Commerce spectrum - June 2013

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Commerce Spectrum Vol. I. No. 1 June, 2013

Corporate Performance and Stock Returns in India:An Exploratory Factor Framework Dr. T.G. Saji 3-9

Factors Affecting Green Brand Equity (GBE) of theCustomers of Two and Three Wheelers: Dr. P.N. HarikumarAn Application of Logistic Regression Dr. K.S. Chandrasekar 10-17

TAM Constructs and Extent of Use of Internet Banking: Ajimon GeorgeAn Empirical Analysis Dr. G.S. Gireeshkumar 18-25

Recruitment Policy of the Hotel Industry in Kerala: T. RajeshAn Empirical Analysis Dr. R. Vasanthagopal 26-35

Bank Credit Utilisation by Agriculturists and MSMEs:An Empirical Study With Reference To Kerala Dr. Suby Baby 36-42

Causes of Stress among IT-BPO Dr. S. Santhosh KumarSector Employees: Helaney M.Y.An Exploration B.B. Haripriya 43-52

Do Co-operatives Lack Co-operation?A Study in the Context of Workers’ Dr. Deepu Jose SebastianParticipation in Management Dr. Lishamol Tomy 53-59

Bhagavad Gita and Management Dr. C.V. Jayamani 60-65

Chit Fund – Is it an Ideal Financial Instrument? Dr. B. Johnson 66-72

Antecedents of Patients’ Satisfaction atGovernment Hospitals in Kerala: Rehin.K.RAn Exploration Dr. P.T. Raveendran 73-82

COMMUNICATION

Growth of Micro, Small and Medium K. Munaswamy ReddyEnterprises in Chittoor District, P. SankarappaAndhra Pradesh Dr. B. Bhagavan Reddy 83-90

ABSTRACT OF DOCTORAL DISSERTATIONS

The Role of District Tourism Promotion Councilsin the Promotion of Tourism in Kerala Dr. T. Subash 91-99

Momentum and Contrarian Strategiesin the Indian Stock Market - An Evaluative Study Dr. Asha E. Thomas 100-112

Commerce SpectrumDouble Blind Peer Reviewed Half Yearly Journal

CONTENTSARTICLES Page No.

Number 1

Author(s)

ISSN 2321 - 371X

Volume I June 2013

2

Vol. I. No. 1 June, 2013 Commerce Spectrum

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Statement about Ownership and Other Particulars about

Commerce SpectrumDouble Blind Peer Reviewed Half Yearly Journal

FORM IV

1. Place of Publication : St. Peter’s College, Kolenchery, Kerala.

2. Periodicity of Publication : Half yearly

3. Printer’s name : Dr. Thampy Abraham

Nationality : Indian

Address : Principal, St. Peter’s College,Kolenchery, Kerala.

4. Publisher’s Name : Dr. Thampy Abraham


Address : Principal, St. Peter’s College,Kolenchery, Kerala.erala.

5. Chief Editor’s Name : Dr. Santhosh Kumar S.


Address : Associate Professor,P.G. & Research Department of Commerce,St. Peter’s College, Kolenchery, Kerala.

6. Name and Address of the IndividualWho own the periodical : Dr. Thampy Abraham


Address : Principal, St. Peter’s College,Kolenchery, Kerala.

I, Dr. Thampy Abraham, hereby declare that the particulars given above are true to the

best of my knowledge and belief.

Date: Signature

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Corporate Performance and Stock Returns in India:An Exploratory Factor Framework

Dr. T.G. SajiAssistant Professor

P.G. Department of Commerce and Management Studies,Sri C. Achuthamenon Govt, College, Thrissur, Kerala, India.

Email: [email protected]

Abstract

This paper explores the prominent factors which embed in stock returns using firm level dataon Indian Information Technology (IT) Industry for the period 2000-2010. Empiricalmethodology involves an exploratory factor analysis that condenses twelve corporate financialvariables, selected on the basis of intuitive knowledge and available literature, in to five factorswhich possibly explain stock returns in India. The analysis finds earnings growth and EarningsPrice (E/P) rate as the prime determinants of stock returns and a multi-factor model usingthem can help investors to track mispriced securities in Indian context.

Keywords: Earnings Growth – E/P Rate – Valuation Factor

ISSN 2321 - 371X

Financial ratio analysis is of immense usein security analysis for critically evaluating theinformation content in the financial statementsof firms and thereby to understand more abouttheir operating as well as financial conditions.They make use of these ratios to explore thesources of a firm’s profitability and evaluate thequality of its earnings. But the financial ratios,as such, are not a tool to identify mispricedsecurities. They reveal the performance of firmsduring the past years. For an investor futureperformance is more important than the pastachievements. However, in normal situations,the past is the sole basis for the forecast of thefuture. So from the analysis of past performanceof the firms, an analyst can forecast the futureprospects of the company and his investmentdecision would depend upon such forecast.

I. Introduction

Equity price movement could be viewedas the function of a host of factors ranging fromglobal market forces to unique companycharacteristics Grinold, Andrew & Dan, 1989).Each stock is assumed to have an economic worthbased on its future earning capacity decided byits fundamentals. Along with the performance ofthe global and national economy, and the globaland local industry conditions, an analyst assessesthe relative performance of individual firms inpursuit of his investment strategies (Beckers,Gregory, & Ross 1996). Some of these factorsare of purely financial/quantifiable nature andsome others are simply qualitative. An analyst isconcerned more about the financial aspects ofbusiness for which he mainly depends on theaccounting data published by the corporate.

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stocks in Indian stock market. The study foundearnings per share (EPS) and investmentexpenditure to be significant determinants ofshare price. Sehgal and Tripathi (2007)investigated value effect (better returns) in theIndian stock market by using alternative valuemeasures such as book-equity to market-equity(BE/ME), earnings-to-price (E/P), cash flows-to-price (C/P) and dividends-to-price (D/P). Thestudy identified operating profitability, size andfinancial leverage as the three important sourcesof variations in stock returns in the country. Saji(2012) provides evidence on the significance ofearnings growth and beta factor in predictingstock returns in market downturns.

On reviewing the literature, it is evidentthat the academic community has consensus asto the significance of corporate performance invaluation of stock returns, but their findingsindicating the underlying reasons for suchperformance are much conflicting. So this study,which investigates further evidence on this issue,deserves special significance.

III. Methodology and Materials

The sample used in the study consists of32 Information Technology (IT) sectorcompanies whose stocks were tradedcontinuously in NSE (National Stock Exchange)during the period 2000-2010. The data aboutthese firms were collected from three sources.Prowess (Centre for Monitoring of IndianEconomy) and Capital Line constitute thesources from which the data for measuringcompany fundamentals have been collected.The data relating to the share price and marketcapitalisation was obtained from NSE database.The stock price data were adjusted for stock splitsand bonus issue.

The study has chosen twelve exploratoryfinancial variables (including beta and stock

For having the most precise forecast or estimateabout the future, he should pursue rigorousstatistical approaches.

Before going for any type of forecasting,especially forecasting of the future stock returns,first of all, the analyst has to identify its broaddeterminants from the list of variables availableto him. After identifying the key financial factorswhich specifically influence the prices ofindividual stocks, he should ascertain the natureof its relationship with the stock returns.Measurement of such relationship definitelyhelps him to judge the simultaneous impact ofdeterminant variables on the stock returns whichfurther help him to have the best estimate of thefuture stock price. This paper discusses only theprelude part of this forecasting process. The paperis organised to present the reviews of relatedstudies first; then the data and methodology; theresults of the analysis and its discussion nextfollowed by a conclusion in the last.

II. Review of literature

Basu (1977) and Campbell (1998) foundPrice to Earnings (P/E) ratio as a good predictorof equity returns. Chan, Hamao & Lakonishok(1991) found that four financial variables –earnings yield, size, book to market ratio andcash flow yield – are significant in variation ofstock returns. When Fama and French (1992)document that firm size and B/M (Book-to-Market) explain the cross sectional variations inreturns, Lakonishok, Shleifer & Vishny (1994)give evidence only for B/M effect. Leledakis andDavidson (2001) stand for the betterpredictability of returns by ratios of sales to priceand debt to equity. Athanassakos (2009) showsP/E ratio as a better predictor of average equityreturns than Price to Book (P/B) ratio.

Malakar and Gupta (2002) took an effortto explain the major determinants of sectoral

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returns). The variables which the study choosesto use stem from both existing literature andintuitive knowledge of the data. Accordingly thestudy uses EPS, earnings growth, Return onEquity (ROE), Return on Capital Employed(ROCE), Debt to Equity ratio, Beta (market riskpremium), Earnings to Price ratio or Earningsyield (E/P), Book Value per share (BV), Price toBook value ratio (P/B), Market Capitalization(MC), Dividend yield and Average Stock Return(AR) for exploration.

Exploratory factor analysis is employed todiscover the common factors or latent variablesamong the observed company financialvariables. The objective of this methodology isto identify the company financials, the variationof which is more significant in explaining thevariation of its stock returns. The frameworkunder which the empirical methodologyexecuted in the study is detailed along with theresults and discussions.

0.5469 582.4 0.000*

*Significant at one per cent level

IV. Results and Discussions

IV. (A) Factor Analysis: Results

The exploratory Factor Analysisadministered in the study aims at exploring thedimensions that could have caused correlationsamong the observed company fundamentalvariables. The factor extraction method ofPrincipal Component Analysis (PCA) was optedto identify the critical factors. In PCA, thevariables must be correlated to each other forthe factor model to be appropriate forexploration. So a correlation co efficient matrixof the selected variables was prepared at firstfor deciding the feasibility of PCA to thecollected financial data and then a test given byKaiser –Meyer – Olkin (KMO) and Bartlett’s isapplied to test whether the sample variables areadequate for factor analysis. The results of KMO–Bartlett’s test and the correlation matrix arereported in Table 1 and Table 2 respectively.

Table 1: KMO and Bartlett’s Test of Sphericity

KMO measure of SamplingAdequacy

Bartlett’s Test of Sphericity(Approx. chi square value)

p value

an identity matrix. If the correlation matrix is anidentity matrix, all correlation coefficients wouldbe zero. For factor analysis to work there shouldbe some relationship between the variables andhence the correlation matrix should not be anidentity matrix. Therefore, there are somerelationships between the variables to includein the analysis. For the data used in this study,Bartlett’s test is highly significant (p<0.001), andtherefore factor analysis is appropriate for thisstudy.

The KMO statistic reported in Table 1represents the ratio of the squared correlationbetween the variables to the squared partialcorrelation between those variables. The KMOstatistic varies between 0 and 1. Kaiser (1974)recommends values greater than 0.5 asacceptable. For the data used in this study thevalue is 0.5469, and so the author believes thatthe factor analysis is appropriate for the data.

The Bartlett’s measure tests the nullhypothesis that the original correlation matrix is

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Table 2: Correlation Matrix of Company Financial Variables

*Correlation Coefficient greater than or equal to 0.25 and significant at one per cent level Source: Compiled from SPSS Generated Result

Eigen values have estimated. The Eigen valuesassociated with each factor represent thevariance explained by that particular linearcomponent. By following Kaiser’s rule ofretaining factors with Eigen values greaterthan unity, five factors have extracted fromthe data. The proportion (per cent) of varianceexplained by each factor is shown in Table 3,indicating that these five factors altogetheraccount for 69.48 per cent of the totalvariance. To have better interpretability offactors, the orthogonal factor rotation method– Varimax is used.

The correlation matrix (Table 2) illustratesthe extent to which the selected twelve financialvariables are correlated pair-wise in a matrix.Out of 60 cells below the main diagonal thereare only fourteen correlation coefficients (shownin boldface letters) above or equal to 0.25 whichare also statistically significant (at one per centlevel) and different from zero.

