‟s Fintech adoption

has risen exponentially over the last two years led by the

government‟s push toward a digitalised economy and

financial inclusion. Global Fintech adoption rate almost

doubled to 64% in 2019, compared to two years ago,

with emerging markets like China and India leading the

way with 87% adoption, according to EY Global Fintech

Adoption Index 2019. In 2017, the first time the index

was created, India‟s Fintech adoption rate was 52% still

higher than the global average of 33%.

FEATURES OF FINTECH (FINANCIAL

TECHNOLOGY)

The following are the main features of Fintech (Financial

Technology):

1. Fintech is mainly concerned with monetising

data. Further, it concentrates on value creation

from the already available data by taking

maximum use of technology in the field of

finance.

2. Fintech involves crypto-currencies creation and

use.

3. Fintech includes a range of economic operations

such as payments, online money transfers, loan

application, raising money or managing

investment in stock/mutual funds without a

middleman‟s assistance.

4. The combination of streamlined products with

technology enables Fintech companies to be

more efficient and decrease each transaction‟s

related costs.

5. Fintech is also a passionate adaptor of automated

customer service technology, using AI interfaces

to support fundamental functions for clients.

6. It is also helping lower financial shocks to the

market through diversification and

decentralization, and is creating more accurate

and transparent financial risk assessment models.

7. Fintech is also leveraged to combat fraud by

leveraging payment history data to non-standard

flag transactions.



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CHALLENGES IN FINTECH

The following are the main challenges in Fintech:

1. Increased focus on cyber security

Process automation and information digitization

makes Fintech systems susceptible hacker

assaults. For the promotion of Fintech, strict

measures are needed for the protection of

sensitive information from cyber attacks.

Therefore, there is a need of creating a safer,

more secure cyberspace and more robust controls

to ensure that the risks and opportunities

associated with emerging digital technologies are

balanced. Though one of Fintechs‟ top priorities

is safety, data that is available online can easily

be stolen and used for other lucrative purposes

by third parties.

2. Managing collision of a technology culture

There have also been cases where the collision

with the conservative and risk-averse globe of

finance with a technology culture that believes in

a philosophy of "Move quickly and break things"

has generated undesirable outcomes.

3. Regulatory Measures

Excessive volatility due to Fintech has the

potential to amplify market shocks. One of the

great difficulties of Fintech expansion is the lack

of compatibility of different regulatory

environments. A good example is Bitcoin: it is

banned in a number of countries, regulated as a

wallet in others, treated as a currency in some,

encouraged in a few, pushed into a „grey‟ area by

more, and left unaddressed by authorities by

many. There are differences in regulation,

licensing and other compliance requirements.

BENEFITS OF FINTECH

The following are the main benefits of Fintech:

1. Useful to Financial Services Industry

Fintech is transforming/reshaping the financial

services landscape. Fintech has enormous

potential in improving the financial services to

better manage risk in the financial system by

allowing greater transparency in payments

systems and more security in financial

transactions. Fintech helps a financial services

provider to make proactive and passionate

strategic decisions. Fintech may help in

minimizing cost and offering faster, more

transparent, cheaper and user-friendly financial

services. Fintech helps in focusing on markets

where a business have a true competitive

advantage. Fintech can also help drive

improvements in traditional financial services

and promote disruption through innovative new

products and services, which can offer benefits to

consumers and other sectors of the economy.

Fintech provides solutions that respond to

consumer needs for trust, security, privacy,

transparency, better services, and change the

competitive landscape and more user-friendly

financial services. Fintech is very useful to

financial services industry in formulating

innovative strategies, offerings, and tactics that

drive higher consumer expectations. Fintech can

help financial service firms think more

holistically about their customers‟ needs and

expectations and develop innovative solutions

without losing sight of their core offerings and

revenue streams.In developed markets, a new

tool has been deployed to better tackle this

challenge; Robo-advisors are a class of financial

advisors that provide financial advice or

Investment management online with moderate to

minimal human intervention. Investors of the

future will have the ability to invest their funds,

monitor the performance of their portfolio, and

liquidate their investments in real time using

their smart phone or personal computers. One of

the major benefits of Fintech, specifically in

regards to blockchain-based Fintech and AI-

powered regtech for the financial services

industry, is the introduction of transparency.

Fintech projects create auditable money trails

and can help identify potentially fraudulent

activity faster and more easily than a human.

2. Useful in Accounting

Fintech will definitely be having a wide-ranging

and transformative effects on accountants.

Artificial intelligence, automation and cloud

accounting etc. transform the accountancy and

advisory profession, and, by extension, create

huge new opportunities for the businesses they

serve. Due to Fintech, financial information is

flowing faster and freer than ever. It results in

greater automation of processes like payroll

services, invoice management, credit control,

cash flow forecasting, and reconciliations, it will

reduce the time accountants need to spend on

these traditional duties, freeing up resources and

expertise to focus on more value-adding projects.

The accountants will be able to concentrate on

their key knowledge and build the company.

They will be able to take an increasingly

strategic position in defining threats and

possibilities with more strong instruments at their



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disposal around planning, forecasting and

evaluation.

3. Useful in Business

Business will have access to real-time economic

information and reporting, and increased access

to data and more strong instruments and could

lead to better insight and budgeting, forecasting,

assessment and resource management choices.

Companies can now depend on data-driven ideas

that are powered by AI to form strategy. Data-

driven insights to shape strategy. Companies can

make better informed choices on where to direct

resources and how to target customers.

4. Useful to SMEs

Fintech start-ups are offering solutions to many

of the problems faced by small businesses, such

as cash flow concerns and insufficient funding.

Fintechs around the world have been playing

over the years in service of bridging the SME

financing gap. According to the World Economic

Forum (WEF), Fintech start-ups in P2P lending

and crowd funding are well poised to play a key

role in bridging the $2-trillion funding gap for

millions of small businesses across the world. A

2017 report showed that India had the fourth-

highest number of Fintech start-ups focused on

alternate lending for SMEs.

5. Useful to Banks

Fintech allows banks a fast and convenient way

to innovate their product offerings. Banks can

vastly improve their customers‟ experience with

lower capital expenditures. Banks may think of

starting reinventing their services by leveraging

the latest technologies such as data analytics, big

data, and artificial intelligence. Fintech can

deliver better, cheaper, faster and more

innovative solutions for customers.

6. Useful to National Economy

Fintech sector can play a vital role in aiding the

positive transition by generating new value

streams in our economy. Various microeconomic

reforms will also be accelerated by innovations

in Fintech, especially in payments systems.

Fintech will be very helpful in creating job

opportunities in our economy.

ACTIVE AREAS OF FINTECH INNOVATION

According to a recent Deloitte‟s report, Fintech

companies will have on six areas within financial

services including payments, insurance, deposits and

lending, capital raising, investment management, and

market provisioning. Some of the liveliest areas of

Fintech innovation comprise or rotate around the

following areas:

1. Mobile Banking Apps

With Smart phones and devices perking up, most the

banks have already started offering their personalized

apps, where entire services can be availed at a single

destination.

2. Mobile Payment Apps

Mobile wallet apps like Paytm or PhonePe has received

overwhelming response from the users. These apps offer

services such as mobile and DTH recharging, payment

for electricity or phone bills, booking railway, flight, or

payment of school fees, and many more. It also serves as

a fastest medium of P2P payments for transferring the

money most secured manner.

3. Loan Apps

There are a few loan apps as well that are specifically

developed to simplify the process of availing personal

loans. These personal finance apps are playing an

important role in promoting the Fintech industry.

4. Wealth Management Apps

People want to invest and manage their money online

smartly and various apps help in managing the finances

and preparing an investment strategy. It acts as your

digital financial adviser.

5. Stock Trading and Mutual Funds Apps

Fintech provides a lot of exciting new opportunities to

investors to bypass brokers and investment bankers.

Various apps enable user‟s access their financial data

from anywhere. Fintech simplifies the process of stock

trading. In a similar way, various apps are there to

purchase Mutual Funds units in virtually real time. In this

context, the apps by Karvy and CAMS are worth

mentioning.

CONCLUSION

To conclude, it may be remarked that Fintech has really

brought a revolution in the financial industry influencing

every domain including the banking services, the mobile

wallet, stock trading and equity funds, the insurance

sector, and the Block chain technology etc. Fintech

strives to make financial services more accessible for

both consumers and businesses. By connecting customers

to a digital world, Fintech enhances their experiences,

making them efficient, economical and frictionless.

While the landscape for financial technology is still in its

infancy, its potential is transformational. Fintech is

reducing information asymmetry on the marketplace,

thereby contributing to risk mitigation and promoting

more effective resource allocation. Fintechs‟ potential to

unleash a new era of innovation and healthy competition



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is definitely noteworthy. As Fintech continues to the

shape the future of the financial services industries,

companies must invest in emerging technologies as it

makes sense to their business. Advances in artificial

intelligence and information processing and analytics

will drive the Fintech sector even more innovation.

REFERENCES

1. Philippon, T. (2016). The fintech opportunity (No. w22476).

National Bureau of Economic Research.

2. Arner, D. W., Barberis, J., & Buckley, R. P. (2015). The

evolution of Fintech: A new post-crisis paradigm. Geo. J.

Int'l L., 47, 1271.

3. Buchak, G., Matvos, G., Piskorski, T., & Seru, A. (2018).

Fintech, regulatory arbitrage, and the rise of shadow

banks. Journal of Financial Economics, 130(3), 453-483.

4. Nicoletti, B., Nicoletti, & Weis. (2017). Future of FinTech.

Basingstoke, UK: Palgrave Macmillan.

5. Puschmann, T. (2017). Fintech. Business & Information

Systems Engineering, 59(1), 69-76.

6. Schueffel, P. (2016). Taming the beast: a scientific

definition of fintech. Available at SSRN 3097312.

7. Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., &

Hess, J. (2018). The Global Findex Database 2017:

Measuring financial inclusion and the fintech revolution.

The World Bank.

8. Gai, K., Qiu, M., & Sun, X. (2018). A survey on

FinTech. Journal of Network and Computer

Applications, 103, 262-273.

9. Arner, D. W., Barberis, J., & Buckey, R. P. (2016).

FinTech, RegTech, and the reconceptualization of financial

regulation. Nw. J. Int'l L. & Bus., 37, 371.



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A DROWNING SPEED BOAT "THE INDIAN GROWTH STORY"

Dr. Monika Chopra*

*Assistant Professor, Department of Commerce, DAV College, Chandigarh, India

ABSTRACT

The Economy of India is the tenth-largest in the world by nominal GDP and the third largest by phasing

power parity (PPP). The country is one of the G-20 major economies, a member of BRICS and a developing

economy that is among the top 20 global traders according to the WTO. In the recent past, the Indian

economy has had to overcome varied challenges in its resolve to sustain its economics success. The major

challenges included: unsupportive external environment, domestic structural constraints, growth slowdown

and inflationary pressures. The slowdown manifested in the decline in the growth of Gross Domestic Product

(at factor cost at constant 2004-05 prices) from 8.9 per cent in 2010-11 to 6.7 per cent in 2011-12 and 4.5 per

cent in 2012-13. With the economy projected to have registered a growth rate of 4.9 per cent in 2013-14, the

declining trend in growth seems to have reversed. The growth slowdown in India is broadly in sync with

trends in similar emerging economies. The sharp downturn in growth owes to the interface of domestic

factors with the global economic environment of uncertainties and slow growth in many advanced

economies. The growth of real GDP has generally shown a declining trend since the first quarter (Q1) of

2011-12, and is characterized by a moderation in services growth and a protracted slowdown in industry. The

revival in agriculture on the back of a steady monsoon and robust growth in financial and business services

led to a modest uptick in growth in 2013-14. The Union Budget 2013-14 laid considerable emphasis to

control inflationary pressures and mitigation of structural bottlenecks to growth. The policy response of the

Government to the present growth slowdown has been in the form of structural reforms aimed at reducing

entry-barriers and boosting competition and productivity in various sectors; fiscal consolidation and reforms

in administered prices; further strengthening of financial/banking sectors; introduction of instruments to

encourage financial savings of households; measures to restart the investment cycle through support to

infrastructure financing and encouragement to micro, small and medium enterprises (MSMEs); steps to

revive growth in manufacturing and reforms in energy pricing. These policies have gone hand-in-hand with

macroeconomic stabilization characterized by a sharp depreciation of the Rupee witnessed till the second

quarter (Q2) of 2013-14.

Keywords: Indian Economy, GDP, Agriculture, Industry

INTRODUCTION

Economic growth is defined as the steady process by

which the productive capacity of the economy is

increased over time to bring about rising levels of

national output and income (Todaro and Smith, 2003).

Samuelson and Nordhaus (2007) assert that economic

growth represents the expansion of a country's potential

GDP or national output. Soon after the Independence,

Indian Economy was facing chronic imbalances as part

of colonial rule.

Indian economy. Indian made the first declaration of

industrial policy in their resolution dated 6th, 1948 in

which both public and private sectors had been given

importance. India Followed the planning model like all

other Socialist Countries The First five FYP was started

in 1 951 . The development however, the development of

industrialization and sub normality as part of industrial

development can be traced through the facts. According

to the 1st Five Year Plan, on the one hand, factory

establishment in the country accounted for merely 6.6 per

cent in 1948-49 as a proportion of national income and

on the other, only 1-8 per cent of the working population

were engaged in these establishments. On April 1956, a

new policy statement was announced. It was aimed at

accelerating the process of industrialization and

specifically developing large scale heavy industries. The

new revised industrial policy includes Schedule A and

Schedule B. Schedule A included industries which were

the exclusive responsibility of the state - monopoly of the

state. Schedule B included mixed sector of public and

private undertaking. All the rest of the industrial were left

for the private sector to establish and operate. The third

plan focused on long run benefits with the objective of

increase in the national outputs and income generating

huge employment. The focus was on the development of

capital and producer goods industries. It also emphasized

on the development of machine-building industries.

However, the growth rate of industrial output declined,

initially at slow place and after that, it decelerated

sharply reaching stagnation levels. This created serious

concerns for nearly three years when the economy



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fluctuated. This year 1968-69 showed a clear sign of

recovery. Fourth Five Year Plan (1969-74), was marked

by a very low growth in industrial production of 3.9 per

cent again the targeted rate of 8-10 percent. Fifth Five

Year Plan, started in 1974; proposed to achieve growth

with the attainment of self-reliance. The emphasis was on

the industries of core-sector like iron & steel, non-ferrous

metals, fertilizers, mineral oil, machinery-building, coal

and others. The economy was faced with pressures and

the industrial growth rate was: low at 23 per cent in

1974-75. It was 53 per cent in 1975-76 which provided

some relief for the economy. Sixth Five Year Plan was

started in 1980. Substantial policy changes were

announced during this plan. Industrial licensing and

controls were relaxed and import policy was more

liberalized than ever before. The result was that growth

was witnessed in industrial production. Seventh Five

Year Plan was started in 1985. The emphasis was on

development with growth and increases in productivity.

The industrial growth rate during this plan was, 8.5

percent against the target of 8.4 per cent. Thus, it was

successful on the part of industries. Ahluwalia (1995)

pointed out that the inadequacy of the growth

performance of the Indian economy led Prof. Raj Krishna

to the coin the much quoted phrase 'the Hindu rate of

growth, to specify the disappointing trend of growth. The

Hindu growth rate has nothing to do with any specific

religion; rather it is a term that was economics in nature.

It was a caustic remark on the socialist pattern that was

adopted by the government after he independence. It was

an indication of low and almost stagnant growth of

Indian economy during 1950s to 1980. The average

annual growth rate of GDP during this period was 3.5 per

cent. Virmani (2004), asserts that the new economic

policy introduced in 1991-92 had changed the Indian

economy and pushed it from the Hindu rate of growth to

a new higher rate of 5 per cent - 6 per cent, called as, new

Hindu rate of growth. More recently, Piketty (2014) has

argued for preventing the growth in functional

inequalities - based on a differential movement between

the rate of return on capital (r) and the rate of economic

growth (g) - as a means of protecting democracy. Growth

potential of Indian economy can be gauged in two ways:

quantitative and structural. To understand the

quantitative aspects, growth rate of different sectors and

overall GDP growth are considered. But the understand

the economy well, structural aspects have to be

considered. Changes in sectoral distribution of GDP give

the more realistic account on the part of economics

growth of the country. Agriculture dominated sectoral

composition of the GDP till 1970. In 1950-51 agriculture

and allied sector's share in GDP was 55.3 per cent. Two

decades of planning in India, did not show any

significant decline in the share of agriculture and allied

sector. This was the manifestation of the fact that

industries were indeed in a bad"- condition in India. The

process of industrialization was not smooth and not

contributing significantly.

RECENT GROWTH TRENDS

The crises of 1991 led the Indian policy makers to think

beyond the policy. of import substitution to outward

oriented export promotion model. The Indian Economy

was integrated with the economies of the world. Reforms

were initiated in industrial policy and foreign investment

policy, trade and exchange rate policy, trade and

exchange rate policy, tax policy, tax reforms, public

sector, financial sector reforms, reforms in agricultural

sector, labor market reforms and others. The result of

these reforms were seen soon after the reforms. The GDP

growth rate which was merely 1.43 per cent in 1991-92,

increased to 5.36 per cent in 1992-93. In the present

paper the growth rates of different sector of the economy

have shown.

Table 1 : GDP growth rate from 1950-1979

Decades GDP Growth Rate

1950-59 3.3

1960-69 4.4

1970-79 2.9

1950-79 3.5

For the calculation of sectoral growth in India Mean,

sample variance (S2), Sample standard deviations (S) &

Sample Pearson correlation coefficient (r) are used.



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Table 2 : Mean, sample variance and Sample standard deviation of Growth Rates from 1991-92 to 2012-13

Sectors Mean growth

rate

Sample variance v

(S2)

Sample standard deviation

(S)

Agri. & Allied

(X1)

3.01 16.7 4.90

Industry (X2) 6.54 10.03 3.16

Services (X3) 8.24 3.75 1.93

GDP (X4) 6.62 4.38 2.09

Table 3 : Trade balance and GDP growth rate

Year GDP Growth Trade Balance (US m 5)2

1991-92 1.43 -1546

2001-02 5.52 -7586

2007-08 9.32 -88522

2012-13 4.96 -118633

AGRICULTURE & ALLIED SECTORS

Indian grounds agriculture. The low production and

productivity poses constraints on the total output of

agriculture. The inefficiency on the part of agriculture

merits sound policy implications and investments. A very

alarming characteristic of agricultural sector is that real

investment in agriculture, both private and public, has

been stagnant (Ahluwalia, 1993). This, with other

structural factors, led to slow growth in agricultural and

allied sector.

INDUSTRY

The economic reforms were more radical as far as

industries were concerned. Changes in the policy

framework gave a big boost to industries. The major

reforms were the abolition of licenses to a wide range of

industries. Licenses are required now only for some

industries. Industries have thus grown significantly

during the last two decades after the reforms. Average

growth rate from 1991-92 to 2010-11 was 5.7 per cent

with a peak growth of 12.17 per cent in 2006-07 and

lowest of 0.34 per cent in 1991-92.

SERVICE SECTOR

The service sector in India after the reforms has

dominated the sectoral composition of GDP. The share of

services in 1991-92 was 43.9 per cent which rose to

59.29 per cent in 2012-13. There is a sharp increase in

IT, telecom, banking service, insurance, entertainment

and many more. But, it's also true that only few services

are performing well. Today, India is well known for IT

and IT- enabled services (ITES), communication and

BPO. The growth of service sector after the reforms

shows a relatively smooth trend compared to agriculture

and industries. The growth rate which was 4.69 per cent

in 1991-92, started increasing and witnessed double-digit

growth in several years.

PERFORMANCE OF INDIAN ECONOMY

There are different phases of growth of Indian economy.

Before 1980s, there was relative stagnation in the

economy, with average growth rate of GDP at 3.5 per

cent. Partial reforms were started during 1980s. But total

reforms were initiated only after 1991. The currency

crisis of 1990s compelled the policy makers to initiate

the reforms.

GDP started peaking after reforms. Table 2 show the

growth rate, mean, sample variance, sample standard

deviation and deviations from mean and sample standard

deviation of GDP growth rates.

The mean growth rates of all the three sectors-

agriculture & allied, industry and services, have been

shown in Table 3. It gives the complete picture of

performance of the economy on the basis of each

individual sector's performance.

EXTERNAL LINKAGES

Domestic sectors have been discussed till now. To

analyze the economy completely, it is imperative to

understand the external linkages of growth also,

comprising exports and imports. Trade balance remained

negative since long. There has been trade deficit in the

balance of payments account. Table 4 shows trade

balance and GDP growth rates from 1991-92 to 2010-11.



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The correlation coefficient between GDP growth rate and

trade deficit is found to be 0.58. This indicates that there

is a moderate positive relationship between these two.

The value of correlation coefficient shows that when

GDP increases, India's trade deficit also increases

(though moderately), indicating that the exports are not

responding as fast as compared to imports. These growth

rates indicate that the reforms had certainly brought more

imports which has contributed in our growth because

such range of growth rate (1991-2010) has not been

achieved by India before trade liberalization started in

1991. Figure 1 shows how GDP growth rate and trade

deficit are inter-related. Primary vertical axis shows trade

deficit in US million S and secondary vertical axis shows

GDP growth rate in percentage (per cent). Horizontal

axis indicates years from 1991-92 to 2010-11.

RECENT GROWTH TRENDS

The Indian economy is acing problems that are reflected

through the facts released by the Ministry of Finance.

Department of Economic Affairs during recent couple of

year. Quarterly data released from 2010-11 to 2'012-13

related to the growth rates of agriculture & allied sector

industry and service sector have been changing at a wider

rate.

Agriculture & allied sectors have been performing

poorly. This is the most fluctuating sector — growth

rates have fluctuated between peak rates of 11.0 per cent

in quarter 3 (Q3) of 2010-11 to mere 11 per cent in

quarter 2 (Q2) of 2012-13. Average growth rate during

this period was 3.4 per cent. Industrial sector is also a

matter of concern for the policy makers and the

government. Industries have grown on an average of 4.4

per cent during Q 1 of 2010-11 to Q 2 of 2012-13.

However, service sector shows a steady trend rate in this

sector stood at 8_6 per cent. Overall GDP growth rate

during this period was 6.9 per cent.

CONCLUSION

Compared to the pre reforms era, Indian economy had

much faster economic growth in the post reforms period.

But, the recent revised forecasts released by ADB and

others on the growth of Indian economy provide a

glimpse of slow down of Indian economy.

Agriculture and allied sector is still a matter of concern

as it is the most fluctuating sector in the Indian economy

with mean growth of mere 3.01 per cent with high

standard deviation of 4.09 pa cent in the post-reforms era.

Mean growth of industries during 1991-92 to 2012-13

stood at 6.5 per cent with standard deviation of 3.16 per

cent indicating fluctuations in the growth rates. Seri ices

are performing well as compared to agriculture and allied

and industries. The mean growth is 8.24 per cent which

gives a trend of growth from 1991-92 to 2012-13.

Sample standard deviation is comparatively low at 1.93

per cent showing low spread of growth rates from mean.

These results show a relative smooth tend of services

growth in India.

After the wake-up call of economic reforms an trade the

role of external sector become crucial in determining the

fate of Indian economy. Trade balance exports-imports

(X-M) remained negative and sharp even in the post

reforms period. The correlation coefficient between GDP

growth rate and trade deficit is found to be 0.58 which

shows positive moderate association between two GDP is

increasing and so is trade deficit. At the beginning of this

period, the ratio was admittedly low but after 1991

reforms, the ratio rose more rapidly (Sinha and Bharti

2012). The values reveal the fact that the increase in GDP

growth has not turned into increasing exports as

increasing import. This indicates that the ex s are not

responding as fast as compared to imports.

The results on growth statistics after the reforms suggest

that GDP growth of 6.6 per cent during 1991-92 to 2012-

13 is out-lying from Hindu growth rate of 3.5 per cent.

The sectoral mean of growth rates of industry and service

sector are 6.5 per cent and 8.2 per cent respectively,

moving far away from Hindu growth rate. But the most

revealing fact lies in the growth rate of agriculture and

allied sector witnessing mean growth rate of only 3.01

per cent during the same period, which is even lower than

Hindu growth rate. Thus, agriculture and allied sector

being close to Hindu growth rate means more need of the

God's blessing. This is a big question on our post reform

growth performance that at the sectoral level, the major

contributor in our growth is services where a small

workforce is dependent For many years, agriculture had

negative growth rate where the majority of the workforce

is dependent. To conclude, there may be fluctuations in

growth of the economy, but the post-reforms growth

statistics show that India will certainly not be back to the

Hindu Growth but much ahead from such growth. The

quantum of fear for back to Hindu as mostly been

exaggerated.

REFERENCES

1. Atkinson, A.B. (2009). "Factor shares. the principal

problem of political economy?, Oxford Review of

Economic Policy, Vol. 25, No.1, pp. 3-16.

2. Balakrishnan P. and M. Parameswaran (2007):

"Understanding Economic Growth in India: A prerequisite",

Economic and Political Weekly, July 14, pp. 2915-22.

3. Dholakia, Ravindra H. (2014): "Sacrifice Ratio and Cost of

Inflation for the Indian Economy", IIMA sworking Paper

No. 2014-02-04.

4. Daudey, E. & C. Garcia-Penalosa (2007). "The personal and

the factor distributions of income ina cross-section of

countries", Journal of Development Studies, 43(5), pp. 812-

829.



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5. Feenstra, R.C., R. Inklaar & M. Timmer (2013). "The Next

Generation of the Penn World Table," NI3ER Working

Paper; 19255, National Bureau of Economic Research, Inc.

6. Glyn, A. (2009). "Functional Distribution and Inequality",

in W. Salverda, B. Nolan and T.M. Smeeding (eds), The

Oxford Handbook of Economic Inequality, pp. 1001-126.

Oxford: Oxford University Press.

7. Hatekar, N,. And A. Dongre (2005): "Structural Breaks in

India's Growth", Economic and Political Weekly, April 2,

pp. 1432-35.

8. Sivasubramonian S. (2004): The National Income of India

in the Twentieth Century, Oxford. University Press.



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A REVIEW STUDY ON INHIBITING FACTORS OF IMPULSE BUYING

BEHAVIOR OF ONLINE SHOPPING CUSTOMERS

Amanpreet*, Dr. Anupama Bains

**

*Research Scholar of School of Management Studies, Punjabi University, Patiala, Punjab, India

**Principal of Ratan Professional Education College, Mohali, Punjab, India

ABSTRACT

In the 21st century where living standards of people are improving and their living patterns has been

changed positively which can be easily seen from their shopping behaviors. As per the various

research studies customers considered the online shopping as the convenient shopping. A high

increase in the number of online shopping customers indicates that customers prefers online

shopping due to its number of encouraging factors which influence them to buy online and influence

them to make sudden purchase decisions but there are so many factors which discourages the online

shopping customers to make sudden or spontaneous purchase decisions. The descriptive research

study has the purpose to identify the various inhibiting factors that discourages the online shopping

customers to make sudden buying decisions. After studied or reviewing a number of research studies

it is found that delay in delivery, more control of consumer, comparison between product and price,

quality perception, family control or boundaries, conscientiousness, website quality and

impulsiveness in customers behavior are the inhibiting factors of online shopping customers which

discourages them to make spontaneous purchases. The research study will be helpful to the

marketers to understand the discouraging factors so that they can improve them.

Keywords: Impulsiveness, Online Shopping, Inhibiting Factors, Customers.

INTRODUCTION

Customers buying behavior is important to measure for

the marketer to understand their needs, desires and

demands to sale their products or services. Online

shopping is highly in the trend which can be seen in the

high rise in the number of online shopping customers as

per the statistical reports of the various organizations.

There are large number of online shopping portals are

available which are offering a wide range of products or

items with different promotional offers. Online shopping

is convenient for the customers and its easy access

attracts the customers towards it. There are various

encouraging factors that influence the customers to buy

online from the various online shopping portals such

factors are convenient, variety, low cost, free shipping

services, promotional offers etc which affects their

degree of impulsiveness and encourage them to make

sudden purchases. But there are also some discouraging

factors that affect the buying decisions of the customers.

Customers are affected by their mood or awareness that

influences their buying decisions. In 1951, Applebaum

defined impulse buying as the customer exposure to their

stimuli. Customer income, family background, self

awareness, reference and experience play a vital role in

their buying decisions. The aim of the research study is

to identify the all those parameters that negatively

influence the online shopping customers and inhibiting

them to make sudden or spontaneous purchase decision

through the internet.


Dr. Sanjib Chakraborty, (2017), studied the online

impulsive buying behavior of online shoppers. The aim

of the research study was to identify the motivators and

the inhibitors of the impulse purchase decisions of

internet shopping customers. Structured questionnaire

was designed to collect the responses of online shoppers.

The analysis of the study revealed that customers are

found highly influenced toward the low price products

offered by the online shopping portals and the quality of

website affects them negatively. Quality of website does

not associated positively with the impulse purchase

decisions of online shopping customers.

Zhiguo Fan and Ping Zhang, (2015), studied the impulse

buying behavior of online shopping customers. The

purpose of the research study was to identify the impact

of credit card and increased consumer control on sudden

purchase decisions of customers. The responses were

collected from online shopping customers and it was

found after analyzing the data that customers found it

convenient to purchase online and to pay with the credit



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card as credit card is positively associated with the

purchase decisions of online shopping customers. Online

reviews regarding the product provide the detail

information of the product that increases the control of

customers on their purchase decisions so it has not

significant impact on impulse buying decisions of online

shopping customers.

Yalin Chen and Liang Zhang, (2015), conducted a

research study to examine the customer sudden purchase

decisions. The research study determined the impact of

price and product comparison on the sudden purchase

decisions of online shoppers. To collect the primary

survey was conducted and it was found that customers

have so many alternatives of any product on different

online shopping portals that make convenient for them to

make comparisons of products and prices that stops them

to make spontaneous purchase decision online.

Dr. Mehdi Shirmohammadi, Dr. Mohammad Reza

Ebrahimi and Nina Ghane, (2014), studied the impact of

quality on purchase decisions of online shoppers. The

study indicated that customers preferred online shopping

as the convenient shopping. Quality is one of the

important factors of buying decisions. The responses of

the online shoppers revealed that the quality of received

product found not satisfactory that retrain them to make

purchase decisions.

Ceyda Aysuna Turkyilmaz, Sakir Erdem and Aypar

Uslu,(2014), conducted a research study on the purchase

behavior of customers and determine the impact of

conscientiousness on the purchase decisions of

customers. It was found that customers with introvert

behavior are not easily influenced by the promotional

offers and website designs.

Yong Liu, Hongxiu Li and Feng Hu, (2013), studied the

impulsive buying behavior of online shopping customers

and determined their buying decisions. The primary

survey was conducted to understand the customer

purchase decisions. The findings revealed that customers

are positively associated with the quality of product but it

is found that delay in delivery of products has not

significant impact on customers purchase decisions.

Malin Sundstrom, Jenny Balkow, Jonas Florhed, Matilda

Tjernstorm and Pernilla Wadenfors, (2013), conducted a

research study with the objective to identify the factors of

buying decisions and measured their impacts on purchase

decisions. To achieve the purpose the survey was

conducted and after analyzing the responses it was

indicated that customers with more awareness make

buying decisions after evaluating the alternatives. Ease of

access is the positive factor of buying decision of

customers via internet.

Rashed Al Karim, (2013), studied the buying behavior

with the objective to understand the buying decision of

customers. As per the findings of the research study it

was revealed that customers preferred the online

shopping as the easy shopping due to its all time

availability. Various factors such are conscientiousness,

delayed gratification and perception of quality affects the

customers negatively and stops them to make sudden

purchase decisions.

Clair Elizabeth Crafts, (2012), stated that as per the

research study conducted on the purchase behavior of

customers that various factors such are degree of

impulsiveness, conscientiousness, quality of website are

the inhibitors of the impulsive buying decisions of

customers. Customers who are aware evaluates the

available options do not make sudden purchase decisions.

Degree of impulsiveness, conscientiousness and quality

of website does not have positive impact on impulse

purchase decisions of customers.

John D. Wells, Veena Parboteeah and Joseph S.

Valacich, (2011), measured the sudden purchase

behavior of customers with the help of this research

study. The structured questionnaire was developed based

on 5 point Likert’s Scale. The responses were collected

from the customers to understand their buying behavior

and to determine their purchase decision. The results of

the research study revealed that customers shopping

behavior are highly influenced by their general behavior.

Customers who are very introvert as per their behavior

and having less degree of impulsiveness control their

purchase decisions and evaluate the available alternatives

as comparatively to the customers with having high

degree of impulsiveness.