After testing the adequacy of the dataand the explanatory variables, factor analysis isundertaken with those twelve company financialvariables. For determining the number of factorswhich are needed to represent the financial data,

1.00 0.07 *0.30 *0.32 -0.20 0.10 0.12 *0.52 *0.76 *0.55 0.03 0.08

0.07 1.00 *0.29 0.14 -0.12 -0.05 *0.46 -0.11 0.02 0.01 0.01 *0.36

*0.30 *0.29 1.00 *0.76 -0.22 0.01 *0.34 -0.01 *0.25 0.17 0.04 0.17

*0.32 0.14 *0.76 1.00 -0.24 0.01 0.19 0.00 *0.30 0.19 0.02 0.22

-0.20 -0.12 -0.22 -0.24 1.00 -0.24 -0.14 0.01 -0.15 -0.11 -0.10 -0.03

0.10 -0.05 0.01 0.01 -0.24 1.00 0.04 0.07 0.18 -0.05 -0.05 -0.10

0.12 *0.46 *0.34 0.19 -0.14 0.04 1.00 0.08 -0.08 -0.08 0.14 .07

*0.52 -0.11 -0.01 0.00 0.01 0.07 0.08 1.00 0.12 *0.47 -0.01 .06

*0.76 0.02 *0.25 *0.30 -0.15 0.18 -0.08 0.12 1.00 0.38 -0.06 0.00

*0.55 0.01 0.17 0.19 -0.11 -0.05 -0.08 *0.47 *0.38 1.00 -0.09 -0.01

0.03 0.01 0.04 0.02 -0.10 -0.05 0.14 -0.01 -0.06 -0.09 1.00 0.03

0.08 *0.36 0.17 0.22 -0.03 -0.10 0.07 0.06 0.00 -0.01 0.03 1.00

FinancialVariables

EPS Earningsgrowth

ROE ROCE DebtEquity

Beta E/P BV pershare

P/B MC Dividendyield

AR

EPS

EarningsGrowth

ROE

ROCE

DebtEquity

Beta

E/P

BV perShare

P/B

MC

DividendYield

AR

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EPS .854 .296 .044 .174 .014

Earnings growth -.043 .137 .837 .047 -.060

ROE .086 .836 .276 .062 .076

ROCE .119 .885 .125 .029 .026

DE -.054 -.285 -.077 -.617 -.173

Beta .038 -.096 -.047 .844 -.155

E/P -.001 .075 .692 .250 .357

BV per share .790 -.276 .110 -.019 .135

P/B .592 .429 -.174 .233 -.210

MC .779 .135 -.045 -.089 -.079

Dividend Yield -.020 .056 -.029 -.023 .904

AR .061 .157 .589 -.271 -.161

Eigen values 3.023 1.908 1.686 1.319 1.097

Variance explained in (%) 23.250 14.680 12.970 10.140 8.440

Cumulative (%) 23.250 37.930 50.900 61.040 69.480

Table 3: Varimax Rotated Factor Loading Matrix (2001-2010)

Rotated Component Matrix

VariablesComponent

1 2 3 4 5

capitalization and price-book ratio. This factoris positively loaded in favour of all of these fourvariables and represents the size and growthpotential of firms in the industry. Increasedearnings encourage the firms especially thegrowth firms to retain more amount of itsearnings for its further profitable investmentswhich will enhance the total value of the equityand the corresponding asset base on the balancesheet i.e. book value. Improving book valueshall attract more investors to the shares of such

IV. (B) Factor Analysis – Discussions

The discussions made in the followingparagraphs shall unfold the picture of thegroupings of company financials pertaining tothe firms sampled under the study based on theirco movement. They also identify the criticalfinancial variables which have significant effecton the movement stock prices in Indian context.

Factor 1 – Size and Growth Factor: This factorconsists of EPS, book value per share, market

Source: Compiled from SPSS Generated Result

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Factor 4 – Risk Factor: This factor consists ofbeta and debtequity proportion in the capitalstructure of the sample firms. When betaindicates magnitude and direction of movementof equity shares with respect to the generalmarket movement (proxy for market risk), thedebt equity ratio is a measure indicating thepossible variations in financial results of a firmunder changing conditions of business (representfinancial risk). This factor is positively loadedin favour of beta and negatively loaded infavour of debt equity ratio of firms. Negativeloading of this factor with regard to the debtequity ratio as against its positive loading withmarket sensitivity truly consistent with thecommon notion in investment management(Lasher 2003) that when the economic outlookis good, at low to moderate level of debt in thecapital structure of firms, the investors value thepositive effects of leverage a great deal andvirtually ignore concerns about increasedfinancial risks thereby the stock prices of suchfirms tend to rise at a rate higher than that ofmarket index.

Factor 5 – Income Factor: This factor is solelyconstituted by Dividend yield and is positivelyloaded with it. An increase in this factor indicatesa high increase in dividend per share withrespect to the market price. Even though thisfactor is an indicator of residual incomedistribution policy of firms, the absence of thesignificant correlation of this factor with any ofthe other eleven financial variables under studypose some problems in judging its impact onthe price movement of firms’ common stocksin the market. Such a situation indirectlyvalidates the argument of dividend irrelevancein valuation of firms in Indian stock marketconditions.

firms which push up its prices in the market andthereby higher Price-book ratio. Rising shareprice means increased market capitalisation orsize of the firms.

Factor 2 – Profitability Factor: This factorshows the operating as well as economicefficiency with which the firms are able to utilizethe funds invested in its business. This factorconsists of only two variables - return on capitalemployed and return on equity. This factor ispositively loaded to both of these profitabilitymeasures. The increase in this factor indicatesthe more profitable use of investments with thecompany and has a favourable effect on its shareprices and stock market movement. But, thereverse situation results in the loss of investorconfidence and market failures.

Factor 3 – Valuation Factor: This factorindicates how well the securities are valued inthe market, what determines its valuation andalso the valuation outcome. So this factor canbe termed as valuation indicators. This factorcomprises of earnings yield (just reciprocal ofPrice Earnings ratio), earnings growth andaverage return. This component is positivelyloaded to all three variables. Growth in earningsleads to larger increase in Earnings per Share(EPS) of firms compared to its market price ofshare (increase in earnings yield/decrease inprice earnings ratio). An increase in this factorindicates that the company has high earningsper share, but the market price of the share islow which implies that the investment in shareof such firm has good potential for growth interms of capital appreciation in the near futureas the share is undervalued at present in themarket. An increase in this factor over a periodof time has a positive effect on the share price,there by the investors could enjoy increasedreturns from their investments.

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V. Conclusion

Among the factors which have identifiedthrough factor analysis, the valuation factor ismore important as far as an equity investor isconcerned. This is because the financialvariables included in this factor can constitutethe major determinant variables which have asignificant bearing on the stock price movementor stock returns. So these variables – earningsgrowth and P/E ratio (or earnings price rate) canbe used as an effective tool to track the pricebehaviour of the stocks in the Indian stockmarket. So the Multifactor modelling usingearnings growth and Earnings price rate asexogenous factors and stock return asendogenous factor can make a good estimate ofthe real worth of a stock. Investors can find morevalue in understanding the variations in stockreturns at micro level. Since the stock returns ofdifferent companies from the same industrybehave differently at same economic andindustrial conditions, an understanding of theirrelative performance with the help of a multi-factor approach enable them better investmentchoices.

There are some limitations to this study.Firstly, the findings of this study are limited tothe post financial reform period for a singleindustry from a developing economy, India.Secondly, this study does not exclude thepossibility that there might be other factorsimportant to stock pricing. Finally, the empiricalmethodology pursued in the study is not usefulto ascertain the degree of variations in stockreturns explained by firm level factors; ratherjust explore the possible factors which can causevariations in stock prices. So a regressionmethodology under panel data framework basedon better specified sample covering longer timeperiod and multiple industries and exploring theexistence of other pricing factors are certainlyvalue lines of future research.

References

Athanassakos, G. (2009). Value versus GrowthStock Returns and the Value Premium:The Canadian Experience 1985–2005.Canadian Journal of AdministrativeSciences, 26, 109–121.

Basu, S. (1977). Investment Performance ofCommon Stocks in relation to their Priceto Earnings Ratios: A Test of the EfficientMarket Hypothesis. Journal Finance, 32,663-681.

Beckers, S., Gregory, C. and Ross, C. (1996)National versus Global Influences onEquity Returns, Financial AnalystsJournal, 52(2): 31–39.

Chan, L.K.C., Hamao,Y., & Lakonishok, J.(1991). Fundamentals and Stock Returnsin Japan, Journal of Finance, 32, 663-682.

Fama, E.F.& French, K.R. (1992).The Cross-Section of Expected Stock Returns.Journal of Finance, 47, 427-465.

Grinold, R., Andrew, R. & Dan, S. (1989). GlobalFactors: Fact or Fiction? Journal ofPortfolio Management, 16(1), 79–89.

Kaiser, H.F. (1974). An Index of FactoralSimplicity. Psychometrika, 39, 31-36.

Lakonishok, J., Shleifer, A. & Vishny, R. (1994).Contrarian Investment, Extrapolation, andRisk. Journal of Finance, 49, 1541-78.

Leledakis, G. & Davidson, I. (2001). Are TwoFactors enough? U.K Evidence. FinancialAnalysts Journal, 57, 96-105.

Malkiel, B.G. & Cragg, J.G. (1970).Expectations and the Structure of SharePrices. American Economic Review,September, 601-617.

Saji, T.G. (2012). Does Value OutperformGrowth in a Downturn? IOSR Journal ofBusiness and Management, 4(6), 11-17.

Sehgal, S. and Tripathi, V. (2007) Value Effectin Indian Stock Market, The ICFAI Journalof Applied Finance, 13 (1): 23-36

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Factors Affecting Green Brand Equity (GBE) of theCustomers of Two and Three Wheelers:An Application of Logistic Regression

Dr. P.N. HarikumarAssociate Professor

Post Graduate Department of Commerce, Catholicate College, Pathanamthitta, Kerala, India.Email: [email protected]

Dr. K.S. ChandrasekarProfessor

Institute of Management in Kerala (IMK), School of Business Management& Legal Studies, University of Kerala, Thiruvananthapuram, Kerala, India.


Abstract

The production, marketing and use of vehicles affect our natural and green environment muchworse than other industries due to the pollution caused by emission and effluent of vehicles.Chemical effluent and emission from the automobile sector are harmful to our environmentand the living organisms on the earth. Therefore, automobile companies are more concentratedon bringing ‘green effect’ in their production and marketing functions with the aim of gettingan image as ‘green companies’. They declare that they are more socially responsible to theliving organism in the green environment. They design, develop, produce and modify thestructure of the vehicle by re-engineering their processes for reducing the detrimental impacton the natural and green environment. At the same time, these companies attract the prospectiveenvironmentally-conscious customers by claiming green effect in all these functions and try tosatisfy the customers by launching environment-friendly vehicles in the market. Noticeably,how the various Green Marketing Practices (GMP) of these companies affect the purchasingbehaviour of customers, and how they react and respond towards these practices are normallyunknown to these companies. Similarly, the perception and response of the customers ofautomobile industries towards the GMP, the degree of satisfaction over these practices, howfar the environmental effect of these vehicles affects their trust and loyalty, and finally, how fartheir trust and loyalty affect customers’ Green Brand Equity (GBE) are normally not predictable.In this study, the authors analyse the impact of Green Satisfaction (GS), Green Trust (GT) andGreen Loyalty (GL) on the GBE of the customers of two-wheelers and three-wheelers inKerala.

Keywords: Brand Equity – Green Brand Equity – Logistic Regression

ISSN 2321 - 371X

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I. Introduction

‘Green Marketing’ is a holistic marketingconcept wherein the production, marketing,consumption and disposal of products andservices happen in a manner that is lessdetrimental to the environment, with growingawareness about the implications of globalwarming, non-biodegradable solid waste,harmful impact of pollutants, etc. Both marketersand consumers are becoming increasinglysensitive to the need for switching over to ‘greenproducts and services’. Green marketing is theprocess of developing products and services andpromoting them to satisfy the customers whoprefer products of good quality, performance andconvenience at affordable cost, which at thesame time do not have a detrimental impact onthe environment. It includes a broad range ofactivities like product design and development,product modification, changing the productionprocess, modified advertising, change inpackaging, and change in the style ofconsumption and change in the attitude afterconsumption, etc., aimed at reducing thedetrimental impact of products, theirconsumption and disposal, on the environment.Companies all over the world are striving toreduce the impact of products and services onthe climate and other environmental parameters.Marketers are taking the cue and are going green.Green marketing is a vital constituent of theholistic marketing concept. It is particularlyapplicable to businesses that are directlydependent on the natural environment.