Amna Sirhindi, (2010), conducted a research study to

evaluate the impact of shipping services and delayed

gratification on the impulsive purchase decision of online

shopping customers. The results of the research study

found that free shipping services attract the customers

and it has positively impact on their purchase decisions.

Delay of possession of good restrains the customers to

make sudden purchase decisions.

Young-Ju Rhee, (2006), studied the factors restraining

the purchase decisions of online shopping customers and

as per the responses of online shopping customers it was

found that customers consider the online shopping as the

easy shopping but the various factors such are quality

website, delayed gratification and privacy concerns are

the factors that restrain the customers to make such

sudden purchase decisions.

Nina Koski, (2004), identified the factors of online

impulse buying behavior that restrain the customers to

make the sudden buying decision. Website quality has

not any positive impact on impulse purchase decisions.

Customers consider online shopping as the convenient

shopping but due to delay in shipping services restrain

them to make purchase decisions through internet as via

online shopping possession of goods does not meet

immediately.

Jacqueline J. Kacen and Julie Anne Lee, (2002),

conducted a research study to understand the buying

behavior of online shopping customers. The study found



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that family boundaries affect the buying behavior of

customers. The research study revealed that customers

living in individual families are more frequent buyers as

comparative to customers living in joint families.

Opinion of family and reference groups does not have

any significant impact on the purchase decisions of

customers.

OBJECTIVE OF THE STUDY

To identify the inhibiting factors that restraining

the customers from impulse online shopping

decisions.

FINDINGS

After studied the literature review it is clearly showed

that customers buying behavior is one of the most crucial

concept to understand which can be understood after

evaluating the number of parameters of impulse buying

behavior of online shopping customers. The research has

been done a very wide range of studies to understand the

buying decisions of online shopping customers. The

undertaken study of literature review indicated that

customers who are highly influence by their families are

very conscious about their shopping decisions. They buy

things as per their family and friends suggestions.

Customers who want to get the possession of the

purchased product soon sometimes get disappointed with

the delivery period of the product. Delayed gratification

has negative impact on impulse buying decision of

internet shopping customers. Online shopping portals are

very wide in numbers that gives the more options to the

customers to select the product with different suitable

offered prices from one to another online shopping portal

that stops the customers to make sudden purchases.

Consumer control also has significant impact on impulse

buying decision of online shopping customers. Number

of available options of products and prices gives the

customers more time to evaluate their desired product

that stops them to make spontaneous buying decision in

the search of desired one deal. In traditional shopping

customer is able to touch the product which is missing in

the buying process of online shopping that creates

negativity in the mind of customer and discourage them

to buy through online shopping portals. Website quality

is also found as the important parameter of online

shopping that can affect the customer positively or

negatively due to its quality and design. Degree of

impulsive is important parameters that can be seen in the

decision making capability of a person. An impulsive

person makes more sudden or impulsive buying decision

due to its degree of impulsiveness in their behaviors.

Conscientious customers found as the aware buyer who

makes buying decisions after evaluating the all available

alternatives and do not associate with the impulse buying

decisions.

CONCLUSIONS

The analysis of the descriptive research study indicated

that there are various motivating and inhibiting factors

that are positively and negatively associated with the

impulse buying decisions. The purpose of the research

study was to indentify the negative parameters that affect

the impulsive buying decision of the online shopping

customers which inhibiting them to make sudden

purchases. After reviewing a number of review studies

which are done in the context of impulse buying

decision of online shopping customers it is found that

delay in delivery, consumer control, family boundaries,

website quality, degree of impulsiveness, more control of

consumer, quality perception, awareness or

conscientiousness of customer and degree of

impulsiveness affects the customers buying decision

negatively and these factors are found as the inhibiting

factors of impulsive purchase decisions.

RECOMMENDATIONS

The research study can be conducted on

traditional shopping.

Smart shopping behavior of customers can be

studied.

Conscientiousness of customers can be studied.

Comparative study of online shopping portals

can be conducted.

Research study can be conducted on the

customer feedback process.

Research study can be conducted on post

purchase behavior of customers.

Customer loyalty can be studied.

Specific online shopping portal can be studied.

The research study can be done in the specific

area or city.

Positive parameters of impulse buying can be

studied in the context of online shopping.

Demographic factors can be identified in the

context of online shopping.

REFERENCES

1. Chakraborty, S.,(2017). An empirical investigation on the

association between consumer online impulsive buying

behavior and website quality- A study with special reference

to Flipkart online store. Imperial Journal of Interdisciplinary

Research (IJIR); Vol-3, Issue-3, ISSN: 2454-1362.

2. Zhang, P. and Fan, Z. (2015). Impact of online reviews on

impulsive buying intention based on regulatory focus

theory. International Conference on Education Technology,

Management and Humanities Science (ETMHS 2015).

Retrieved from the given link: www.atlantis-

press.com/php/download_paper.php?id=1922.

3. Shirmohammadi, M., Ebrahimi, M.R. and Ghane, N.

(2014). Investigating and prioritizing the effective factors on

online impulse buying in electronic commerce (case study:



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42 | P a g e

discount group sites in Iran). European Journal of Business

and Management; Vol.6, No.4, ISSN: 2222-1905.

4. Turkyilmaz, C.A., Erdem, S. and Uslu, A.(2014). The

effects of personality traits and website quality on online

impulse buying. International Conference on Strategic

Innovative Marketing, IC-SIM 2014.

5. www.sciencedirect.com/science/article/pii/S1877042815012

392.

6. Al Karim, R.(2013). Customer satisfaction in online

shopping: a study into the reasons for motivations and

inhibitions. IOSR journal of business and management,

Vol.11, Issue-6, pp.13-20, ISSN: 2319-7668.

7. Sundstrom, M., Balkow, J., Tjernstorm, M. and Wadenfors,

P. (2013). Impulsive buying behaviour: The role of feelings

when shopping for online fashion. Retrieved from the given

link:www.diva-

portal.org/smash/record.jsf?pid=diva2:887789..

8. Sirhindi, Amna.(2010). A critical review of in-store and

online impulse purchase behavior- Oklahoma state

university.

9.

https://shareok.org/bitstream/handle/11244/.../Sirhindi_okst

ate_0664M_10908.pdf.

10. Wells, J.D., Parboteeah, V. and Valacich, J.S.(2011). Online

impulse buying: Understanding the interplay between

consumer impulsiveness. Journal of the Association for

Information Systems; Vol. 12, Issue. 1, PP.32-56. ISSN:

1536-9323.

11. Tsai, C.(2008). Impulse purchase varied by products and

marketing channels. Journal of International Management

Studies. Retrieved from the given link

www.jimsjournal.org/19%20Tsai%20Chen.pdf

12. Young, J.R.(2006). Online Impulse Buying Behavior with

Apparel Products: Relationships with apparel involvement,

website attributes and product category/price. Retrieved

from the given link:

https://vtechworks.lib.vt.edu/bitstream/handle/10919/39628/

TITLE.pdf?sequence=1

13. Hodge, Rebecca. (2004). Factors influencing impulse

buying during an online purchase transaction- university of

waterloo. Retrieved from the given link:

https://uwspace.uwaterloo.ca/handle/10012/912.

14. Koski, N. (2004). Impulse Buying on the internet:

Encouraging and Discouraging factors. Retrieved from the

given link www.ebrc.info/kuvat/23-35_04.pdf.

REFERRED LINKS

1. www.businessdirectory.com

2. www.wikipedia.org.

3. www.marketbusiness.com

4. www.quora.com

5. www.computerhope.com

6. www.digitalunite.com

7. www.bloggersideas.com



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A STUDY OF WELFARE MEASURES ON EMPLOYEE’S MORALE

Dr. Gopal Krishan*, Veeni

**

*Assistant Professor, Dept. of Political Science, Gobindgarh Public College, Alour, Khanna, Punjab

**Student, A.S. College, Khanna, Punjab, India

ABSTRACT

In today’s era employees plays a vital role in the organisation. All the activities related to the organisation are done

by the employees so every organisation have to pay fair wages and salaries to the employees and workers of the

organisation. The growth of the organisation is totally depending on the performance of the employees. The

performance of the employees are dependent on the organisational environment and consideration given by the

organisation to them and satisfaction level of them. In this paper, the researcher highlights some of the welfare

measures which will help the organisation to increase their productivity. For this purpose, the researcher conduct

study in Kuber Casting Private Limited and sample of 60 employees were taken. To check the reliability of the data

f-test and chi-square test had been applied.

Key words: employee, welfare, morale, satisfaction, growth.

INTRODUCTION

“THE EFFORTS TO MAKE LIFE WORTH

LIVING FOR WORKMEN”

Employee welfare: Employee welfare means everything

from services, facilities and benefits that are provided by

an employer for the benefits and comfort of an employee.

It is undertaken in order to motivate the employees. It

will also raise the level of productivity. Other forms of

employee welfare include housing, health insurance,

stipends, transportation and provision of food etc.

Employee morale: Morale is an employee’s attitude in

the direction of job, employer, and others. Employee

morale as the psychological state with respect to

approval, assurance and decide the things.

Morale

High Low

Employee is satisfied with job Employee is less satisfied with job.

Takes initiatives Unsolved complaints

Focuses on achievement of organizational goals. Strikes

Happy employees Unhappy employees

Contribute high level of productivity Less productivity

High returns to stakeholders and employee loyalty High absenteeism and turnover

Types of employee welfare Employee welfare can be categorized into two types:

Employee welfare

Intramural activities

welfare measures inside the workplace.

for example: medical facilities, compensation for accidents, provision of

canteens, supply of drinking water

Extramural activities

welfare measures outside the workplace.

for example: housing accommodation, indoor and outdoor facilities, recreational

facilities, amusement and sports, educational facilities for adults and children

etc



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The present literature review is used to briefly summarize

the past researches’ studies.

K. Logasakthi& K. Raja Gopal (2013) The researcher

things to see the welfare measures were taken in the

compounded business, the representative's fulfillment

levels and to distinguish the general nature of work life

of the workers and employees. The information gathering

was finished on the timetable. Now and again the

individual meeting was required around then of topping

off of questionnaire, to break down, the gathered

information the analyst utilized basic rate examination.

KeerthisriyaDr.Panatulamurali Krishna (2014) The

results indicates that the general mindfulness level of

various arrangements of the Factory Act, it is not highest

but rather an acceptable level, in with these facilities

given by the industries, all the accounts sufficient among

the workers. Security and welfare measured by the

organization which is keeping the employees satisfied. R

Santana Krishnan (2015) In this study the welfare

activities are for the most part impacted by concerned

standards and passing in any country. In India, before the

presentation of welfare and another performance the

states of the work were hopeless, misuse of kid work,

work of long hours, terrible cleanliness and

nonappearance of wellbeing measures are the consistent

elements of industrial facility life in India. This article

highlights the labor welfare measures and programs.

RESEARCH OBJECTIVES

To check the satisfaction level of the employees

with their income received.

To check the satisfaction level of the employees

with job as against to their ages.

To check the significance between the salary

increment and overtime on daily basis.

To check the level of support by management &

co-workers.


Research Empirical

Primary data collection Through structured questionnaire

Secondary data collection From the website of the company and E-journals.

Sampling method Stratified sampling

Sample area Kuber Casting Private Limited

Respondents Employees of Kuber casting private limited

Sample size 60

Scaling technique 5 point likert scale.

Statistical tool F-test, Chi-square test.

ANALYSIS OF DATA:

Table 1: The No. of Employees in accordance with their ages

AGE GROUP NO. OF EMPLOYEES PERCENTAGE (%)

Below 25 18 30%

25-35 25 42%

35-45 13 21%

Above 45 4 7%

Total 60 100%

The above table infers that, most of the employees in the organization are under the age of 25-35 against 13 are under

the age 35-45, 18 of them below the age of 25 and only 4 of the employees are under the age group of above 45.



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Table 2. Monthly income received by the employees

INCOME RECEIVED NO. OF EMPLOYEES PERCENTAGE (%)

5000-10000 12 20%

10000-15000 30 50%

15000-20000 14 23%

Above 20000 04 07%

Total 60 100%

As their salary received, Most of the employees falls in

the category of 10000-15000, against to 23% of the

employees received salary in the category of 15000-

25000, 20% of the employees received salary in the

category of 5000-10000 and only 7% of the employees

receives salary in the category of above 25000.

Table 3 Satisfaction with salary received

Satisfaction level No. of employees Percentage Mean value

Highly satisfied 9 15% 5*9=45

Satisfied 18 30% 4*18=72

Neutral 22 36.67% 3*22=66

Dissatisfied 10 16.67% 2*10=20

Highly dissatisfied 1 1.66% 1*1=1

60 100 204/60=3.4

Table 3 summarized the survey results that indicate the

satisfaction level of employees with respect to income

received in their organization. Five point Likert scale is

used to collect respondent’s feedback on the statement

related to satisfaction with income received. The factors

were rated as follows – 5= highly satisfied, 4= satisfied,

3= neutral, 2= dissatisfied, 1= highly dissatisfied. The

distribution of responses for each item was tabulated as

shown in Table 3. Besides, the mean scores were

calculated for each item.

The findings indicate that 36.67% of the respondents are

neutral with the satisfaction level of income received,

30% of the respondents are satisfied with their income,

16.67% of the respondents are dissatisfied with the

income received, 15% of the respondents are highly

satisfied with the income and 1.66% of the respondents

are highly dissatisfied with the income received.

By applying likert scale, mean value also proofs that

employees are neutral with the satisfaction level with

respect to income

Table 4 Satisfaction with Salary increment

Satisfaction level No. of respondents % Mean value


Satisfied 16 26% 4*16=64

Neutral 18 30% 3*18=54

Dissatisfied 9 14% 2*9=18

Highly dissatisfied 8 12% 1*8=8

Total 60 100% 199/60= 3.32

Table 4 depicts the survey results that indicate the

satisfaction level of employees with respect to their

increment in salary in their organization. Five point

Likert scale is used to collect respondent’s feedback on

the statement related to Satisfaction with Salary

increment.

The findings indicate that 30% of the employees are

neutral, 26% of the employees are satisfied, 14% of the

employees are dissatisfied, 18% of the employees are

highly satisfied and 12% of the employees are highly

dissatisfied with the salary increment.



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respect to increment in salary.

Table 5 Satisfaction with overtime on daily basis



Satisfied 14 23% 4*14=56

Neutral 28 46% 3*28=84



Total 60 100% 209/60=3.48

Table 5 shows the survey results that indicate the

satisfaction level of employees with respect to overtime

received on daily basis in the organization. Five point

Likert scale is used to collect respondents’ feedback on

the statement related to Satisfaction with Overtime on

daily basis.



employees are dissatisfied,18% of the employees are

highly satisfied with overtime received on daily basis.



respect to overtime received on daily basis.

Table 6 Satisfaction with Support of management



Satisfied 13 22% 4*13=52

Neutral 33 55% 3*33=99



Total 60 100% 208/60=3.47

Table 6 summarized the survey results that indicate the

satisfaction level of employees with respect to support of

management in their organization. Five point Likert scale

is used to collect respondent’s feedback on the statement

related to Satisfaction with Support of management.





dissatisfied with the support of management.



respect to the support of management.

Table 7 Satisfaction with Support of co-workers



Satisfied 12 20% 4*12=48

Neutral 14 23% 3*14=42



Total 60 100% 229/60=3.82



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Table 7 infers that the satisfaction level of employees

with respect to support of co-workers in their

organization. Five point Likert scale is used to collect

respondent’s feedback on the statement related to

Satisfaction with support of co-workers.





dissatisfied with support of co-workers.


employees are satisfied with the satisfaction level with

respect to the support of co-workers.

HYPOTHESIS TESTING

Age and satisfaction with job.

H.satisfied

(a)

Satisfied

(b)

Neutral

(c)

Dissatisfied

(d)

H.dissatisfied

(e)

Below 25 2 1 10 4 1

25-35 3 5 13 3 1

35-45 2 3 7 1 0

Above 45 2 2 0 0 0

Hypothesis – 1

Let us take the null hypothesis that there is no

significant difference between the age group and the

satisfaction level of the employees with job.

Applying chi-square test:

x2 =11.723 , d.f.= (4-1)(5-1) = 12

at d.f. = 12, x2

0.05= 21.026

Since, calculated x2 value is less than the table value,

therefore hypothesis is accepted. We conclude that there

is no significant difference between the age group and the

satisfaction level of the employees with job.

Salary increment and overtime on daily basis

H. satisfied Satisfied Neutral Dissatisfied H. dissatisfied

Salary increment

11 16 18 9 8

Overtime on daily basis 11 14 28 7 0

Hypothesis – 2


significant difference between the salary increment and

overtime on daily basis.

Applying F-test

Calculated value: 3.67 for V1= 4, V2 = 4

Table value @ 5% = 6.39

For V1= 4, V2= 4, the table value of F at 5% level of

significant is 6.39. Since the calculated value of F is less

than table value. So, we accept the null hypothesis and

conclude that there is no significant difference between

the salary increment and overtime on daily basis.

Support of management and support of co-workers

H. satisfied Satisfied Neutral Dissatisfied H. dissatisfied

Support of management 10 13 33 3 1

support of co-workers 25 12 14 5 4



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Hypothesis – 3


significant difference between the support of

management and support of co-workers.

Applying F-test

Calculated value: 2.27 for V1= 4, V2 = 4

Table value @ 5% = 6.39


significant is 6.39. Since the calculated value of F is less

than table value. So, we accept the null hypothesis and

conclude that there is no significant difference between

the support of management and support of co-workers.

Income received by the employees and satisfaction level of the employees with income

Hypothesis-4


significant difference between the satisfaction level of the

employees with respect to their income.

By applying chi-square test

x2 = 7.349 , d.f.= (4-1)(5-1) = 12,

at d.f. = 12,

x2

0.05= 21.026



is no significant difference between the satisfaction level

of the employees with respect to their income.

FINDINGS

Almost the employees are satisfied with

management support.

Few of the respondents are dissatisfied with the

co-workers support.

KCPL provided good salary package to

employees, which energies them to work more

and reduce the labor turnover.

Most of the employees are satisfied with their job

as against to their ages.

SUGGESTIONS

It will be better if the management provides

incentives to the employees so it will boost their

morale and productivity.

Supervisors should maintain coordinal

relationship with workers.

It will be better if management provide

performance and potential appraisal in regularly.

Job rotation is to be made at least once in three

years.

CONCLUSION

By analysing the summary of the results it is identified

that the welfare and safety measures, which is followed

by organization is neutral and satisfied and they want

some improvements in the system. This project would be

helpful for the industry and also to improve some welfare

and safety measures inside the industry. The strength of

any organization depends entirely on sincere working of

all the employees. The management should take special

care to frame certain policies procedures to improve the

welfare and safety measure of the organizations.

REFERENCES

1. ASWATHAPPA (2005), ”HUMAN RESOURCE

MANAGEMENT”, TATA Mcgraw Hill Publishing New

Delhi

2. S.P.GUPTA (2002), “STATISTICAL METHOD”, Sultan

Chand & Co, New Delhi.

3. C.R.KOTHARI (2004), “RESEAERCH METHHODLOGY”,

(Method & Techniques), New Age International (P) LTD,

New Delhi.

4. K. Logasakthi& K. Raja Gopal (2013)

5. R Santana Krishnan (2015)

Income/satisfaction H.satisfied

Satisfied

Neutral

Dissatisfied H.dissatisfied

Total

5000-10000 1 2 4 3 0 10

10000-15000 4 11 13 6 1 35

15000-20000 2 4 4 1 0 11

Above 20000 2 1 1 0 0 04

Total 09 18 22 10 01 60



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AGE AND GENDER EQUALITY IN AUTOMOBILES

Dr.K.K.Sharma* Dr. Yashmin Sofat

**

*Associate Professor, A. S. College, Khanna, Punjab, India

**Assistant Professor, A. S. College, Khanna, Punjab, India

ABSTRACT

The success of the organization is highly dependent on the sales. The organization has to

implement the effective sales promotion to improve the sales to increase profits. In this paper,

authors attempt to study the sales promotional activities of Bajaj automobiles with reference to

Balaji motors pvt. ltd. The study indicates promotional tools used in the company such as extended

warranty, loyalty card programs, demo bikes availability, discount policy, sound online marketing,

insurance of the new vehicle etc. and check out the effectiveness of each tool so that company can

improve their marketing technique. The research is being carried on various customers of Balaji

motors visited in the showroom. Random sampling is used to collect data from the respondents at

Balaji motors pvt.ltd. A sample of 173 customers is taken as sample respondents for the purpose of

the study. In this paper authors, applied chi square test to check the validity with respect to age and

gender equality on discount policies.

Keywords: Promotional Tools, Effectiveness, Gender Equality.

INTRODUCTION

The Bajaj Group is amongst the top 10 business houses

in India. Its footprint stretches over a wide range of

industries, spanning automobiles (two wheelers

manufacturer and three wheelers manufacturer), home

appliances, lighting, iron and steel, insurance, travel and

finance. The group's flagship company, Bajaj Auto, is

ranked as the world's fourth largest three and two

wheeler manufacturer and the Bajaj brand is well-known

across several countries in Latin America, Africa, Middle

East, South and South East Asia. Founded in 1926, at the

height of India's movement for independence from the

British, the group has an illustrious history. The integrity,

dedication, resourcefulness and determination to succeed

which are characteristic of the group today, are often

traced back to its birth during those days of relentless

devotion to a common cause. Jamna Lal Bajaj, founder

of the group, was a close confidant and disciple of

Mahatma Gandhi. In fact, Gandhiji had adopted him as

his son. His close relationship and his deep involvement

in the independence movement did not leave Jamna Lal

Bajaj with much time to spend on his newly launched

business venture. We are celebrating 125th Birth

anniversary of Shri.Jamnalal Bajaj on 4th of November

2014.

His son, Kamalnayan Bajaj, then 27, took over the reigns

of business in 1942. He too was close to Gandhiji and it

was only after Independence in 1947, that he was able to

give his full attention to the business. Kamalnayan Bajaj

not only consolidated the group, but also diversified into

various manufacturing activities. The present Chairman

of the group, Rahul Bajaj, took charge of the business in

1965. Under his leadership, the turnover of the Bajaj

Auto the flagship company has gone up from INR.72

million to INR. 120 billion, its product portfolio has

expanded and the brand has found a global market. He is

one of India’s most distinguished business leaders, bike

manufacturer India and internationally respected for his

business acumen and entrepreneurial spirit.

LITERATURE REVIEW

Its ultimate goal is to bring the reader up to date with

current literature on a topic and forms the basis for

another goal such as future that may be needed in the

area. Sunil Gupta, (1988) have demonstrated that a

comprehensive model which captures three main

components of consumers buying decision: when, what,

and how much to buy. The model incorporates price and

promotions of the competitive brands as well. He states

that promotional variables (feature, display, price cut)

play a strong role in consumer brand choice decisions

feature and display have some impact on the purchase

time decision, price cut and regular price have almost

none. Blatterg and Nelson, (1990) Effect of sales

promotion as a tool on customer attention to purchase;

one of the most important of channels is sales promotion.

Sales promotion is action-focused marketing events

whose purpose is to have a direct impact on the behavior

of the firm’s consumers. The researcher analyses that



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there are three major types of sales promotion: consumer

promotion, trade promotion and sales force promotion.

Consumer promotions are promotions offered by

manufacturer directly to consumers whereas trade

promotion is benefited for retailers/dealers & sales force

promotion is give benefit to the sales people hence all

three sales promotion programs are similar important for

the companies. Chemung Kumar Nat, (2003) find that

advertising and sales promotion has large impact on the

buying behavior and brands preferences. According to

researcher advertising remind the consumer about the

product. And sales promotion helps the consumer to

purchase the product. Researcher states that the exposure

to advertising is associated with changes in the buying

pattern in so for as the choice of the brand is concerned.

Safi Zimmer,(2008) states that management of sales

promotion and event has directly impact on the profit ,

awareness and image in the mind of the customer. In

retail sector sales promotion tools has impact on the store

traffic with fast movement of the goods. Researcher

states that the use of promotional tools or event depend

on the nature of the product and also the purpose of the

event and promotion. Lisa S. McNeill,(2008)have

demonstrated that no major impact of initial product

price on consumers who likely to feel satisfied or pleased

with price promotion experience. Incomes of the

consumers have impact on the sales promotion. Rebates

and Refunds have an impact of the consumer’s

preferences. Rachel Nazi,(2008) suggest that firms use

games as major type for online sales promotions of

consumer products. In addition firm also use

advertisement programs, contests and sweepstakes for

online sales promotion. For digital product firms take

necessary aspects to make their websites effectives. He

also focuses on the online transaction security and

provides playfulness in websites which make them more

effective. His research work state that firms use aspects

to make websites effective, they do not use many of sales

promotion types for online promotions. Oyedapo

Williams , Akinlabi Babatunde (2012)In this researcher

paper the researcher analyzed that sales promotion is

normally used to boost sales there by increasing the

profit. The most significant sales promotion techniques

that contributed to higher performance in the company

are special sales, price off and coupons. The low

significant techniques are sweepstake and gifts. In the

course of any sales promotion exercise, management

should strategically facilitate the exercises so that

customers do not doubt the reality of the program by

using credible techniques. For instance, very incredible

prize like winning over a thousand brand new

automobiles should be avoided. In addition, the study

found that organization promotion strategies enhance

consumer buying pattern. According to the result,

majority of the respondents accepted the facts that

organization promotion strategies enhance consumer

buying pattern. Alexander Peko(2012)The researcher

states that consumers are always attracted by various

sales promotion tools to try a new product and make an

initial purchase. However, the effects induced by sales

promotion tools need to be sustained by the actual

performance of the products, which should be the

ultimate focus of management to retain loyal consumers

so as to generate stable sales revenues in a longer term.

Sales promotion helps to build brand loyalty by giving

the seller the opportunity to attract a loyal and profitable

set of customers which provides sellers some protections

from competition and greater control in planning their

marketing mix.


NEED OF THE STUDY

The success of the organization is highly

dependent on the sales. The organization has to

implement the effective sales promotion to

improve the sales to increase profits.

Sales promotional activity does not only satisfy

the organizational goal it fulfills customer and

helps in acquiring new customers.

Building an effective sales promotion strategy

helps organization in acquiring new customers.

This study attempts to assess the promotional

activities of the organization.


PRIMARY OBJECTIVE

1. To study the sales promotional activities of Bajaj

automobiles with reference to Balaji motors pvt.

ltd.

SECONDARY OBJECTIVE

1. To study the effectiveness of the sales

promotional activities

2. To provide suggestions regarding improvement

in sales promotion techniques.

3. To find out which technique is best suited to the

company and check out which one is more

effective.

SCOPE OF THE STUDY

The study indicates promotional tools used in the

company such as extended warranty, loyalty card

programs, demo bikes availability, discount policy,

sound online marketing, insurance of the new vehicle etc.

and check out the effectiveness of each tool so that

company can improve their marketing technique. The

research is being carried on various customers of Balaji



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motors visited in the showroom. The study will be sales

oriented character of any promotion.

RESEARCH DESIGN: A research design is an

arrangement of conditions for collection and analysis of

data in a manner that aims to combine relevance to the

research purpose with economy in procedure. A good

research design has the characteristics via problem

definition, specific method of data collection analysis.

The research design used for the study is descriptive in

nature. The major purpose of descriptive research is

description of the state of affairs as it exists at present

and includes surveys and fact finding enquiries.

SAMPLING DESIGN: Sampling is a process of a

sufficient number of elements from the population or

characteristics would make it possible for us to

generalize such properties. Random sampling is used to

collect data from the respondents at Balaji motors pvt.ltd.

A sample of 173 customers is taken as sample

respondents for the purpose of the study. The study is

regarding the effectiveness of sales promotion and

advertisement given by Balaji motors.

DATA COLLECTION TECHNIQUES: Information

was collected through both primary and secondary

sources. In some cases the researchers may realize the

need for collecting the first hand information. Thus, the

two methods by which primary data can be collected is

observation and questionnaire. I use questionnaire

method for the purpose of research. And, secondary data

was collected through journals, newspapers and

magazines.

In this study, we have studied 2chi-square test.

There is significant difference between the age of

respondents and the satisfaction level of

respondents on the discount policy.

There is significant difference between the

gender of respondents and satisfaction level of

the respondents on the discount policy.

LIMITATIONS OF THE STUDY

Following are the limitations of the research work and

survey was conducted over 173 respondents only.

This research work is done with reference to

Goraya city. Hence it has scope of study in other

regions which may result differently.

While conducting survey some respondents

hesitate to respond. It creates problem in research

work to collect data.

The time given for research work was limited.

Information is collected from the customers.

ANALYSIS OF DATA

TABLE 1

AGE OF THE RESPONDENTS

AGE FREQUENCY PERCENT

BELOW 18 33 19.1

19-40 96 55.5

ABOVE 40 44 25.4

TOTAL 173 100

Table 1inferred that 55.5% respondents are from age 19-40years and 25.4% are above 40.19.1% are below 18 years

which mean there is need to attract the customers from above 40 group and below 18 teenagers.

TABLE 2

GENDER OF THE RESPONDENTS

GENDER FREQUENCY PERCENT

MALE 121 69.9

FEMALE 52 30.1

TOTAL 173 100

Table 2 inferred that 70% respondents are male.30% of the respondents are female which means new female

customers can be attracted by adopting sales promotion techniques.



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TABLE 3

OCCUPATION OF THE RESPONDENTS

OCCUPATION FREQUENCY PERCENT

BUSINESS 42 24.3

EMPLOYED 73 42.2

PROFESSIONAL 21 12.1

OTHERS 37 21.4

TOTAL 173 100

Table 3 shows that 42.2% respondents are employed. 24.3% of respondents are from business background.12.1% are

professionals.21.4%are from other background (household). Company has chances to promote sales in professional

respondents group because that area is still unattracted and sales are less.

TABLE 4

MARITAL STATUS OF THE RESPONDENTS

MARITAL STATUS FREQUENCY PERCENT

SINGLE 68 39.3

MARRIED 104 60.1

DIVORCED 1 0.6

TOTAL 173 100

Table 4 inferred that 60.1% respondents are married.39.3% are single.0.6% are divorced. So our product is more

popular among married customer groups.

TABLE 5

INCOME OF THE RESPONDENTS

INCOME FREQUENCY PERCENT

BELOW 25000 24 13.9

25000-35000 21 12.1

35000-50000 19 11

50000-75000 44 25.4

ABOVE 75000 65 36.6

TOTAL 173 100

Table 5 inferred that 36.6% of respondents earns above Rs.75000. 25.4% earns Rs.50000 to Rs.75000.13.9% are

below Rs.25000.12.1% earns Rs.25000to Rs.35000.11% of respondents earns from Rs.35000 to Rs.50000.

TABLE6

VISIT TO SHOWROOM

VISITED BALAJI MOTORS FREQUENCY PERCENT

YES 173 100

NO 0 0

TOTAL 173 100

Table 6 shows that 100% respondents have visited balaji motors showroom which provides evidence about customer

satisfaction with the services.



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TABLE 7

CAME TO KNOW ABOUT US?

CAME TO KNOW ABOUT US FREQUENCY PERCENT

ADVERTISEMENT 35 20.2

FAMILY AND FRIENDS 62 35.8

SOCIAL MEDIA 27 15.6

INTERNET 30 17.3

MAGAZINES 18 10.4

OTHERS 1 0.6

TOTAL 173 100

Table 7 shows that most of the customers came to know about us through family and friends that and other modes of

awareness are not providing that results so there is a need to do more sales promotion through advertisements and

other mediums to catch more customers.

TABLE 8

EXCHANGE OFFERS AND LOYALTY PROGRAMMES

AVAILABILITY FREQUENCY PERCENT

YES 137 79.2

NO 36 20.8

TOTAL 173 100

Table 8 shows that 20.8% of respondents are unaware about any exchange offer and loyalty programs carried in

showroom which is lack of sales promotion and awareness among those group of respondents.

TABLE 9

AVAILABILITY OF DEMO BIKES

AVAILABILITY FREQUENCY PERCENT MEAN SCORE

GOOD 148 85.5 148*3=444

NEUTRAL 24 13.9 24*2=48

BAD 1 0.6 1*1=1

TOTAL 173 100 493/173=2.9

According to the likert scale, the mean rate is 2.99. So, the availability of demo bikes is good in the company. Table 9

shows that 85.5% customers says availability of demo bikes is good whereas 13.9% customers find that availability of

demo bikes is neutral and 0.6% customers says that it is bad and need to improve this technique of sales promotion.

TABLE 10

SATISFACTION LEVEL THROUGH FREE GIFTS

SATISFACTION FREE GIFTS FREQUENCY PERCENT MEAN SCORE

HIGHLY SATISFIED 29 16.8 29*5=145

SATISFIED 65 37.6 65*4=260

NEUTRAL 62 35.8 62*3=186

DISSATISFIED 9 5.2 9*2=18

HIGHLY DISSATISFIED 8 4.6 8*1=8

TOTAL 173 100 617/173=3.7

According to likert scale, the mean score is 3.7 means that customers are satisfied with the delivery of free gifts. Table

10 shows 16.8% of the customers are highly satisfied with the gifts provided at the time of delivery whereas 37.6 are

satisfied, 35.8% are neutral whereas 5.2% are dissatisfied and 4.6% are highly dissatisfied.



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TABLE 11

TEST DRIVE OFFERED

TEST DRIVE OFFERED FREQUENCY PERCENT

YES 156 90.2

NO 17 9.8

TOTAL 173 100

Table 11 shows that the result of this type of sales promotion is quite impressive as shown in the table as 90.2 %

customers finds that test drive is offered and satisfactory.

TABLE 12

ATTRACTIVENESS OF ADVERTISEMENT

ATTRACTIVE FREQUENCY PERCENT MEAN SCORE

EXCELLENT 35 20.2 35*5=175

GOOD 45 26 45*4=180

NEUTRAL 59 34.1 59*3=177

BAD 24 13.9 24*2=48

WORST 10 5.8 10*1=10

TOTAL 173 100 590/173=3.4

According to likert scale, the mean score is 3.4 means the result is neutral. Advertisement may or may not affect the

buying decision of the customer as the result is neutral. Table 12 shows that 20.2% says that ads are excellent, 26%

says good, 34.1% is neutral whereas 13.9% says ads are bad and 5.6%says the ads are worst and not attractive.

TABLE 13

VISIT OUR WEBSITE

VISIT OUR WEBSITE FREQUENCY PERCENT

YES 172 99.4

NO 1 0.6

TOTAL 173 100

Table 13 shows that most of the customers 99.4% of respondents visit our website which shows our website is quite

popular and effective in order to attract customers more.

TABLE 14

SOCIAL MEDIA PAGE

VIEWED FREQUENCY PERCENT

YES 82 47.4

NO 91 52.6

TOTAL 173 100

Table 14 shows that more than half customers never viewed our social media page that is 52.6%. It is not a good sign

of online sales promotion so try to improve the access of social media page, make it more attractive so that customers

also get attracted towards the product.



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TABLE15

PERFORMANCE OF WEBSITE

PERFORMANCE FREQUENCY PERCENT MEAN SCORE

EXCELLENT 57 32.9 57*5=285

GOOD 67 38.7 67*4=268

NEUTRAL 39 23.1 40*3=120

BAD 8 4.6 8*2=16

VERY BAD 1 0.6 1*1=1

TOTAL 172 100 690/172=4

According to likert scale the mean score is 4 means the performance of the website is good. Table 15 shows that

32.9% says website performance is excellent whereas 38.7% finds it good, 23.1% finds it bad whereas 0.6% finds that

it is worst.

TABLE 16

ATTRACTIVENESS OF THE COMPETITION

ATTRACTIVENESS FREQUENCY PERCENT MEAN SCORE

ATTRACTIVE 33 19.1 33*3=99

NEUTRAL 82 47.4 82*2=164

NOT ATTRACTIVE 58 33.5 58*1=58

TOTAL 173 100 321/173=1.85

According to likert scale mean score is 1.85 means that competition attractiveness is neutral and may or may not affect

the buyer decision.Table 16 shows that on the basis of our competition with other dealers 19.1% says that balaji

motors are more attractive whereas 47.4% are having neutral decision and 33.50% finds it not attractive.

TABLE 17

INSURANCE POLICY OF THE NEW BIKES

INSURANCE POLICIES FREQUENCY PERCENT MEAN SCORE


SATISFIED 75 43.4 75*4=300

NEUTRAL 29 16.8 29*3=87



TOTAL 173 100 690/173=3.99

According to likert scale, mean score is 3.99 means the customers are satisfied with the insurance policy of the new

bikes. Table.17 shows that 32.40% customers are highly satisfied, 43.40% are satisfied, 16.80% are neutral, 5.8% are

dissatisfied and 1.70% is highly dissatisfied with insurance policy.



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TABLE 18

DISCOUNT POLICY

SATISFACTION LEVEL OF RESPONDENT

THROUGH DISCOUNT POLICY

FREQUENCY PERCENT MEAN SCORE


SATISFIED 54 31.2 54*4=216

NEUTRAL 33 19.1 33*3=99



TOTAL 173 100 649/173=3.75

Likert scale value is 3.75 means that customers are satisfied with the discount policy. Table 18 shows 32.9%

respondents are highly satisfied, 31.20% are satisfied, 19.10% are neutral, 11.60%are dissatisfied and 5.20% are

highly dissatisfied with the discount policy.

TABLE 19

EXTENDED WARRANTY SCHEME

SATISFACTION FREQUENCY PERCENT MEAN SCORE


SATISFIED 56 32.4 56*4=224

NEUTRAL 36 20.8 36*3=108

DISSATSFIED 5 2.9 5*2=10

HIGHLY DISSATISFIED 7 4 7*1=7

TOTAL 173 100 694/173=4.1

According to likert scale mean score is 4.1 so the customers are highly satisfied with the extended warranty scheme.

Table 19 shows that about 39.90% are highly satisfied, 32.40% customers are satisfied, 20.80% are neutral, 2.9% are

dissatisfied and 4% are highly dissatisfied with the extended warranty scheme of the Balaji motors.

TABLE 20

REFERENCE TO OTHERS

REFERRALS FREQUENCY PERCENT

YES 136 78.6

NO 37 21.4

TOTAL 173 100

Table 20 shows that 78.6% customers will refer others about our services which is quite good for our sales promotion

through referrals.

CHI-SQUARE TEST-1

NULL HYPOTHESIS: There is no significant

difference between the age and satisfaction level of

respondents on the discount policy.

ALTERNATIVE HYPOTHESIS: There is significant

difference between the age and satisfaction level of

respondents on the discount policy



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AGE HIGHLY

SATISFIED

SATISFIED NEUTRAL DISSATISFIED HIGHLY DISSATISFIED TOTAL

18 13 15 2 3 0 33

19-40 26 31 23 11 5 96

ABOVE 40 18 8 8 6 4 44

TOTAL 57 54 33 20 9 173

PVALUE=0.074

Accept null hypothesis

Reject alternative hypothesis

INFERENCE: There is no significant difference

between the age of respondents and satisfaction level of

respondents on discount policy. So we can say that

satisfaction level of the respondents is not affected by the

age of respondents.

DECISION: Accept null hypothesis, since pvalue >0.05

CHI SQUARE TEST-2

NULL HYPOTHESIS: There is no significant

difference between the gender of the respondents and

satisfaction level of respondents on the discount policy

given by the company at the time of sale.

ALTERNATIVE HYPOTHESIS: There is a significant

difference between the gender of the respondents and

satisfaction level of respondents on the discount policy

given by the company at the time of sale.

GENDER HIGHLY

SATISFIED

SATISFIED NEUTRAL DISSATISFIED HIGHLY DISSATISFIED TOTAL

MALE 37 38 25 13 8 121

FEMALE 20 16 8 7 1 52

TOTAL 57 54 33 20 9 173

PVALUE=0.559

REJECT NULL HYPOTHESIS

ACCEPT ALTERNATE HYPOTHESIS

INFERENCES: there is a significant difference between

the gender of the respondents and satisfaction level of

respondents on the discount policy given by the company

at the time of sale that is satisfaction level of respondents

are being affected by the gender of the respondents.

DECISION: accept alternate hypothesis, since p

value>0.0

FINDINGS

From the above study, it is inferred that 55.5%

respondents are from the age 19-40 years.

From the study conducted, it is found that 70%

of the respondents are male.

From the study, it is said that 42% respondents

are employed.

From the above study, it is identified that 60.1%

respondents are married.

From the above study, it is said that 36.6% of the

respondents earns above Rs. 75000

From the above study, it is found that 100%

respondents have visited Balaji motors

showroom.

From the study, it is found that 35.8% of the

respondents came to know through family and

friends.

It is said that 67.1% of the respondents have

known about availability of exchange offers and

loyalty programmes.

From the study it is found that 99.4%

respondents have visited our website and 47.4%

visit social media page.

32.9% are highly satisfied with discount policy.

85.5% are aware of the availability of demo

bikes.

It is found that 37.6% of the respondents are

satisfied through the free gifts.

90.2% says that they are offered with test drive.

It is found that 78.6% refer Balaji motors to

others.

Sales promotion is found to be an important tool

to attract dealers and hence it has helped the

Balaji motors to push its product (bike) in the

market through dealers.

CONCLUSION

It is concluded that the sales promotion is important to

improve the sales of the company and to reach new



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customers. Each and every organization should have a

good strategic plan for their promotion to withstand in

the market of huge competition. The company should

frame the best strategic plan to meet the competition and

fulfill the needs of customers.

RECOMMENDATIONS

Based on the above research work the following

recommendations are made to the Balaji motors:

Balaji motors have to improve its platform to improve

to reach the new customer. Sales promotion schemes

like, seminars for dealers, gifts, exchange etc..

Timely delivery is highly appreciable.

Need to spread business hence need to focus on the

rural areas near by Goraya city.

Company should improve its after sale services.

Improve its strategy to attract new customers.

Provide discount and exchange offers.

Improve online advertisement.

Sales promotion is beneficial for the Balaji motors it

helps to increase the sales of the Bajaj bikes.

Balaji motors uses different types of sales

promotional techniques for its Bajaj bikes like cash

incentives, gifts, price discount, tour, seminars,

exchange offer etc. The researcher found that the free

display material is widely used by the agency for its

sales promotion activity.

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A STUDY ON THE RELATIONSHIP BETWEEN COMPANY

CHARACTERISTICS AND EXTENT OF DISCLOSURE IN SMALL-CAP

COMPANIES

Madhur Joshi*, Dr. B S Bhatia

**

*Research Scholar, Sri Guru Granth Sahib World University, Fatehgarh Sahib, Punjab, India

**Pro-Vice Chancellor, RIMT University, Mandi Gobindgarh, Punjab, India

ABSTRACT

The corporate reporting practices play a very critical role in increasing trust and confidence of the

stakeholders as well as potential investors in the company, which in turn, helps the company in

attracting long-term financial support on continuous basis for its rapid expansion and growth. Current

study is based on a 15 small-cap companies as sample selected from BSE listed 500 companies for the

period of five years i.e. 2013-14 to 2017-18. The objective of the study was to measure the extent of

disclosure in corporate reports and its relationship with company characteristics and financial

performance. The data collected has been analysed using statistical tools like mean and coefficient of

correlation. The study concludes that there is a positive correlation between extent of disclosure and

company characteristics.

Keywords: Disclosure, Corporate Reporting, Mandatory Disclosure, Voluntary Disclosure, Company

Profile, Company Characteristics

INTRODUCTION

Corporate reporting is one of the means of

communication to its various stakeholders not only

about the financial performance but also its

sustainability. It plays a critical role in increasing the

trust and confidence of the stakeholders as well as the

potential investors, which in turn helps the company in

attracting long term financial support on continuous

basis for its rapid expansion and growth. All public

companies are required to meet the minimum

disclosures; they differ substantially in terms of the

amount of additional information that is disclosed to the

capital markets.

One way to improve the credibility of the company is

through disclosures in annual reports which assist

investors in understanding the business resources and

the way they have been employed. The company has

the discretion to make voluntary disclosures in the

annual report that gives rise to the diversity or variation

of inter-company voluntary disclosure. The current

study focuses on measuring the extent of disclosure and

its association with company specific characteristics.


A good number of research studies have been

conducted on Corporate Reporting Practices which are

as follows:

Healy Paul M. & Palepu Krishna G. (2001) conducted empirical research on financial reporting and

voluntary disclosure of information by management.

The research concludes that regulated financial reports

are informative to investors, and degree of

informativeness varies systematically with firm and

economy characteristics. Analysts add value in the

capital market through their analysis of firm‟s financial

reporting decisions, forecasts of future earnings.

Mahajan and Chander (2006) analysed fifty software

companies of India for the period of 2004-05. He

examined extent of disclosure in relation to company

characteristics like age, size, profitability, listing status

and leverage. Study concluded that there is significant

relation of disclosure with size, profitability and audit

firm but no significant relation with age, listing status,

shareholding pattern.

Varghese (2007) studied financial reporting by a

sample of 160 listed companies of India for the period

of 2001-02 to 2003-04. Index of 154 items was

developed for studying strategic and non-strategic

information and its relationship with various company

attributes like size, profitability, nature of industry.

Contemporary issues of disclosure were also cover

under study. The study found that large variations are

there in disclosure of informational items and Indian

companies rarely disclosed futuristic information.

Singh (2009) carried out comparative analysis of large-

cap and mid-cap companies of India for corporate

disclosure practices. This study covered the period of

1999-2000 to 2005-06. He concluded his study that


Volume-11, Issue-2 (January to June), Year-2019 UGC Care Listed Journal

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large cap companies performed better disclosure

practices than mid cap. He also found that large cap

companies have higher disclosure level in relation to

seven company attributes i.e. total assets, sales, net

profit, age, sectors and listing status.

Despina Galani (2011) assessed the level of disclosure

in the annual reports of 43 non-financial Greek firms

listed at Athens Stock Exchange. 100 mandatory

disclosure items index was developed on the basis of

year 2009 annual reports of selected companies for

measuring the association between extent of disclosure

and few firm characteristics using multiple regression

models. Study found significant positive relationship

with size of the firm whereas other characteristics like

age, profitability, liquidity and board composition were

found to be having insignificant association.

Kaur, Gagandeep (2012) conducted her study on

corporate reporting practices by insurance companies in

India for the period of 8 years i.e. from 2002-03 to

2009-10. This study concluded that mandatory and

voluntary disclosure have significant positive

relationship with size of company and net premium

whereas negative association with net profit of most of

the insurance companies. Corporate governance is

better in general insurance companies as compared to

life insurance companies.

Goyal, Neeraj (2014) studied the environmental

reporting practices in Indian corporate sector. The study

is based on the annual reports of 50 companies, taking

10 companies from five different sectors, for a period

of five years from 2007-08 to 2011-12. Result of the

study showed that highest overall disclosures on

environmental information are in cement sector. Study

also concluded positive correlation of environmental

disclosure with age and size of the company where as

negative correlation with leverage of the company.

Mangla, Deep & Isha (2016) Studied the impact of

company characteristics like Firm‟s size, liquidity,

leverage, profitability and age on extent of disclosure

by listed companies. Correlation and panel data

regression tools have been used to measure the impact.

The results depicted that large size and highly levered

firms have a greater extent of disclosure on the other

hand age of the firm and profitability have significant

and positive relation to the extent of disclosure.


The title of the study is „a study on the relationship

between company characteristics and extent of

disclosure in small-cap companies‟.

1.1. Research Objectives

To measure the extent of disclosure in corporate

reporting by selected BSE listed small cap

companies.

To study the relationship between extent of

disclosure and company characteristics.

1.2. Scope of the Study

The scope of study is limited to corporate annual

reports of listed Indian companies. Fifteen small cap

companies have been selected as sample which belongs

to different industries except financial sector. The study

has examined the corporate reporting practices for five

financial years i.e. 2013-14 to 2017-18.Here Corporate

Reporting items have been divided into Mandatory and

Voluntary disclosure items. There are 135 total number

of items in Corporate reporting index out of which 65

are mandatory items and 70 are the voluntary items.

Further the study has been conducted to evaluate the

relationship of extent of reporting with selected

company characteristics which are as follows:

1. Size of the Company in terms of Total Assets

2. Age of the Company from the Year of

Incorporation

3. Sales Turnover

4. Profitability in terms of Profit for the period before

tax

5. Shareholders‟ Funds

1.3. Population and Sample

The population for this study is all the listed companies

of Bombay Stock Exchange & National Stock

Exchange excluding the financial sector as the reporting

requirements for the financial companies are

specialised and regulated by separate set of regulatory

authorities. Fifteen small-cap companies have been

selected as sample for the purpose of study which

belongs to different industry groups based on the nature

of the company. The sample excludes the financial

sector. Stratified sampling has been used for the study.

Market capitalization is the basis for the selection of

companies. The list of Sample Companies is mentioned

below:



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S. No. Company Sector

1 Dish TV India Ltd. Services

2 Century Textiles &Inds. Ltd. Diversified

3 CESC Ltd. Energy

4 Coromandel International Ltd. Chemicals

5 SRF Ltd. Diversified

6 Jubilant Life Sciences Ltd. Healthcare

7 Sterlite Technologies Ltd. Communication

8 Thermax Ltd. Engineering

9 AIA Engineering Ltd. Metals

10 Graphite India Ltd. Engineering

11 NLC India Ltd. Energy

12 JSW Energy Ltd. Engineering

13 Abbott India Ltd. Healthcare

14 SJVN Ltd. Energy

15 Hexaware Technologies Ltd. Technology

1.4. Data Collection

The Corporate Annual Reports of the selected

companies have been collected for the period of five

years for the purpose of study and these were procured

from respective companies‟ websites.

3.5. Analysis of Data

For the purpose of study, Disclosure Index has been

developed on the basis of content analysis of Corporate

Annual Reports and this Disclosure Index includes

various Voluntary and Mandatory items falling under

each of the reporting segments. Total 135 mandatory

and voluntary items have been selected to develop the

index. If the index item is disclosed in the annual

report, then a score of „1‟ is given and if the item is not

disclosed then „0‟ is given as a score.

1. To measure the Extent of Disclosure following

formula has been used:

Extent of Corporate Reporting (%) =

Total score obtained by particular company

Maximum Score obtainable by the company

2. To study the relationship between extent of

disclosure and company characteristics Co-efficient of

correlation has been used.

4. Results of the Study:

4.1 Measurement of Extent of Disclosure

The company wise disclosure has been calculated by

dividing the score obtained by each company in a

particular year with the maximum score i.e. 135 using

an index of disclosure. The average disclosure score of

five years is calculated for each company and Average

disclosure of fifteen companies is calculated for each

year.

The company-wise analysis of extent of disclosure is as

follows:

Table 4.1.1: Extent of Overall disclosure

Small Cap Companies

Extent of Total Disclosure (%)

2013-

14 2014-15

2015-

16

2016-

17

2017-

18 Average of Disclosure

Dish TV India Ltd. 53 54 56 60 61 57

Century Textiles & Inds. Ltd. 66 70 72 72 73 71

CESC Ltd. 69 70 70 70 72 70

Coromandel International Ltd. 72 71 73 75 76 73

X 100



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SRF Ltd. 61 64 65 69 70 66

Jubilant Life Sciences Ltd. 70 71 71 73 73 72

Sterlite Technologies Ltd. 56 60 61 64 65 61

Thermax Ltd. 76 76 76 76 76 76

AIA Engineering Ltd. 74 75 76 77 77 76

Graphite India Ltd. 72 73 73 76 76 74

NLC India Ltd. 79 80 80 81 82 81

JSW Energy Ltd. 75 75 75 76 76 75

Abbott India Ltd. 67 70 71 75 76 72

SJVN Ltd. 75 76 76 76 76 76

Hexaware Technologies Ltd. 55 57 59 63 64 59

Average Disclosure 68 69 70 72 73 71

Table 4.1.1 shows that the average of combined

disclosure score of all the sample companies has

improved over five years‟ time period i.e. from 68% to

73%. Sterlite Technologies Ltd has shown highest

improvement in extent of disclosure from 56% in 2013-

14 to 65% in 2017-18 followed by Dish TV Ltd, SRF

Ltd. and Hexaware Technologies Ltd. whereas NLC

India Ltd. has scored highest average extent of

disclosure at 81%.

Table 4.1.2: Extent of Mandatory Disclosure Score (%)

Small Cap Companies

Extent of Mandatory Disclosure Score (%)

2013-

14

2014-

15

2015-

16

2016-

17 2017-18 Average Disclosure

Dish TV India Ltd. 82 85 86 91 91 87

Century Textiles &Inds. Ltd. 88 91 92 92 95 92

CESC Ltd. 86 86 86 88 91 87


SRF Ltd. 86 91 91 95 95 92



Thermax Ltd. 88 89 89 91 91 90



NLC India Ltd. 92 92 92 95 95 94

JSW Energy Ltd. 89 89 89 91 91 90


SJVN Ltd. 92 89 89 91 91 90





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Table 4.1.2 shows that the average of mandatory



93%. Sterlite Technologies Ltd has shown highest

improvement in the extent of mandatory disclosures

from 85% in 2013-14 to 95% in 2017-18 followed by

Dish TV Ltd, SRF Ltd. and Hexaware Technologies

Ltd. whereas NLC India Ltd. has scored the highest

average extent of mandatory disclosures at 94%.

Table 4.1.3:Extent of Voluntary Disclosure Score (%)

Small Cap Companies

Extent of Voluntary Disclosure Score (%)

2013-

14 2014-15

2015-

16

2016-

17 2017-18 Average Disclosure

Dish TV India Ltd. 26 26 27 31 34 29

Century Textiles &Inds. Ltd. 46 50 53 53 53 51

CESC Ltd. 53 54 54 54 54 54


SRF Ltd. 37 39 41 44 46 41



Thermax Ltd. 64 63 63 63 63 63



NLC India Ltd. 67 69 69 69 70 69

JSW Energy Ltd. 61 61 61 61 63 62


SJVN Ltd. 59 63 63 63 63 62



Table 4.1.3 shows that the average of voluntary



54%. Abbott India Ltd has shown highest improvement

in extent of disclosure from 47% in 2013-14 to 57% in

2017-18 whereas NLC India Ltd. has scored highest

average extent of disclosure at 69% while companies

like Dish TV Ltd, Hexaware Technologies Ltd, Sterlite

Technologies Ltd. & SRF Ltd. have quite low average

extent of disclosure below around 40%.

4.2 Extent of Disclosure and Company

Characteristics

To study the relationship between dependent variable

i.e. total disclosure score and independent variables i.e.

company characteristics like Size of the company, Age,

Profitability, shareholders‟ fund and Sales Turnover

coefficient of correlation was used. The results of

analysis are as follows:

Table 4.2.1: Relationship Between Size of Company and Extent of Disclosure

Size of The company (Total Assets) 2013-14 2014-15 2015-16 2016-17 2017-18

Total Disclosure 0.549 0.535 0.539 0.517 0.526

Voluntary Disclosure 0.508 0.529 0.544 0.503 0.537

Table 4.2.1 shows the above findings of the currently

conducted study which concludes that there is a

Moderate Positive correlation (i.e. in between +0.25 to

+0.75) between total disclosure score and size of the

companies as well as between voluntary disclosure

score and size of the companies.



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Table 4.2.2: Relationship Between Age of the Company and Extent of Disclosure

Age of the Company

(Year of Incorporation) 2013-14 2014-15 2015-16 2016-17 2017-18




conducted study which concludes that in case of total

disclosure, there is a low degree of correlation (i.e. in

between 0 to +0.25)between total disclosure score and

age of the company in 2013-14 & 2014-15 but later on,

it improves to moderate degree of correlation (i.e. in

between +0.25 to +0.75) from 2015-2016 to 2017-2018.

Whereas in case of voluntary disclosure,there is a low

degree of correlation (i.e. in between 0 to +0.25)

between voluntary disclosure score and age of the

company during all these five years‟ time period.

Table 4.2.3: Relationship Between Sales Turnover of the Company and Extent of Disclosure

Sales Turnover (Revenue Gross) 2013-14 2014-15 2015-16 2016-17 2017-18




conducted study which concludes that there is a weak

but positive correlation between total disclosure score

and Sales Turnoveras well as between voluntary

disclosure score and Sales Turnover.

Table 4.2.4: Relationship Between Profitability of the Company and Extent of Disclosure

Profitability

(Profit for the period) 2013-14 2014-15 2015-16 2016-17 2017-18




conducted study which concludes that there is a

positive and moderate correlation between total

disclosure score and profitability of the companiesas

well as between voluntary disclosure score and

profitability of the companiesduring all these five

years‟ time periodexcept in the year 2015-16.

Table 4.2.5: Relationship Between Shareholders’ Fund of the Company and Extent of Disclosure

Total Shareholders' Fund 2013-14 2014-15 2015-16 2016-17 2017-18



Table 4.2.5 shows the findings of the current study

that there is a strong and positive correlation between

total disclosure score and total shareholders‟ fundas

well as between voluntary disclosure score and total

shareholders‟ fundduring all these five years‟ time

period except in the year 2017-18.

CONCLUSION

On the basis of the analysis of the data of the 15

selected small-cap companies, the main findings with

regard to two research objectives are as follows:

1. All the 15 companies have more than 80%

average of mandatory disclosures.

2. However, when it comes to voluntary

disclosures, no company out of the 15 selected



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small-cap companies fell in above 80% bracket.

5 companies fell in 60-80% bracket and 7

companies fell in 40-60% bracket and rest of

the 3 companies fell in 20-40% bracket with

regards to extent of voluntary disclosures.

3. But when we look at overall mandatory and

voluntary combined disclosures, we find that

only one company fell in above 80% bracket

and two companies fell in 40-60% bracket

while the rest of the 12 companies fell in 60-

80% bracket with regards to extent of overall

disclosures.

4. An overall positive relationship was found

between the extent of disclosures made by the

company and selected company characteristics

during the chosen five years‟ time period.

5. As per the study, a low degree of coefficient of

correlation was found between extent of

disclosures and two specific company

characteristics i.e. age of the company & sales

turnover. Whereas there is moderate degree of

correlation between extent of disclosures and

two other company characteristics viz. size of

the company & profitability of the

company.Only in case of total shareholders‟

fund, a strong correlation between extent of

disclosures and total shareholders‟ fund was

found.

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Disclosure by SwedishCompanies, Garland Publishing,

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Characteristics and Corporate Mandatory Disclosure – the

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No:5, 2011, pp 80-84.

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asymmetry, corporate disclosure, and the capital markets:

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Department of Commerce, Punjabi University, Patiala,

Punjab.

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sustainability reporting and its impact on firm value:

evidence from the emerging market of Turkey. Journal of

Cleaner Production, 143, pg nos. 27-39.

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Characteristics on Extent of Disclosure in Published

Annual Reports in India”, Amity Journal of Finance,

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“Corporate Financial Reporting in New Zealand : An

Analysis of User Preference, Corporate Characteristics

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111-124.

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Visibility: Distinct and Joint Effects on Voluntary

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12. Przemy KABALSKI (2009).Comments on the Objective

of Financial Reporting in the Proposed New Conceptual

Framework, Eurasian Journal of Business and Economics

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13. Sanan, Neeti K (2011), “ Financial Disclosures And

Corporate Governance: A Comparative Study Of Large

And Medium Sized Companies” PhD thesis submitted to

Department Of Business Administration, Faculty Of

Management Studies And Research, Aligarh Muslim

University, Aligarh (India)

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Reporting: Theory and Practice, The Associated

Publishers, ISBN: 8184290179, Vol. I.

15. Suttipun Muttanachai (2012), “Triple Bottom Line

reporting in Annual Reports – A Case Study of

Companies listed on stock exchange of Thailand (SET)”,

Asian Journal of Finance & Accounting, ISSN 1946-052X

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Reporting. Association of Chartered Certified

Accountants, June 2013.



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A STUDY ON AWARENESS LEVEL OF BANK EMPLOYEES ON

SECURITIZATION OF BANKING LOANS IN INDIA

Reena Rani*, Dr. Manisha Gupta

**, James Kanda

***

*Assistant Professor, Pyramid College of Business & Technology, Phagwara, Punjab, India

**Director, Punjab Institute of Management & Technology, Alour, Khanna, Punjab, India

***Assistant Professor, GNA University, Phagwara, Punjab, India

ABSTRACT

Securitization has treated as an important technique for dealing with non-performing assets in the world. In

India, there has been a sturdy increase in loan disbursement of banks over the last few years and at the same

time there has been a growing mismatch between the development of credit off take and growth in deposits.

In other words, an increase in demand of credit has led to a decline in the amount of liquidity of banks and

financial institutions. This has ultimately formed a vacuity between the demand and availability of finance.

In this situation, when some conservative techniques of financing are either undesirable, there is an option

of securitization. The term securitization may be known as a design of security in any financial transaction

and the process of securitization helps in improving various performance related measures of the banking

institutions by enhancing the loan portfolio of banking institutions. This paper makes an effort to determine

the concept of securitization and awareness level of the concept in banking industry in India.

Keywords: Securitization, SPV, Originator, Structured Finance, DRT’s, SARFAESI

INRODUCTION

Funding is a major problem in front of all financial

institutions and banks. The banks under the usual scheme

for recovering its loans have huge sum of money blocked

in the figure of uncreative assets. Financial engineers and

investment bankers from all over the world are

continually searching and developing various new types

of financial instruments to deal with the recovery and

scarcity of funds. In the recent scenario, there is

enormously spoken about one technique for solving

liquidity problems of banks i.e. “securitization”. It has

come out as the most eye-catching way for arranging

capital in countries like the US, Europe, Asia and Latin

America. Securitization refers to the conversion of non-

performing assets in securities which are marketable and

more liquid than the original loans or receivables which

results in lower the risk, add liquidity and improve

economic efficiency (Prof. Ian Giddy 2001). It can be

explained as a method by which all homogeneous liquid

assets/loans are clubbed together and shifted to

moneymaking securities and sold to investors through the

capital market operation (Yener Altunbas and Leonardo

Gambacorta 2007). Securitization generally refers to

putting together all assets, those are mainly cash-

producing assets in the form of loans, bonds, and

mortgages and after that these assets issued to the capital

markets in the form of securities backed by these

collateral pools (Gopinath, 2010, BIS Review).

Securitization is the advanced technique in which all

homogenous illicit funds or securities are bundled

together on the originator's balance sheet, and then

convert them into the securities with different risk levels

and then sold into the capital markets to investors who

will buy these securities according to their risk-taking

ability with the help of a special purpose entity (SPV).

These securities can be categorized in the form of

securities backed by its assets (ABS), securities backed

by mortgages (MBS), and securities of infrastructure

financing.

BANKING SECURITIZATION IN INDIA

The Indian banking sector is suffering from the increased

burden of bad loans, which results in a decline of

profitability of its commercial banks particularly public

sector banks. In the beginning of the recuperation of

amount overdue to banks and financial Institution Act

1993, there was an immense expectation in the banking

industry that the majority of the nonperforming assets

shall be easy to recover. This act intended to offer for

prompt adjudication and recuperation of debts due to

banks and financial institutions. But this attempt taken by

the Indian government was not enough to deal with this

problem. Most banks in India follow the conventional

way for the recovery of funds like of borrower default on

loans; banks typically re-negotiate the contract. If re-

negotiation fails, then banks sell the pledged property of

the borrower to recover funds. Apart from this for the

recovery of funds, banks can approach Lok Adalats or



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DRT‟s. Over the years, the percentage of debt recovered

through these modes has steadily decreased as given in

the following table.

Graph 1: Trend in Debt Recovery

(Sources: Statistical Tables relating to banks in India, RBI)

While the total percentage recovered has steadily

decreased, it is clear from the graph given above, that

number of cases of non-performing loans and the amount

involved in these cases referred at DRTs has increased

considerably but no significant increase can be observed

in the amount of loan recovered. Securitization comes as

a technique by which banks can get rid off from their

blocked funds. Its results are increasing by year, but still

banks are relying more on the traditional recovery

channels.


Ian M.Ramsay (1993) a detailed study was conducted

on financial innovation, and its impact. He studied that

there were many factors which influenced financial

innovation; legal regulation was a major factor among

them. The author had taken securitization as an example

of showing the effects of regulations on it. In the study, it

showed some regulations which had impeded

securitization in Australia were stamp duty in some states

which needed to be abolished.

Nick Davis (2000) a study about securitization in New

Zealand was conducted. He revealed that there are no

real impediments exists in New Zealand from legal,

regulatory, tax or accounting perspective and its legal

environment easily adopted securitization models from

the US and UK. In New Zealand, there is a possibility for

the use of securitization for enhancing fiscal credibility,

mainly in the area of superannuation where sustainability

and policy credibility is crucial determinants of a

successful policy.

Samuel H. Cox, Joseph R. Fairchild and Hal W.

Pedersen (2000) conducted a detailed study on life

insurance securitization and its economic justification for

insurance risk and the study revealed that insurance risks

are repackaged and sold in the capital markets and

investors can allocate their money over these risks more

economically. Securitization makes insurance policies

more efficient and risk transfer and risk sharing, which

leads to better insurance pricing and lower capital costs

for insurers and re-insurers.