Many global players in diverse businessesare now successfully implementing greenmarketing practices (GMP). Today, manycompanies have accepted their responsibility not

to harm the environment. So, products andproduction processes become cleaner, and morecompanies go green because they realize thatthey can reduce pollution and keep the naturalenvironment greener at the same time. Green

marketing is a creative opportunity to innovatein ways that make a difference and at the same

time achieve business success by designing andmodifying the products in a way totally suitable

to nature. As business activities caused many ofthe environmental problems in the past and still

do, there is increasing recognition that Greenbusiness is vital in the process of a more

ecological, sustainable society. Companies,especially multinationals, play an essential role

in the world economy, and they have also theresources and capacity to put ecological

solutions into practice. Companies have aresponsibility to drive the development towards

greater sustainability and becoming greener, sothat a company’s aim is to create markets for

more environment-friendly products andservices and educate and influence customers

to change their black behaviour into Greenbehaviour. At least two motives for companies

to change to more environmentally appropriatestrategies and practices are protecting the

environment and creating a green market for thegreen customers. Companies can save money

by reducing the amount of raw material andenergy used in production. Becoming more eco-

oriented and offering environmental-friendlyproducts might result in increased market shares

as well as an improved company’s greenorientation towards environment and thus,

companies gaining first-mover advantages ingreening should become more competitive. This

first-mover advantage, however, is not sufficient

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anymore as more companies orient themselvesecologically and customers can choose from avariety of eco-designed products. Thus, greenmarketing incorporates a broad range ofactivities, including product modification,changes in the production process, packagingand modifying advertising. Green Marketingmeans “all activities designed to generate andfacilitate any exchange intended to satisfy humanneeds or wants, such that satisfying these needsand wants occurs with minimal detrimental inputon the natural environment.” Green marketingmust satisfy two objectives: improvedenvironmental quality and customer satisfaction.

The current rapid growth in the economyand the patterns of consumers’ consumption andbehaviour worldwide are the main causes ofenvironmental deterioration. As the environmentcontinues to worsen, it has become a persistentpublic concern in the developed countries andhas recently awakened developing countries tothe Green Movement. The obvious assumptionof Green marketing is that potential consumerswill see in the ‘green’ product an additionalbenefit and adjust their purchasing decisionsaccordingly. Moreover, the trend of the EUcountries, and even of our own land, is to noticewhat they look like and what the product isworth. It remains to be seen to what extentconsumers are willing to pay extra for a greenproduct. In this respect, consumers are highlysensitive to the environmental impacts ofproducts and to their health.

As customers are aware of theenvironmental protection, manufacturers arebound to design and produce their productsmore environmental consciousness in bothdesign and manufacturing. It has been proved

that the green design should incorporate thevoices from both customers and producers atthe same time. Customer needs might be thedriving force, while producers are asked to doso from cost, technical ability, and other aspects.It is important to know what kind of greenproducts is acceptable by the marketplace, andit is also essential to understand if manufacturingthis type of green products is possible from theangle of cost, material, marketability, and otheraspects. Therefore, a consensus should bereached between customers and manufacturerssince it might be unreasonable to make undesiredproducts with unacceptable costs from customerviewpoints. The philosophy of green designshould begin with the above consensus betweencustomers and manufacturers.

II. Concepts Used

II. (A) Green Satisfaction (GS)

Green satisfaction means the satisfactionof the customers of vehicles which reduce theoutflow of pollutants so that their health and theGreen environment will not be badly affected.Green satisfaction is a customer-sensedconsumption/use which fulfils some need, goal,desire about environmental or Green concernsand this fulfilment is pleasurable. It was theoutcome of consumption that the performancemet or exceeded the green needs of customers,the requirements of environmental regulations,and the sustainable expectation of society.

II. (B) Green Brand Image (GI)

A Green brand identity is defined by aspecific set of brand attributes and benefitsrelated to the reduced environmental impact ofthe brand and its perception as beingenvironmentally sound. A well-implemented

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Green brand identity should provide benefits toenvironmentally conscious consumers. Theimage of the vehicle companies due to therecognition of their name as the perfect one toproduce vehicles with the latest technology formaking them more eco-friendly and use themwith low energy and waste is GI.

II. (C) Green Brand Trust (GT)

The trust of the customers towards avehicle brand due to its Green features suitableto the Green environment gives satisfaction tothe customers while these vehicles are in use.Green consumers’ trust in eco-friendly productsis treated as reliability and safety of the eco-friendly product, by which consumers may bepersuaded from their own experience toconsume eco-friendly products

II. (D) Green Brand Loyalty (GL)

Green customer loyalty is the urge of thecustomer to maintain a relation with an institute,which involves environmental or Greenconcerns. The customer is then committed to re-buy or re-patronize a preferred productconsistently in the future. The loyalty of thecustomers due to their satisfaction over the Greenfeatures of the vehicles, forces them to purchasethe same brand when they decide to change theirmodel.

II. (E) Green Brand Equity (GBE)

Customer-based Green Brand Equity isdefined from the perspective of the customer andis based on consumer knowledge, familiarity,and associations with respect to the features ofa Green vehicle. Proponents contend that for aGreen brand to have value, it must be valued bythe customer. A thorough understanding of

Green Brand Equity from the customer’s pointof view is essential for successful Green BrandManagement of the vehicle companies.

III. Objective and Methodology

The objective of the paper is to discussthe behaviour of customers of two-wheelers andthree-wheelers in view of the green marketingpractices (GMP) followed by the two-wheelerand three-wheeler companies and to evaluatetheir Green Satisfaction (GS), Green Trust (GT)and Green Loyalty (GL) on the GBE. For thispurpose 650 customers were selected from thedata bases of different Regional TransportOffices (RTO) in Kerala by applying the Multi-stage stratified random sampling method and thedata were collected by using a structuredinterview schedule.

IV. Hypothesis

The changes in the Green satisfaction(GS), Green Trust (GT) and Green Loyalty(GL) of the customers do not make anychange in the Green Brand Equity (GBE) ofthe customers.

V. Statistical Method for Analysis

The hypothesis is tested with OmnibusTests of Model Coefficients, and Hosmer andLemeshow Test in the Logistic regression model.

VI. Results and Discussion

Table 1 clearly indicates the correlationamong the GS, GT, GL and the GBE of thecustomers of two-wheelers and three-wheelers. These four variables are highlyinterconnected and inter-correlated, as thecorrelation coefficients are statisticallysignificant at 1 per cent level of significance(p<.05 in all cases).

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Table 1: Correlation Matrix

GreenSatisfaction

Green Trust GreenLoyalty

Green BrandEquity

1 .634** .777** .764**

.000 .000 .000

650 650 650 650

.734** 1 .937** .893*

.000 .000 .018

650 650 650 650

.777** .737** 1 .970**

.000 .000 .000

650 650 650 650

.764** .793* .870** 1

.000 .018 .000

650 650 650 650

PearsonCorrelation

Sig. (2-tailed)Green Satisfaction

N

PearsonCorrelation

Green Trust Sig. (2-tailed)

N

PearsonCorrelation

Green Loyalty

PearsonCorrelation

Green Brand Equity

Sig. (2-tailed)

N

Sig. (2-tailed)

N

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

The logistic model is specified as;

Where;

This model is used to explain the givenproblem that GBE is affected by GS, GT, andGL. Therefore, Logistic Regression Model isapplied to measure the GBE in terms of GS, GTand GL. The results are reported below.

Factors Sig.

Source: Survey data

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Table 2: Omnibus Tests of Model Coefficients

Step 500.056 3 .000**

Block 500.056 3 .000**

Model 500.056 3 .000**

Chi-square Df Sig.

Step 1

Source: Survey data

*Significant at 5 per cent level of significance** Significant at 1 per cent level of significance

The omnibus test is the starting point and it is seen that the model is statistically significant(p=000<.01).

Table 3: Logistic Regression Model Summary

1 384.962a .537 .722

-2 LogLikelihood

Cox & SnellR Square

NagelkerkeR Square

Step

a. Estimation terminated at iteration number 7 because parameter estimates changed by less than .001.

Source: Survey data

As per Table 3 Model summary, Cox andSnell R square and Nagelkerke R square are0.537 and 0.722 respectively indicating that the

percentage of GBE is accounted for by allincluded predictor variables such as GS, GTand GL.

Table 4: Classification Table of Logistic Regressiona

ObservedPredicted

Step 1

GBE CODED Percentage Correct.00 1.00

Low 242 32 88.3

High 37 339 90.2GBE CODED

Overall Percentage 89.4a. The cut value is .500

Source: Survey data

prediction from the model turns out to be88.3 and 90.2 per cent respectively for the

I t may be observed f rom theClassification Table (Table 4) that correct

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two levels of GBE. This is held statisticallyva l id as seen f rom the Hosmer and

Lemeshow Test (value of the Chi-square97.693 with p=0.000<0.01)

Table 5: Hosmer and Lemeshow Test

Hosmer and Lemeshow Test

Step Chi-square Df Sig.

1 97.693 8 .000**

Source: Survey data*Significant at 5 per cent level of significance** Significant at 1 per cent level of significance

Finally, the impact of GS, GT, and GL onGBE is individually evaluated and presented inthe equation.

Table 6: Logistic Regression Co-efficient

Source: Survey data*Significant at 5 per cent level of significance ** Significant at 1 per cent level of significance

GS .260 .060 19.002 1 .000** 1.297

GT .490 .069 50.669 1 .000** 1.633

GL .198 .031 40.184 1 .000** 1.219

Constant -31.288 2.743 130.122 1 .000** .000

B S.E. Wald df Sig. Exp(B)

Variables in the Equation

Step 1a

a. Variable(s) entered on step 1: GS, GT, GL.

All the variables in the equations such asGS, GT, and GL can better explain the level ofGBE, as the variables are statistically significantand its Exp (B) is greater than 1. It is inferredthat any positive change in these predictorvariables turns out to make positive significantchanges in GBE.

VII. Conclusion

Based on the significant values of Chi-square in the Omnibus test of model coefficients,Nagelkare R square, Chi-square value in the

Hosmer Lemeshow test and the significant betacoefficients and Exp (B) in the model, thishypothesis is rejected with the conclusion thatGBE is always affected by the GS, GT, and theGL of the customers and any change in the GS,GT and GL changes the GBE of the customerscorrespondingly. Moreover, by examining theoutput of logistic regression model, the changein the probability of GS, GT, and GL affects thechange in the probability of GBE. This can bevalidated by observing the significant Chi-square values obtained in the Omnibus test of

17 ••


Banerjee, S., Gulas, C., & Iyer, E., (1995),

Shades of Green: A Multidimensional

Analysis of Environmental advertising,

Journal of Advertising, 24(2), pp. 21–31.

Barr, S., Ford, N., & Gilg, A., (2003), Attitudes

towards Recycling Household Waste in

Exeter, Devon: Quantitative and

Qualitative Approaches, Local Environment,

8, pp. 407 421.

Crane, A. and Peattie, K., (1999), Has Green

Marketing Failed or was it never Really

Tried? Business Strategy and

Environmental Conference, Leeds,

September, pp. 120-129.

Danis, J, (1992), Ethics and Environmental

Marketing, Journal of Business Ethics,

2(2), 81-87, pp. 122-139.

D’Souza, C., and Peretiatko, R., (2002), The

Nexus between Industrialization and

Environment : A Case Study of Indian

Enterprises, Environmental Management

and Health, 13(1), pp. 80-97.

Jain, S. K. and Kaur, G., (2003), Strategic Green

Marketing : How should business Firms

Go about Adopting it?, Indian Journal of

Commerce, 55(4); Oct-Dec : 1-16.

Titterington, A, Davis, C. and Cochsane, A.,

(1996), Forty Shades of Green: A

Classification of Green Consumering in

Northern Ireland, Journal of Euro

Marketing, 5(3) : 35-43.

model co-efficients, Nagelkare R square, Chi-

square value in the Hosmer Lemeshow test and

significant beta co-efficients and Exp (B) in the

Logistic Regression Model.

References

Abdel-Rahman, A., (1996), Administrative

Efficiency and Effectiveness: An IslamicPerspective, The Islamic Quarterly, 40,139–154.

Ajzen, I., & Driver, B., (1992), Prediction ofLeisure Participation from Behavioral,

Normative, and Control Beliefs: An

Application of the Theory of PlannedBehavior, Leisure Sciences, 13, pp. 185–191.

Anderson, J., & Gerbing, D., (1988), Structural

Equation Modeling in Practice: A Review

and Recommended Two-step Approach,Psychological Bulletin, 103, pp. 411–423.

Antil, J., (1984), Socially Responsible Consumers:

Profile and Implications for Public Policy,Journal of Macro-marketing, 4, pp.18–39.

Bagozzi, R., Yi, Y., & Phillips,W., (1991), Assessing

Construct Validity in OrganizationalResearch, Administrative Science Quarterly,36, pp, 421–458.

Balderjahn, I., (1988), Personality Variables andEnvironmental Attitudes as Predictors of

Ecologically Responsible Consumption

Patterns, Journal of Business Research, 17,pp. 51–56.

Bamberg, S., (2003), How does Environmental

Concern Influence Specific Environ-mentally Related Behaviors? A New

Answer to an Old Question, Journal of

Environmental Psychology, 23, pp. 21–32.

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Ajimon George Associate Professor

Department of Commerce, Marian college, Kuttikkanam, Kerala, India.E-mail: [email protected]

Dr. G.S. GireeshkumarAssociate Professor

Research and P.G. Department of Commerce, Nirmala College, Muvattupuzha, Kerala, India,E-mail: [email protected]

TAM Constructs and Extent of Use of Internet Banking:An Empirical Analysis

Abstract

The beginning of empowerment of banking customers for their own transactions started withthe evolution of ATMs as a delivery channel. The emergence of Self Service BankingTechnologies (SSBT) such as ATM, Internet Banking (IB) and Mobile Banking (MB) usheredthe concept of anytime and anywhere banking. Internet Banking (IB) is a method of bankingthat allows a customer to perform banking transactions through a bank’s website hosted inthe internet. The objective of the study is to examine the perceptions of IB users about TAMconstructs by categorizing them based on their extent of IB use. Users are classified into low,medium and high users and their differences in perceptions about TAM constructs areinvestigated and found that as their perceptions increases, their IB use also increases.

Keywords: Self Service Banking Technology, Internet Banking, Technology Acceptance Model,Perceived Ease of Use, Perceived Usefulness

bank customers to get access to their accountsand general information on bank products andservices through the use of bank’s website,without the intervention or inconvenience ofsending letters, faxes, original signatures andtelephone confirmations (Henry, 2000 cited inDube et. al., 2009). Pikkarainen (2004) definesInternet Banking as an “Internet portal, throughwhich customers can use different kinds ofbanking services ranging from bill payment tomaking investments”. Thus, internet banking is

I. Introduction

The advent of IT has contributed to theintroduction of more flexible and user friendlySelf Service Banking Technologies (SSBT). Thebeginning of empowerment of bankingcustomers for their own transactions started withthe evolution of ATMs as a delivery channel.The emergence of SSBT such as ATM, InternetBanking (IB) and Mobile Banking (MB) usheredthe concept of anytime and anywhere banking.Internet Banking refers to systems that enable

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studies and it has been found that its ability toexplain intention and attitude towards using ITis better than TRA (Theory of Reasoned Action)and TPB (Theory of Planned Behaviour)(Mathieson, 1991). TAM is one of the mostutilized models for studying IS (InformationSystem) acceptance (Al-Gahtani, 2001). TAMis a powerful, highly reliable, valid and robustpredictive model that may be used in a varietyof contexts (King and He, 2006).

Suh and Han (2002) used TAM model andfound that PEOU and PU were significantdeterminants of attitude which in turn hadsignificant effect on intention and finallyintention had significant effect on actual usageof IB in Korea. Bomil and Ingoo (2002) foundthat PEOU has significant effect on use of IB.Significant effects of PEOU and PU onbehavioural intention to use IB were observedby Wang et al., (2003) and Aldas-Manzasno etal., (2009). PU was found to be one of the mainfactors influencing Online Banking (OB)acceptance in Finland (Pikkarainen, Pikkarainen,Karjaluto, & Pahnila, 2004). PU was found tobe the primary reason that Estonian bankcustomer use IB (Kent, Katri & Daniel, 2005).PU was found to have a significant impact oncontinued usage of IB in UAE (Awamleh &Fernades, 2006). PU is a major determinant ofcustomer intention to use IB in Hongkong whilePEOU is a secondary determinant (Edwin, David& Andy, 2006). Acceptance of IB in India wasfound to have been significantly influenced byPEOU and PU (Sudeep, 2008).

A review of literature revealed that studiesthat examined the perceptions of IB users aboutTAM constructs by classifying them into low,medium and high users are hardly found in theliterature. It is quite natural that the extent of IBuse varies among users. The perceptions of lowusers may be different from medium and high

the use of internet by bank customers fortransacting their banking transactions. In otherwords, it is the use of internet by banks to deliverbanking services to customers irrespective oftheir geographical location. It is the delivery oftraditional bricks and mortar banking servicesvia non personal communication channel, viz.,internet.

II. Review of Literature

Internet Banking is an innovation in thefield of banking technology. The literature oninnovation adoption showed that there areseveral theories that explain the factorsinfluencing the adoption of new technologies.Important among them are; Theory of ReasonedAction (TRA), Innovation Diffusion Theory(IDT), Technology Acceptance Model (TAM),Theory of Planned Behaviour (TPB) andDecomposed Theory of Planned Behaviour(DTPB). The most widely used amongresearchers is TAM. Davis (1989) developedTechnology Acceptance Model (TAM),according to which ‘users’ adoption of computersystem depends on their behavioural intentionto use, which in turn depends on attitude,consisting of two beliefs, namely perceived easeof use and perceived usefulness. TAM is anadaptation of TRA in the Information System(IS) field. TAM theorizes that a technology thatis easy to use, and if found to be useful will havea positive influence on the intended user’sattitude which in turn increases intentiontowards using the technology that generates theadoption behaviour. Perceived usefulness (PU)is defined as the degree to which ‘a personbelieves that using the system will enhance hisor her performance’. Perceived ease of use(PEOU), on the other hand, is defined as thedegree to which ‘a person believes that usingthe system will be free of mental effort’. TAMhas been the instrument in many empirical

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sons. Therefore, IB users were located fromATM outlets. The customers who use IB for aperiod of one year or above, visiting ATM out-lets on the days of survey were selected to par-ticipate in the survey. The questionnaire waspiloted on 406 respondents. The responses aremeasured on a five point Likert scale rangingfrom strongly agree (5) to strongly disagree (1)for TAM constructs. The construct score wascalculated by adding the scores of individualmeasures in the construct. The extent of IB useis measured on a four point scale as ‘Regularly’,‘Occasionally’, ‘Rarely’ and ‘Never’ by assign-ing them scores of four, three, two and onerespectively. The hypotheses were tested usingone-way ANOVA. For performing one-wayANOVA, the assumption of homogeneity ofvariance among different independent sampleswas checked using Levene’s test of equality ofvariance. If the observed significance ofLevene’s test is greater than 0.05, the assump-tion of homogeneity of variance is met and viceversa.

IV. Hypotheses

Based on the objective, the followinghypotheses were formulated and tested.

H01:

Perceived Ease of Use (PEOU) doesnot significantly differ among low, mediumand high users of IB.

H02

:Perceived Usefulness (PU) does notsignificantly differ among low, medium andhigh users of IB.

IV. Description of Measures of TAM Constructs

Based on the review of literature, three andfour measures were identified to capture theperceptions of IB users about PEOU and PUconstructs respectively. The descriptions ofmeasures are exhibited in Table 1.

users. Hence, there is a need to investigatewhether the perceptions of different categoriesof IB users are different from one another. Thisstudy thus aims to fill the gap in the literatureand hence the study is quite relevant and timelyfrom the point of view of both academic andbanking industry.

III. Objective, Materials and Methods

The specific objective of the study is toexamine the perceptions of IB users about TAMconstructs by categorizing them based on theirextent of IB use. The study is empirical in natureand survey method has been used to collectprimary data from 406 IB users. Therespondents were identified through differentstages of selection. In the first stage of sampleselection, banks were divided into three strata(categories) – public sector banks, old privatesector and new generation banks. State bank ofIndia, State Bank of Travancore, Canara Bankand Punjab National Bank were selected fromthe public sector. Federal Bank and South IndianBank were selected from the old private sector.HDFC Bank, ICICI Bank and Axis Bank wereselected from the new generation banks. Thesebanks were selected because they are in theforefront in harnessing technology and have wonaccolades for their excellence in bankingtechnology from Institute for Development andResearch in Banking Technology (IDBRT) invarious years.

To accommodate geographical consider-ations, as the second stage of sample selection,one district each from North Kerala, CentralKerala and South Kerala were selected. Accord-ingly North Kerala is represented by Kozhikode,Central Kerala by Ernakulam, and South Keralaby Thiruvanathapuram. A sampling frame whichcontains the contact details of IB users couldnot be obtained from banks because of bank’sprivacy, topic sensitivity and competition rea-

21 ••


Measures

Perceived Ease of Use (PEOU):

The text on the IB website is easy to read and understand

I find IB easy to use

To become skilful (ability to use advanced options) in IB is easy

Perceived Usefulness (PU):

IB saves time

IB is available at anytime (24 x 7)

IB is accessible from anywhere

IB is less expensive

Table 1: Measures of TAM Constructs

the frequency of use determines the extent ofIB use. If they are used more frequently theextent of use is high and vice versa. Responsesfor the extent of use of 17 major services in IBare obtained. The services are (1) Checkbalances (2) View account statements/transaction history (3) Fund transfer (RTGS/NEFT) from one account to another (4) Mobilerecharging (5) Pay direct and indirect taxes (6)Booking for Train/Bus/Flight or Movie tickets(7) Payment of utility bills (insurance premium,rent, phone, mobiles etc.) (8) collect informationrelated to new services from the bank’s website(9) Apply online for loan or for fixed/Recurringdeposits (10) Request for demand draft/pay order(11) Request for issuing ATM/Debit card (12)Request for cheque book or pass book (13)Enquiry about cheques under collection (14)TDS enquiry (15) Request for pre-closure of loan/deposit etc. (16) Online shopping (17) Religiousofferings

The overall score of the extent of use wascalculated by adding the individual scores ofeach of the 17 services and the descriptive are:minimum score 21, maximum score 66, mean

V. Results and Discussion

V. (A) Sample Profile

Out of 406 respondents, 76 per cent aremale and 24 per cent are female. About 74 percent of the respondents are below 35 years ofage and 26 per cent are above 35 years of age.About three-fourth (74 per cent) of the totalrespondents are Post Graduates/Professionalsand out of the remaining, 22 per cent aregraduates and a meagre 4 per cent areundergraduates. This indicates that most of theIB users are well educated banking customers.About 71 per cent of the respondents areemployees, 16 per cent are self employedprofessionals like Chartered Accountants, CostAccountants, Company Secretaries, Doctors,Lawyers etc, and the rest 13 per cent are studentsand businessmen. Majority (66 per cent) of therespondents have monthly income ranging from15,000 to 45,000.

V. (B) Extent of IB Use and Classification of Users

The extent of use indicates the frequencyof use of each of the services. In other words,

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score 36.62, Standard deviation 7.99. Based onIB use, users were classified in to three groups

as low, medium and high users. The criteria forclassification are given in Table 2.

Table 2: Criteria for Classification of IB Users as Low, Medium and High

30 41 < 30 30 - 41 > 41

1st Quartile 3rd QuartileBased on quartiles of extent of use of 17 types of IB services

Low Use Medium Use High Use

The first and third quartile values of theoverall score are 30 and 41 respectively. IB userswith overall score less than the first quartile (30)are classified as low users, those with overall scorebetween first quartile and third quartile (30 – 41)are classified as medium users and those withoverall score above the third quartile (41) are

classified as high users. Low, medium and highusers are collectively tagged ‘IB Usage Group’.

V. (C) Testing of Hypotheses

Table 3 exhibits the descriptive statisticsand the results of one way ANOVA of PEOUconstruct.

Table 3: Descriptive Statistics and Results of Levene’s Test and ANOVA of PEOU

Type of IB User Levene’s Test One way ANOVA

Low Medium High Total Statistic Sig. F Sig.

Mean 7.87 8.30 8.79 8.31

SD 1.18 1.25 1.06 1.23 1.729 0.179 15.565* 0.000

N 108 198 100 406

Source: Primary Data. *Significance at 1 per cent level. SD – Standard Deviation

It is clear from Table 3 that mean values

of three groups are different and it is lowest (7.87)

among low users as compared to medium users

(8.30) and high users (8.79). The statistical

significance of the mean differences was tested

using one-way ANOVA. The significance of

ANOVA test 0.005 is less than 0.05 and therefore

H01

is rejected. It means that the perception of

low, medium and high users about PEOU construct

is statistically different. In order to understand the

mean difference of which of the groups are

significant, multiple comparisons using post hoc

[LSD] test was performed and the result is presented

in Table 4.