V. Sridhar (2002) studied the present stage of

securitization in India and the need for it to grow in India

and his studied that securitization in India is at the

infancy stage and there is an area like Mortgage-Backed

Securities (MBS) in which it holds greater promise to

develop in the future. But still, there are a lot of complex

securitization transactions which are still a dream in the

field of securitization like securitized papers.

Loutskina Elena (2004) conducted a broad study on the

effect of securitization, which is treated as a substitute for

cash and securities for banks. By securitizing loans,

banks, lending ability will increase because securitization

reduces the sensitivity of banks lending. Securitization

also helps banks to enhance their sources of funds.

Suhas Ketkar and Dilip Ratha (2005) study were

mainly focused to discuss the future flow receivables by

focusing the recent developments. The authors found

after doing the study that securitization of future

receivables is a tremendous way to raise finance for

banks and it is very helpful for developing countries too

for boosting their economy.

6 6

3 4

0

14

10

7

3

24

27 27

16 17

1

22

18

12 10 10

0

5

10

15

20

25

30

2012-13 2013-14 2014-15 2015-16 2016-17

Lok Adalats

DRTs

SARFAESI Act

Total



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J David Cummins (2006) the study is mainly focused on

securitization of life insurance policies, pension funds,

and risks involved in it. The study began with an

indication, and examination of underlying principle for

the constitution of asset-backed securities. According to

the author, securitization was treated as a promising

source for value creation in the insurance industry.

Dorota Krupa and Michal Buszko (2015) a descriptive

analysis of securitization investment funds was done by

authors and they also discussed the potential and

directions of the securitization in Poland. After analyzing

statistical data related to the securitization volume of

various areas, they found that the market of securitization

has high growth potential due to an increase in

outstanding debts.

THE NEED OF STUDY

Till now, there is noteworthy knowledge formed by

many researchers in this topic, but no study so far

conducted to know the knowledge of bankers towards the

technique and its benefits.


Research is about searching for new ideas, hidden or

inherent facts or the search for unidentified entities,

quantities or things.


To study the concept of securitization and to

examine the need for securitization in the Indian

banking sector.

To identify factors and the amount of their

significance for the support of securitization in

the Indian Banking industry.

RESEARCH DESIGN: Descriptive

Data collection: Qualitative

Population size: All commercial Banks in India

Sample size: 200 Respondents

Coding of questionnaires: To analyze the results, the

coding has been done for responses received in all

surveys with codes ranging from 5 to 1 with the coding

of 5 for „strongly agreed‟ and coding of 1 for the

„strongly disagreed‟.

STATISTICAL ANALYSIS

Factor Analysis: To achieve the objective of this study

Principal Axis method of Factor analysis is used for

extraction of the factors and subsequently rotated using

the Kesar Varimax Normalized Rotation technique for

getting better interpretable results.

FACTORS AFFECTING SECURITIZATION IN

INDIAN BANKING INDUSTRY

The Indian banking industry is in stress as the volume of

bad loans, frauds and weak profitability are increasing

day by day and these results in limiting bank exposure.

Among all, public sector banks are the main sufferer as

the sector has accumulated nearly 88% of the total non-

performing assets of the banking sector compared to their

70% assets-base. Securitization comes as a tool of

pooling a variety of contractual debts (i.e. residential

mortgage, commercial mortgage, auto loans, credit card

loans, and other non-debt future returns) and promotion

of the related cash flows to the investors in the form of

securities according to their risk preferences. The

securitization market in India is not much popular, but in

coming days we can see even public sector banks using it

as a technique to deal with their bad loans.

Table 1 Rotated Factor Loadings and Communalities using Varimax Rotation

Rotated Component Matrix

Communaliti

es Variable

Component

Factor 1 Factor 2 Factor 3

Provide funds for infrastructure growth in the

country. .901 .090 .033 .821

Alternative Risk transfer, management, and Hedging

Strategy. .879 .088 -.061 .784

Help banks in providing world-class services. .859 .008 .029 .738

Provides with better Asset Liability Management. .852 .076 .122 .747

Provide saving on capital that may assist banks in

meeting regulatory capital requirements. .844 .220 -.031 .763

With interest swaps and turnover, the income of

banks‟ increases by which their profitability goes up. -.097 .955 .018 .922

Banks can become competent to maintain its capital

adequacy norms with the help of securitization, .182 .833 -.026 .727



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which helps to deal high-risk assets by lower-risk

assets.

Banks can obtain a better source of funds. .086 .811 -.062 .669

Allows restructuring of portfolios and of asset

composition. .034 .734 -.107 .551

Can modify and reduce banking capital/solvency risk

requirements. .112 .648 .282 .512

Provides banks with the necessary funding essential

for tapping rural markets. .173 .618 -.124 .427

Helps in Improving Financial indicators like Interest

Income, Total Income, Investment, Net Worth and

Loans.

.016 -.191 .930 .901

Replacement of non-performing assets with liquid

assets which improve the liquidity position of banks. .015 .109 .822 .689

It provides banks with an alternative source for

funding. .043 -.066 .822 .681

Securitization has the potential to lower the funding

cost. -.108 -.130 .808 .682

Banks can generate more credit and be able to shift

from one portfolio of investment to another with

securitization funds.

.113 .134 .795 .662

Eigen Value 3.881 3.763 3.634

% of variance explained 24.259 23.516 22.711

Cumulative % 24.259 47.775 70.485

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser

Normalization

Communality Analysis: The proportion of variation in a

variable explained by all the factors combined is called

communality of the variable/attribute. It is calculated as a

sum of squares of factor loadings for each variable and is

reported in the last column of table 5.2.2. Communality

Analysis indicates that whether the model explains most

of the variation of those variables or not.

The result of the rotating component of „benefits of

securitization to banks‟ identify three important

underlying components which are most correlated. The

first factors with high loadings are „alternative means of

investment‟. The attributes that have high loadings on

this factor are, provide funds for infrastructure growth in

the country (.901), provides risk transfer, management

and hedging strategy (.879), help banks in providing

world-class services (.859), better asset-liability

management (.852). The communality is 24.259 percent,

which means that 24.259 percent of the variance in any

one of the original variables, which is being captured by

extracted factors. The second factor with high loadings is

„alternative funding source‟ with attributes that interest

rate swaps results in an increase in profitability (.955),

banks become able to maintain capital adequacy norms

(.833), banks can obtain a better source of funds (.811),

securitization allows restructuring of portfolios (.734).

The communality of the factors is 23.516 percent, which

means approximately 23.516 percent of the variance in

anyone of the original variable, which is being captured

by extracted factors. The third factor with high loadings

is „securitization helps in improving liquidity.‟ The

attributes that have high loadings on this factor are,

securitization helps in improving financial indicators of

banks like interest income, net worth, and investments

(.930), securitization improve banks‟ liquidity by

converting illiquid funds into liquid (.822), has the

potential to lower funding cost (.808). The communality

of all factors is 22.711 percent.



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Communalities Variable Component

Factor 1 Factor 2

Highly rated and credit improved securities provide safety as well as capital

savings on investment for investors. .936 .039 .877

Investors can select securities with a relatively lower or a higher risk portion, as

per their risk-taking ability. .923 .152 .875

In securitization, additional assurance, and safety provided by the “Pool

Servicer”. .863 .195 .783

Securitization provides an additional option for diversifying its debt portfolio. .495 -.140 .264

Securitization allows investors to structure the timing of their cash flows

according to needs. .136 .892 .814

Provide investors with market-related yields without compromising their credit

yield. .084 .847 .724

Improving Transparency .092 .830 .698

Eigen Value 2.751 2.284

% of variance explained 39.306 32.623

Cumulative % 39.306 71.929


Rotation Method: Varimax with Kaiser Normalization.

The benefits are selected to represent the assorted

components enhancing assorted benefits of securitization

to investors. The first factor that has high loadings is

„Providing investment avenues‟. The attributes that have

high loadings on this factor are, high rated and credit

improved securities provide safety as well as capital

savings on investment for investors (.936), Investors can

select securities according to their risk acceptance level

(.923), securitization investment provides additional

safety by pool servicer (.863) and securitization provide

investors an additional opportunity for diversifying their

funds (.495). The communality of the factors is 39.306

percent, which means approximately 39 percent of the

variance is being captured by extracted factors. The

second factor i.e., „safety to investors‟ and the attributes

that have high loadings are securitization allows

investors to structure the timing of their cash flows

according to needs (.892), make available investors with

market-related yields without compromising their credit

yield (.847) and improves transparency for investors

(.830). The second factor explained 32.623 percent of

variance in the data.



Variable Component

Communalities Factor 1 Factor 2

Foreign investors are disallowed in the Indian securitized instruments. .948 -.034 .901

Transaction costs, transfer fees, and stamp duty are high in securitizations

process. .890 .079 .797

There is an absence of a secondary market in India relating to securitized

instruments. .818 -.029 .671

It is initially complex and time-consuming process. .802 .074 .649

Lack of adequate and affable Legal framework in the country relating to

securitization. .781 -.150 .632

Investors may be slow in accepting these securities because of the lack of -.047 .951 .907



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awareness.

There is low demand from the investor for long tenor receivables and Pension

funds. .061 .828 .689

Lack of transparency due to inadequate disclosures. .188 .764 .620

Lack of adequate laws governing the rights and liabilities of the parties. .061 .659 .438

The lacks of investor base securitization as banks are investing only in

meeting Priority Sector Lending (PSL) -.159 .656 .456



Cumulative % 36.842 67.594



The problems are chosen to represent the various

problems faced by banks while implementing

securitization in India. It has been extracted on account

of high loadings of attributes, „lack of securitization

popularity in India‟. The attributes that are correlated and

have higher loadings on this factor are foreign investors

are not allowed to invest in Indian securitization

instruments (.948), the cost of transactions, credit rating

agencies, transfer fees, and stamp duty are high in

securitizations process in India (.890), there is an absence

of a secondary market for securitization instruments

(.818), the process is time-consuming and costly (.802)

The second attributes i.e.‟ lack of interest from the

investors‟ represents the factors with high loadings are a

lack of awareness among investors about the subject of

securitization (.951), low demand from investor for long

tenor receivables and Pension funds (.828), lack of

transparency due to inadequate disclosure (.764). The

second factor explained 30.751 percent of the variance in

the data.



Variable

Component Communalities

Factor 1 Factor 2

Conservative regulations are needed to be abolished from the securitization

market like boundaries on assignments, the prevention of re-securitization,

limitations on insurance and retirement funds, restraining first-loss

provisions, etc.

.951 .057 .908

Securitization will be likely to play a major role in the future development

of the Indian Banking Industry. .897 .258 .871

It is still a need to be applied by public sector banks in India. .040 .920 .847

Tax-related disincentives should be resolved as they are ostracizing

investors like Mutual fund Companies, and banks. .270 .843 .784



Cumulative % 44.603 85.261



The variables are chosen to represent the various

components enhancing Future of Securitization in

Banking in India. The result of the rotated component

from under the table identifies two important underlying

components which are most correlated. It has been

extracted on account of high loadings on attributes



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„relaxation of regulations lead to growth‟. The attributes

that are correlated and have higher loadings on this are

Conservative regulations are needed to be abolished from

the securitization market (.951) and securitization will be

likely to play a major role in the future development of

the Indian Banking Industry. The first factor explained

44.603 percent of the variance. The second attribute for

„initiative needs to be taken by the government‟. The

factors those are correlated and have high loadings on

this are securitization needs to be applied by public sector

banks in India (.951) and tax-related disincentives should

be resolved as they are the main hurdles for securitization

growth (.843). The second factor explained 40.659

percent of the variance.

CONCLUSION

This research highlights the possibility that securitization

of loans could be a feasible option to strengthen the

capital position of banks and financial companies

operating in India. In India securitization transactions

have performed well and Indian regulators have played a

key role in ensuring vigorous performance. The Indian

government, along with the central bank of India is

issuing new recommendations to accelerate the use of

securitization among banks and investors and many

recommendations are also done to speed up the growth of

housing finance securitization and retail securitization.

Apart from this, there is a heavy burden of non-

performing assets for commercial public sector banks,

and the top-ranked public sector bank i.e. State Bank of

India is also deciding to enter the securitization market

soon.

REFERENCES

1. RAMSAY IAN M. (1993),”Financial Innovation and

Regulation: The Case of Securitisation” Journal of Banking

and Finance Law and Practice, September, pp 169-174.

Also available at SSRN-id 928795 pdf.

2. Davis Nick (2000),” Securitisation: A Public Policy Tool?”

Treasury Working Paper 00/8.

3. Cox Samuel H., Joseph R. Fairchild and Hal W. Pedersen

(2000),” Article on The Economics of Insurance

Securitisation” September/October pp 48-56, available at

www.contingencies.org.

4. Sridhar V. (2002),” Securitisation in India- Opportunities

and Obstacles- A Discussion Paper” available at Vinod

Kothari.com/wp-content/uploads/2013/12/india-article-

iime.pdf.

5. Elena Loutskina (2004),” Does Securitisation affects Bank

Lending? Evidence from Bank Responses to Funding

Shocks” The Quarterly Journal of Economics, MIT Press,

2004, pp 7.

6. Ketkar Suhas and Dilip Ratha (2005),” Recent Advances in

Future Flow Securitisation” The Financier, Vol. 11/12,

2004-2005 also available at http:/www.the financier.com.

7. Cummins J David (2006),” Securitisation of life insurance

assets and liabilities” The Wharton School, University of

Pennsylvania, Philadephia,3 June 2004, also available at

website http:/ fic.wharton.upenn.edu/fic/paper/04/403.pdf.

8. Krupa Dorota and Michal Buszko,” Securitisation funds in

Poland in Investment Fund Companies Perspective” Dorota

Krupa and Michal Buszko/Procedia Economics and Finance

30 August 2015, pp 379-387 also available at

www.sciencedirect.com.



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A STUDY OF ECONOMIC AND LEGAL ASPECT OF BITCOIN IN INDIA

Mankaj Mehta*

*Assistant Professor, PG Department of Commerce, Multani Mal Modi College, Patiala, Punjab, India

ABSTRACT

Bitcoin is a decentralized virtual cryptocurrency which provide a solution to the double spending problem

without involving any trusted third-party intermediary. The rising craze for bitcoin has come under the

government's lens. Bitcoin can be an easy way to evade tax or snare unsuspecting small investors in ponzi

schemes. The government has begun a crackdown on illegal uses of this unregulated virtual currency. The

present paper aims to study the legal and economic aspects related to Bitcoins in India using secondary data

for the study. The problem with bitcoins is that not all the countries have legalized its use. For consumers,

some countries like Australia, Canada, Finland and Germany have legalized its use and have made it clear to

apply normal earned income rules on Bitcoin, while many countries have yet not made a clear statement with

the legalization and use of bitcoin. Countries like China, Japan etc. have adopted a restrictive approach .On

the hand Thailand has made the use of bitcoins illegal. The non-uniformity in the legalization of bitcoin in

different countries is a major issue. In India the finance minister during his budget speech on February 01,

2018 has cleared that the cryptocurrencies are not recognized as legal tender in India. Moreover the various

government has issued tax notices to the investors of the cryptocurrencies and has also warned its people to

be aware while investments in digital currencies.

Keywords: Bitcoins, Cryptocurrency, Legal

INTRODUCTION

Bitcoin is a decentralized virtual cryptocurrency,

launched in 2009 by an unidentified person known as

Satoshi Nakamoto. It does not rely on any central

services for managing the creation or flow of money. It

relies on cryptographic algorithms in order to prevent

abuse of the system. It is abbreviated as BTC and is

powered by a peer-to-peer network in the public domain

both in terms of issuing and valuation. Bitcoins provide a

solution to the double spending problem without

involving any trusted third-party intermediary. It does

this by distributing the transaction information among all

the users on the network. Every transaction in a bitcoin

economy is contained in a block which also contains the

information about the previous block, forming a block

chain. This block chain is available over the bitcoin

network for users to verify that whether the bitcoin being

transacted has been previously spent or not. The

thousands of users present over the network act as the

intermediary and each user of bitcoin owns a set of

private and public key. Generally used terms related to

bitcoins are Address, Transactions, Block, Wallet, Miner

and Block-chain etc. (“Effect of Bitcoin,” 2017) the

rising craze for bitcoin has come under the government's

lens. Bitcoin can be an easy way to evade tax or snare

unsuspecting small investors in ponzi schemes. The

government has begun a crackdown on illegal uses of

this unregulated virtual currency. There is a suspicion

that some so-called cryptocurrencies and bitcoin

investments may actually have nothing to do with any

block chain-developed virtual currency and are just new

ways devised by scamsters to ride the wave and what

they may be offering could be 'e-ponzi' schemes (“Here's

Why India,” 2017).

OBJECTIVES

This research paper has the following objectives:

1. To study the legal and economic aspects related to

Bitcoins in India.

2. To know about the legal position of Bitcoins in various

countries.


The main objective of the study is to know about the

working of bitcoins and various provisions related to the

bitcoin in India and other countries. The secondary data

has been used for the present paper.

HOW TO INVEST IN BITCOINS

In India, you can purchase Bitcoin from Zebpay

exchange. Zebpay has Android and iPhone app which

lets you link your bank account for quick transfers. You

can buy bitcoins by making a payment to Zebpay's bank

account. You can also withdraw the money to your bank

account, and track data on Bitcoin valuation in the

country. Sandeep Goenka, CEO of Zebpay, one of the

largest bitcoin exchanges in the country had said,



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"Indians are enquiring about bitcoins as an alternative

and safe investment option. They are downloading

Zebpay as they want to experiment with digital

currencies. There has been a 50% increase in Zebpay

downloads (Dhar, 2017)." Officials at Zebpay, India's

leading bitcoin exchange said the industry was adding

near 200,000 users every month with an estimated trade

volume of about 20 billion Indian rupees ($315 million).

Aman Kalra, marketing head of Coinsecure, a bitcoin

exchange in New Delhi, said more than 150 bitcoins

were changing hands every week through its platform.

The company has 100,000 registered users and is now

launching a platform to sell ethereum and other digital

currencies (“Government Sends Tax,” 2018).

ECONOMIC IMPACT OF BITCOINS

Alternative currencies such as Bitcoin or the ones backed

by Gold have one feature that is particularly charming in

the post-QE world – the promise of finite supply and nil

dependence on central planners. Such currencies are

supposed to be a free-market counter to „deep state‟

monetary interference. But the concept of a finite

monetary supply system deserves a deeper review. While

the merits are relatively well-known, it is time we look

closer at some demerits of such a fixed supply system.

Many such demerits are well-documented but not

widely-appreciated. There is no fiat currency and central

bankers are jobless. No authority in the world can create

currency out of thin air and indirectly devalue/deflate the

hard-earned currency stashed in our wallet (Sethi, 2017).

On November 8, the day Prime Minister Narendra Modi

announced that Rs 500 and Rs 1,000 banknotes would

cease to be legal tender; bitcoin was priced at about Rs

52,000 on Unocoin and Zebpay. The surge in interest for

the e-currency came as it evolved as an alternative and

safe investment option. Google search data show that

Indians' search for the keyword "Bitcoin" was at its peak

soon after note ban. But increasing demand has also

raised security concerns. Experts say there was a rush

following the cash crackdown announcement as many

traders exchanged their black money against bitcoins.

The demand of the largest and oldest among crypto

currencies is high as it is untraceable by security agencies

and does not require physical storage that can be raided

by authorities (Narayan, 2017). The government has sent

tax notices to tens of thousands of people dealing in

cryptocurrency after a nationwide survey showed more

than $3.5 billion worth of transactions have been

conducted over a 17-month period. The government has

issued repeated warnings against digital currency

investments, saying these were like "Ponzi schemes" that

offer unusually high returns to early investors. But it has

not so far imposed curbs on an industry estimated to be

adding 200,000 users in India every month

(“Government Sends Tax”, 2018).

POSITION OF BITCOINS IN VARIOUS

COUNTRIES

Countries like Australia, United States, Canada etc. have

legalized bitcoins operations within their territories.

While countries like China, Japan etc. have adopted a

restrictive approach. China has restricted only financial

institutions from dealing directly in bitcoins without

making it illegal (Jhala, 2014). Chinese citizens are still

investing in Bitcoin and the cryptocurrency market

despite the government‟s heavy crackdown. In

September 2017, Chinese cryptocurrency exchanges

BTCC China, Huobi and OKCoin were ordered by the

government to shut down their businesses. At one point,

executives of the three cryptocurrency exchanges were

prevented from leaving the country, due to a government

investigation into local cryptocurrency exchanges. In

Hong Kong, it is relatively easy for investors to set up

businesses. With less than $1,000, businesses can be

legally created, which allows the opening of business

bank accounts at Hong Kong-based financial institutions.

Beginning in December 2017, many Chinese investors

moved their funds from their Chinese bank accounts to

Hong Kong bank accounts and started to trade

cryptocurrencies more actively, effectively bypassing

China’s restrictions (Young, 2018). In November 2013,

the United States Senate held a committee meeting to

discuss virtual currencies. It was stated that bitcoin is a

legal means of exchange and that online payment

systems, both centralized and decentralized, offer

legitimate financial services. Further, the Internal

Revenue Service made its position clear on bitcoin in

March 2014 stating that it will consider bitcoin a form of

"property" rather than a currency. Thus, every bitcoin

transaction would be considered as capital gain and

accordingly taxed (Narayan, 2017). While

cryptocurrencies have been a talking point at previous

World Economic Forum conferences, they have come to

the fore in Davos this year. Following a breakout year

which saw Bitcoin rise to an almighty high of $20,000,

alongside the massive growth of other altcoins, it’s

hardly surprising that one of the major talking points at

WEF would be the future of cryptocurrency. UBS

Chairman Axel Weber said as much in an interview with

Bloomberg, saying his firm would not recommend

cryptocurrency adoption or investment to its clients until

there is clarity on future regulatory action. Renowned

American investor Bill Gross suggested that the rise of

bitcoin and crypto currency has signalled a move away

from centralized institutions governing and controlling

money. People seem to be putting their trust in

technology over government-run establishments



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(Jankinson, 2018). Joseph Stiglitz, well-known

economist, is bragging to the Davos crowd that Bitcoin is

used for "secret use cases" & that fiat currency is

superior. My theory is that this type of fear-mongering

actually drives more adoption of Bitcoin &

cryptocurrencies (Jankinson, 2018). Bitcoin’s rise may

reflect, for better or worse, a monumental transfer of

social trust: away from human institutions backed by

government and to systems reliant on well-tested

computer code.

(https://www.nytimes.com/2017/12/18/opinion/bitcoin-

boom-technology-trust.html.) As the 68th US Secretary

of State John Kerry told Cointelegraph earlier this week

at the summit, the sheer value of capital that has been

poured into the overall cryptocurrency market has made

it impossible to ignore.

LEGAL POSITION OF BITCOINS IN INDIA

The main problem with determining the legal status of

how bitcoins should be handled is whether they are a

currency, security, commodity, or something completely

different. While bitcoins are commonly referred to as a

"currency" as they have many common characteristics of

one, the legal definition requires a currency to be issued,

used and accepted by a country, which is not the case

with bitcoin. Another problem with bitcoins is that not all

the countries have legalized its use. For consumers, some

countries like Australia, Canada, Finland and Germany

have legalized its use and have made it clear to apply

normal earned income rules on Bitcoin, while many

countries have yet not made a clear statement with the

legalization and use of bitcoin. On the hand Thailand has

made the use of bitcoins illegal. The non-uniformity in

the legalization of bitcoin in different countries is a major

issue (“Effect of Bitcoin”, 2017). In March, RBI Deputy

Governor R Gandhi warned against crypto-currencies

such as Bitcoin. "They pose potential financial, legal,

customer protection and security-related risks," Gandhi

said. "Payments by such currencies are on a peer-to-peer

basis and there is no established framework for recourse

to customer problems, disputes, etc. Legal status is

definitely not there," he added (Dhar, 2017). As

mentioned above, bitcoins are not authorized as yet but

there is scope for them to be legalized under different

legislations. As per the Foreign Exchange Management

Act, 1999, currency is defined as "all currency notes,

postal notes, postal orders, money orders, cheques, drafts,

travellers cheques, letters of credit, bills of exchange and

promissory notes, credit cards or such other similar

instruments, as may be notified by the Reserve Bank."

According to the definition, RBI has the power to include

bitcoins within the definition of currency. Currency other

than "Indian currency" is termed as "foreign currency",

and regulated by foreign exchange laws. Most likely

bitcoins can be governed by foreign exchange laws.

Further, Bitcoins can also be included within the

definition of "security" which states that "such other

instruments as may be declared by the Central

Government to be securities". Further, the Indian

Copyright Act, 1957, defines the term "computer

programme" as "a set of instructions expressed in words,

codes, schemes or in any other form, including a machine

readable medium, capable of causing a computer to

perform a particular task or achieve a particular result".

Having gone through the various definitions, it can be

concluded that there is enough scope for legalizing

bitcoins. One has to wait and watch as to which approach

the Indian government takes (Jhala, 2014). In the Union

Budget 2018, Finance Minister Arun Jaitley reiterated

that the cryptocurrencies are not recognised as legal

tender. During his budget speech, the Finance Minister

said, “The Government does not consider crypto-

currencies legal tender or coin and will take all measures

to eliminate use of these crypto-assets in financing

illegitimate activities or as part of the payment system.

However, Jaitley also added that the government would

try and explore the blockchain technology, which drives

bitcoin and other crypto-currencies. The recognition of

blockchain technology for future use in the digital

economy has received positive reactions from the

industry. Though the budget does not specifically talk

about how blockchain will be explored, it should be

noted that in digital economy the major use for this has

been around crypto-currencies like Bitcoins (“Budget

2018”, 2018).

CHALLENGES AND ISSUES

The form of cryptocurrencies is not free from some

financial problems and security concerns. I analyzed

several studies and cryptocurrency platforms and also

observed some cryptocurrency selling forums in order to

explore challenges and issues that are exist in such

virtual phenomenon. The main problems and impacts of

cryptocurrency can include:

Security threats: Hackers and malicious users can create

as much as they want from virtual currency if they break

the system and know the method of virtual currency

creations. This will lead to the ability to create fake

virtual currency or steal virtual currency by just changing

the accounts balances. For example, selling in-game

virtual items and virtual currency is against World of

Warcraft (WoW) game policies. Therefore, many users

log into WoW gold selling websites to buy virtual gold in

order to pay for virtual items that they need. Many of

WoW gold selling websites are not reliable and they are

vulnerable to hacking and many users are complaining

about paying real money for nothing or for fake virtual

currency.



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Collapse concerns in cryptocurrency systems:

Unlimited issuing of virtual currency in the variety

virtual communities will lead to economic problems

since its issuing is not based on the demand and supply.

It is possible for some providers such as Second Life to

issue unlimited Linden Dollars and increase their virtual

items prices in order to gain more real revenues. On the

other hand, it will suffer from inflation and economic

issues leading to collapse in the virtual currency system.

Impact on real monetary systems: Since some virtual

currency systems are connected with real world monetary

systems, they may affect the demands and supply

facilities of real world money. For example, enabling

users to purchase virtual and real goods and services with

virtual currency in some platforms may reduce the

demands on real money. Users will no longer depend on

real money to buy what they want and they will use

virtual money instead. On the other hand, some platforms

enable users to exchange their virtual currency with real

currency and this will increase the demands on real world

currency. This fluctuation will affect on the real

monetary systems.

Gold farming risks: Gold farming term is very popular

in China and developing countries. Gold farmers are

players who play in social games such as World of

Warcraft in order to gain gold, which is virtual currency

of the game, and then sell it for real money. The targeted

buyers are the players who do not have enough time to

play and compete for gaining virtual currency. In fact,

huge cash flow is generated from gold farming process

and it is not controlled and regulated. This will increase

fraud and financial risks where virtual currency is

exchanged with real money in unreliable environment.

Fluctuation in virtual currency value: According to

Chow and Guo study, it is observed that when the

popularity of a virtual community drops, the value of its

virtual currency will be devalued. For example, users

who own 1000 units of virtual currency can buy from

variety of 100 items. In case the provider of that virtual

currency drops, users can only buy from 10 items with

their 1000 units since dropping will be reflected in fewer

goods and services especially in closed virtual

communities.

Money laundering: Money laundering is one risk that is

very likely to rise with the use of VC especially with

platforms that enable users to exchange virtual currency

with real money. In practical case occurred in Korea in

2008, the police arrested a group of 14 persons for

laundering $38 million obtained from selling virtual

currency. The group converted the amount of $38

million, which is generated by gold farming, from Korea

to a paper company in China as payments for purchases.

Unknown identity risks: Since creating an account in

most of virtual currency platforms such as social games

and social networks is not authenticated, financial

transactions cannot be monitored very well. Gamers and

users can create more than one account with unknown

identities and use them for illegal transactions. There is

no way to recognize the source of creating or cashing out

the virtual currencies. This leads to inability to track the

transactions in case of money laundering suspicion.

Moreover, unknown identity will enable criminals to get

paid with virtual currency for their crimes.

Black market for cryptocurrency: The financial

position of some social games such as Second Life and

World of War craft are mature enough to create black

market for buying and selling their virtual currency. The

increasing popularity of virtual currency in online

environment has led to a thriving black market for

trading virtual currency with real money. By observing

several social games’ forums, some fraud cases have

been raised and discussed between users. For example,

when a gamer decides to quit from a game, he/she may

want to sell the owned virtual currency by offering them

in the game’s forums. The way of receiving the payments

is risky since many malicious users may not complete the

payment or they dispute after paying. In this case, they

will get their money back plus the virtual currency.

CONCLUSION

Every new currency has to face an uphill battle legally

and technically. Though the bitcoin is a huge step

towards decentralized digital currency but it is not a fiat

currency. Any currency in the world has government or

its institutions‟ backing which the bitcoins lacks. The

value of bitcoins is highly volatile in nature as it has

decreased from $20000 approximately to $ 6000 (The

Guardian). The new head of the Bank for International

Settlements, Agustín Carstens, also said bitcoin

threatened to undermine public trust in central banks and

posed a threat to financial stability, and he signalled a

global clampdown. In India the finance minister during

his budget speech on February 01, 2018 has cleared that

the cryptocurrencies are not recognized as legal tender in

India. Moreover the various government has issued tax

notices to the investors of the cryptocurrencies and has

also warned its people to be aware while investments in

digital currencies. Thus the bitcions are not legal tender

in India.

REFERENCES

1. Effect of Bitcoin in India. (2017, October 17). Retrieved

from https://www.ukessays.com/essays/economics/effect-

bitcoinindia-8223.php

2. Here's why India has decided to crank up its crackdown

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4. Government sends tax notices to cryptocurrency investors

as trading hits $3.5 billion. (2018, January 19). Retrieved

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in-price-crackdown-bis-cryptocurrency.



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JOB SATISFACTION OF EMPLOYEES IN SHREE GANESH EDIBLE PVT. LTD.

Ritika Sharma*

*Student,

A.S. College, Khanna, Punjab, India

ABSTRACT

Job satisfaction is an important factor used to motivate the employees to work harder. It is generally said

that, “A happy employee is a productive employee.” A happy employee is mostly satisfied with his job.

Therefore, job satisfaction can be influenced by the ability of a person to complete the required tasks, the

communication level in the organization and the way of management treats their employees. When a person

says that he has job satisfaction, it means that he really likes his job, feels good about job and values his job

highly. It is the level of contentment a person feels regarding their job. So, job satisfaction is the collection of

feelings and beliefs that people have about their current job. A highly satisfied employee has better physical

and mental well being. The study tries to evaluate how human resource factors affect the satisfaction level of

employees in Shree Ganesh Edible Pvt. Ltd. It also assesses how various factors affect the satisfaction level

of employees in the organization. The study also attempts to finding the challenges faced by employees in the

company and provide some suggestions regarding this.

Keywords: Job satisfaction, motivation, promotion, supervision

INTRODUCTION ABOUT JOB SATISFACTION

It is no doubt that human beings are important assets of

an organization. The thoughts and feelings of the

employees strongly influence their behaviour on the job.

These feelings and thoughts are the part of their mental

state and these feelings are used as inputs to get

decisions. So, it is very essential to understand more

about their conscious states. For efficient and effective

functioning of an organization job satisfaction is of great

significance. As people spend major portion of their lives

in working place or environment and they also want that

proportion of their lives to be pleasant, agreeable and

fulfilling. Job requires interaction with co-workers and

supervisors follow organizational rules and policies,

performance standards, living with working conditions.

Job satisfaction is not same as motivation, although it is

clearly linked with motivation. Job design aims to

increase job satisfaction and performance methods

include job rotation, job enlargement and job enrichment.