DS

Source: Compiled by researcher

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Table 4: Significance of Mean Difference of Perceived Ease of Use – Post Hoc

Usage Group (I) Usage Group (J) Mean Difference (I-J) Sig.

Medium Users -.43266* 0.002

High Users -.91963* 0.000

High Users Medium Users .48697* 0.001

*Significance at 1 per cent level

It is found that the mean differencebetween low users and medium users, low users

and high users, high users and medium users isstatistically significant (p < 0.01) at 1 per cent

significance level. High users perceive IB moreeasy to use than medium and low users. The

conclusion emerging from the analysis is thatas the perception of ease of use increases, userstend to become high users of IB.

Table 5 exhibits the descriptive statisticsand the results of one way ANOVA of PUconstruct.

Table 5: Descriptive Statistics and Results of Levene’s Test and ANOVA of PU

Type of IB User Levene’s Test One way ANOVA

Low Medium High Total Statistic Sig. F Sig.

Mean 16.86 18.07 18.53 17.86

0.778 0.460 19.239* 0.000SD 2.42 1.91 1.87 2.14

N 108 198 100 406

Source: Primary Data. *Significance at 1 per cent level

It is clear from Table 5 that mean values of threegroups are different and it is lowest (16.86)among low users as compared to medium users(18.07) and high users (18.53). The statisticalsignificance of the mean differences was testedusing one-way ANOVA. The significance ofANOVA test 0.005 is less than 0.05 and

therefore H02

is rejected. It means that theperception of low, medium and high users aboutPU construct is statistically different. In orderto understand the mean difference of which ofthe groups are significant, multiple comparisonsusing post hoc [LSD] test was performed andthe result is presented in Table 6.

Table 6: Significance of Mean Difference of PU – Post Hoc

Usage Group (I) Usage Group (J) Mean Difference (I-J) Sig.

Low UsersMedium Users -1.20960* 0.000

High Users -1.66889* 0.000

High Users Medium Users .45929 0.068

*Significance at 1 per cent level

Low Users

DS

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It is found that the mean difference

between low users and medium users, low users

and high users is statistically significant (p < 0.01)

at 1 per cent significance level. However, the

mean difference between high users and medium

users is not statistically significant (p > 0.01). It

indicates that high users and medium users

perceive IB more useful than low users. The

conclusion emerging from the analysis is that

as the perception of usefulness increases, extent

of IB use increases.

VI. Conclusion

The finding that as the perception of ease of use

increases, users tend to become high users of

IB, points to the practical implication that IB

software developers should pay attention on

making the user interface easier to use. In

addition to PEOU, as the perception of usefulness

increases, extent of IB use increases. This finding

refers to the fact that customers use IB for the

benefits they get in comparison to other banking

delivery channels, especially banking at physical

branches. These findings lead to the conclusion

that when IB is perceived as easy to use and

useful, adoption of IB among customers would

be greater. Practical implication of these results

is that IB service providers need to highlight the

benefits of IB among the customers and also

make IB interface simple and easy to use.

References

Aldas-Manzasno, J., Navarre-Lassala, C., Mafe-Ruiz, C. & Blas-Sanz, S. (2009) Keydrivers of internet banking services use.Online Information Review, 33(4), 672-695. doi:10.1108/14684520910985675.

Al-Gahtani, S. (2001). The applicability of TAMoutside North America: an empirical testin the United Kingdom. InformationResource Management Journal, 14 (3),37-46.

Awamleh, R. & Fernandes, C. (2006). Diffusionof Internet Banking amongst educatedconsumers in a high income non-OECDcountry. Journal of Iinternet Banking andCommerce, 11 (3). Retrieved from http://www.arraydev.com/commerce /JIBC /2006-12/Awamleh.html

Bomil, S. & Ingoo, H. (2002). Effect of trust oncustomer acceptance of Internet Banking.Electronic Commerce Research andApplications, 1, 247-263.

Davis, F. (1989). Perceived usefulness,perceived ease of use, and user acceptanceof information technology. MIS Quarterly13(3), 319-340.

Dube, T., Chitura, T. & Runyowa, L. (2009).Adoption and use of internet banking inZimbabwe: An exploratory study. Journalof Internet Banking and C o m m e r c e ,14(1), 1-13. Retrieved from http://www.arraydev.com/commerce/jibc/2009-04/Dube%20etal.pdf

Edwin, C. T.C., David, Y.C, & Andy, Y. C.L.(2006). Adoption of internet banking: Anempirical study in Hong Kong. DecisionSupport Systems, 42, 1558-1572. doi.org/10.1016/j.dss.2006.01.002

Kent, E., Katri, K. & Daniel, N. (2005).Customer acceptance of internet bankingin Estonia.International Journal of BankMarketing, 23(2), 200-216.doi:10.1108/02652320510584412

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King, W. R. & He, J. (2006). A meta analysisof the technology acceptance model.Information & Management, 43(6), 740-755.

Mathieson, K. (1991). Prediciting userintensions: comparing the TechnologyAcceptance Model with the Theory ofPlanned behavior. Information SystemsResearch, 2(3),173-191.

Pikkarainen, T. Pikkarainen, K., Karjaluto,H. & Pahnila, S. (2004). Consumeracceptance of online banking: anextension of the Technology AcceptanceModel. Internet Research: ElectronicNetworking Applications and Policy,14 (3), 224-235.doi:10.1108/10662240410542652

Sudeep, S. (2008). Internet Banking and

Customer Acceptance: The Indian

scenario (Doctoral dissertation).

Retrieved from http://dyuthi.cusat.ac.in/

xmlui /bitstream/h a n d l e / p u r l / 2 0 1 1 /

Dyuthi-T0419.pdf?sequence=6

Suh, B. & Han, I. (2002). Effect of trust on

customer acceptance of internet banking.

Electronic Commerce Research and

Applications, 1(3-4), 247-263.

Wang, Y.S., Wang, Y.M., Lin, H.H., & Tang, I.

(2003). Determinants of user acceptance

of Internet Banking: an empirical study.

International Journal of Service Industry

Management, 14(5), 501-519.

doi: 10.1108/09564230310500192

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Recruitment Policy of the Hotel Industry in Kerala:An Empirical Analysis

T. RajeshAssistant Professor

Mannaniya College of Arts and Science, Pangode, Thiruvananthapuram, Kerala, India.Email: [email protected]

Dr. R. VasanthagopalAssistant Professor

Institute of Management in Kerala (IMK), University of Kerala,Thiruvananthapuram, Kerala, India.Email: [email protected]

Abstract

Recruitment forms a prominent stage in the process which continues with selection and ceaseswith the placement of the candidates. Unlike other service organizations, it is observed that inKerala there is a lack of scientifically planned recruitment procedure in the hotel industry.They usually follow traditional and abandoned techniques of recruitment and, therefore, fail toattract well trained hospitality experts to this sector. The present study intends to make anempirical investigation into the recruitment policy of employees’ in hotel industry in Kerala, animperative and venerable service sector. The empirical study is based on variables viz. awarenessof the nature and responsibilities of the job, awareness of monetary packages, awareness ofnon-monetary incentives, awareness of promotion and career advancement opportunities andeffectiveness of recruitment policy. The study concludes that more than one-half of the employeesare satisfied with the recruitment policy of the hotel industry in Kerala.

Key words : Career advancement – Human resource – Monetary packages – Recruitment policy

I. Introduction

Human resources are the most importantassets of an organization. The success or failureof an organization is largely dependent on thecalibre of the people working therein. Withoutthe positive and creative contributions frompeople, an organization cannot progress andprosper. In order to achieve the goals of anorganization, it needs to recruit people with

requisite skills, qualifications and experience.Recruitment forms a prominent stage in theprocess which continues with selection andceases with the placement of the candidates(Kempner, 1971). It is the next step in theprocurement function, the first being themanpower planning (Mamoria, 1984).Recruiting refers to the process of attractingpotential job applicants from the available labourforce. Every organization must be able to attract

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a sufficient number of job candidates who havethe abilities and aptitudes needed to help theorganization achieve its objectives. Therecruitment process also interacts with otherpersonnel functions, especially performanceevaluation, compensation, training anddevelopment and employee relations. Thus,recruitment is typically a human resourcefunction.

In the hotel industry most of the vacanciesare filled from external sources. But it is observedthat unlike other service organizations, there isa lack of scientifically planned recruitment andselection procedure in the hotel industry. Theyusually apply traditional and abandonedtechniques of recruitment and selection and thisfails to attract well trained hospitality experts tothis sector. Hence it is worthwhile to examinethe present recruitment policy in the industry inorder to decide whether and how much changeis required in its strategies on recruitment.

The study is confined to classified hotelindustry in Kerala. It covers three, four and fivestar segments both in the private sector andKTDC hotels. The study purports to gather theopinions of employees and to arrive at a rationalinference regarding the practices of employeerecruitment in the classified hotels in Kerala.Awareness of the nature and responsibilities ofthe job, awareness of monetary packages,awareness of non-monetary incentives,awareness of promotion and careeradvancement opportunities and effectiveness ofrecruitment policy are the variables used for thestudy. The study has been made on theassumption that not more than one-half of theemployees are satisfied with the recruitmentpolicy of the hotel industry in Kerala.

II. Methodology

The population for the study consists ofemployees of classified hotels in Kerala. InKerala, there were 235 classified hotels as onMarch 31, 2009 (consisting of 15 five starhotels, 18 four star hotels and 202 three starhotels). For intensive study, 20 per cent fromeach category of hotels is selected at random.Thus, the total number of hotels selected assample has come to 47 (three from five star,four from four star and 40 from three star). Therespondents for the study consist of theemployees of the sample hotels. There were2151 employees in the 47 sample hotels as on31-03-2009. From them, 20 per cent (consist of62 form 3 five star hotels, 64 from 4 four starhotels and 304 from 40 three star hotels) wereselected at random. Thus, the total sampleemployees selected for the intensive study hascome to 430. While selecting the sampleemployees, care has been taken to selectemployees working in all the operatingdepartments’ viz., Food and Beverage,Housekeeping, Front office, Accounts, andMarketing. Systematic random sampling methodwas used for selecting the sample hotels andemployees. The empirical study makes use ofprimary data only and was collected from thesample respondents by administering astructured interview schedule. For data analysis,statistical tools such as average, percentages,chi-square test, z-test and Mann-Whitney U testwere used.

III. Results and Discussion

III. (A) Awareness of the Nature and Responsibilities of the Job

In the hotel industry, most of thevacancies are filled through advertisement innewspapers. A good advertisement of vacancynotification should include a brief description

28


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of the job offered, viz. duties, responsibilities,required qualifications, and reportingrelationships of a particular job. Objectiveinformation obtained through job analysis is thebasis for job description. Poorly writtenemployee job descriptions add to workplaceconfusion, hurt communication, and makepeople feel that they don’t know what isexpected of them.

On analyzing the opinions of employeesin the hotel industry in Kerala regarding theawareness of the nature and responsibilities ofthe job it is observed that only 49.2 per cent areeither fully or partially aware of the nature andresponsibilities of the job they have to perform.But the sector-wise analysis reveals that unlikein the private sector (only 43.2%) more than twothird (64.1 per cent) of the KTDC employees

were either fully or partially aware of the jobrequirements. While analysing this variable inthe case of star hotels, more than one half of theemployees in all the star groups in the privatesector were unaware of the responsibilitiesattached to the job. But more than one half ofthe employees in all the star groups of KTDCwere aware of the nature and responsibilities ofthe job (Table 1). The Chi square test also showsa significant difference of opinion amongemployees in the three star categories, but nosignificant difference among employees in thefour and five star categories. The Mann WhitneyU test is also applied to find the association ofopinion of employees in the private sector andKTDC. It also finds a significant difference withregard to the awareness of the nature andresponsibilities of the job at the time ofsubmitting the job application.