Besides these, management style, culture, employee

involvement, empowerment and autonomous workgroups

also influence the satisfaction level of employees.

INTRODUCTION ABOUT SHREE GANESH EDIBLE PVT. LTD.

CIN U15143PB2006PTC029802

Company name Shree Ganesh Edibles Private Limited

Company status Active

RoC RoC- Chandigarh

Registration number 29802

Company category company limited by shares

Class of company private

Date of incorporation 27 February 2006

Company sub category non- government company

Activity Production. Processing, preservation of meat, fish, fruit

vegetables, oils and fats.

MEANING OF JOB SATISFACTION:

Job satisfaction can be defined as a process in which the

employees feel satisfied with their work. It is an end

feeling of an employee after performing his task. The

feeling may be positive or negative depending upon

whether the need of employee is satisfied or not. Job

satisfaction also relates to the working conditions

provided by the employer to the employee like good



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infrastructure, proper working hours, lighting,

ventilation, drinking water and urinal facilities, healthy

relationship with seniors, subordinates and per group and

also with salary packages. All these facilities motivate

the employees to do better work for his organization. So,

job satisfaction refers to the person’s feelings of

satisfaction on the job, which motivate the employee to

work with great zeal, confidence and enthusiasm which

will be helpful for him to attain the set goals of the

organization.

FACTORS INFLUENCING JOB SATISFACTION IN SHREE GANESH EDIBLE PVT. LTD.

ORGANIZATIONAL FACTORS

Salaries and wages: Salary and wages plays an

important role in fulfilling one’s needs.

Promotion chances: Promotion includes

positive changes like: higher salary, less

supervision, status and increased responsibility.

Company policies: Company policies regarding

compensation and benefits also influence

satisfaction level of employees. A feeling of

employee satisfaction is felt by attaining fair and

equitable rewards.

WORK ENVIRONMENT

Supervision: Supervision is the important source

of job satisfaction. In Shree Ganesh Edible

company behaviour of supervisor towards their

employees is fairly fine.

Work group: The nature of work group also

influence the job satisfaction level of employees.

If the co-workers are friendly and co-operative

then the employees are satisfied with their job.

Working conditions: Working conditions

particularly physical environment affects

satisfaction level of employees on the job.

WORK IT SELF

Job scope: Job scope means job content. It

provides the amount of responsibility, feedback

etc.

Autonomy and freedom: Autonomy and

freedom is very important in every organization

to achieve certain specific goals. If there is lack

of autonomy and freedom in any organization it

leads to helplessness and dissatisfaction.

Status: It refers to social status of a person.

Management may create some status symbols in

the organization. In Shree Ganesh Edible Pvt.

Ltd., various status symbols provides to

employees like mobile facility to the managers,

personal car, superior furniture, office, peons etc.

PERSONAL FACTORS

Age: Senior people feel more satisfied with their

job as compared to young employees because

they are more mature and they are realistic rather

than idealistic.

Length of service: Employee with longer tenure

of job feel more satisfied with their job tenure

assures job security to the employees.

Personality: Some personality traits are directly

linked to job satisfaction such as: self- assurance,

self-esteem, maturity, decisiveness, challenge,

responsibility etc.

Education/ intelligence: Too much

education/intelligence i.e. more than the job

required will lead to dissatisfaction.


Gupta and Joshi (2005) concluded in their study that

job satisfaction is an important technique used to

motivate the employees to work harder. It had often

said that, “A HAPPYEMPLOYEE IS A

PRODUCTIVE EMPLOYEE.” Job satisfaction is

ORGANIZATIONAL FACTORS

• Salaries and wags

• promotion chances

• company policies

WORK ENVIRONMENT

• supervision

• work group

• working conditions

WORK ITSELF

• job scope

• autonomy and freedom

• status

PERSONAL FACTORS

• age

• length of service

• personality

• education/ intelligence



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very important because most of the people spend a

major part of their life at their workplace.

Statt (2010) Job satisfaction can be defined also as the

extent to which a worker is content with the rewards he

or she gets out of his or her job, particularly in terms of

intrinsic motivation

Kaliski (2016) Job satisfaction is a worker’s sense of

achievement and success on the job. It is generally

perceived to be directly linked to productivity as well as

to personal well-being. Job satisfaction implies doing a

job one enjoys, doing it well and being rewarded for

one’s efforts. Job satisfaction further implies enthusiasm

and happiness with one’s work. Job satisfaction is the

key ingredient that leads to recognition, income,

promotion, and the achievement of other goals that lead

to a feeling of fulfillment.

George et al., (2017) Job satisfaction is the collection of

feeling and beliefs that people have about their current

job. People’s levels of degrees of job satisfaction can

range from extreme satisfaction to extreme

dissatisfaction. People also can have attitudes about

various aspects of their jobs such as the kind of work

they do, their coworkers, supervisors or subordinates and

their pay.

Aziri (2018) we consider that job satisfaction represents

a feeling that appears as a result of the perception that the

job enables the material and psychological needs.


OBJECTIVES

1. To study the satisfaction level of employees with

respect to gender.

2. To study the satisfaction level of employees with

respect to income.

3. To study the impact of working hours on the

satisfaction level of employees.

Research design Descriptive

Primary data collection Through structured questionnaire, observation, interview

and discussion method

Secondary data collection Through text books, journals, record of Shree Ganesh,

academic reports, internet

Sampling method Convenience sampling

Sampling size 100

Scaling technique 5 point Likert scale, percentage method

Statistical tools Chi- Square test

DATA ANALYSIS AND INTERPRETATION

Table 1

Showing data on the basis of gender

SEX NUMBER OF RESPONDENTS PERCENTAGE (%)

Male 70 70%

Female 30 30%

TOTAL 100 100%

Table 1 depicts that out of 100 employees in the

company, there are 70% male and 30% females are to be

taken for the study.

HYPOTHESIS 1

H0: Let us take null hypothesis that there is no

significance difference between gender and overall


Highly

Satisfied

Satisfied Neutral Dis- Satisfied Highly

Dis-Satisfied

Rows Total

Male (observed) 15 25 5 15 10 70

Female (observed) 5 15 5 5 0 30

Column total 20 40 10 20 20 100



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MALE CHI- STATS

Highly satisfied Satisfied Neutral Dis- satisfied Highly dis-

satisfied

Males

(expected)

14 28 7 14 7

(O-E) 1 -3 -2 1 3

(O-E)² 1 9 4 1 9

(O-E)²/E 0.071428571 0.321428571 0.571428571 0.071428571 1.285714286 2.321428571

FEMALE CHI- STATS

Highly satisfied Satisfied Neutral Dis- satisfied Highly

dissatisfied

Female (expected) 6 12 3 6 3

(O-E) -1 3 2 -1 -3

(O-E)² 1 9 4 1 9

(O-E)²/E 0.166666667 0.75 1.333333333 0.166666667 3 5.416666667

Chi- squared statistic 7.738095283

Degree of freedom 4

Level of significance 0.05

Critical value 9.488

As the chi- statistics (7.738095238) is smaller than the

critical value (9.488) at degree of freedom= 4 and level

of significance= 0.05, hence our hypothesis is accepted.

Therefore, gender and overall satisfaction level are

independent.

Table 2

Showing Income level

INCOME NO. OF RESPONDENTS TOTAL

<10,000 35 35%

10,000-50,000 41 41%

50,000-1,00,000 24 24%

TOTAL 100 100%

Table 2 shows that out of 100 respondents, 35%

employees getting income <10,000. 41% employees are

those who are getting income between 10,000-50,000

and 24% employees getting income between 50,000-1,

00,000.

HYPOTHESIS 2

H0: Let us take null hypothesis that there is no

significance difference between income and overall


INCOME HIGHLY

SATISFIED

SATISFIED NEUTRAL DIS SATISFIED HIGHLY DIS

SATISFIED

TOTAL

<10,000 5 20 1 5 4 35

10,000-50,000 4 15 3 14 5 41

50,000-1,00,000 1 5 1 11 6 24

TOTAL 10 40 5 30 15 100



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WHEN INCOME IS <1O, OOO


satisfied

Income

(expected)

3.5 14 1.75 10.5 5.25

(O-E) 1.5 6 -0.75 -5.5 -1.25

(O-E)² 2.25 36 0.5625 30.25 1.5625

(O-E)²/E 0.642857 2.571428 0.321428 2.88095 0.297619 6.714282

WHEN INCOME IS 1O, OOO-50,000


satisfied

Income

(expected)

4.1 16.4 2.05 12.3 6.15

(O-E) -0.1 -1.4 0.95 1.7 -1.15

(O-E)² 0.01 1.96 0.9025 2.89 1.3225

(O-E)²/E 0.002439 0.119512 0.4402439 0.234959 0.2150406 1.0121945

WHEN INCOME IS 50,000-1, 00,000


satisfied

Income

(expected)

2.4 9.6 1.2 7.2 3.6

(O-E) -1.4 -4.6 -0.2 3.8 2.4

(O-E)² 1.96 21.16 0.04 14.44 5.76

(O-E)²/E 0.81666 2.204166 0.0333 2.00555 1.6 6.65968

Chi- squared statistic 14.386

Degree of freedom 8

Level of significance 0.05

Critical value 15.51

As the chi- statistics (14.386) is smaller than the critical

value (15.51) at degree of freedom= 8 and level of

significance= 0.05, hence our hypothesis is accepted.

Therefore, income and overall satisfaction level are

independent.



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Table 3

Showing level of Satisfaction towards working hours

LIKERT SCALE VALUE=4.30

According to likert scale, the mean rate is 4.3. So, the

respondents are highly satisfied with working hours.

Table 3 shows that from 100 respondents 50% are highly

satisfied, 30% are satisfied, 20% are neutral, nobody is

dis satisfied and highly dis satisfied.

FINDINGS

Employees are satisfied with the income pattern

of the company.

Almost all the employees are satisfied with the

working hours of the company.

Equal participation of males and females in the

decision making process of the company.

Employee mostly in 20-30 age groups gets

promotion through better performance in shorter

period.

SUGGESTIONS

Proper rewards must be provided by the

company if employees perform better.

Working environment must be favorable to the

employees.

Managers make cordial relations with the

employees.

Managers adopt some democratic approach also

along with autocratic approach.

CONCLUSION

Findings and suggestions are based on the survey

conducted and these points are to be looked into and

steps are to be taken in this regards for higher growth.

From this analysis, I conclude that the job provides the

opportunity to the employees to exercise his or her skills

at workplace. Number of the employees accepted at times

there is a considerable flexibility in coordinating with

work and they are satisfied with the exciting inter

personal communication. The company follows the

systematic planning and review process to evaluate the

performance of employees. From the analysis, it was also

observed that there is a scope for the improvement of

working conditions in SHREE GANESH COMPANY.

Finally, I would like to conclude that the employees of

this company are satisfied with their work and the

organization.

REFERENCES

1. Economic and Political Weekly; a Sameeksha Trust

Publication; March 19-25, 2005; Vol XL No 12; 1283-12

2. European Journal of work and Organizational Psychology

2005, 14 (3), 209-237, 2005

3. International Journal of educational management 18(2), 87-

92, 2004

4. Journal of managerial psychology; volume 18(4), 368-376,

2003

LEVEL OF SATISFACTION TOWARDS

WORKING HOURS

NO. OF RESPONDENTS PERCENTAGE (%) WEIGHTED MEAN


Satisfied 30 30% 4*30=120

Neutral 20 20% 3*20=60

Dis – satisfied 0 0% 2*0=0

Highly dis - satisfied 0 0% 1*0=0

TOTAL 100 100 430/100=4.3



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IMPACT OF FOREIGN DIRECT INVESTMENT INFLOWS: A CASE OF RUSSIAN

ECONOMY

Dr. Robin Inderpal Singh*, CA (Dr.) Sanjeev K. Bansal

**, Dr. Sandeep K. Bansal

***

*Assistant Professor, PG Department of Commerce, Shree Atam Vallabh Jain College, Ludhiana,

Punjab, India

**Assistant Professor, Dept. of Commerce, IKG Punjab Technical University, Kapurthala, Punjab, India

***Assistant Professor, PG Department of Commerce, Shree Atam Vallabh Jain College, Ludhiana,

Punjab, India

ABSTRACT

Finance is the major economic problem for the developing economies as they do not have the money for the

investments which is necessary for the development of the nation. Developing nations tries to get direct and

indirect investments to solve the finance problems in the form of foreign capital and reform their investment

policies to get the foreign investments in their country. Due to the changes, there has been changes in the of

Foreign Direct Investment inflows in the Russian economy. The study is conducted to know the determinants for

FDI inflow in Russia and its impact on economic growth of the country. The study revealed that R&D GDP is the

determinant which significantly influences the FDI inflows in Russia. It acts as the important macroeconomic

determinants and pull factor of FDI inflows in Russia. It is also revealed in the study that FDI does not play a

significant role in the economic growth in Russia.

Keywords: FDI, GDP, Economic Growth

INTRODUCTION

One of the major developments that have taken place

during the last three decades is the growth of FDI inflows

in the economies of the world. After the replacement of

GATT with WTO and increased influence of

international organizations like IMF and UN, the

economies have become globalized. Due to globalization,

there have been changes in the government policies of

different countries which lead to internationalization,

privatization, liberalization, minimizing the barriers and

upgradation of technologies. With the becoming of world

as global economy, the developing countries with labour

surplus, availability of labour at low rate, higher rate of

returns on investments have started competing with the

developed nations.

Foreign portfolio investments are the investments

through which investments can be made in a foreign

country but there is no control of investor on the

business. Investments in foreign portfolio investment are

made in equity or debt which can be of short, medium or

long term.

The foreign direct investments are the investments made

by a person residing in a foreign country where the

investor has the control over the business and actually

participates in the decision making of the business.

Governments see foreign direct investment as one of the

important sources of capital which can be used for the

development of the economy.


To increase the flow of FDI inflows, so far many studies

have been conducted around the globe over the different

period of time for exploring the determinants and impact

of FDI inflows on an economy.

Laskar (2015) in her doctoral dissertation „Determinants

of Trade and FDI flows in the BRICS countries–

Evidences from Gravity Model Analysis‟ explores the

determinants of FDI flows and trade in the BRICS

economies. The period of study is from 2008 to 2012 and

used the Gravity model for the purpose of analysis. The

study found that market size has positive relation with

foreign direct investment flows and trade whereas

distance between the pair countries have negative relation

with foreign direct investment flows and trade in BRICS

economies.

Carp (2013) in her paper „Anaysis of the relationship

between FDI and Economic Growth – Literature Review

Study‟ tried to find out the benefits that host country gets

with foreign capital flows on the economic growth of the

country and found that capital flows have significant

impact on the host country‟s economic growth through

technology transfer, extension of financial markets,



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increase of exports, economy openness and human

capital.

Kaur et al (2013) in their paper „Financial system

development and foreign direct investment: A panel data

study for BRIC countries‟ examined the financial

system‟s impact on the flow of FDI in BRIC countries.

The period of study is from 1991 to 2010 and used panel

data, fixed and random effect analysis. The study found

that capitalizations of stock market and banking sector

size are the factors influencing the foreign direct

investment inflows in BRIC. The study also found that

higher credit to domestic firms by banking sector has

negative impact on FDI inflows.

Assuncao et al (2011) in their paper titled „Location

determinants of FDI: a Literature Review‟ reviewed the

different studies related to FDI to find out the factors

which affect the distribution of FDI inflow in different

parts of the world and found human capital, production

costs, economic stability, infrastructure, political

instability, corruption, institutional quality, openness of

the economy, financial and fiscal incentives, market size

and market growth have significant impact on investors‟

decision related to location.

De Vita and Kyaw (2008) in their research

„Determinants of FDI and portfolio flows to developing

countries: A panel cointegration analysis‟ tried to find

out the important determinants of foreign direct

investment in 32 developing countries. The period of

study is from 1990 to 2004. FMOLS cointegration panel

data technique is used to find out the determinants. The

study found that in context to FDI flows, growth of

domestic productivity is found to be the main

determinant whereas growth of foreign output found to

have significant negative influence on flows of FDI.

Blonigen (2005) in his work „A review of the empirical

literature on FDI determinants‟ investigated the existing

literature and tried to find out the multinational

corporation (MNCs) decision in context of FDI and also

tried to find out how MNCs decide on foreign direct

investment location. The study found that MNC‟s

decision depends on the exchange rate and taxes while

investing in the other country. MNCs see the country

level factors which influence their decision regarding

investments. The study finds no statistically strong

determinants in cross country foreign direct investment

inflows.


The objective of the study is to evaluate the impact of

FDI on the economy. To achieve the objectives of the

paper, the study has been done for the period of 1991-

2014.

STUDY PERIOD AND DATA COLLECTION

For the purpose of study, secondary data has been used.

It is a time series data covering the time period from

1991 to 2014. The required data has been collected from

various sources i.e. World Investment Reports,

publications from Federal State Statistics Service

(Rosstat), Russia, United Nations and from websites of

World Bank, IMF, WTO, RBI, UNCTAD, etc. Data

related to variables related to study like total trade i.e.

export and import (TRADEGDP), research and

development expenditure (R&D GDP), financial position

i.e. external debts to exports (FIN. Position), exchange

rate (EXR), foreign exchange reserves (RESERVES

GDP), foreign direct investment (FDI), foreign direct

investment growth rate (FDIG) and level of economic

growth (GDPG) has been collected for time period from

1991 to 2014.

Hypothesis

The present study has been taken up with the following

hypotheses which are formulated as per the group:

H1: There exists a significant relationship between

FDI and each of its determinants in Russia.

H1a : There is a significant relationship

between FDI and FIN Pos

H1b : There is a significant relationship

between FDI and TRADE GDP

H1c : There is a significant relationship

between FDI and RES GDP

H1d : There is a significant relationship

between FDI and R&D GDP

H1e : There is a significant relationship

between FDI and EXR


GDP G and FDI G.

Model Building

To evaluate the impact of foreign direct investment

inflows on the Russian Economy, two models have been

formed.

The first model formed is:

Model I……. FDI = f [TRADEGDP, RESGDP,

R&DGDP, FIN. Position, EXR.]

This model is formed to find the determinants of foreign

direct investment that has significant association with

foreign direct investment inflow separately on Russia.

The second model formed is:

Model II……. GDP G = f [FDI G]

In this model, level of economic growth (GDP G) is

taken as the dependent variable of the foreign direct

investment growth (FDI G) which is the independent



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variable. In this, it is found if there is any association of

foreign direct investment Growth (FDI G) with Level of

Economic Growth (GDP G) of Russia. Econometric

techniques were applied using simple and multiple

regression methods.

STATISTICAL ANALYSIS

Statistical analysis of Russia is performed and found that

in Model I, Russia is having a significant relationship

between FDI and determinants of FDI.R&D GDP is the

determinant which significantly influences the FDI

inflows. It acts as the important macroeconomic

determinant and pull factor of FDI inflows in Russia. In

Model II, the study reveals that FDI is not a significant

factor in influencing the level of economic growth in

Russia.

MODEL – I

FDI = f [TRADEGDP, RESGDP,

R&DGDP, FIN. Position, EXR.]

Hypothesis


FDI and each of its determinants in Russia.

Table 1: Correlation Matrix of FDI and determinants of FDI

Correlationsa

FDI GDP FIN Pos TRADE

GDP

RES GDP R&D GDP EXR

FDI Pearson

Correlation

1

Sig.

(2-tailed)

N 24

FIN Pos Pearson

Correlation

-.733** -.833** 1

Sig.

(2-tailed)

.000 .000

N 24 24 24

TRADE

GDP

Pearson

Correlation

-.252 -.261 .287 1

Sig.

(2-tailed)

.236 .217 .174

N 24 24 24 24

RES GDP Pearson

Correlation

.234 .261 -.319 -.597** 1

Sig.

(2-tailed)

.271 .218 .128 .002

N 24 24 24 24 24

R&D GDP Pearson

Correlation

.809** .730** -.782** -.247 .463* 1

Sig.

(2-tailed)

.000 .000 .000 .245 .023

N 24 24 24 24 24 24

EXR Pearson

Correlation

.533** .539** -.745** -.115 .576** .778** 1

Sig.

(2-tailed)

.007 .007 .000 .591 .003 .000

N 24 24 24 24 24 24 24

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

a. Stat =Russia

A total of five sub hypotheses are tested with the help of regression analysis and explained statistically.

Table 2: Model Summary: FDI and determinants of FDI

Model Summarya

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson

1 .858b .736 .663 14268.83828164 1.868

a. State = Russia

b. Predictors: (Constant), EXR, RES GDP, TRADE GDP, FIN Pos, R&D GDP



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In the above table (Table 2), the R value represents the

association that the dependent variable (FDI) has with all

independent variables or predictors. The R2

value (.736)

depicts the amount of variance explained by all the

independent variables (determinants) accounting in for

Foreign Direct Investment (FDI). In case where the

number of independent variables is more than 1, the

adjusted R square values are considered which come out

to be .663 in this case. The value of adjusted R square

depicts that determinants of FDI influence 66.3% of FDI.

Table 3: ANNOVA Table - FDI and determinants of FDI.

ANOVAa,b

Model Sum of Squares df Mean Square F Sig.

1 Regression 10216770589.471 5 2043354117.894 10.036 .000c

Residual 3664795426.337 18 203599745.908

Total 13881566015.808 23

a. State = Russia

b. Dependent Variable: FDI

c. Predictors: (Constant), EXR, RES GDP, TRADE GDP, FIN Pos, R&D GDP

The above table (Table 3) talks about the significance of

the model. The Significance value (less than .05)

confirms that the model is significant at 95% degree of

freedom. In other words, it depicts that various

determinants of FDI influence FDI. Further, in the

analysis (B) values are calculated to check which

determinant of FDI significantly influences the FDI.

Table 4: Coefficients Summary: FDI and determinants of FDI.

Coefficientsa,b

Model Unstandardized Coefficients Standardized

Coefficients

t Sig. Collinearity Statistics

B Std. Error Beta Tol VIF

1 (Constant) 42695.300 43060.890 .992 .335

FIN Pos. -11839.708 9013.302 -.330 -1.314 .205 .232 4.310

TRADE GDP -104.878 340.627 -.061 -.308 .762 .370 2.701

RES GDP -18149.614 35405.074 -.121 -.513 .614 .263 3.795

R&D GDP 1687.030 462.046 .812 3.651 .002 .297 3.369

EXR -531.304 552.354 -.282 -.962 .349 .171 5.865

a. State = Russia

b. Dependent Variable: FDI

The above table (Table 4) shows that R&D GDP is the

only determinant (p value < .05) which significantly

influences the Foreign Direct Investment in Russia. In

other words we can say that there is only one determinant

of FDI named that R&D GDP influence the FDI in

Russia.

A regression equation thus has been drawn after

eliminating the insignificant variables from the

regression and thus the regression equation can be

written as:

Y = B1X1 +C

FDI = 1687.030 (R&D GDP) + 42695.300



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Table 5: Summary of sub hypotheses formulated

Hypotheses Formulated Status of Acceptance

H1a : There is a significant relationship between FDI and FIN Pos Not Accepted

H1b : There is a significant relationship between FDI and TRADE GDP Not Accepted

H1c : There is a significant relationship between FDI and RES GDP Not Accepted

H1d : There is a significant relationship between FDI and R&D GDP Accepted

H1e : There is a significant relationship between FDI and EXR Not Accepted

MODEL – II

GDP G = f [FDI G]

Hypothesis

H2: There exists a significant relationship between GDP G and FDI G.

Table 6: Correlation Matrix of GDP G and FDI G

Correlationsa

GDP G FDI G

GDP G Pearson Correlation 1

Sig. (2-tailed)

N 24

FDI G Pearson Correlation .262 1

Sig. (2-tailed) .217

N 24 24


*. Correlation is significant at the 0.05 level (2-tailed).

a. Stat = Russia

Table 7: Model Summary: GDP G and FDI G

Model Summarya

Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson

1 .262b .068 .026 6.09996112 1.848

a. State = Russia

b. Predictors: (Constant), FDI G

In the above table (Table 7), the R value represents the

association that the dependent variable (GDP) has with

independent variable or predictor. The R2

value (.068)

depicts the amount of variance explained by the

independent variables (FDI G) accounting in for GDP

growth.

Table 8: ANNOVA Table – GDP G and FDI G.

ANOVAa,b

Model Sum of Squares df Mean Square F Sig.

1 Regression 60.140 1 60.140 1.616 .217c

Residual 818.610 22 37.210

Total 878.750 23

a. State = Russia

b. Dependent Variable: GDP G

c. Predictors: (Constant), FDI G



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The above table (Table 8) shows the significance of the

model. The significance value (more than .05) confirms

that the model is not significant at 95% degree of

freedom. In other words, it depicts that FDI Growth does

not scientifically influences GDP Growth. Further, in the

analysis (B) values are calculated to check the level of

insignificance.

Table 9: Coefficients Summary: GDP G and FDI G.

Coefficientsa,b

Model Unstandardized Coefficients Standardized

Coefficients

T Sig. Collinearity Statistics

B Std. Error Beta Tol VIF

1 (Constant) .695 1.410 .493 .627

FDI G .025 .020 .262 1.271 .217 1.000 1.000

a. State = Russia

b. Dependent Variable: GDP G

The above table (Table 9) shows that FDI Growth is the

factor (p value > .05) which does not significantly

influence the GDP Growth in Russia. In other words we

can say that FDI Growth does not significantly influence

the GDP Growth in Russia.

Table 10: Summary of sub hypotheses formulated

Hypothesis Formulated Status of Acceptance

H2 : There is a significant relationship between GDP G and FDI G Not Accepted

CONCLUSION

It has been found that R&D GDP is the determinant

which significantly influences the FDI inflows in Russia.

It acts as the important determinants and pull factor of

FDI inflows in Russia. It is also revealed in the study that

FDI does not play a significant role in the economic

growth in Russia.

REFERENCES

1. Assuncao, S., Forte, R., & Teixeira, A. A.

(2011). Location determinants of FDI: a literature review,

Universidade do Porto, Faculdade de Economia do Porto,

(No. 433) FEP Working Paper.

2. Badar, A.I. (2006), “FDI: A tool For Economic

Development” Foreign Trade Review, Vol. 41, No. 2, pp.

62-81.

3. Banga, R. (2003). Impact of government policies and

investment agreements on FDI inflows. Indian council for

research on international economic relations, (No. 116) 1-

43.

4. Blonigen, B. A. (2005). A review of the empirical literature

on FDI determinants. Atlantic Economic Journal, 33(4),

383-403.

5. Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic

growth? Journal of international Economics, 45(1), 115-

135.

6. Carkovic, M. V., & Levine, R. (2005).Does foreign direct

investment accelerate economic growth?

MoranT.,GrahamE. andBlomströmM. (eds), Does Foreign

Direct Investment Promote Development? Institute for

International Economics and Center for Global

Development, Washington, DC, 195–220.

7. Carp, L. (2013).Anaysis of the Relationship between FDI

and Economic Growth – Literature Review Study. The USV

Annals of Economics and Public Administration, 12(1 (15)),

154-160.

8. De Vita, G., & Kyaw, K. S. (2008). Determinants of FDI

and portfolio flows to developing countries: A panel

cointegration analysis. European Journal of Economics,

Finance and Administrative Sciences, 13(13), 161-168.

9. Humphrey, D. (1960), “Direct Foreign Investment and

Economic Growth”, The Economic Weekly, Vol. 12, No.

23-25, pp. 925-930.

10. Kaur, M., Yadav, S. S., &Gautam, V. (2013).Financial

system development and foreign direct investment: A panel

data study for BRIC countries. Global Business

Review, 14(4), 729-742.

11. Laskar, S. (2015). Determinants of Trade and FDI flows in

the BRICS countries–Evidences from Gravity Model

Analysis (Doctoral dissertation).

12. Mencinger, J. (2003). Does foreign direct investment

always enhance economic growth?. Kyklos, 56(4), 491-508.

13. Namita, R., Anuj, J., Ajay, R., & Rahul, G.

(2012).Relationship of FDI and growth in India: A

diagnostic study. Asian Journal of Management

Research, 2(2), 797-813.



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TO STUDY THE ROLE OF SPIRITUAL INTELLIGENCE AT WORK PLACE

A REVIEW

Dr. B.B. Singla*, Damanpreet Kaur

**

*Assistant Professor School of Management Studies, Punjabi University Patiala, Punjab, India

**Ph .D Research Scholar, School of Management Studies, Punjabi University Patiala, Punjab, India

ABSTRACT

In the long term, spirituality is considered as one of the key success factors of the organization.

Organization requires its employees to be more committed as well as to have a better cohesive

working interrelationship. They are looking for the ways to succeed by using all its potential to

improve job satisfaction, work performance and internal motivation at work place through various

domains of spiritual intelligence. So, SI is set of abilities that individuals used to apply, manifest

and embody spiritual resources qualities in a way to improve their daily functioning and wellbeing.

So the purpose of this paper is “to study the role of spiritual intelligence at work place”. So having

the SI in the workplace, the environment will be more favourable and a favourable working

environment relates to a higher level of productivity.

Key words: Spiritual Intelligence, Job Satisfaction, Work Performance.

INTRODUCTION

In present century when the world economy has been

globalized , organization have to face more complexities,

competition, lifestyle changes, structural changes and

increase of stress day by day in the work place as well as

in social life. These factors also affect the economy,

society, co-operative sector and environment in different

ways. The changes in the work place have witnessed in

the terms of people work and with whom they work. The

pattern of doing work also changes very rapidly. The

workforce is now more diverse not only in the terms of

nationality but also as of age. As with diversity

organizations have to handle different type of issues like

collaboration, co-operation and team work which are

increasing at fast pace. So, giving response to these

issues the organization has to change the condition of

work and employment significantly. The demand of

skilled and multi skilled workforce increases due to

increase in the growth of IT and automation. Therefore,

every organization requires the work force has to be more

committed as well as better cohesive working

interrelationship.

In this era the accelerating pace of company has made

organization more concerned about their productivity and

efficiency. So, every organization is looking for

differentiating itself from other and sustains the

advantage they have. They have started realizing that

considering the emotions of the workforce does not

suffice and only a stronger orientation toward meaningful

existence and purpose of the organization and its people

can overcome today’s complex problems. So competition

in the every organization increased day by day that could

be related to product and services, cost and price,

technological adaptation, quick response and quick

production by companies etc. Because of more

competition in the work environment the employees at

workplace experience a lot of stress due to redesigning of

jobs, deadlines, excessive workloads, job insecurities,

longer working hours and reallocation of roles and

increased responsibilities. So, in other words we can say

that race of excellence has also pushed the work force

into such a difficult situation that people are thinking

nothing but want to competing of each other at any cost.

The result of this is that people are moving from the

cultural roots to managerial skills. Autocratic styles of

management have come back in the work performance.

People are moving away from their emotions or even

they have no care for other emotions and emotional

intelligence and spirituality at work place is also getting

very hard to find.

DEFINING SPIRITUAL INTELLIGENCE (S.I.)

A brief account of definitions proposed by different

authors on spiritual intelligence is given below:

McGuire, M.B (1993) the spiritual intelligence has the

ability of action along with conscious giving dynamics

and movement to the life. Sisk and Torrance (2001)

Spiritual Intelligence can be defined as a deep self-

awareness in which one becomes more and more aware



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of the dimensions of self, not simply as a body, but as the

mind, body and spirit. Gain, M. and Purohit, P. (2006)

consider spiritual intelligence as experienced ability that

gives people the possibility of achieving knowledge and

understanding and provides the basis to achieve

perfection and advancement in life. Spiritual intelligence

is called as multiple ways of understanding and

integration of the interior life (mental and spiritual) with

outer life in the world. Kumar and Mehta (2011)

defined spiritual intelligence as "the capacity of an

individual to possess a socially relevant purpose in life

by understanding 'self' and having a high a high degree of

conscience, compassion and commitment to human

values.

REVIEW OF EXISTING KNOWLEDGE ABOUT

SPIRITUAL INTELLIGENCE

Sudarsih, Puspitasri Nur. E.F, et alt (2018) the main

aim of this study is to investigate the influence of EI and

SI on the employee of performance with motivation as

mediating. The respondents of this study were employees

of Mandarin Sharja and Sinarmas Sharia banks in Jember

and were 103 in no. and the sample was selected through

census sampling technique. Data for this study was

collected through questionnaires interviews. Descriptive

research is used in this study and data was analyzed

through SPSS. The results of this study showed that SI,

EI and motivation have a significant and positive impact

on the employee performance and EI and SI also have the

positive impact on the employee’s motivation.