Table 1: Awareness of the Nature and Responsibilities of the Job

Private KTDC

Three Four Five Total Three Four Five TotalStar Star Star Star Star Star

Fully Agree 70 9 6 85 37 12 5 54 139(30.60) (25.0) (12.8) (27.2) (49.3) (42.9) (33.3) (45.7) (32.3)

Partly Agree 36 7 7 50 7 9 7 23 73(15.70) (19.4) (14.9) (16.0) (9.3) (32.1) (46.7) (19.4) (16.9)

Neither agree 4 2 4 10 5 2 7 17Nor Disagree (1.70) (5.6) (8.50) (3.2) (6.7) (7.1) - (5.9) (3.9)

Disagree 7 3 3 13 7 2 1 10 23(3.10) (8.3) (6.49) (4.1) (9.3) (7.1) (6.7) (8.4) (5.3)

Highly 112 15 27 154 19 3 2 24 178Disagree (48.90) (41.7) (57.49) (49.3) (25.3) (10.7) (13.3) (20.3) (41.4)

Total 229 36 47 312 75 28 15 11 430(100) (100) (100) (100) (100) (100) (100) 8(100) (100)

Source: Primary data. Figures in parentheses are percentages to respective total.Three star: Chi-square= 24.021(df=4) and p value =.000*; Four star: Chi-square=2.828 (df=4) andp value =.587**; Five star: Chi-square=4.249 (df=4) and p value =.373**Median- Private: 2.00; KTDC: 4.00 and p value=0.004** Significant at 5% level. ** Not significant at 5% level.

Opinion Total

29 ••


III. (B) Awareness of Monetary Packages

A clear understanding and awareness of

monetary packages attached to the position is a

good stimulus to the aspirating candidates

(Jacobs, 1989). But in the case of the hotel

industry, such type of recruitment advertisement

can seldom be seen. In the private sector, most

of the advertisements do not furnish exact

figures regarding the monetary packages

attached to the post. It contains the terms ‘pay

package best in the industry’ or ‘pay

commensurate with qualification and

experience’ and so on. But employees who are

already in the field will have a clear idea about

the pay packages offered by organizations of

different star groups.

As regards the awareness of monetary

packages at the time of recruitment, only less

than a half (47.2 per cent) of the employees have

agreed that they were aware of the monetary

packages offered at the time of submission of

applications. The sector-wise analysis shows

that while more than one half (51.8 per cent) of

the employees in the private sector were aware

of the monetary package attached to the post,

more than one half (54.3 per cent) in the KTDC

were unaware of the package. It may be due to

the fact that most of the employees prefer KTDC

as an entry level engagement. Once they get

enough experience they will shift to private

sector as it provides more monetary benefits for

higher posts. Similarly the star-wise analysis also

exhibits that only less than one half of the

employees in all the star groups of KTDC and

the employees in three star category of the

private sector were aware of the monetary

packages plugged with the job. But, more than

one half (61.7 per cent) of the employees in the

five star category in the private sector and one

half of the employees in the four star category

were aware of the package (Table 2). The Chi

square also shows that the difference in the

opinion of employees in the three star and four

star category is significant (p<.05); but no such

difference can be traced in the opinion of the

employees of the five star category (p>.05). The

Mann-Whitney U test reveals the employees of

KTDC hotels are more aware of the monetary

packages at the time of submission of application

as its Median value is higher. The test also finds

that there is a significant difference of opinion

among employees in the KTDC and private

hotels as to the awareness of packages (p<.05).

30


••

III. (C) Awareness of Non-Monetary Incentives

In addition to the monetary offerings, the

employees will expect some non cash benefits

from the employer. Non-monetary benefits refer

to indirect compensation offered and provided

to employees in lieu of the services provided

by them to the organization. They include Leave

Policy, Overtime Policy, Car policy, Insurance,

Leave Travel Assistance, Holiday Homes, etc.

Employee benefits are an important part of any

company’s offering to their prospective or

existing staff. There can be numerous

advantages in establishing an employee benefits

scheme, not only to the employee, who can

receive useful non-cash benefits in addition to,

or in place of part of their salary, but also to

employers, who can bulk out their salary offering

with additional benefits to their staff (Kamoche,

1996). In fact non monetary benefits are one

of the most common attractions which force the

employees to leave one organization and join

another. Hence a clear awareness of such

indirect compensation will enable to pull in

employees to the organization.

As regards monetary packages offered in

the industry, more than one half (52.6 per cent)

of the employees argued that they were fully or

Table 2: Awareness of Monetary Packages

Private KTDC


Fully Agree 93 15 26 134 15 5 6 26 160(40.6) (41.7) (55.3) (42.9) (20.0) (17.9) (40.0) (22.0) (37.2)

Partly Agree 22 3 3 3 13 1 1 15 43(9.6) (8.3) (6.49) (8.9) (17.3) (3.6) (6.7) (12.7) (10.0)


Disagree46 9 1166 66 11 11 5 27 93

(20.1) (25.0) (23.4) (21.2) (14.7) (39.3) (33.3) (22.9) (21.6)

Highly 67 8 4 79 31 3 3 37 116Disagree (29.3) (22.9) (8.5) (25.4) (43.7) (10.7) (20.0) (31.4) (26.9)

Total229 36 47 312 75 28 15 118 430

(100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Primary data. Figures in parentheses are percentages to respective totalsThree star: Chi-square=24.236 (df=4) and p value =.000*; Four star: Chi-square= 13.122 (df=4)and p value =.011*; Five star: Chi-square=3.240 (df=4) and p value =.519**.Median- Private: 2.00; KTDC: 4.00 and p value=0.004** Significant at 5% level. ** Not significant at 5% level.

Responses Total

31 ••


partly aware of the non monetary packages

provided by the organization. Only less than one

forth (24.4 per cent) of the employees argued

that they are fully unaware of the type of non

monetary incentives attached to the post. More

than one half (51.8 per cent) of the employees

in private hotels and more than one half (52.6

per cent) of the employees in KTDC hotels also

were of the opinion that they had enough pre

knowledge regarding the kind of non-monetary

offers attached to the job. On analyzing the data

star wise it is inferred that more than one half of

the employees in all the star types of both KTDC

and the private sector stated that there was pre-

awareness among the staff regarding the non-

monetary incentives offered. But it is worthmentioning that 49.4 per cent of the employeesin three star private hotels had no pre awarenessregarding the non monetary incentive attachedwith the post. The Chi square analysis also showsthat the difference in opinion of employees inthree star and four star categories is statisticallysignificant; however no such significance canbe traced in the opinion of the employees infive star hotels (Table 3). The difference in theopinion of the employees according to Mann-Whitney U test in the matter of awareness ofnon monetary packages is also significant at 5per cent level (p<.05).

Table 3: Awareness of Non Monetary Incentives

Private KTDC


Fully Agree93 15 26 134 31 3 3 37 171

(40.6) (41.7) (55.3) (42.9) (41.3) (10.7) (20.0) (31.4) (39.8)

Partly Agree22 3 3 28 11 11 5 27 55

(9.6) (8.3) (6.4) (8.9) (14.7) (39.9) (33.3) (22.9) (12.8)


Disagree 46 9 11 66 13 1 1 15 81(20.1) (25.0) (2 3.4) (21.2) (17.3) (3.6) (6.7) (12.7) (18.8)

Highly 67 8 4 79 15 5 6 26 105Disagree (29.3) (22.2) (8.5) (25.4) (20.0) (17.9) (40.0) (22.0) (24.4)

Total 229 36 47 312 75 28 15 118 430(100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Primary data. Figures in parentheses are percentages to respective totals.Three star: Chi-square=24.236 (df=4) and p value =.000*; Four star: Chi square=14.122 (df=4)and p value =.001*; Five star: Chi-square=3.240 (df=4) and p value =.519**.Median- Private: 4.00; KTDC: 4.00 and p value=0.001** Significant at 5% level. ** Not significant at 5% level.

Responses Total

32


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III. (D) Awareness of Promotion and Career Advancement Opportunities

Recruiting can become highly

competitive in markets where job openings

outnumber qualified job applicants. Three and

four star hotel employers face distinct

challenges in the attempt to lure job applicants

away from five star and deluxe class

employers with well established reputation. In

fact labour market in the hotel industry is

facing severe problems-on the one side young

students are not opting hotel industry as a

profession and on the other side existing

professional are trying to leave the industry

charmed by the social status provided by the

emerging industries like IT and ITES. But by

revamping the existing recruitment strategies,

the present labour shortage can be overcome.

One of the best ways is to provide ample

opportunities for career advancement. While

considering a choice between two or more job

offers, applicants would be more attracted to

the prospect of getting on board with a

growing company likely to throw open new

management positions in the near future.

Recruiters can use stories of their own rapid

advancement within a small business to add

credibility to their claims and pique

applicants’ curiosity. Larger companies can

leverage this appeal by laying out clearly

defined advancement paths within their

organizations, showing potential employees

how length of service or meeting performance

goals can advance their careers quickly

(Kamoche, 1996). When employees are aware

of the chances of advancement at the time of

entry, more and more talented and committed

professionals will come to the industry. Hence

it is a good recruitment practice to include the

career advancement opportunities in the initial

job vacancy advertisement itself.

On examining the employees views

regarding the pre knowledge of career

advancement opportunities, more than one

half (54.9 per cent) of the employees declared

that they were unaware of the promotion and

career advancement opportunities while

submitting the application. The sector-wise

analysis also does not find any considerable

variation. 14.4 per cent of KTDC and 31.7

per cent of the private sector employees

argued that these policies were published with

vacancy notification. Star-wise analysis

shows that more than one half (61.7 per cent)

of the employees in private five star hotels

argued that these policies were made known

along with the job notification. Except this

category, more than one half of the employees

in all the star categories of both the sectors

viewed that they were unaware of the career

advancement and promotional opportunities

while submitting application (Table 4). The

Chi square test shows that the difference in

the opinion of the employees in three star

hotels is significant, but no difference of any

significance is rooted in the four and five star

category. But the Mann-Whitney test shows

that the difference in the opinion of employees

in KTDC and the private sector is not much

significant (p>.05).

33 ••


III. (E) Effectiveness of Recruitment Policy

The effective recruitment and selection of

employees is a fundamental HRM activity, one

that if managed well can have a significant

impact on organizational performance as well

as lead to a more positive organizational image.

An employee considers a recruitment process

an effective one if it comes through a good

recruitment channel. Recruitment channels

usually used to attract applicants include:

advertisements in local newspapers; recruitment

agencies/search firms; corporate websites;

specialist journals; encouraging speculative

applications; employee referral schemes, and

national newspaper advertisements. They will

consider a recruitment practice effective if it is

fair and transparent. A manger will consider it

effective if it is cost effective, reduces turnover

ratio and finds apt persons for employment.

On analyzing the opinion of employees

regarding the effectiveness of recruitment

policy, more than one half (61.1 per cent) of

the employees stated that the recruitment policy

followed in the organization was an effective

Responses Total

Table 4: Awareness of Promotion and Career Advancement Opportunities

Private KTDC


Fully Agree71 7 21 99 8 3 6 17 116

(31.0) (19.4) (44.7) (31.7) (10.7) (10.7) (40.0) (14.4) (26.9)

Partly Agree22 3 8 33 11 2 1 14 47

(9.6) (8.3) (17.0) (10.6) (14.7) (7.9) (6.7) (12.0.) (10.9)


Disagree 46 15 8 69 16 14 5 35 104(20.1) (41.7) (17.0) (22.1) (21.3) (50.0) (33.3) (29.6) (24.2)

Highly 80 10 7 97 29 3 3 35 132Disagree (34.9) (27.8) (14.9) (31.1) (38.7) (10.7) (20.0) (29.6) (30.7)

Total 229 36 47 312 75 28 15 118 430(100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Primary data. Figures in parentheses are percentages to respective totals.Three star: Chi-square=19.264 (df=4) and p value =.001*; Four star: Chi-square=8.305 (df=4) andp value =.081**; Five star: Chi-square= 3.240 (df=4) and p value =.481**.Median- Private: 4.00; KTDC: 4.00 and p value=0.079*** Significant at 5% level. ** Not significant at 5% level.

34


••

one. Only 31.1 per cent stated that there weredeficiencies in the policy. Sector-wise analyzealso shows that more than one half of theemployees in both KTDC and private sectorviewed the recruitment policy as an effectiveone. Most of the employees (63.6%) in KTDCand the private sector (60.9%) argued that theorganization followed an effective recruitmentpolicy. When we analyze the data star-wise, itis understood that more than one half of theemployees in all the star groups pointed out thatthe policy was effective and there were no

deficiencies. But in five star hotels, more than

three fourths in both the sectors opined that

there were no drawbacks in the recruitment

policy (Table 5). The analysis of the data

through the Chi-square reveals that the

difference in the opinion of employees of the

different star categories is not statistically

significant (p>.05). The Mann-Whitney U test

also shows that the difference in the opinion of

employees in KTDC hotels and private hotels

is not significant at 5 per cent level.

Table 5: Effectiveness of Recruitment Policy

Private KTDC


Fully Agree90 15 30 135 23 15 10 48 183

(39.3) (41.7) (63.8) (43.2) (30.7) (53.6) (66.7) (40.7) (42.5)

Partly Agree35 9 9 53 19 6 2 27 80

(15.3) (25.0) (19.1) (17.0) (25.3) (21.4) (13.3) (22.9) (18.6)


Disagree13 3 2 18 1 1 1 3 21

(5.7) (8.3) (4.3) (5.8) (1.3) (3.6) (6.7) (2.5) (4.9)

Highly 67 8 5 80 27 5 2 34 114Disagree (29.3) (22.2) (10.6) (25.6) (36.0) (17.9) (13.3) (28.9) (26.5)

Total229 36 47 312 75 28 15 118 430

(100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Primary data. Figures in parentheses are percentages to respective totalsThree star: Chi-square=8.352 (df=4) and p value =.080**; Four star: Chi-square=1.313 (df=4) andp value =.859**; Five star: Chi-square=.760 (df=4) and p value =.944**.Median- Private: 2.00; KTDC: 2.00 and p value=0.693*** Significant at 5% level. ** Not significant at 5% level.

Responses Total

35 ••


IV. Conclusion

The foregoing analysis of the opinion of

the 430 employees in both the KTDC and

private hotels in Kerala clearly establishes the

fact that 61.1 per cent of the employees have

come out with the view that the recruitment

policy followed in the industry is effective. Also,

the chi-square test conducted for finding out the

association of their opinion in the three different

star categories and the Mann-Whitney U test

conducted to find out their difference of opinion

in KTDC and private hotels are also found no

variation at 5 per cent level of significance.

Further, the one sided z test conducted to test

the hypothesis also found that the recruitment

policy of the hotel industry in Kerala is effective

(p<.05). Hence, the null hypothesis stating that

not more than one half of the employees is

satisfied with the recruitment policy of the hotel

industry in Kerala stands rejected. Alternatively,

more than one-half of the employees are satisfied

with the recruitment policy of the hotel industry

in Kerala.

References

Jacobs, R. (1989).Getting the measure ofmanagement competence, London:Personal Management.

Kamoche, K. (1996). Human resource as astrategic Asset: an evolutionary resourcebased theory. London: Journal ofManagement Studies.

Kempner, T. (1971). Handbook of Management.London: Weildenfied and Nicolson.

Mamoria, C.B. (1984). Personnel Management.New Delhi: Himalaya PublishingCompany.

36


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Bank Credit Utilisation by Agriculturists and MSMEs:An Empirical Study With Reference To Kerala

Dr. Suby BabyAssistant Professor

Post Graduate and Research Department of Commerce, Nirmala College,Muvattupuzha, Kerala, India.


Abstract

The paper examines the utilisation of bank credit by micro, small and medium enterprises (MSMEs)in the selected districts of Kerala. One of the cardinal principles behind sanctioning a loan is touse it for the purpose for which it was granted. However, diversions of credit for unspecifiedpurposes are alleged to be diluting the objective of lending. Moreover, most of the bank officialsare pressured by target oriented lending and to fulfil their target, most of the time, they relax thelending and utilisation norms. Eventually, it results in loan default and utilization gap. Theempirical results show that a large majority of the borrowers (63.8%) utilized credit for thepurpose for which it was sanctioned and the rest (36.2%) diverted the credit. Again, 38.2 percent of the borrowers diverted 10 to 20 per cent of their loan amount and 33.6 per cent diverted30 to 40 per cent. Further, 53.9 per cent of the borrowers, who diverted the loan, used theamount for unproductive purposes and none more than 7.4 per cent used it for productivepurposes. This paper insinuates banks to cautiously design an efficient and effective mechanismto identify an eligible borrower and the point at which the borrower diverts the loan. Ensuringproper scrutinizing of the borrowers along with adequate credit flow and efficient monitoringmachinery will definitely alleviate the chances of default, which rescue the borrower from theclaws of insolvency and the bank from the snatch of over dues syndrome.

Keywords: Bank Credit Utilization – Credit Diversion – Credit Utilisation Gap – MSME CreditUtilisation – Credit Overdue

I. Introduction

Access to bank credit and its efficient

utilization, especially by the agriculturists and

micro, small and medium enterprises (MSMEs)

are the essential pre-requisite for improving

economic growth, poverty alleviation and social

upliftment. A significant portion of Keralites(20.19%) are either in agriculture fields or insmall industries sector (Kerala EconomicReview, 2009). They are either depending onformal source of finance like commercial banksor informal sources of finance like privatemoney lenders for their financial need. The

ISSN 2321 - 371X

37 ••


commercial banks in Kerala play a pivotal rolein catering the financial needs of these sectors.But their access to credit is prone to problemsdue to the inability to arrange for collateralsecurity and or third party guarantee. Again,there are divergent views as to the utilization ofcredit by these category borrowers. It is expectedthat all the borrowers utilize the credit for thepurpose for which it was sanctioned. Thoughthis is one of the cardinal principles behindsanctioning a loan most of them are not actuallyadhered this. Again, in order to fulfil the targetoriented lending imposed on bank officials theyfail to chalk out eligible borrower and eventuallythe concerned borrower makes divert the loan.This gradually results in wilful default andutilization gap. It is in this backdrop that thepresent paper has been prepared.

II. Objectives and Methodology

This paper focuses on the utilization ofbank credit by agriculture and MSME borrowersof the public and private sector banks in Kerala.It examines whether the credits have beenutilised by the borrowers effectively or not forthe purpose for which they are sanctioned. Theextent and purpose of credit diversion, and thesteps taken by banks to avoid diversions are alsodiscussed in the paper. The study has been donebased on the perception of the borrowers andbank managers.

The study is empirical in nature. Thedata required for the study are collected fromthe borrowers (i.e. agriculturists and MSMEs)and managers in the public and private sectorbanks in Kerala based on structured interviewschedules. All the public and private sectorbanks (except new generation and foreignbanks) in Kerala constitute the universe for the

study. Multistage Systematic Random Sampling

technique was employed for selecting the

sample. In the first stage, the State of Kerala is

divided in to three zones – south, central and

north – for selecting one district each

representing these zones. The districts were

selected by considering the volume of banking

business and number of branches. Accordingly,

Thiruvananthapuram (representing the south),

Ernakulam (representing the central) and

Kozhikode (representing the north) are selected.

In the second stage, one bank from the public

sector and one bank from the private sector are

selected from each of the three sample districts

based on the volume of business and number

of branches. The State Bank of Travancore

(SBT) and Federal bank were the banks in the

public sector and private sector, respectively

fulfilling the selection criteria in all the three

zones in Kerala. Thus, State Bank of Travancore

and Federal Bank constitute the sample banks.

There are 172 SBT branches and 128

Federal bank branches in the three selected

zones in Kerala. In the third stage, for selecting

the sample branches, 10 per cent from each

zone of SBT and Federal bank are selected

systematically. Thus, 17 SBT branches and 13

Federal bank branches constitute the sample

branches. In the fourth stage, the sample

borrowers are selected. For the intensive study,

300 agricultural borrowers (270 from SBT and

30 from Federal bank) and 300 MSME

borrowers (208 from SBT and 92 from Federal

bank) are selected conveniently by considering

the proportion of the number of agricultural and

MSME borrowers from the three zones of

38


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17 branches of SBT and 13 branches of

Federa l bank . Thus , a to ta l o f 600

respondents are representing as borrowers

for the study. All the branch managers of

the selected 17 branches of SBT and 13

branches of Federal bank are respondents

to represent the public and private sector

commercial banks in Kerala. Data analysis

i s done us ing average , percentage ,

weighted mean and chi square test . The

weighted mean is found to determine the

re la t ive order of preference of the

respondents and the ch i square tes t i s

applied to examine the variations in the

opinion of the respondents with reference

to the three zones of Kerala.

III. Results and Discussion

III. (A) Credit Utilisation

While sanctioning a loan, it is expected

that all the borrowers utilise the credit for the

purpose for which it was sanctioned. The

utilisation of credit availed by agriculturists and

MSMEs in the public and private sector banks

in Kerala reveals that a large majority of the

borrowers (63.8%) utilised the credit for the

purpose for which it was sanctioned and the rest

(36.2%) diverted the credit for other purposes.

The chi-square test calculated separately for the

public sector and private sector banks, and also

between the sectors show a significant variation

in the opinion among borrowers (p< 0.05)

(Table 1).

Table 1: Credit Utilisation (Opinion of Borrowers)

Public Sector Bank Private Sector Bank

South Central North Total South Central North Total

Diversion 69 89 33 191 18 6 2 26 217(31.2) (44.1) (60.0) (40.0) (60.0) (8.5) (9.5) (21.3) (36.2)

Utilisation152 113 22 287 12 65 19 96 383

(68.8) (55.9) (40.0) (60.0) (40.0) (91.5) (90.5) (78.7) (63.8)

Total221 202 55 478 30 71 21 122 600

(100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in parenthesis are percentages to respective totals.Public sector banks- Chi square (df= 2) = 17.655 p value = .000*Private sector banks- Chi square (df= 2) = 35.520 p value = .000*Public and Private sector banks- Chi square (df= 1) = 13.842;p value = .000** Significant at 5 per cent level.Source: Primary data.

Diversion/Utilisation

Total

39 ••


Table 2: Extent of Credit Diversion (Opinion of Borrowers)

Public sector bank Private sector bank

South Central North Total South Central North Total

< 20 21 24 24 69 16 5 1 22 91(30.4) (26.9) (72.7) (36.1) (88.9) (83.3) (50) (84.6) (41.9)

30-50 46 20 7 73 1 1 2 75(66.7) (22.5) (21.2) (38.2) (5.6) (16.7) - (7.7) (34.6)

> 50 2 45 2 49 1 1 2 51(2.9) (50.5) (6.1) (25.7) (5.5) - (50) (7.7) (23.5)

Total69 89 33 191 18 6 2 26 217

(100) (100) (100) (100) (100) (100) (100) (100) (100)

Figures in parenthesis are percentages to respective totals.Public sector banks- Chi square (df =4) = 110.488 p value = .000*Private sector banks- Chi square (df = 4) = 40.971 p value = .000*Public and Private sector banks- Chi square (df = 2) = 5.162; p value = .0757** Significant at 5 per cent level.Source: Primary data.

cent of their credit whereas 84.6 per cent of the

borrowers in the private sector banks diverted

less than 20 per cent. The chi-square test results

confirm that significant variation exist regarding

credit diversion among the borrowers of public

sector banks (p < 0.05). However, no significant

variations exist with regard to extent of credit

diversion among the borrowers of the private

sector banks; and between the borrowers of the

two sectors (p>0.05).

III. (B) Extent of Credit Diversion

Larger the amount of credit diverted, the

more will be the chance of overdue. The

extent of credit diversion given in Table 2

reveals that 41.9 per cent of the borrowers

diverted up to 20 per cent of their credit and

34.6 per cent diverted between 30 and 50 per

cent of their credit amount. While analyzing the

sectors separately, 38.2 per cent of the borrowers

of the public sector banks diverted 30 to 50 per

Extent ofDiversion (%) Total

that 53.9 per cent of them have diverted the creditfor unproductive purposes like clearing of oldpersonal debts, meeting family recurringexpenses, purchase of household assets, etc. Thistrue for the two sectors independently and

collectively (Table 3).