Jaffar H. A. et alt (2018) conducted a study to

investigate the association between the SI and work

engagement. The study was conducted in Malaysia. The

respondents of this study were Royal Malaysian police

officers and were 372 in numbers. Data collected for this

study was through questionnaires and were analyzed

using PLS –SEM. The results of this study indicate the

positive relationship between three constructs of SI that

are TA,PMP and CET but the non significant relationship

with CET with work engagement. The findings of the

study also showed that SI is the essential factor for the

police officer in increasing their work engagement and

subsequently the increase of loyalty of police officer of

the Malaysia.

Mohsenimaram .M, Naji .S et alt (2018) the main aim

of this study is to explore the relationship of SI and

quality of work life in nurses in the oncology department

of Ahwaz hospitals. The respondents of this study were

nurses were oncology department. Descriptive

correlation research is used for this study sampling was

done through census method. Data collected for this

study this study was through questionnaire method and

were analyzed through mean, standard deviation and t-

test and Pearson and spearman correlation coefficients

were used. The findings of the study showed that there is

a direct relationship between SI and the quality of life

and all of its dimensions.

Haryono .S, Rosady .F et alt (2018) the main aim of

this study is to investigate the effect of EI and SI on job

performance with the mediating role of organization

commitment on the relationship between EI and SI on

performance. The study was conducted in Indonesia. The

respondents of this study were temporary nurses at Abdul

Riva Regional General hospital and were129 in numbers.

Data collected through questionnaires for this study and

was analyzed through SEM (Structural equation

modelling) techniques. The results of this study showed

that EI and SI have positive and significant effect

towards organization commitment. Subsequently

organization commitment has significant and positive

effect on temporary nurses performance.

Abdolshah .M, Khatibi Mohammad .A.S et alt (2018) the main aim of this study is to investigate the factors

that influencing job satisfaction of banking employees.

The study was conducted in Qazvin and Alborz. The

respondents of this study were senior executives of

Asgariyeh and Mehriran Banks. Cross sectional research

is used in this study. Questionnaire is used for data

collection and was analyzed through SPSS. The findings

of the study showed that some variables are respectively

influencing the job satisfaction.

Mohammad Hassan .A .N, et alt (2018) conducted a

study to investigate the job satisfaction among bank

employees. The study was conducted in Malaysia. The

respondents of this study were managerial and non

managerial public bank employees and were 353 in

number. Sample was selected for this study was through

multistage sampling. Data collection of this study was

through questionnaires and was analyzed through t-test

and SPSS. The results of this study showed that intrinsic

and extrinsic factors contribute significantly in improving

job satisfaction in the workplace. So, combining both the

factors as a determinant will help us to increase the

quality of job satisfaction.

Sogolitappeh .N .F, Hedayat . A et alt (2018) the main

goal of this study is to explore the relationship between

SI and EI with resilience. The study was conducted in

Ghorveh city and the respondents for this study were

undergraduate students of Payame Noor University

during 2016-17 academic years. The respondents were

100 in number and were selected through random

sampling. Questionnaires are used for data collection in

this study and were analyzed through descriptive and

inferential statistics. The findings of this study showed

that there is a positive relationship between EI and SI and

resilience has also a significant positive correlation.



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Kumari. J, Kumar .S (2018) the main aim of this study

is to examine and review the effect of SI on the persons

quality of life and how it is beneficial for enhancing the

quality of person’s life in organization. The findings of

this study showed that there is a positive significant

correlation between quality of person’s life and SI.

Jamalnia. S, Javanmadifard .S et alt (2018) conducted

a study to explore the relationship between EI and SI in

patients. The study was conducted in Kermanshah

diabetes research centre. The respondents of this study

were 2 type diabetic patients and were 100 in number.

The samples collected for this study were through

convenient sampling method. Descriptive co relational

research is used in this study. Data collected for this

study were through questionnaires and were analyzed by

SPSS. The results conclude that there is a positive

significant difference between SI and EI and both

compliment to each other in order to increase diabetes.

Dr.Ujjal Mukherjee (2018) the main aim of this study is

to explore the influence of workplace spirituality and

demographic variables on job satisfaction. The study was

conducted India. The respondents of this study were

employees of 3 IT companies and were 255 in number.

Judgemental sampling was used for this research.

Questionnaires were used for data collection and were

analyzed. The findings of this study showed that

workplace spirituality positively related to job

satisfaction which means to enhance in the level of

workplace spirituality can also increase the levels of job

satisfaction.

Dargahi H, Abdochalli K.N.Z, et alt (2017) conducted

a study to investigate the relationship between spiritual

leadership & organization commitment. The study was

conducted in Tehran University and the population of

this study were staffs in the headquarter sections of

medical sciences (TUMS). The sample consisted of this

research was 150 staffs. The research was analytical,

cross sectional and descriptive in nature. Data was

collected through two questionnaires and were analyzed

by spss version 20. Mean t test, Annova mean and

standard deviation for analytical statistics. The results of

this study showed that there was significant relationship

with organization commitment. The author also

concludes that spiritual leadership brings organization

commitment in order to satisfy needs expectations and

show their potential abilities by attempting to achieve

organizational goals.

Dr. Monika R. Seth (2017) conducted a study to

investigate S.I. in students pursuing professional and

non- professional courses. The study was conducted in

Nagpur city. The respondents of this study were 500

professional and non-professional students with the age

range 18-23yrs. In both groups 25 male and 125 female

students and both samples from group were selected

through random techniques. Data was collected through

questionnaires and were analyzed by mean, standard

deviation, t-test and correlation. The results of this study

showed that no significance difference between

professional and non professional group over the level of

spiritual intelligence.

Arsang-Jang .S, Pourmarzi D., et alt (2017) study to

explore the relationship between S.I. and ethical decision

making. The research was conducted in Iran. The

population of this research were nurses of Iran hospitals.

The participants were 376 in number. Proportional

stratified sampling was used for this research .Data was

collected was through structured questionnaires and were

analyzed through descriptive statistics and Pearson

correlation. The results of this study showed that S.I.

plays a positive role in the ethical decision making of

nurses, because nurses face ethical dilemmas that arise

from different different situations involving conflicts and

belief in their routine life. The findings of this study also

showed that overall ethical decision making of nurses

also seems more challenging aspects of their duties.

V Raaj .G, Gunaseelan R.(2017) the main aim of this

study is to investigate the destructive behaviour and its

impact on workplace spirituality. The study was

conducted in Coimbatore, Tamil Naidu. The participants

of this study were 217 respondents who were working in

BPO companies in Coimbatore. The sample used for this

study for choosing participants was through snowball

sampling. Data collected for this study were through

questionnaires and were analysed. The results of this

study show that there is a significant positive and

negative relationship between the variables of destructive

leadership on workplace spirituality.

Renu Sodhi (2016) the main aim of this study is to find

the association between spirituality and emotional

intelligence on the basis of earlier studies that was related

with this topic .The nature for this study was exploratory

and was based on purely secondary data which have been

collected from various books, journals and websites etc

and the sample size was 40 articles from the period 1998

to 2012 .After reviewing literature the study concludes

that emotional intelligence and spirituality both are

interlinked to each other and both have positive impact

on physical and psychological wellbeing and also plays a

better role in the field of organization and education.

Mansouri .M, Khorshidzade .M, Asgari Ali (2016)

conducted a research to examine the relationship between

spiritual intelligence components with the student’s

adjustment components. The participants of this study

were students of Birjand university. The participants

were 210 of them (male & female) enrolled in the year

2011-2012 and were selected randomly for this research

for collecting the data S.I. questionnaire and student

adjustment questionnaires were used and were analyzed.



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The results of this study showed that there is a positive

significant relationship between student adjustment

components and spiritual intelligence components. The

author also concludes that positive and significant

relationship also exists between social adjustment and

spiritual life.

Malik Shaukat .M, Tariq .S (2016) the main aim of this

study is to explore the impact of S.I on organization

performance. The study was conducted in 38 banks

including govt, private and Islamic banks. Respondents

of this study were employees of banks which were

working for last 5 years in these banks. The sample size

for respondents was 300 in number. Primary and

secondary data were used in this research. Data was

analyzed by using spss (16) versions. The results of this

study indicate that there is a positive significant

relationship between S.I and organizational performance.

This research will also motivate the managers to increase

the S.I. of employees to improve the efficiency and

effectiveness.

Korazija .M, Zizek.S.S et alt (2016) conducted a study

to explore the relationship between S.I. and work

satisfaction among leaders and employees. The study was

conducted in Salovenia. The participants of this study

were 100 leaders and 100 employees of largest metal

manufacturing companies in salovenia. For this study

sample were selected through random sampling

technique and were collected through questionnaires and

were analyzed through mean, standard deviations and t-

test. The results of this study showed that there was no

significant relationship between S.I. and work

satisfaction for leaders, but a positive significant

relationship was found between S.I. and workplace

satisfaction for employees.

Tabausa and Jalaei (2015) conducted a study to

investigate the relationship between burnout and spiritual

intelligence and mental stress. The study was conducted

in Golistan province and the participants of this study

were staffs of rural cooperatives organization.

Descriptive correlational survey and applied research was

used for this study showed that positive correlational

between S.I. and mental health and there is a significant

and negative correlation between depression and S.I. and

there is a significant job.

Hossein M. K. (2015) the main aim of this study is to

determine the spiritual intelligence status with its clinical

competence. The research was conducted in Iran and the

participants of this study were 250 nurses in Masahhad

educational hospitals. Multistage sampling was used for

the participant’s selection. Descriptive correlational study

was carried out for this study. Data was collected through

demographic , spiritual intelligence and clinical

competence questionnaires and were analyzed. The

results of this study showed a positive significant

correlation was between spiritual intelligence and clinical

competency. In this research it is also observed that

spiritual intelligence is considered as one of the

important factor in nurses efficacy and success.

Kalantarkousheh M.S, Sharghi .N, et alt (2014) conducted a study to investigate the relationship between

S.I. and organization commitment in employees of

Tehran University. The study was conducted in Iran. The

participants of this study were 200 staff members (111

males and 89 females) of Tehran university and were

selected randomly. Descriptive research is used for this

study. The data was collected through structured

questionnaires. Correlation and regression is used for

analyzed the data. The results of this study showed that

amount of S.I. and organization commitment vary

between males and females. In this study the male scored

more in both the variables as compared to females. A

meaningful relationship has been shown between the

spiritual intelligence and organization commitment of

organization employees. The findings of this study also

showed that positive effects of spiritual intelligence in

the promotion of organization’s effectiveness and the

individual growth of employees also considered in this

study.

Akbar Ali .S.R, Abas E . et alt(2014) conducted a study

to examined the relationship between S.I. and

demographic variables and dimensions of burnout and

350 personnel of police staff in sistan-o-Baluchestan. The

samples of this study were collected through convenience

sampling method. Data collected for this study was

through burnout and S.I. questionnaires and were

analyzed with spss17 software, descriptive and inferential

statistics. So the results of this study showed that having

high level of S.I. could also improve job burnout so that

fact suggest to managers to have an eye concern about

education and enhancing S.I.in staff. The findings also

showed that S.I. only had significant correlation with

depersonalization dimension and two emotional

exhaustion and no significant correlation found between

experience, education, income satisfaction and spiritual

intelligence.

Hassan nodehi , mamid Nehardani (2013) the main

aim of this study is to investigate the relationship

between spiritual intelligence and job satisfaction . The

study was conducted in Mashad city . The population

consisted for this study was male and female of sec

school teachers from Mashaad city. 215 samples were

selected from population by using multistage classified

sampling. The methods of this study were descriptive

correlation. Data for this study were collected through

structured questionnaires. The results of this study

indicates that there is a positive relationship between

spiritual intelligence and job satisfaction of high school

teachers and the dimensions of job satisfaction that is



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work itself is also more related. The findings also showed

that gender has significant effect on spiritual intelligence

but no significant effect on job satisfaction schooling and

work experience also has no significant effects on both.

Ajala. ME (2013) conducted a study to investigate the

impact of workplace spirituality on employees well being

at the industrial sector. This study was conducted in

Nigeria. The participants of this study were 275 in

number and these were drawn from three firms

representing three industrial sectors. Data collected for

this study was through questionnaires. Descriptive

research and ex post facto was used for this study. The

findings for this study showed that workplace spirituality

has positive significant impact on the wellbeing of

employees. The author concludes that with employees

wellbeing guaranteed, the workplace spirituality

enhances employee’s morale, productivity and

commitment due to reduction in stress.

Sapta .A, Hermawan A. et alt (2013) examines the

effect of ESQ training to organization commitment and

job satisfaction. Its purpose is also to analyze the effect

of S.I. and emotional intelligence on organizational

commitment and job satisfaction. For this study he uses

the research method of survey with 244 people randomly

and also in depth interview of the management of the

company. In this study the structural equation model and

descriptive analysis is used as analysis tool. The results

of this study indicate that there is a direct effect of S.I.

and E.I. on organizational commitment and job

satisfaction.

CONCLUSION

The most important task of every organization is to get

things done through people and also to achieve it’s and

team’s goal, spiritual intelligence is the important factor.

If the manager of the organization do not maintain or

balance their intelligence quotient skills with spiritual

intelligence like understanding and patience, then the

employees might feel insecure, low confidence,

unappreciated and under estimated. Even at that time

they also seems more dissatisfied, criticized and

disrespected. These negative feelings of employees

results in low productivity, less efficiency, more

absenteeism , more turnover, low morale, lack of

organization commitment and participation in

organization. So as an employee it is very rare to retain

the desired potential in your team, and success of

managers is directly proportional to retaining the

potential employees in manager’s team. Therefore

enhancing spiritual intelligence assist the managers in

motivating their own self confidence and morale which

would help the overall team growth with positive outlook

towards the achievement of organization goals.

The review of related literature reveals that a number of

studies have been carried out on various aspects of

spiritual intelligence in healthcare sector and teaching

sector but a few comprehensive studies on spiritual

intelligence in banking sector could be found which

provide detailed information regarding the spiritual

intelligence of employees in banking sector .The present

paper is a little endeavour to study the role of spiritual

intelligence at workplace. So, skills like Spiritual

intelligence, Emotional Intelligence is of need in every

type of organization specially in banking sector. With

skill competition banks work for longer working hours,

giving better services to their customers which is a

challenging task now a day’s also enhance their job

satisfaction, morale and work performance.

REFERENCES

1. Abdul Kadir Othman, Mohd Khalid Abas, Mysara Syafikah

Ishak (2017) the moderating role of spiritual intelligence on

the relationship between job stress and job performance of

employees in banking sector. Journal of Islamic

management studies, vol.no.1 issue no.1, 2017, pp.89-103.

2. Adjie sapta, Ajie Harmawan, Musa Hubeis, M. Tokro

Affandi (2013) Training of Emotional intelligence and

spiritual intelligence to organizational commitment and job

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Vol ,3 (special, 2), 85-89, 2015



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INTERDEPENDENCE OF PERFORMANCE MANAGEMENT SYSTEM AND

EMPLOYEE ENGAGEMENT

Ramneek Kaur*, Deepika Singla

**

*Research Scholar, School of Management Studies, Punjabi University, Patiala, Punjab, India

**Assistant Professor, PG Deptt. of Commerce, Multani Mal Modi College, Patiala, Punjab, India

ABSTRACT

Employee Engagement is a relatively new construct in academic literature and has been gaining immense

popularity in business practice. The proponents of employee engagement display a strong positive relationship

between employee engagement and organisational success, both at the business and employee levels. High

organisational performance is achieved only when employees at all levels are fully engaged. The purpose of

this research paper is to comprehensively examine those performance management characteristics that

significantly predict employee engagement, thereby promoting organizational success. A comprehensive study

of related literature revealed those characteristics of performance management systems that significantly

impact employee engagement. It was found that participative decision making and recognition that contribute

to empowerment have the greatest positive influence on employee engagement. This will help organisations to

design the performance management systems in a manner that promote employee engagement.

Keywords: Employee Engagement, Performance Management System and Empowerment

INTRODUCTION

The challenge today is not just retaining talented people,

but fully engaging them, capturing their minds and hearts

at each stage of their work lives. Employee engagement

has emerged as a critical driver of business success in

today’s competitive marketplace. Further, employee

engagement can be a deciding factor in organizational

success. Not only does engagement have the potential to

significantly affect employee retention, productivity and

loyalty, it is also a key link to customer satisfaction,

company reputation and overall stakeholder value. Thus,

to gain a competitive edge, organizations are turning to

human resource to set the agenda for employee

engagement and commitment. Furthermore, the

organisational performance is also determined by its

performance management systems. Despite the

importance of these systems many organisations have not

been able to gain maximum benefits from its

implementation. This is mainly due to lack of

information about which characteristics of performance

management systems are most crucial and effective in

producing results. (Janko Kotze, Sanet Van der

Westhuizen, 2014) further elaborated that performance

management characteristics that cultivate a work

environment of empowerment and trust and signal that

managers are supportive of employees improve employee

engagement.

One of the first challenges presented by the literature is

the lack of a universal definition of employee

engagement. (Kahn, 1990) defines employee engagement

as “the harnessing of organization members‟ selves to

their work roles in engagement, people employ and

express themselves physically, cognitively, and

emotionally during role performances”. The cognitive

aspect of employee engagement concerns employees

beliefs about the organisation, its leaders and working

conditions. The emotional aspect concerns how

employees feel about each of those three factors and

whether they have positive or negative attitudes toward

the organisation and its leaders. The physical aspect of

employee engagement concerns the physical energies

exerted by individuals to accomplish their roles. Thus,

according to (Janko Kotze, Sanet Van der Westhuizen,

2014), engagement means to be psychologically as well

as physically present when occupying and performing an

organisational role. Most often employee engagement

has been defined as emotional and intellectual

commitment to the organisation or the amount of

discretionary effort exhibited by employees in their job

(Frank, Finnegan, & Taylor, 2004). Although it is

acknowledged and accepted that employee engagement is

a multi-faceted construct, as previously suggested by

(Kahn, 1990), (Truss, C., Gratton, L., Hope Hailey, V.,

McGovern, P. and Stiles, 1997) define employee

engagement simply as passion for work, a psychological

state which is seen to encompass the three dimensions of

engagement discussed by (Kahn, 1990), and captures the

common theme running through all these definitions.

Thus, after a thorough study and understanding of all the

above definitions it can therefore, be concluded that

employee engagement is the employee’s dedication and



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loyalty towards the organization. It is the time and effort

an employee is ready to expend and find ways to add

value to the organisation. An engaged employee is fully

absorbed in his work with energy and vigor using his

talents to the fullest. Employee engagement is presently

considered as an important source for gaining

competitive advantage and has attained a lot of

significance in the last few decades.

PERFORMANCE MANAGEMENT SYSTEM

Performance management systems are crucial to enhance

organizational performance (Buchner, 2007) and

effectiveness (Cardy, 2004; as cited by (Gruman & Saks,

2011). However, despite the touted benefits of utilizing

performance management systems, 70% of

implementations of these systems fail (McCunn, 1998).

In order to put successful performance management

systems in place, organizations must know what

characteristics of these systems are most instrumental in

producing beneficial organizational outcomes.

Performance management is one component of talent

management and has been defined as the measurement

and management of employee and organizational

performance, with the ultimate goal of improving

organizational effectiveness (DeNisi, 2000). As part of

performance management, managers work together with

their employees to set performance expectations, measure

and review performance results, and reward performance

(DeNisi, 2000). Specifically, performance management

consists of the following elements: setting performance

goals at the organizational, departmental, team, and

individual level, conducting performance appraisals,

developing systems to provide rewards, feedback, and

coaching, and measuring the effectiveness of

performance management systems (Roberts, 2003).

Performance management systems can be defined by

these interrelated and independent performance

management elements that influence one another to

increase employee and organizational performance in

order to ultimately enhance organizational effectiveness.

Each of the elements can be present alone and can be

considered performance management. However,

performance management systems consist of several

performance management elements that work together to

achieve the common goal of improving organizational

performance and effectiveness.

CHARACTERISTICS OF PERFORMANCE

MANAGEMENT SYSTEMS

Performance management system characteristics can be

grouped into four categories: the purpose of the system,

performance measures, activities and structural

characteristics

PURPOSE OF THE PERFORMANCE

MANAGEMENT SYSTEM

The purpose of a performance management system

reflects the main objectives and guiding principles an

organization has for the system to help it gain a

competitive advantage (Dewettnick, 2008). Most

commonly, organizations use performance management

systems for three main purposes: to achieve results,

develop employees, or accomplish administrative

purposes. Performance management systems with a

results oriented purpose focus on performance outcomes

and view employees as a means to achieve organizational

goals, such as increasing revenue or company sales

(Truss, C., Gratton, L., Hope Hailey, V., McGovern, P.

and Stiles, 1997). Performance management systems

with a development oriented purpose focus primarily on

employee development under the assumption that

empowering employees through development leads to

better performance and subsequently a competitive

advantage (Truss, C., Gratton, L., Hope Hailey, V.,

McGovern, P. and Stiles, 1997). Performance

management systems that focus mainly on administrative

purposes provide organizations with valuable

information for human resource-related decisions,

including promotions, pay raises, and terminations

(Biron, M., Farndale, E., & Paauwe, 2011).


MEASURES

A critical component of a performance management

system is how performance is evaluated or assessed.

Performance is typically evaluated by use of a

performance measure, which has been defined as “a

variable or metric used to quantify the efficiency or

effectiveness of an action” (Olsen et al 2007). The

relevance of the performance measures to the employee’s

actual job performance is one characteristic of the

performance management system. In addition,

performance can be evaluated by the extent to which

employees demonstrate task performance, display

contextual performance, achieve goals or objectives.

Performance measures can evaluate task or contextual

performance. Task performance refers to how well an

employee performs fundamental technical activities

deemed important to his or her job (Borman, W. C., &

Motowidlo, 1997). Contextual performance, on the other

hand, assesses employees' engagement in extra-role

behaviors that are not directly job-related but improve the

work climate by increasing organizational effectiveness

(Borman, W. C., & Motowidlo, 1997) . Employee

performance can also be evaluated on the achievement of

goals. Performance can be assessed on the extent to

which employees achieve their performance goals or

objectives; these goals or objectives are typically specific

to each employee’s role.



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ACTIVITIES

Within performance management systems, organizations

can use a range of activities designed to improve

employee performance. Some activities include clearly

communicating performance expectations to employees

and informing employees why their performance efforts

are important to organizational effectiveness (Biron, M.,

Farndale, E., & Paauwe, 2011). Performance

management activities also include providing coaching,

feedback, recognition, goal setting, identification of

training needs, construction of development plans, and

career planning. Coaching, feedback, and recognition are

activities that happen within performance management

systems. Coaching consists of formal on-going

interactions between employees and their supervisors

with the goal of facilitating individual learning and

behavior changes, as well as providing constructive and

developmental opportunities to help employees learn

how to face complex situations (Lindbom, 2007). Unlike

coaching, which typically focuses on future job

performance, feedback focuses on providing employees

with information about past job performance in order to

reinforce desirable behavior or indicate areas for

improvement (Hillman, L. W., Schwandt, D. R., & Bartz,

1990). Recognition is a type of positive reinforcement

given in response to desirable behaviors designed to

shape and improve performance. The common forms of

recognition include special mention in a meeting, a note

in a company newsletter, or various gifts (III Haines &

St.Onge, 2012).

Performance management systems can include the

activity of setting performance goals for employees for

the position they currently hold (Roberts, 2003). In

addition, performance management systems prove to be a

useful tool to identify areas in which employees need

training to help them achieve their performance goals

(Armstrong & Baron, 2000). Performance management

systems can also incorporate career planning for

employees to help them identify and work toward career

paths (Fey, Bjorkman, & Pavlovskaya, 2000).

STRUCTURE OF PERFORMANCE

MANAGEMENT SYSTEM

The structure of the performance management system

denotes its design and formation. Structural

characteristics of performance management systems

include the number of formal performance reviews, the

number of informal performance reviews, goal

alignment, the presence of a clear link between the

performance management system and the organization’s

rewards system, sources of feedback, and participative

decision making. Some structural characteristics of a

performance management system include the number of

formal and informal performance reviews. Formal

performance reviews refer to planned face-to-face

meetings between employees and their supervisors to

discuss the employee’s job performance or development.

On the other hand, informal performance reviews are

unplanned encounters between a supervisor and his or

her employee to discuss the employee’s job performance

and provide feedback that helps the employee meet

performance expectations set in formal performance

reviews (Dewettnick, K & Dijik, 2013). Goal alignment

and the presence of a clear link between the performance

management system and the organization’s reward

system are two other structural components of

performance management systems. Goal alignment refers

to the extent to which employees’ performance goals are

explicitly aligned with organizational goals and priorities

(Enriquez, V., McBride, J., & Paxton, 2011). The

presence of a clear link between the performance

management system and the rewards system implies that

the system should connect to the organization’s reward

system as a way to differentiate rewards based on the

quality of employee performance (de Waal, A., &

Counet, 2008). The structure of a performance

management system also involves the extent to which it

allows for participative decision making. Participative

decision making refers to the degree to which supervisors

encourage employees to express their ideas and use

employee feedback when making decisions (Arnold,

Beach, & Drasgow, 2018).

REVIEW OF RELATED LITERATURE ON

EMPLOYEE ENGAGEMENT

(Kahn, 1990) in his research article “Psychological

Conditions of Personal Engagement and Disengagement

at Work”, undertook a qualitative study on the

psychological conditions of personal engagement and

disengagement by interviewing summer camp counselors

and staff at an architecture firm about their moments of

engagement and disengagement at work. He defined

disengagement as the decoupling of the self within the

role, involving the individual withdrawing and defending

themselves during role performances. Disengaged

employees displayed incomplete role performances and

were effortless, automatic or robotic. He found that there

were three psychological conditions related with

engagement or disengagement at work: meaningfulness,

safety, and availability. These psychological conditions

are linked to existing theoretical concepts and provide

directions for future research are described.

(Ferguson, 2005) in the research paper on, “Employee

engagement: does it exist, and if so, how does it relate to

performance, other constructs and individual

differences?” reviews the current literature on employee

engagement and considers the various definition and

models of engagement available in the psychological and

business literature. The research aims to clarify the



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construct of employee engagement. Specifically, this

research attempts to develop a scale to measure employee

engagement, establish if employee engagement is uni-

dimensional or multidimensional, determine reliability

and validity of the scale, testing as to whether

engagement shows discriminant validity with respect to

job satisfaction, job involvement, intrinsic motivation,

affective commitment, organisational citizenship

behaviours, establish predictors of employee engagement

and lastly, examine the impact of individual differences

on employee engagement. This research has potential

applications in human resource management for role

definition, support and flexibility.

(Little, Beverly & Little, 2006) in their article on,

“Employee Engagement: Conceptual Issues” explores

the construct of employee engagement. The researchers

have explored questions related to how the construct is

defined and it relation with other existing, well-validated

constructs. The article covers application of the construct

to organisational outcomes. Many organisations now

measure their employees level of engagement and make

an attempt to increase these levels because they believe

that doing so will improve productivity, profitability,

turnover and safety. This article attempted to critically

analyse the positives and negatives of employee

engagement research.

(Vance, 2006) in his article on, “Employee Engagement

and Commitment: A guide to understanding, measuring

and increasing engagement in your organization”

examines the approach adopted by employers and

corporate consultants in defining the term employee

engagement and offers ideas for strengthening employee

engagement. Though different organisations define

engagement differently, some common themes emerge.

These themes include employee’s satisfaction with their

work and pride in their employer, the extent to which

people enjoy and believe in what they do for work and

the perception that their employer values what they bring

to the table. This report provides guidelines for

understanding and measuring employee engagement, and

for designing and implementing effective engagement

initiatives. The report also outlines the way in which

everyday human resource practices such as recruitment,

training, performance management and workforce

surveys can provide powerful levers for enhancing

engagement. The author highlights ten common themes

related to engagement: Pride in employer, satisfaction

with employer, job satisfaction, opportunity to perform

well at challenging work, recognition and positive

feedback for one’s contributions, personal support from

the supervisor, effort more than required, understanding

the link between one’s job and the organisations mission,

prospects for future growth with one’s employer and

intent to stay with one’s employer.

(Christopher, 2007) in his research on, “A new

Measurement Scale for Employee Engagement: Scale

Development, Pilot Test, and Replication”, contradicts

the views of the previous researchers that engagement is

multidimensional and conceptualizes engagement as one-

dimensional. In the first phase of item generation a

preliminary set of scale items were generated using

insights from existing literature and information gained

through semi structured interviews. Individuals

occupying diverse occupations from various

organisations were selected for these sessions. Males (n =

9) and females (n = 9) each represented 50% of the

sample, and the interviewees ranged in age from 26 to 65

years. The findings of the semi structured interviews

indicated that engagement was strongly related to the job

tasks. The consensus was that when the right personal,

task, and contextual elements came together engagement

was the result. Findings indicated that meaningfulness

was strongly correlated with engagement. In conclusion,

the newly developed scale supports the idea that

engagement is a state of aroused, situation specific

motivation that is correlated with both attitudinal and

behavioural outcomes.

(Bhatnagar, 2007) in her paper titled, “Talent

Management strategy of Employee Engagement in Indian

ITES employees: Key to retention, investigate talent

management and its relationship to levels of employee

engagement” uses a mixed method research design. In

the first phase a survey was conducted on a sample of

272 BPO/ITES employees, using Gallup Q12 or Gallup

Workplace Audit. Focus group interview discussion was

based on reasons for attrition and the unique problems of

employee engagement. In the second phase, one of the

BPO organizations from the phase I sample was chosen

at random and exit interview data was analysed using

factor analysis and content analysis. In the first phase low

factor loadings indicated low engagement scores at the

beginning of the career and at completion of 16 months

with the organization. High factor loadings at

intermediate stages of employment were indicative of

high engagement levels, but the interview data reflected

that this may mean high loyalty, but only for a limited

time. In the second phase factor loadings indicated three

distinct factors of organizational culture, career planning

along with incentives and organizational support. The

first two were indicative of high attrition. The study

indicated that a good level of engagement may lead to

high retention, but only for a limited time in the ITES

sector. The need for a more rigorous employee

engagement construct is indicated by the study.

(Markos, Sandhya, 2010) in their paper titled,

“Employee Engagement: The key to improving

performance”, explicates that employee engagement is a

vast construct that touches almost all parts of human

resource management facets. If every part of human



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resources is not addressed in appropriate manner,

employees fail to fully engage themselves in their job in

the response to such kind of mismanagement. The

construct employee engagement is built on the

foundation of earlier concepts like job satisfaction,

employee commitment and organizational citizenship

behaviour. Though it is related to and encompasses these

concepts, employee engagement is broader in scope.

Employee engagement is stronger predictor of positive

organizational performance clearly showing the two-way

relationship between employer and employee compared

to the three earlier constructs: job satisfaction, employee

commitment and organizational citizenship behaviour.

Engaged employees are emotionally attached to their

organization and highly involved in their job with a great

enthusiasm for the success of their employer, going extra

mile beyond the employment contractual agreement.

(Doherty, 2010) in his article titled, “Making employee

engagement an end-to-end practice” aims to assist

businesses of all sizes in employee engagement,

attraction and retention, by demonstrating how

fundamental human resources processes can be

effectively combined with new technologies to make

employee engagement an end-to-end practice. Employers

know that happy and fulfilled employees are more

productive, but attracting and retaining the best talent for

a business involves engaging employees in the long term.

This paper discussed a range of tactics to help ensure

engagement, such as regular appraisals, use of social

networking and the efficient recording of employee

performance and interests, to best optimize the talent

management process. This paper demonstrates how best

to engage employees from before a career even begins,

right up until it ends. It offers guidance on using the

latest techniques and technology to keep employees

engaged and motivated. Employee engagement must

therefore be an end-to-end practice. Motivated and

efficient workforces only happen when respect flows in

all directions through a business, with transparent

processes throughout.

(Thiagarajan, B. & Renugadevi, 2011) in their article

on, “Employee Engagement practices in Indian BPO

Industries- An Empirical Investigation” provide an

introduction to the concept of employee engagement and

key research on engagement related factors in BPO

Industries in India. The authors conducted a literature

search on employee engagement and interviews with 126

executives. The results reveal that, career development,

performance appraisal and motivation factors are

connected to employee engagement. The implications are

that leaders should be educated on engagement, career

development opportunities are particularly important and

that performance improvement should champion work

life balance, these practices are useful to increase

engagement.

(Malhotra, 2012) in her research paper titled, “Employee

Engagement: A conceptual analysis” explores the

historical development of employee engagement using

integrative literature review method. The paper throws

light on the early conceptualisations of employee

engagement followed by the contemporary approach. It

further elaborates on the various models developed by

consultants to understand the role of human resource in

enhancing employee engagement at workplace and

application of the concept at business unit level. Drivers

of employee engagement are also highlighted in this

study. To conclude the author presents implications for

HRD scholars and practitioners.

(Thakur, 2014) in her paper “A Research Paper on the

Effect of Employee Engagement on Job Satisfaction in IT

Sector” seeks to determine the Effect of Employee

Engagement on Job Satisfaction in the IT Sector. Primary

as well as secondary data has been used to carry out the

research. Descriptive Research Design has been used

with a sample size of 120 respondents from the IT

Sector. Correlation and Regression analysis techniques

have been sued for the purpose of analyzing data. The

study has been carried out on officers as well as the

clerks of IT sector. The findings suggest that among the

officers work motivation could be improved through

increasing job authority and accountability. At the

clerical level, rewards and sanctions are significantly

associated with job involvement.

LITERATURE RELATED TO PERFORMANCE

MANAGEMENT SYSTEMS

(Mel & Cochran, 1985) in their study on, “Effect of two

Goal-Setting dimensions on Perceived Intra

Organizational Conflict” attempted to assess the effects

of goal setting upon intra organisational conflict. Non-

supervisory employees of a large utility were

administered a questionnaire containing measures of task

goal attributes, perceptions of inter and intradepartmental

conflict, internal work motivation and intrinsic job

satisfaction. Results suggest that task goal attributes do

influence perceptions of intra organisational conflicts.

Higher levels of goal difficulty and goal clarity were

found to be associated with lower levels of both intra and

interdepartmental conflict. A significant interaction effect

for goal difficulty and clarity on interdepartmental

conflict suggests that individuals who have challenging

goals experience lower interdepartmental conflicts when

goals are clear and specific than when goals are

ambiguous. Individuals who have goals that are not

challenging experience higher inter departmental conflict

when goals are ambiguous than when goals are clear and

specific. Results further suggest that increasing levels of

both types of conflict reduced both internal work

motivation and intrinsic job satisfaction.



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(Motowidlo & Van Scotter, 1994) in their research

paper “Evidence That Task Performance Should Be

Distinguished From Contextual Performance” attempts

to tests the merit of the distinction made by W. C.

Borman and S. J. Motowidlo (1993) between task

performance and contextual performance. Supervisors

rated 421 U.S. Air Force mechanics on their task

performance, contextual performance, and overall

performance. Data on length of air force experience,

ability, training performance, and personality was

available for many of these mechanics. Results displayed

that both task performance and contextual performance

contribute independently to overall performance.

Experience is more highly correlated with task

performance than with contextual performance, and

personality variables are more highly correlated with

contextual performance than with task performance. The

results of the study support the distinction between task

performance and contextual performance and confirm

that performance, at least as judged by supervisors, is

multidimensional.

(Renn & Prien, 1995) in their study on, “Employee

responses to performance feedback from the task: A field

study of the moderating effects of Global Self-Esteem”

examined the moderating effects of global self-esteem on

the relationship between performance feedback from the

task and several work attitudes and behaviours. As

predicted, self esteem interacted with the frequency of

performance feedback from the task to account for

significant amounts of additional variance in job

performance, general job satisfaction, absenteeism, and

job search intentions. Specifically, low self esteem had

lower performance, absenteeism, and job search

intentions than high self esteem in relation to frequent

performance feedback from the task. High self esteem

reported greater job satisfaction than low self esteem in

response to frequent task-derived performance feedback.

The discussion centers on the implications the findings

have for future research and for human resource

management.

(Borman, W. C., & Motowidlo, 1997) in their research

article “Task and Contextual Performance: The Meaning

for Personnel Selection Research” describe and compare

task and contextual performance and discusse the impact

of this distinction on personnel selection research. A

taxonomy of contextual performance containing elements

of organizational citizenship behavior and pro social

organizational behavior is offered. Evidence is presented

demonstrating that supervisors equally consider

subordinate task and contextual performance when

making overall judgments of personnel performance.

This, along with data showing that personality

successfully predicts contextual performance, provides

an alternative explanation for recent meta-analytic

findings that personality correlates moderately with

overall performance. Personality may be predicting the

contextual component of overall performance. Results

from studies using the Hogan Personality Inventory

confirm that correlations between personality and

contextual criteria are higher than correlations between

personality and overall performance. The authors argue

that finding such links between predictors and individual

criterion elements significantly advances the science of

personnel selection.

(Frink & Ferris, 1998) in their article titled,

“Accountability, impression management, and goal

setting in the performance evaluation process” reviews

the past research on accountability, impression

management, goal setting, and performance evaluation.

The authors suggest that accountability conditions may

influence whether goals are used for impression

management or performance-directed purposes. Goal

theory and research suggest that goals typically are

performance-directed, resulting in elevated performance

under certain conditions. Alternatively, impression

management theory might imply that goals may not

always be performance-directed, and the goal-

performance relationship may be decoupled in such

cases. Accountability is proposed as influencing this

relationship in addition to main effects on how people

approach tasks. Two studies tested notions of how

accountability influences task approaches and goal uses a

laboratory experiment with university students, and a

field study of telemarketers. Convergence of results

indicates that participants approached tasks and set goals

differently according to accountability conditions.

Furthermore, the goal-performance relationship

differences reflect the use of goals for performance-

directed purposes under low accountability, and for

impression-management purposes under high

accountability (with no goal-performance relationship),

as predicted.

(Eisenberg, 2001) in his research paper titled, “The

effects of reward schemes, individualism-collectivism and

intrinsic motivation on teams creative performance”

throws light on the detrimental effects of extrinsic

rewarding schemes where intrinsic rewarding schemes

are needed. The objective of the research was to study the

effects of rewards on teams and individuals creative

performance. The nature of the study is exploratory.

According to the author rewards do increase motivation

but beyond a certain optimal level it can decrease

performance. Thus, excessive rewarding is detrimental to

performance. If people are pressuring themselves, in

urgency, anxious in doing their work then we can be sure

that extrinsic rewards are involved. In conclusion

intrinsic motivation is important in learning, adaptation

and cognitive performance. There is nothing wrong in

rewards when administered properly. Only when rewards

were highly salient were found to be detrimental and



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intrinsic rewards played an important role in teams and

individuals creative performance. Individual rewards

worked best for where group interdependence was not

involved and there is dedication, voluntary overtime and

innovation seen under intrinsic reward schemes.

(Roberts, 2003) in his research article “Employee

Performance Appraisal System Participation: A

Technique that Works” emphasises that performance

appraisal is one of the most complex and controversial

human resource techniques. Participatory performance

appraisal is an essential and proven attribute of an

effective performance appraisal system. This article

summarizes the conceptual foundation for participation

including its intrinsic motivational value, the expansion

of available information, and the opportunity to interject

employee voice. The moderating role of goal setting and

feedback in enhancing participation effectiveness is

outlined. The article concludes with factors that attenuate

the effectiveness of participation including lack of

training, absence of rater accountability strategies, and

organizational and supervisory resistance to honest

subordinate feedback.

(London, Mone, & Scott, 2004) in their article titled,

“Performance Management and assessment: Methods for

improved rater accuracy and employee goal setting”

examines the gaps between research and practice in the

areas of rater accuracy and goal setting. Prior research

has shown that human resource managers may

incorrectly believe that training raters to recognize errors

will increase rater accuracy and that employee

participation in goal setting is more effective than

assigning goals. Theory-based research suggests ways to

help raters recognize expected performance and enable

employees to self-regulate their pursuit of goals. The

study describes applications of these findings to

performance management programs and suggested

methods for evaluating their effectiveness once

implemented.

(Pittman, 2007) in her research study on, “Antecedents

and Consequences of the Feedback Environment”,

examines possible antecedents and consequences of

feedback environment. The feedback environment

focuses on informal feedback rather than the feedback

associated with formal performance appraisals.

Organisational learning culture, transformational

leadership, and supervisor emotional intelligence were

hypothesized to have a positive impact on the feedback

environment. Regression analysis showed that these

antecedents lead to favorable feedback environment.

Further the feedback environment was hypothesized to

influence employees participation in self development

behaviours by increasing self-determination. The results

of this study contribute to the existing literature by

identifying organisational characteristics that influence

the work environment surrounding feedback.

(Dewettnick, 2008) in his study “Employee performance

management systems in Belgian organisations: purpose,

contextual dependence and effectiveness” proposed that a

performance management systems purpose can be

positioned on a bipolar continuum from a strong

performance orientation to a strong development

orientation. Further, the research article suggested that

performance management system purpose relates to

industry characteristics and also the performance

management system's effectiveness in terms of increasing

performance and fostering employee development and

motivation. The data collected from 319 Belgian

organisations reveal that organisations operating in more

competitive markets tend to have a performance

management system with a stronger performance

oriented purpose, at the expense of a stronger

development-oriented purpose. The findings indicate that

performance management systems with a stronger

development-oriented purpose are more effective in

fostering employee development and motivation. In

contrast, the strength of a performance management

system's with a performance-oriented purpose did not

relate to higher effectiveness in terms of increasing

performance at various levels.

(Perrin, 2009) in his article titled, “Power of recognition

from managers” examines new research on the power of

recognition from managers to accelerate employee

engagement and boost productivity and performance. The

article outlines various studies on how recognition can

boost employee morale. Part one of the research explores

many areas that lead to employee engagement and

presents the detailed analysis of the findings in a tabular

format so as to evaluate the role of recognition in

employee engagement. In this paper, a sample size of

more than 10,000 workers was taken for studying how

recognition of efforts of an employee affects his

productivity and thereby the growth of an organisation.

The findings indicate that effective recognition from

managers encompasses three basic requirements:

inclusiveness, communication, and trust. The study also

reveals that proper recognition and appreciation given to

even less engaged employees can help to boost their

efficiency level.

(Rhodes & Blvd, 2010) in their paper titled, “The

Impact of Rewards Programs on Employee Engagement”

attempts to study the pay practices used by compensation

professional and determine how total rewards programs

and employee engagement are related. The survey with a

sample of 6300 world at work member companies throw

light on the facts that the impact of intangible rewards on

employee engagement is perceived as very high with

work environment or organisation climate rated at 61%



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second only to the nature of the job or quality of work

rated at 69%. 60% of the respondents indicated that they

used variable pay to reward employee engagement. More

than 40% of the respondents believe that base salary

increases, and benefits and perquisites have a high or

very high impact on employee engagement. Moreover,

respondents believe that short-term incentives or bonuses

have an even higher impact on engagement. However,

fewer believe that long-term incentives and financial

recognition have a high impact on engagement. Further,

non-financial total rewards programs receive a relatively

low score at 37%, which is not very encouraging, given

that non-financial recognition programs are often

suggested as ways to motivate and engage employees.

Thus, we can find a relationship between recognition of

employees work and employees productivity in this

paper.

(Chakraborty, Yin, & Zeynep, 2011) in their research

article “Determinants of Performance Management

System in South East Asia” attempts to study the

relationship between determinants influencing the

implementation and effectiveness of performance

management system in an educational institution in

South East Asia. This study specifically examines

organizational factors influencing PMS as well as the

perceived effectiveness of the system. The study also

attempts to examine the relationship between

organizational factors and the perceived effectiveness of

the performance management system. A total of 123

questionnaires were distributed to academic members

across the higher education institution. Factor analysis

was conducted using Principle Component Analysis

(PCA) technique to identify the construct validity of

factors influencing performance management system and

descriptive statistics was used to examine the

effectiveness of performance management system.

Pearson correlation method was used to determine the

relationship between organizational factors and

effectiveness of performance management system. The

results of the study demonstrated that three

organizational factors namely employee involvement,

performance oriented culture and management

commitment influenced performance management

system and its effectiveness at a moderate level.

Furthermore, among these three organisational factors,

performance oriented culture has the strongest

relationship with effectiveness of performance

management system. The results of the study also

suggest that management commitment is still inadequate

and needs to be carefully and strictly taken into account

to increase the effectiveness of performance management

systems.

(Dewettinck & van Dijk, 2013) in their paper “Linking

Belgian Employee Performance Management System

Characteristics with Performance Management System

Effectiveness : Mediating Role of Fairness” proposed a

model in which perceived fairness mediates the

relationship between characteristics of employee

performance management systems and their perceived

effectiveness by employees based on the expectancy

theory, goal setting theory and control theory.

Performance Management System characteristics studied

in this paper are frequency and length of formal reviews,

the frequency of informal reviews and feedback, whether

the formal conversation focused on evaluation or

development and lastly the degree of participation. The

model was tested on a cross-industry sample of 3192

employees in Belgium. The findings of the study indicate

that performance review focus and employee

participation strongly relate to perceptions of appraisal

fairness and performance management system

effectiveness. The frequency of informal performance

reviews is more strongly related to performance

management system effectiveness than the frequency of

formal performance reviews. The findings indicate that

the role and functionality of performance management

systems by showing that the manner in which

performance management systems are shaped and

executed is of fundamental importance for their

effectiveness. Lastly, it is highlighted that the three

motivational theories appear useful for understanding the

consequences of performance management practices on

individual employees.

(Sahin & Yogzat, 2016) in their research article

“Evaluation of Task and Contextual Performance A

Multitrait – Multimethod Approach” aim to investigate

the discriminant and convergent validity of task and

contextual performance, using the scales of Goodman

and Svyantek (1999) with self-ratings and supervisor-

ratings. The total sample included 486 employees and

their supervisors, working in the public hospitals. The

questionnaires were distributed and collected by the

surveyor. Firstly, the authors ran preliminary CFAs to

test the factor structure of task and contextual

performance separately for self-ratings and supervisor

ratings. Then further, they examined the convergent and

discriminant validity of task and contextual performance

by applying the multitrait-multimethod approach. The

results of multitrait-multimethod analysis suggested that

the two performance dimensions (task and contextual

performance) can be differentiated and the measurement

of task and contextual performance is invariant across

self-ratings and supervisor-ratings.

REVIEW OF RELATED LITERATURE ON

PERFORMANCE MANAGEMENT SYSTEM AND

EMPLOYEE ENGAGEMENT

(Gruman & Saks, 2011) in their article on

“Performance Management System and Employee

Engagement” emphasise on the increased importance



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organisations are laying on their performance

management systems to increase employee effectiveness.

They point out that harnessing the performance

management system fully will not only generate higher

employee performance but also promote increased

employee engagement levels. In this article, the authors

present a new model of engagement management for this

purpose. They argue that although performance

evaluation is at the centre of performance management,

the whole process incorporates organizational policies

and design features that interact to influence employee

performance. In essence, this approach to human

resources management is based on the understanding that

patterns of HR activities and factors rather than single

drivers such as performance management contribute to

achieving organisational objectives. Integrating employee

engagement into performance management activity is

proving to be effective in improving organisational

performance. The authors present support to the fact that

performance management and employee engagement are

of corresponding importance within what they term the

engagement management process, which begins with

goal setting and the framing of a psychological contract

between supervisor and employee

(Malhotra, 2014) in her study “Performance

Management System and its relationship with Employee

Engagement in the service industry” aims to identify

ways to effectively implement goal setting, performance

feedback, mentoring and development opportunities for

enhancing employee engagement in various types of

organizations from the service industry. The study is

divided into three phases. Phase one is the study of the

existing practices of Performance Management in

organizations from the service industry. Phase two is the

study to identify the present level of employee

engagement and its relationship with performance

management in selected organisations from the service

industry. In the phase three based on the findings of the

study the researcher identifies training needs and

development opportunities for the employees. For the

purpose of the study both primary and secondary data is

collected. Purposive sampling technique is used and the

researcher has considered completed responses of 200

respondents in each industry. The data is collected using

questionnaires and experience survey. Utrecht Work

Engagement Scale and Performance Management System

Scale (own construct) is used for data collection. The

study examines the relationship between Goal Setting,

Performance Feedback, Mentoring and Development

Opportunities (independent variables) and Vigor,

Dedication and Absorption (dependent variables). The

results of the study indicate a strong correlation between

the independent and dependent variables.

(Arakal & Mampilly, 2015) in their research paper “The

Impact of Performance Management System on

Employee Involvement and Interpersonal Trust: A Survey

among Scientists” examines the phenomenon of

performance management, which holds a significant

place in management literature. The authors attempt to

foresee the impact of performance management system

on employee involvement and interpersonal trust. This

research paper intends to empirically validate the

mediating role of employee involvement in the

relationship between performance management system

and interpersonal trust. Primary data is collected from

150 scientists working in nationalized research and

development organizations in Kerala. It is envisaged that

this research paper will add to the understanding of the

link between performance management system,

employee involvement and interpersonal trust. Partial

Least Squares (PLS) was used to authorize the

relationship among the variables. Findings of the study

are conferred, together with limitations and suggestions

for future research. The results of the empirical study

suggest that there is significant relationship between

performance management system and employee

involvement. The study provides a deeper and richer

understanding in explaining the relationship between

employee involvement and interpersonal trust.

(Everlyne, Mbithi, & Musiega, 2016) in their research

paper “Influence of Performance Management Practices

on Employee Engagement in Public Universities: A Case

of Kibabii University – Kenya” Performance

management practices are considered as one of the most

powerful measures or steps a company can take towards

competitive advantage and high performance. This study

sought to investigate influence of performance

management practices on employee engagement at

Kibabii University. Specifically, the study objectives

were to determine the influence of performance review

on employee engagement at Kibabii University- Kenya.

The research adopted a descriptive research design

because it was used to obtain information concerning the

current status of the phenomena. The target population of

the study composed of 200 academic staff of Kibabii

University. Simple random sampling was used as a

sampling technique. Questionnaires were the main data

collection tool which was self administered and later on

collected for data analysis. Data collected was analysed

by use of descriptive and inferential statistics. The

research revealed that there was a positive correlation

between performance management review and employee

engagement at Kibabii University- Kenya. The study

recommended to the organization to embrace job

engagement by indentifying employees with their jobs.

(Chandra & Saraswathi, 2018) in their journal article

“Impact of Performance Management System on

Employee Performance – A Conceptual Framework for

Organistaions” establishes that Performance

Management System is a key variable which has greater



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impact on Employee Performance and on organizational

performance as well. The aim of this study was to

explore the kind of impact that Performance Management

System will have on Employee performance. This study

reports the theoretical foundations on Performance

Management System and utilized all the three phases of

Performance Management System including developing

and planning performance, managing and reviewing

performance, rewarding performance as independent

variables, so as to develop a research model which can be

replicated and used for further research purposes.

Further, this study provides beneficial insight about

Performance Management System with specific focus on

all the three phases of it and its impact on Employee

performance in-order to identify various weaknesses that

exist generally in the Performance Management System.

CONCLUSIONS

A thorough review of related literature revealed that the

successful implementation of performance management

systems has the potential to increase organizational

performance and effectiveness. It was observed that it is

not the merely conducting performance management

does not contribute to employee engagement, but is the

manner in which it is conducted impacts employee

engagement.

Specifically, organisations should evaluate employees

based on the extent to which they engage in contextual

performance. Contextual performance consists of extra-

role behaviors that help to increase organizational

effectiveness, including tackling a project with

enthusiasm, helping a colleague with their work

assignment, volunteering for extra duties, and

maintaining a positive attitude in the office. To ensure

performance management systems are effective and

increase employee engagement, organisations should also

design their performance management systems to allow

for participative decision making between supervisors

and their subordinates. To ensure employees are

encouraged to voice their ideas about their performance,

managers should receive training and planned

performance reviews and allot times for employees to

voice their thoughts about their performance. Managers

should also receive training on how to listen and

incorporate employees input into the decisions managers

make regarding employees performance, objectives, or

development. While designing their performance

management system organisations should primarily focus

on the results employees achieve, because the review of

literature found that systems with a results oriented

purpose increase employee engagement (Dewettnick,

2008),(Dewettnick, K & Dijik, 2013). Organisations

should heavily focus on performance outcomes and how

employee efforts are helping the organisation meet their

goals.

In addition, few other additional characteristics were

found to significantly predict employee engagement. To

achieve an effective performance management system,

organizations should design their system to evaluate

employee performance on measures that are relevant to

the employee’s job and the extent to which employees

achieve their performance goals or objectives.

Organisations should also implement performance

management system activities that help employees

formulate performance goals for themselves and identify

and work towards their career paths. In addition,

organisations should ensure that performance

management systems are clearly linked with the rewards

system, such that level of performance determined by the

performance management system should dictate the

amount of rewards employees receive (Edward, 2003).

Employees who display high levels of performance

should receive more rewards compared to poor

performers. Lastly, to conclude organizations that are

primarily interested in increasing employee engagement

should design their performance management systems to

emphasize the categories and characteristics that were

found to increase employee engagement.

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A STUDY ON EFFECT OF REWARD SYSTEM ON THE MOTIVATION LEVEL

OF EMPLOYEES

Dalbir Kaur*

*Student, A.S. College, Khanna, Punjab, India

ABSTRACT

This research intends to know the effect of reward system on the motivational level of employees. The

most common problem in organizations today is that they miss the importance of rewards. The

rewards play a key role in the overall success of the organization, rewards helps the organization to

make high returns and a key focus is to make employees motivated by appreciating them and valuing

them with various benefits. For this purpose, researchers has done the research on this topic in the

Lakshmi steel rolling mills, Alour.

Keywords: Rewards, Motivation, Employees, Satisfaction

INTRODUCTION

Reward system is an essential tool that management

should keep in mind to channel the employees’

motivation in desired ways. For management, it is

daunting task to know the employees needs so that they

should retain the employees in the company and motivate

them to perform to high levels. The problem confronting

this research is to appraise the effect of reward system on

the motivational level of employees.

WHY USE OF REWARD SYSTEM?

If the company is distributed the rewards adequately then

it could encourage the employees to become interested in

working at the company and ensures effectiveness of the

organization.

THE TOTAL REWARD SYSTEM

Total rewards system describes the total strategy that

brings together the financial and non-financial rewards.

In this both tangible and intangible rewards are

considered valuable. The aim of the total rewards system

is to increase the impact of rewards on the motivation

level of employees, job engagement and organizational

commitments. The components of the total rewards can

be described in the following figure:

VARIOUS KINDS OF REWARDS

FINANCIAL REWARDS

Salary,Fringe benefits

Promotions, Bonuses or

Share

NON-FINANCIAL REWARDS

learning and development



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REWARD SYSTEM HAS BEEN EXAMINED

DIFFERENTLY BY VARIOUS SCHOLARS

MCSHANE (1992) sees organizational rewards system

as those mechanisms which offer money and other

extrinsic and intrinsic rewards to motivate employees

towards fulfilling organizational obligations.

ARMSTRONG (2009) rewards system adopts a total

reward approach, which emphasizes the importance of

considering all aspects of reward as a coherent whole that

is integrated with other human resource initiatives

designed to achieve the motivation, commitment,

engagement and development of employees.

MCSHANE AND VON GLINOW (2000), seniority-

based rewards reduce turnover because the cost of

quitting increases with the employee’s length of service.

They also regarded financial incentives as “that golden

handcuffs”. In that sense that, to them, it discourages

people from leaving the organization.


A descriptive study is chosen to discover answers

to the questions.

A convenience sampling method is used for the

survey.

Researcher used questionnaire method for the

purpose of data collection.

For the study, 50 respondents were selected at

random in the Lakshmi steel rolling mills.

A well structured questionnaire was personally

administrated to the selected sample to collect

the data.

DATA ANALYSIS

TABLE-1

Showing satisfaction of employees with rewards to remove absenteeism

Satisfaction No. of respondents Percentage

Highly satisfied 41 82

Satisfied 06 12

Neutral 00 00

Dissatisfied 03 06

Highly dissatisfied 00 00

50 100

HYPOTHESIS TESTING

CHI-SQUARE TEST

H0: Let us take the null hypothesis that there is no

significance difference between employees’ satisfaction

with rewards and incidence of absenteeism.

H1: Let us take the alternative hypothesis that there is

significance difference employees’ satisfaction with

rewards and incidence of absenteeism.

OBSERVED FREQUENCY

Satisfaction/

Rewards

Highly

Satisfied

Satisfied Neutral Dissatisfied Highly Dissatisfied Total

Profit sharing 09 04 03 05 00 21

Fringe benefits 03 10 09 00 00 22

Bonus 01 04 00 00 00 05

Other incentives 02 00 00 00 00 02

15 18 12 05 00 50



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Expected frequency = Row total x Column total ÷

Grand total

Chi-square=

X2 =

∑ (O-E)2/E

X2 =

the test statistic

∑ = the sum of

O= observed frequencies

E = expected frequencies

∑(O-E)2/E =11.00

Degree of freedom =(c-1) (r-1) =12

5% level of significance=12

Table value =21.026

Interpretation:

As the calculated value (test value) is less than the table

value. Therefore null hypothesis is accepted and

alternative hypothesis is rejected and is concluded that

there is no significant difference between employees

satisfaction with rewards and incidence of absenteeism.

TABLE:2

Showing employees commitment towards their jobs

Satisfaction No. of respondents Percentage


Satisfied 18 36

Neutral 12 24

Dissatisfied 05 10


50 100

HYPOTHESIS TESTING

CHI-SQUARE TEST


significance difference between employees’ satisfaction

with rewards to employees commitment.

H1: Let us take the alternative hypothesis that there is

difference between employees’ satisfaction with rewards

to employees commitment.

OBSERVED FREQUENCY

Satisfaction/rewards Highly satisfied Satisfied Neutral Dissatisfied Highly

dissatisfied

Total

Profit sharing 09 04 03 05 00 21

Fringe benefits 03 10 09 00 00 22

Bonus 01 04 00 00 00 05

Other incentives 02 00 00 00 00 02

15 18 12 05 00 50

Expected frequency= Row total x column total ÷ Grand

total

Chi square =∑ (O-E)2/E

= 77.8112

Degree of freedom= (c-1)(r-1)


Table value=21.026

Interpretation:

As the calculated value is more than the table value.

Therefore null hypothesis is rejected and alternative

hypothesis is accepted. So it is concluded that there is

significance difference between employees commitment.

FINDINGS

Most of the employees are satisfied with rewards

to remove their absenteeism at the company.



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Employees are sometimes not getting rewards

adequately. So it will reduce the employees

commitment towards their job.

Employees get motivated from rewards.

SUGGESTIONS

The research conducted shows the biggest

challenge in motivating the employees is to find

the right balance between the individual based

rewards and company based rewards.

The organization should provide effective

rewards for effective rewards for efficient

performance of employees.

CONCLUSION

As a result of this survey, it shows some that majority of

the employees of firm are satisfied with their job. If the

company is providing rewards adequately and rightfully

then employees shows their commitment and

engagement to their jobs and the company survival

chances becomes more and company will raise and shine.

REFERENCES

1. Mcshane and Von glinow(2000), “Study on seniority based

rewards”.

2. Armstrong(2006), “study on the total rewards system”.



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IMPACT OF PERFORMANCE APPRAISAL ON EMPLOYEE’S PRODUCTIVITY

Ankita*

*Student, A.S College, Khanna, Punjab, India

ABSTRACT

In today dynamic working environment, it is necessary to have a sense of belongingness among employees as

they are the most valuable assets of the company. Performance appraisal should be taken as intrinsic part of

a manager responsibility and not as a time-consuming process. It is a method by which the job performance

of an employee is measured in terms of quality, quantity, cost, behavior and time. It is conducted by self,

peers, seniors and junior. The tools & techniques innovated for measuring human productivity and

performance with respect to the required capability, intellect and experience is under an umbrella named

Performance Appraisal System. It is a systematic means of ensuring that their superiors and staff meet

regularly and have a discussion on the past and present performance. For this purpose, the researcher

conduct study in shri salasar steel structural private limited and sample of 35 employees were taken. To

check the reliability of the data f-test and chi-square test will apply.

Keywords: Appraise, Appraiser, Feedback, Techniques, Performance Appraisal

INTRODUCTION OF PERFORMANCE

APPRAISAL

Performance appraisal is a systematic evaluation of

present potential capabilities and worth of employees by

superior or professional from outside. It is a process of

estimating or judging the value, excellent qualities or

status of a person. Performance appraisal evaluates an

employee’s skills, achievements and growth, or lack

thereof. It is a two dimensional concept-at one end lies

the objectives formulate and implement by the authority,

and at the other end, the targets or performance achieved

by employee individually or in a given group.

Performance appraisals can be either formal or informal.

Usage of former systems involves regular review o n

employee’s performance. Informal appraisals are

unplanned, often just chance statements made in passing

about an employee's performance. Some organizations

use more than one appraisal system for different types of

employees or for different appraisal purposes.

Organizations use a variety of methods for evaluating

employee performance. There are so many types of

performance management methods, understanding of

each method should be there.


Grote (2002) describes performance appraisal as a

formal management tool that helps evaluate the

performance quality of an employee.

Wilson and Jones (2008)58 in their article titled

“Reducing job-irrelevant bias in performance appraisals:

compliance and beyond” state that job-irrelevant

discrimination seems as ubiquitous as the performance

appraisals in which it is commonly detected. This paper

explores both compliance-based and more proactive

approaches that deal with the various possible sources of

discrimination in performance appraisal ratings. The

suggestions lead to a code of practice for performance

management in firms across cultures and national

boundaries

Kona Yasoda (2016) detailed the elements of an Ideal

Performance Management System. The important

elements are job descriptions, performance expectations,

appraisals, compensations, disciplinary policies and

commendations. She described globally trending models

like Team Performance Appraisal, 360 Degree

Appraisal, Rank and Yank strategy, the new model and

real-time feedback.



To study the need and importance of performance

appraisal policies

To study the performance appraisal implementation and

its effectiveness on employees

To identify the growth opportunities



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RESEARCH EMPIRICAL

Primary data collection Through structured questionnaire

Secondary data collection Through the website of the industry

Sampling method Convenience sampling

Sample size 35

Scaling technique 5 point likert scale

Statistical tools Chi-square test, f-test

FINDINGS AND ANALYSIS

TABLE 1 Satisfaction with policies associated with performance appraisal system

Options No. of responses Percentages

Yes 24 69%

No 11 31%

Total 35 100%

TABLE 1 depicts that 69% of the employees are very

much satisfied with the policies associated with

performance appraisal system as against 31% of the

employees does not satisfied with the policies framed in

regard to performance appraisal system.

Hypothesis 1

Let us take null hypothesis that there is no significant

difference between the satisfaction level of employees

regarding policies associated with performance appraisal

system

Employment level Yes No

Top level 5 2

Middle level 8 2

Lower level 11 7

Employment

status

Comments Observed Expected (O-E) (O-E)2 (O-E)2/E

Top level Yes 5 4.8 0.2 0.04 0.008

No 2 2.2 -0.2 0.04 0.002

Middle level Yes 8 6.86 1.14 1.2996 0.189

No 2 3.14 -1.14 1.2996 0.414

Lower level Yes 11 12.35 -1.35 1.8225 0.148

No 7 5.65 1.35 1.8225 0.323

Total 1.084

x2 = 1.084, degree of freedom= (3-1) (2-1) = 2

at d.f. =2, x2

0.05= 5.99



is no significance difference between satisfaction level of

employees with policies associated with performance

appraisal system.



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Table 2 Satisfaction with performance appraisal system

Options No. Of respondents Percentage Mean value


Satisfied 15 43% 4*15=60

Neutral 7 20% 3*7=21


Highly Dissatisfied 0 0% 1*0=0

134/35=3.82

TABLE 2 represents that 9 of the employees are highly

satisfied with performance appraisal system, 15

employees are satisfied whereas 7 employees are in a

neutral position as against 4 are dissatisfied and none of

the employee is highly dissatisfied with performance

appraisal system. This shows that the present appraisal

system is having positive impact on the performance of

employees.

Table 3 Satisfaction with growth opportunities

Options No. Of respondents Percentage Mean value


Satisfied 11 31% 4*11=44

Neutral 9 26% 3*9=27


Highly Dissatisfied 2 6% 1*2=2

126/35=3.6

TABLE 3 shows that 9 employees are highly satisfied

with the growth opportunities where as 11 of them are

satisfied,9 of the employees are in a neutral state against

4 of the employees are dissatisfied and 2 of them are

highly dissatisfied with the growth opportunities

associated with the growth opportunities.

Hypothesis 2

Let us take null hypothesis that there is no significant

difference between growth opportunities and

performance appraisal system

Highly satisfied Satisfied Neutral Dissatisfied highly dissatisfied

Satisfaction with

growth facilities

9 12 7 4 3

Satisfaction with

performance facilities

11 14 5 3 2

Satisfaction with growth facilities

Satisfaction with performance facilities


Satisfied 12 14

Neutral 7 5

Dissatisfied 4 3




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Applying F-test

Calculated value 1.96 for V1= 4, V2 = 4 Table value @

5% = 6.39


significance is 6.39. Since the calculated value of F is

less than table value. So, we accept the null hypothesis

and conclude that there is no significant difference

between the satisfaction with growth facilities and

satisfaction with performance facilities.

INTERPRETATION

On an average, it can be seen that employees are

very much satisfied with the job facilities

provided to them as it ensures their future

growth in the near future

Employee attitude towards the current appraisal

system is very much satisfactory, so it can be

said that there is a great cooperation between the

management and employees

It can be seen that employees are satisfied with

the policies adopted by the company for

appraising the performance of employees

It can be said that the company provides the

opportunities to grow and excel in the near

future

SUGGESTIONS

Performance appraisal should not be perceived just as a

regular activity but its importance should be recognized

and communicated down the line to all the employees.

New methods of appraisal should be adopted

so that both appraiser and the appraise take

interest in the appraisal process.

New mechanisms should be evolved to

reduce the time factor involved in the

procedure of appraisal. Introducing online-

appraisal can do this

CONCLUSION

The findings in this research have showed that it is

essential to have an effective performance appraisal

system. The system should be free from bias so that

employees are afforded the chance to get a fair appraisal.

Therefore, inaccurate ratings result in frustrated

employees, inappropriate rewards and punishment.

REFERENCES

1. Wilson and Jones “Reducing job-irrelevant bias in

performance appraisals: compliance and beyond”

2. Cederblom in his article titled, “The performance appraisal

interview: a review, implications and suggestions



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A STUDY ON ABSENTEEISM OF WORKERS

Manpreet Kaur*

*Student, A.S. College, Khanna, Punjab, India

ABSTRACT

Employee Absenteeism is one of the most common work place problems facing employers in

today’s workplace. Majority of employee absences due to illnesses but still some studies have

shown that less than one-third of employees from the workplace are related to poor health. Most

employers offer their workers vacation, sick leave, paid-time off.

Keywords: Absenteeism, Employees, Industry, Problem

INTRODUCTION

Absenteeism is one of the real challenges to Indian

industry. It becomes major problem in today’s industry.

Absenteeism causes production loss as well as also

causes reduction of gross national income, when the

gross wages of labourers reduces normally his

purchasing capability. It is the responsibility of the

Human resource department to communicate the

attendance policy clearly to the employees. At the same

time, it has to develop HR policies to raise the motivation

level of employees and decrease absenteeism due to

capable reasons. Traditional methods of absenteeism

control only using disciplinary methodology have ended

being ineffective. Absenteeism causing poor utilization

of plant. India is facing unemployment problem on one

side and the other side abnormal absenteeism in

industries. It is the matter of prime concern for the

superiors and managers. They have to find the ways to

overcome absenteeism.

FEATURES OF ABSENTEEISM

Research studies undertaken by different authors reveal

the following features of absenteeism:

The rate of absenteeism is the lowest on pay day,

it increases considerably on the days following

the payment of wages and bonus.

Absenteeism is generally high among the

workers below 25 years and those above 40 years

of age.

Absenteeism in traditional industries is essential

in character.

The rate of absenteeism works from department

to department within an organization. Generally ,

it is high in the production department.

EFFECTS OF ABSENTEEISM

ON INDUSTRY ON EMPLOYEES

Affect production targets Reduces his earnings

Increase the cost of production Adds his indebtedness

Lowers the profit margin Decreasing the purchasing power

Affects industrial growth Leads to inefficiency in his job


A. SUKUMAR (2015) says that absenteeism is harmful

to both the employer and employee as follows: Normal

work- flow in the industry is disturbed, overall

production in the factory goes down, difficulty is faced in

executing the orders in time and casual workers have to

be employed to meet production schedules. Such workers

are not trained properly.

PICOARS AND PAYERS (2009) Unexpected absence

disturbs the efficiency of the group as the jobs are inter-

connected , if single man remains absent without prior

notice the whole operation process is disturbed. This

absenteeism results in production losses because due to

absenteeism, workers cost increases and thus efficiency

of operations is affected. Absenteeism rate can be

calculated for different employees and for different time

period like month & year. The frequency rate reflects the

incidence of absence and usually expressed as the no. of



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separate absence in a given period, irrespective of

absence. The frequency represents the average no of

absence per worker in a given period.


As the main aim is to identify the factors leading to

absenteeism and the relationship between the factors and

absenteeism. The data has been collected through

primary method with the help of questionnaire and for

secondary data books and journals have been referred.

The main objective are to bring out the factors which

affect the working atmosphere of the employees that

drive them to absenteeism and to know the satisfaction

level of workers. It is purely descriptive in nature. This

type of research design framed for the study is

“Descriptive Research”. Convenience sampling method

is used for the survey.

DATA ANALYSIS

Table-1

Showing the impact of age on satisfaction level of safety provision:

Impact of age on satisfaction level No. of respondent Percentage

Low satisfaction 28 56

High satisfaction 22 44

Total 50 100

HYPOTHESIS TESTING

CHI-SQUARE TEST


significant difference between the age and satisfaction

level for safety provision.

H1: Let us take the alternative hypothesis that there is no

significance difference between the age and satisfaction

level for safety provision.

OBSERVED FREQUENCY

Age/Safety provision Low satisfaction High satisfaction Total

Below 25 years 13 8 21

26-50 years 9 9 18

Above 50 years 3 8 11

Total 25 22 50

Chi - Square = ∑ ( Oi-Ei)2/ Ei

= 4.098

Degree of freedom= (R-1) ( C-1) = 2


Table value= 5.991

Comment: As the calculated value is less than the table

value so null hypothesis is accepted. Therefore it can be

concluded that there is no significant difference between

the age and satisfaction for safety provision.



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Table-2

Showing job satisfaction

Job satisfaction Frequency Rank Percentage Mean score

Strongly agree 16 5 32 80

Agree 24 4 48 96

Neutral 00 3 00 00

Disagree 10 2 20 20

Strongly disagree 0 1 00 00

Total 50 100 196/50=3.92

HYPOTHESIS TESTING

CHI-SQUARE TEST


significant difference between the experience and job

satisfaction of workers.

H1: Let us take the alternative hypothesis that there is no

significant difference between the experience and job

satisfaction of workers.

OBSERVED FREQUENCY

Experience/

satisfaction

Strongly agree Agree Neutral Disagree Strongly disagree Total

Below 3yrs 06 09 02 02 00 19

3-5 yrs 04 10 06 00 00 20

5-10 yrs 02 05 00 00 00 07

Above10 yrs 04 00 00 00 00 04

Total 16 24 08 02 00 50

Chi-square =∑ (0i-Ei)2/Ei

= 17.11

Degree of freedom=(R-1) (C-1)=12


Total value= 21.026

As the calculated value is less than the table value so null

hypothesis is accepted.

FINDINGS

The study reveals that majority of the employees

take leave for their personal reasons like social

activities.

They have provided adequate welfare facilities.

48% workers are satisfied from their job.

Most of the employees are well known about

their job responsibilities.

SUGGESTIONS

Write attendance policy and clear attendance

expectations.

Offer an attractive salary package. Because

highly paid employees are less likely to be

absent, so offering an attractive compensation

package can build loyalty and reduce

absenteeism.

Small things that can have a big effect and ensure

that your employees are happy to come into the

office. So provide a pleasant working

environment

Consider introducing more predictable working

hours and limiting overtime as these measures

can help to reduce employee absenteeism.

CONCLUSION

The sources of organization in terms of profitability,

efficiency, growth depends on the contribution and

involvement towards objective. The rate of absenteeism

can be reduced with mutual commitment and



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involvement of employer and employee. The provision of

various welfare facilities, work culture, communication,

training and the workers should feel that they belong to

their family.

REFERENCES

1. A.Sukumar (2005) “A study on labour absenteeism in

Ammaru foundries Coimbatore”

2. Picoars and Payers (14 October 2009) “A research study on

absenteeism of employees in industrial sector”

3. Mamoria, Dr C.B. “Dynamics of industrial Relations” by

Himalaya Publishing House, Banglore.

4. Gupta K Shashi and Joshi Rosy (2007) “ Human resource

Management” Fourth revised addition, Kalyani publisher,

New Delhi

5. http://scribd.in

6. http://academia.edu.com



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EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY ON

SCALING AND PERFORMANCE OF SHGs OF UDAIPUR (RAJASTHAN)

Dr. Ashish Adholiya*, Dr. Santosh Kumar C.S**

, Shilpa Adholiya***

*Assistant Professor, Pacific Business School (Affiliated to Rajasthan Technical University, Kota),

Udaipur, Rajasthan, India

**Research Scholar, Faculty of Management, Pacific Academy of Higher Education and Research University,

Udaipur, Rajasthan, India

***Research Scholar and PGT (Commerce), Central Academy Senior Secondary School, Sardarpura, Udaipur

Rajasthan, India

ABSTRACT

The primary objective of forming the self help groups is to pull the socially deprived class people

into the main stream of the economic development by transforming their capacity through social

mobilization, skill development through self learning programs, self-confidence building through

community action, capacity building and many more. Self help group as an economic development

model can specifically get benefitted from the digitalization. Use of information and

communication technology practices offers technology enabled banking services, online training

and skill development classes promoted and supported by government, broader market penetration

and reach to supply the products, linkage with other SHGs, improved technical aptitude, improved

social inclusion to the members of SHG member which are overall influencing their scaling and

performance. The sample population of the research work is 10 SHGs of rural area (Balicha,

Teetardi, and Bargaon) of Udaipur, Rajasthan. Statistical assessment over dataset initiated after

reliability test and followed by ANOVA and correlation lead into the confirmation that sampled

respondents have positive opinion for social inclusion, skills and aptitude development, market

scale, economic enrichment, financial inclusion, entrepreneurial enrichment, and member

competence enrichment as the measures of SHG scaling and performance and also confirms

positive effect of ICTs on SHG’s scaling and performance. It is also identified that demographic

variables (age, occupation, qualification, and marital status) of respondents also influence their

opinion for the same. Overall study confirmed that ICT activities inclusion had improved SHG

members’ knowledge, understanding, and skills. Study recommends that SHG members should

participate in the skill development activities promoted by government for them either technical or

nontechnical both.

Keywords- Information and Communication Technology (ICT), Self Help Group, Scaling,

Performance, SHG member

INTRODUCTION

Primarily the SHG organizes the deprived class of

society into self-help groups as their members through

some common practices and procedure such as social

mobilization, free training programs for skill

development, capacity building programs, literacy

programs and through other resource supplies too. These

techniques and programs ultimately lead into the

developing and promoting, socio-economic capacity and

ability of the deprived class of the society and also

improve their collective negotiating capacity. The

motivating information and technology advancements are

effectively creating various territories for empowering

rural poor's socio-economic characteristics especially

through empowering farming, forestry service, poultry

farming, fisheries, animal farming/ husbandry and for

improving life standards by giving better wellbeing

services, contemporary advanced medicinal treatment,

and so forth.

Supporting and sustainable employment to maintain the

livelihood in this age when towns and urban areas are

developing quickly can be accomplished through a most

significant driver i.e "Information and Communication

Technology - ICT Driver". ICT has been assuming an

imperative job in the advancement of rural and the semi-

urban India, expanding its development in an uncommon



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way. Technology-enabled services and products have a

great extent impact on everyday life, as it is needed in

networked or community radio or cell phone-based

farmer data services or general health or wellbeing

related arrangements, it is becoming helpful in every

dimension of the daily life (Sambrani, 2016).

Information and Technology trends have broadly

influencing our daily lives by offering us dynamic and

customised information, with special reference to

community radio or mobile phone based farming

information services, health services, payment

transferring services and other related technological

solutions are improving the quality of lives of rural area

people. ICT is significantly and systematically playing its

important role in the growth and advancement of rural

India. In order to keeps the pace of rural poor socio-

economic advancement incorporating the sustainable

livelihood to each rural poor, improved standard of living

and overall development of the villages, wide integration

of technological advancements become necessary and it

can be achieved from the “Information and

Communication Technology” practices and policies

incorporation with the SHGs. It is obviously marked that,

generally of this existing rapid development is only

because of the information and communication

technology practices and processes propagation in all the

scales and class of the society across India. Openings and

benefits are as yet plenteous to scale and incorporate

these advances among the rural populace, with steady

exertion to streamline the procedures and discovering

better approaches to make them moderate to improve the

lives of individuals in India.

The research paper is organized as follows, Section I

contains introduction of information and communication

technology impact on SHG scaling and performance.

Section II contains the related work of technology and

innovation effect on SHG members and overall scaling or

performance of SHG, Section III contains methodology

followed in the research work incorporating geographical

location, research work plan, sample plan, hypotheses

and research objectives, Section IV incorporated

statistical outlook analysis performed over the dataset

procured from the respondents and encoded through

statistical tool IBM SPSS 21.0, and Section V presented

the conclusions and inference drawn and

recommendation proposed.


Bhati P. (2017) in her study on “A Comparative Study on

Technology and Innovation among SHG Women of

Selected Villages of Jodhpur” opined that penetration of

information and communication technology had

developed different fields of rural socio-economic

empowerment. The study concluded that use of

information technology and other technological

innovations improved total wellbeing of individual life.

The research work suggested that as technology can

contribute in growth and development of rural poor so

proper awareness and marketing should be done about

the benefits they can draw in their socio-economic

empowerment. It is also suggested that for promoting

technological advancement first penetration of

technology should be done in their skill development

area which would be helpful in their affirmative

acceptance of the technology.

Sambrani (2016) in the study on “A study of information

and communication Technology (ICT) adoption by

SHG’s in banking activities - Dharwad district” opined

that use of advanced ICT tools and practices in the SHGs

is barely available. But, due to lack of proper mechanism

which can meet the requirements of the SHGs and its

members should be developed and promoted by the

financial institutions. Researcher also gave emphasis

over the creating awareness among the SHGs and rural

poor about the technology use and its benefits. In the

conclusive remarks author stated that technology overall

enables efficiency of SHGs and provide assistance in

micro finance handling and in organizing advanced

training sessions.

As one of the noticeable advancement after the

integration of ICT was observed is that prior to the

integration of information and communication

technology process and tools with the SHG platforms,

facilitators have to execute the group meetings on the

basis of his/ her memory of previous meeting minutes or

from the minutes recorded into a series of binders, but

now, with the advent of ICT facilitators can regularly

update facilitation materials, and skill development

training programs as all the related materials would be

available on the smart phones which a common person

carries with them. Except aforesaid issues several other

advance practices can opt by the SHGs by incorporating

ICT tools and practices to improve the scale and

performance in totality such as banking activities of the

group, cross platform and group interaction on web, more

and wider reach to the new suppliers and buyers,

familiarity with technology, quality and timely support of

facilitator and NGOs, development and learning of new

curricular activities, advanced competence building,

more employment generation and many more.

Berad and Nimbalkar (2014) in their study on “Role of

Information Technology for Promoting Women

Empowerment Especially with reference to Members of

Self Help Groups in Ahmednagar District” opined that

awareness for the information and communication

technology tools and practices among SHG members of

the district is found very low. It was identified that SHG

members want to procure complete and detailed

information about the economic, social, national issues,



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government schemes, and many more through

information technology tool especially from internet and

web based mobile applications. The members are

agreeing that use of information technology enabled

services such as internet had help them to boost their

operational activities and offered them e-commerce

platform for trading.

Some other authors emphasized that use of various

technology enabled tools and practices by the SHG

members helped them to know about the effective and

economical marketing practices which escalate the

performance of the group (Sapkal et. al., 2015), ICT tools

and services offers several income generative activities to

small groups and also motivates them for saving by

continuously exposing them to new and small saving

schemes and financial services (Suri et. al., 2016),

technology frameworks and social groups offers multiple

opportunities and modes through which SHG members

can share their problems to multiple other groups and

common people to get the possible and viable solutions,

and lead into making the collective decision. Interaction

with the global groups makes more sensible and reliable

decision, improve skills, abilities, capacities etc. (Haridas

et. al., 2013).

So, it would be very imperative to assess the information

and communication technology effect on SHG scaling

and performance with reference to the SHGs Udaipur

district of Rajasthan. The present study will focus on the

statistical assessment of SHG members’ opinion or

feedback for the effect on information and

communication technology on SHG’s scaling and

performance, and association between the demographic

variables of the SHG member respondents their opinion

for the incorporation of ICT tools and practice for the

growth and expansion of SHG. The geographical scope

and locale of the present research work is rural area

SHGs of Udaipur district of Rajasthan.


Primary objective of information and communication

technology tools and practices introduction in the rural

area is to pull the rural people in the main stream of the

social, political and other developments by offering them

financial liberalization, baking services availability, web

enabled skill development programmes, e-choupal,

mobile phone enabled health services, assistance for

farming, animal husbandry and many more primary

living activities and so forth. Above mentioned studies

by the researchers related to the ICT and SHG confirmed

that there is imperative relationship between the SHG

members advancements, SHG growth and information

and communication technology. So, the present research

work is intended to assess the SHG members’ opinion

about the role of information and communication

technology in the overall development of SHG and its

group members and overall opinion for the ICT role in

scaling and performance of the SHGs of Udaipur district

of Rajasthan. So, the study has following objectives:

1. To study the SHG member respondents’ opinion

for the effect of information and communication

technology on SHG’s scaling and performance.

2. To study the SHG member respondents’ opinion

for the effect of information and communication

technology on them.

3. To study the effect of SHG member respondents’

demographic characteristics on their opinion for

information and communication technology and

overall development of SHGs.

Geographical Scope of the Study: The geographical

location scope of the research work is rural area (Savina,

Balicha, and Bargaon) SHGs of Udaipur district of

Rajasthan. The selection of the study area Udaipur was

based on convenience sampling method. Purposefully the

Primary data of the research work is collected through

the interviews and questionnaires presented to the sample

population or respondents of the study. Purposefully

Udaipur district was chosen for the study because it

offers a good mix of rural, urban and semi urban

population division.

Research Work Plan: The present research work is

intended to assess the SHG member respondents’ opinion

for the role of information and communication

technology tools and practices in scaling and

performance of their SHGs. For the execution of the

aforesaid study objectives, a well structured

questionnaire was present to the sampled SHG members

as the respondents of the research work. The present

research work nature is descriptive and analytical to

reach the significant results and discussions.

Sampling Plan: Multi-stage sampling procedure has

been followed to select the sample for the study.

Sampling traits used are: location, age of the SHGs and

caste composition of membership. As this study has been

done in the Udaipur district of Rajasthan state of India,

the members of the operational self-help groups of the

study area are considered as a population for this study.

Research Hypotheses:

H01: There is no significant effect of information and


performance.

Ha1: There is significant effect of information and


performance.

H02: Demographic characteristics of respondents do not

influence their opinion for information and

communication technology effect on overall development

of SHGs.



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122 | P a g e

Ha2: Demographic characteristics of respondents

significantly influence their opinion for information and


of SHGs.

H03: Information and communication technology

penetration does not affect their level of knowledge, skill

and understanding of SHG functions.

Ha3: Information and communication technology

penetration significantly affect their level of knowledge,

skill and understanding of SHG functions.

DATA ANALYSIS OF INFORMATION AND

COMMUNICATION TECHNOLOGY EFFECT ON

SHG SCALING AND PERFORMANCE:

Reliability Analysis: In order to assess the internal

consistency and reliability of the data set encoded from

the feedbacks given by the SHG member respondents

Cronbach’s alpha (α) test was performed. The threshold

value or score of the test is 0.7, higher values signifies

higher reliability and validity among the indicators and

lower values represents the lower reliability and validity

among the indicators and it is to be ensured for the

dataset that reliability statistic should be greater than

equal to 0.7 as a good criterion of the quality of data.

Table 1: Reliability Test Statistics

Cronbach's Alpha Reliability Value

Cronbach's Alpha (α) Value N of Items

0.796 26

Source: Primary Data

Reliability Statistics for responses of SHG members of

Sampled SHGs as presented in above Table 1 of

reliability test statistics for 26 different data points

revealed that Cronbach’s alpha (α) value is 0.796 which

ensures 79.6% reliability for the collected data and it is

greater than the threshold value 0.7 and confirms as a

good criterion of the quality of data.

Table 2: Scale Statistics of Sampled SHGs’ Member Respondents

Scale Statistics

Mean Variance Std. Deviation N of Items

124.4100 142.210 11.2314 26


Above Table 2 of scale statistics of sampled SHGs’

member respondents revealed that for 26 data point of

questionnaire presented to respondents 124.4100 was

mean score value, 142.210 was variance value and

11.2314 was standard deviation that in total confirms

good coverage and variation for the feedback.

Percentage (%) Distribution Analysis of Demographic

Characteristics of SHG Member Respondents: In

table below count column presents number of

respondents and % column presents number of

respondents belong to a particular class of demographic

characteristics of SHG member respondents. The

statistics helped to assess the domination of particular

class of SHG member respondents over other class based

feedbacks of the respondents.

Table 3: Demographics’ Percentage of Sampled SHGs’ Member Respondents

Demographic Characteristics Count (N) %

Age

< 30 Years 5 16.67%

30-40 Years 15 50.00%

40-50 Years 7 23.33%

> 50 Years 3 10.00%

Total 30 100.00%

Marital Status

Married 17 56.67%

Unmarried 4 13.33%

Widow(er) 4 13.33%

Separated 5 16.67%



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123 | P a g e

Total 30 100.00%

Educational Status

Illiterate 10 33.33%

Upto Primary 7 23.33%

Upto Middle 5 16.67%

Upto Secondary 2 6.67%

Upto Senior Secondary 3 10.00%

Higher Education 3 10.00%

Total 30 100.00%

Occupational Status

Unemployed 5 16.67%

Agriculture and Allied 9 30.00%

Other than Agriculture 6 20.00%

Petty Businesses 5 16.67%

Other Industry Business 3 10.00%

Others 2 6.67%

Total 30 100.00%


Table 3 of percentage and frequency distribution of

demographic characteristics of sampled SHG members

revealed that out of total sample population of 30 SHG

member respondents, 05 (16.67%) SHG member

respondents were of below 30 year age group, 15

(50.00%) respondents were in between 30 to 40 years, 07

(23.33%) SHG member respondents were in between 40-

50 years, and only 3 (10.00%) respondents were of more

than 50 years of age group. Out of the sampled

population 17 (56.67%) SHG member respondents were

married, 04 (13.33%) SHG member respondents were

unmarried, 04 (13.33%) SHG member respondents were

widow(er) and remaining 5 (16.67%) SHG member

respondents were separated. From the educational

qualification point of view 10 (33.33%) SHG member

respondents were illiterate, 07 (23.33%) SHG member

respondents were up to primary level qualified, 05

(16.67%) SHG member respondents were up to middle

level qualified, 02 (6.67%) SHG member respondents

were up to secondary level qualified and 3 (10.00%)

SHG member respondents were having higher

qualifications. For occupation based percentage

distribution it was found that 5 (16.67%) were

unemployed, 9 (30.00%) were in agriculture and allied

activities, 6 (20.00%) were occupied with other allied

agriculture activities, 5 (16.67%) were working in other

petty businesses, 03 (10.00%) SHG member respondents

were working in other industry businesses and 2 (6.67%)

other was working in other sectors. So, good combination

of demographics variables’ class wise participation of the

SHG member respondents was observed for the study

and it result into good quality of data for future analysis.

ANOVA and Correlation Analysis to Measure

Relationship between Information and

Communication Technology on SHG’s Scaling and

Performance: Information and Communication

Technology enabled government and NGO portals,

websites, applications and other media platforms offers

information and assistance to the rural poor and SHG

members to scale up their knowledge of banking

(financial activities), social involvement, skill based

training, agriculture and allied farming activities,

government schemes, SHG promoting institutes, animal

husbandry and other rural employment generation

activities, marketing and channelizing the distribution of

products and so forth. To measure significance of

difference in the SHG member respondents’ opinion for

the aforesaid benefits, these can scale up and improve the

performance of SHGs. To measure the relationship

significance between respondents’ opinion for the effect

of information and communication technology practices

and processes followed in the SHGs and SHG’s scaling

and performance correlation analysis was performed. The

related hypothesis is stated below here under:

H01: There is no significant effect of information and


performance.

Ha1: There is significant effect of information and


performance.



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124 | P a g e

Table 4: ANOVA Test to Measure the Impact of Information and Communication Technology on SHG’s

Scaling and Performance

Distinctive SHG Scaling and Performance Variables F-Value P-Value

Social Inclusion 1.431 .089

Skill and Aptitude Development 1.227 .097

Market Scale .978 .106

Economical Enrichment .711 .125

Financial Inclusion .951 .102

Entrepreneurial Enrichment 1.696 .069

Member Competence Enrichment 1.223 .095


So, from the statistics of the ANOVA test to measure the

impact of Information and Communication Technology

on SHG’s Scaling and Performance as presented in Table

4 helped to conclude on the basis of F value and

significance value that for distinctive SHG scaling and

performance variables such as Social Inclusion (1.431,

.089), Skill and Aptitude Development (1.227, .097),

Market Scale (0.978, .106), Economical Enrichment

(0.711, .125), Financial Inclusion (.951, .102),

Entrepreneurial Enrichment (1.696, .069) and for

Member Competence Enrichment (1.223, .095), there is

no significant difference in the SHG member respondents

opinion for the aforesaid scaling and performance

variables. So, it is been accepted and significantly

confirmed by all the respondents that ICT positively

influence SHGs scaling and performance and no

difference for them is observed for the listed issues.

Table 5: Correlation Test to Measure the Impact of Information and Communication Technology on SHG’s

Scaling and Performance

Correlations

SHG’s Scaling and Performance

Information and Communication

Technology

Pearson Correlation .651**

Sig. (2-tailed) .000

N 100



Correlation test statistics of measuring the impact of

information and communication technology on SHG’s

Scaling and Performance is presented in Table 5. The

statistics of table revealed that Pearson Correlation

between Information and Communication Technology

and SHG’s Scaling and Performance is .651** (Strong

and Positive Relationship), and found significant at 0.01

(2-tailed) levels. So, it could conclude from that Ha1 must

be accepted which ensured that there is significant effect

of information and communication technology on SHG’s

scaling and performance.

ANOVA Analysis to Measure the SHG member

respondents’ opinion for the Impact of Information

and Communication Technology on SHG’s Scaling

and Performance: Demographic variables like Age,

Marital Status, Educational Status, and Occupational

Status influences the SHG’s Scaling and Performance, in

order to assess the significance of difference in the mean

scores of different demographic classes of respondents in

the all the possible combinations of groups ANOVA test

was performed. Hypothesis under examination in this

section is:

H02: Demographic characteristics of respondents do not



of SHGs.

Ha2: Demographic characteristics of respondents



of SHGs.



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125 | P a g e

Table 6: ANOVA Test to Measure the Impact of Demographic Variables on Respondents’ opinion for ICT

effect on Overall Development of SHG

Demographics Variables F-Value P-Value Null Hypothesis Result

Age 15.174 .000 Rejected

Occupational Status 17.116 .000 Rejected

Qualification Status 16.123 .000 Rejected

Marital Status 15.221 .010 Rejected


So, from the statistics of the ANOVA test to measure the

impact of demographic variables on respondents’ opinion

for ICT effect on overall development of SHG as

presented in Table 6 revealed on the basis of F value and

significance value that for demographic characteristics

such as age (15.174, .000), occupational status (17.116,

.000), qualification status (16.123, .000), and marital

status (15.221, .000) SHG member respondents are

significantly agreeing that demographic characteristics of

them influence their opinion for ICT effect on overall

development of SHG, and for the responses significant

difference was observed between the mean scores. So, it

could conclude that Ha2 must be accepted that confirms

that demographic characteristics of respondents



of SHGs.

Chi-Square Test to Measure Information and

Communication Technology Penetration effect on

SHG members’ Level of Knowledge, Skill and

Understanding of SHG Functions – This section of the

research paper will present the assessment of relationship

or association between the ICT penetration in SHG

activities and SHG members’ Level of Knowledge, Skill

and Understanding of SHG Functions. To measure this

association between the variables chi-square test was

performed. Hypothesis is to be examined is here under:

H03: Information and communication technology

penetration does not affect their level of knowledge, skill

and understanding of SHG functions.

Ha3: Information and communication technology

penetration significantly affect their level of knowledge,

skill and understanding of SHG functions.

Table 7: Chi-Square Test to Measure Association between the ICT Penetration in SHG and Members’

Knowledge, Skill and Understanding of SHG functions

Financial Literacy/ Competency Variables Chi-Square Value P-Value

Knowledge of SHG Functions 13.256 .000

Understanding of SHG Functions 14.147 .000

Skill for betterment of SHG Functions 14.244 .000


Chi-Square Test statistics of association between the ICT

penetration in SHG activities and SHG members’ Level

of Knowledge, Skill and Understanding of SHG

Functions helped to conclude that chi square and

corresponding p-value for the effect of ICT on

Knowledge of SHG Functions (13.256, .000),

Understanding of SHG Functions (14.174, .000) and on

Skill for betterment of SHG Functions (14.244, .000)

were found lesser to the 0.05 significance level which

helped to conclude that hypothesis Ha3 must be accepted

which confirmed that Information and communication

technology penetration significantly affect their level of

knowledge, skill and understanding of SHG functions. It

was identified that SHG member respondents are

positively agreeing that inclusion of ICT enabled services

and practices with the basic functions of SHG had

improved their overall understanding of SHG function

and result into improved confidence over the same too.

RESULTS AND DISCUSSION

Statistical analysis performed in the previous section of

the research work revealed that a good quality dataset

was produced from the feedback given by sampled SHG

member respondents as the Cronbach’s alpha (α) value

was 0.796, and scale statistics confirmed good coverage

and variation for the feedback and produced imperative

results. A noteworthy relationship was observed from the

respondents’ opinion which helped to accept and

significantly confirm that ICT positively influence SHGs

scaling and performance and no difference for them is

observed for the listed issues. A strong and positive

association was observed between information and

communication technology and SHG’s Scaling and



PP: 119-126 ISSN No: 2278-7925

126 | P a g e

Performance. In was also found that demographic

characteristics (age, marital status, occupational status,

and qualification status) of respondents significantly



of SHGs. Finally, it was identified that respondents are

positively agreeing that inclusion of ICT enabled services

and practices with the basic functions of SHG had

improved their overall understanding of SHG function

and result into improved confidence over the same too.

The research work points out that a improvement is

observed and confirmed by the SHG members in their

social inclusion practices, skills and aptitude, market

integration, financial inclusion, competence enrichment

after following the practices and tools of information and

communication technology, and the level of agreement

for the aforesaid factors is directly related with the

scaling and performance of the SHG. A string

relationship between the ICT tools and practices and

SHG’s scaling and performance was lead into making the

interpretation that higher would be the adoption rate for

the advanced technology enabled services promoted by

the government for SHG higher would be their growth

and sustainability, so study recommends that SHG

members should actively participated in government

schemes and training program to improve their ICT

acquaintance and competence. It was also identified that

knowledge, skills, aptitude and understanding of the

SHG members or respondents of the study is enriched

through the uses of ICT enabled services and tools, so it

is also recommended that continuous practice over the

ICT enabled services and practices should be performed

by the SHG members as continuous practices leads into

more specific and confined set of knowledge that may be

useful for the overall SHG performance.

REFERENCES

1. Berad R.R., and Nimbalkar S.K. (2014). “Role of

Information Technology for Promoting Women

Empowerment Especially with reference to Members of

Self Help Groups in Ahmednagar District,” IBMRD's

Journal of Management and Research, Vol. 3, Issue 1, pp.

281-292.

2. Bhati P. (2017). “A Comparative Study on Technology and

Innovation among SHG women of Selected Villages of

Jodhpur,” Scholarly Research Journal for Interdisciplinary,

Vol. 4, Issue 29, pp. 4402-4410.

3. Krishnaveni V. and Haridas D.R. (2013), “SHGS and its

Marketing Problems,” Global Journal of Human Social

Science Economics, Vol. 13, Issue 4 (1), pp.7-11 .

4. Sambrani V. N. (2016). “A Study of Information and

Communication Technology Adoption by SHG’s in

Banking Activities - Dharwad District,” International

Journal of Management, Vol. 7, Issue 6, pp. 145-155.

5. Sapkal D.H., and Kherdikar A. (2015). “Information and

Communication Technology (ICT) as a tool for Marketing

Self Help Groups Products,” International Journal in

Management and Social Science, Vol. 3, Issue 7, pp. 258-

267.

6. Suri D.K., and Kaur R. (2016). “Role of Self Help Groups

(SHGs) in poverty alleviation and micro entrepreneurship of

women in Bishnah block of Jammu district,” Asian Journal

of Multidisciplinary Studies Vol. 4, Issue 2, pp. 103-112.

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