III. (C) Purpose of Credit Diversion

The borrowers may divert the creditsdisbursed to them for productive orunproductive purposes. The analysis of theperception of the borrowers in this regard reveals

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Table 3: Purpose of Diversion of Loan (Opinion of Borrowers)

Public Sector Bank Private Sector Bank

South Central North Total South Central North TotalProductive:Purchase of 1 15 16 16farm animals (1.4) (16.9) - (8.4) - - - - (7.4)Digging of 5 5 5wells - (5.6) - (2.6) - - - - (2.3)Meetingmarketing 3 3 1 1 4 expense - (3.4) - (1.6) - - (50.0) (3.9) (1.8)Meeting 1 1 1labour charges - (3.0) (0.5) - - - - (0.5)Purchase of 1 2 3 1 1 4goods (1.4) (2.2) - (1.6) - - (50.0) (3.9) (1.8)Constructionof farm 8 8 8building - (9.0) - (4.2) - - - - (3.7)Purchase of 4 1 5 5raw materials - (4.5) (3.0) (2.6) - - - - (2.3)Purchase of 12 12 12farm animals - (13.5) - (6.3) - - - - (5.5)Repair 6 3 9 1 1 10expenses - (6.7) (9.1) (4.7) - - (50.0) (3.9) (4.6)Unproductive:Family 25 26 4 55 2 1 3 58expenses (36.2) (29.2) (12.1) (28.8) (11.1) (16.7) - (11.5) (26.7)Clearing ofold personal 48 30 22 100 11 5 1 17 117debts (70) (33.7) (66.7) (52.4) (61.1) (83.3) (50.0) (65.4) (53.9)Purchase ofhousehold 21 12 6 39 6 1 7 46asset (30.4) (13.5) (18.2) (20.4) (33.3) - (50.0) (26.9) (21.2)Social 5 2 7 7ceremonies (7.2) (2.2) - (3.7) - - - - (3.2)Others 3 1 4 4

(4.3) (1.1) - (2.1) - - - - (1.8)Total 69 89 33 191 18 6 2 26 217

(100) (100) (100) (100) (100) (100) (100) (100) (100)

Source: Primary data.Figures in parentheses are percentages to respective totals.

Purpose ofLoan Diversion Total

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III. (D) Steps Taken for Avoiding/ReducingCredit Diversion

The analysis of the perception ofborrowers regarding utilisation of credit (Table2) clearly reveals that 34.6 per cent borrowershave diverted even up to 30 to 50 per cent oftheir credit amounts. Noticeably, 53.9 per centof the borrowers who diverted their creditutilised the same for clearing of old personaldebts (Table 3). The responses of the bankmanagers regarding the preventive steps takento avoid/reduce the credit diversion are givenin Table 4 (Page 42). The steps such as, ‘insistingaccount only transaction’, ‘disburse onlythrough dealers of assets’ and ‘minimum cashdisbursement’ are reported to be effective stepsby the managers. In addition, ‘frequent stockverification’ and ‘educating the borrowers’ arealso found to be initiated by manages.

IV. Conclusion

The empirical analysis made aboveconfirms that majority of the borrowers haveutilised the credit for the purpose for which itwas sanctioned. Regarding the diversion ofcredit, majority of the respondents have divertedbelow 20 per cent of their credit forunsanctioned purposes. Alarmingly, largemajority of the borrowers who diverted theircredit utilised it for unproductive purposes suchas clearing of old personal debts, meeting familyexpenses, purchase of house hold assets, etc.‘Insisting account only transaction’, ‘disburseonly through dealers of assets’ and ‘minimumcash disbursement’ are the main steps taken bybank managers to prevent/reduce the diversionof credit. Thus, the above results confirms that,regardless of sectors, credit diversion forunproductive purposes by borrowers areconsiderable and further measures should betaken by the lenders to minimise it to the extentpossible. Identifying eligible borrowers andassessing the magnitude credit requirementthrough strict adherence to lending norms are

keys to overcome the situation. Also, pre-disbursement and post-disbursement monitoringshould be strengthened further to avoid the creditdiversion or to ensure its effective utilisation.

References

Basu, P (2006). “Improving access to Financefor India’s Rural Poor”, Washington D.C:The World Bank.

Chaudhry Kamran Naseer (2010). “Agriculture-credit is critical for the flood-hit farmers’subsistence”, Business and FinanceReview, Vol.5 (2), January.

Government of Kerala (2009).Economic Review,State Planning Board, Thiruvananthapuram.

Hans,V.Basil (2006). “Towards A VibrantIndian Culture”, Kissan World, Vol 33(2),February, pp. 18-20.

James Manalel (1994). “Role of incentives inthe development of small scale industrialunits in Kerala”, Ph.D Thesis, CochinUniversity, Cochin.

Prasad, C.S (2006). “Micro, Small and Mediumenterprises financing in India: Issues andconcerns”, Cab Calling, July-Sept 2006,pp 35-40.

Press Trust of India (2009). “20-PSU banks failto meet farm sector lending target tillNovember”, The Economic Times.Retrieved fromhttp://economictimes.indiatimes.com.

Rahji, M.A.Y and S. B. Fakyode (2009). “Amultinomial logit analysis of agriculturalcredit rationing by commercial banks inNigeria”, International Research Journalof Finance and Economics, Issue .24,Nigeria.

Singh, S. K and Singh, S (2009). “Use ofinstitutional credit for sustainableagriculture production” GCRA ,International Conference oncommunication for development in theinformation age: Extending benefits oftechnology for all, Banaras HinduUniversity, Varanasi.

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Causes of Stress among IT-BPO Sector Employees:An Exploration

Dr. S. Santhosh Kumar(Post Doctoral Fellowship Awardee of ICSSR)

Associate ProfessorPost Graduate and Research Department of Commerce

St. Peter’s College, Kolenchery P.O., Kerala, India.E mail: [email protected]

Helaney M.Y.Associate Professor & HOD

Post Graduate and Research Department of CommerceSt. Peter’s College, Kolenchery P.O., Kerala, India.

E mail: [email protected]

B.B. HaripriyaResearch Fellow

Post Graduate and Research Department of CommerceSt. Peter’s College, Kolenchery P.O., Kerala, India.


Abstract

Human resource, being a significant factor of production and service, is elevated withunprecedented thrust and importance nowadays on account of the potential that the resourceoccupies. Management of human resource, therefore, assumes greater significance to extractmaximum possible output out of the resource. Stress inherent in all sorts of personal andwork life has an impact on employees’ efficiency and quality-output maximization. Asexcessive stress can badly impact employees’ efficiency and satisfaction, identification andminimization of stress among the employees are critical to human resource management.Though some of the causes of stress are common, most of the causes are sector/industryspecific. Managing stress by employees themselves and supportive measures from the partof the organization are, therefore, necessary for the efficient functioning of organizations.The IT-BPO sector, wherein the principal resource component is human beings, is allegedto be prone to more stress related issues than others. The highly dynamic and competitiveIT-BPO business environment accentuates sector specific stress among the employeesleading to job dissatisfaction. The study is an attempt to explore the causes of stress amongthe IT-BPO sector employees working in two selected IT Parks in Kerala.

Keywords : Job stress – employee stress – causes of stress – IT-BPO employee stress

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circumstances are common to all sectors but atvarying degrees (Ahmad, 1991). Depending upon the nature and characteristics of industries,the volume, causes and impact of stress differ.The stress at work place normally results fromfactors relating to working condition, work load,timing of jobs, nature of work, role and career.Thus in modern time, stress in general and jobstress in particular has become a part of the life.

The Information Technology-BusinessProcess Outsourcing (IT-BPO) sector is one ofthe most significant growth catalysts for thegrowth of Indian economy. The sector startedgaining importance since 1990 as a result ofliberalization measures in the country. Theindustry is positively fuelling the life of peopleby providing employment opportunities,improving standard of living and diversityamong others. The industry has transformed theIndian economy to a global player by providingworld-class technology solutions and businessservices. The FY2012 was a landmark year forthe Indian IT-BPO as it was set to reach asignificant milestone of aggregate revenueexceeding USD 100 billion. By the end of theFY2012, direct employment was expected toreach nearly 2.8 million, an addition of 2.3 lakhduring the current year, while indirect jobcreation was estimated at 8.9 million. As aproportion of national GDP, the sector revenueshave grown from 1.2 per cent in FY1998 to anestimated 7.5 per cent in FY2012 (NASSCOM,2012).

Unlike other sectors, the IT-BPO sector isfeatured with some peculiar characteristics suchas frequent changes in jobs, differential jobtimings, multiple roles, deadline targets etc.(Gunasundari & Ravindran, 2012). In contrastto other machine centred production processes,the sector is people centered demanding specialskill to work with. Among other things, thesespecial features have brought in significant

I. Introduction

The present era of advanced technology,global competition and increased consumerismis all the way mounting stress to everyone inthe world. In every phase of life it has becomean inevitable escort and excessive stress canimpact negatively on productivity and health.Indisputably, every activity gives some amountof stress in one’s life. Managing the stresswithout badly impacting productivity, health andnormal life is very important to be successful inlife. The word stress is derived from the Latinword “stringi”, which means, “to be drawn tight”(Mageswari & Prabhu, 2011; Neelamegam andAsrafi, 2010). Stress is mental, physical oremotional strain or tension or it is a situation orfactor that can cause this (Malhotra, Shefali &Chadha Omesh, 2012) Relating stress to job, itmay be defined as the harmful physical andemotional responses that occur when jobrequirements do not match the worker’scapabilities, resources and needs (NationalInstitute of Occupational Safety and Health,1999). Seyle (1956), one of the leadingauthorities on the concept of stress, describedstress as “the rate of all wear and tear caused bylife”. Job stress is a chronic disease caused byconditions in the workplace that negativelyaffect an individual`s performance and/oroverall well-being of his body and mind.Occupational stress occurs when there is adiscrepancy between the demands of theenvironment or workplace and an individual’sability to carry out and complete these demands(Leka, Griffiths, & Cox, 2003).

The employees in the currentorganizational setup have to face a lot of jobrelated challenges and problems primarilybecause of the tight competition internal andexternal to their environment. These create stress(strain, nervousness and anxiety) among theemployees. No doubt, the stress mounting

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challenges and strain to the employees in thesector causing stress which negatively impactstheir normal work, productivity and personalhealth (Nicolas, Gayatridevi & Velayudhan,2009). Moreover, as a sector makingconsiderable contribution to country’s GDP andgenerating sizeable number of employmentopportunities, its wellbeing in terms of economicefficiency, employees’ efficiency andemployees’ satisfaction is important. No doubt,stress of employees in the sector can result inpoor employees’ efficiency and dissatisfaction.Reports on the stress of employees in the sector,though (all) not based on empiricalexamination, are many on the public domain.However, pragmatic efforts to assess the stressand its causes are a few while it is crucial to thesmooth functioning of the sector.


Research studies on the stress of employeesand its impact on business process andemployees’ satisfaction are plenty in number.Sector/industry specific studies are moreconclusive and accepted models than generalstudies. Malhotra, Shefali & Chadha Omesh(2012) in their study on the BPO sectoremployees observed that competitiveenvironment, technological advancements, newpractices for human resource management,economic and social developments that aretaking place day by day are bringing stress toBPO sector employees. The responsibility of toplevel management to take proper initiatives toreduce the stress level among the employees isalso recommended in the study. Another studyby Gunasundari & Ravindran (2012) onworkplace stress in IT industry found that fearof job security, work pressure, heavy workloadand target deadline are causing stress amongthe IT sector employees. Kumar (2011) in hisstudy on stress of IT sector employees has comeup with the finding that excessive job stress

causes for job dissatisfaction and poorefficiency. Constant appraisal programs,appreciation and motivation are recommendedin the study for reducing stress and increasingjob satisfaction. Dewa, Thompson & Jacob(2011) in their study identified the factors suchas changing work expectations including tighterdeadlines, constant and almost instantaneouscommunication and increased productiontargets are creating stress among hospitalemployees. Neelamegam and Asrafi 2010 intheir study on the stress of bank employeeshighlighted the likely sources and consequencesof the stress and also suggested measures tocope up with it. They advocated the necessityof positive stress (normal level of stress) amongthe employees to carry out their routine worksmoothly in their work place. Theyrecommended the management to devisesuitable concrete measures to maintain thenormal level of stress among the employeesthrough counseling and reinforcementtechniques. Saha, Sinha, & Bhavsar (2010)found excessive workload, underpayment andinadequate staff create stress among hospitalemployees. Nicolas, Gayatridevi & Velayudhan(2009) through their study among multi-nationalcompany executives confirmed that women areexperiencing more job stress than men. Theirdual role between family and work commitmentsbrings role conflict. Lack of emotionalventilation, job instability, technology andphysical demands and sensitivity bring stressto women. The study also found that men reportpoor health status than women. Chandraiah,Agrawal, Marimuthu, & Manoharan (2003) intheir study among a group of managers foundthat individuals under excessive stress tend tofind their jobs less satisfying. Those with lowerjob satisfaction were found to have experiencingmore stress in the form of overload, roleambiguity, role conflict, under participation,powerlessness and low status compared to those

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with higher job satisfaction. The study alsofound that age of the employees is negativelycorrelated with occupational stress andpositively with job satisfaction. Conspicuously,empirical evidences for stress at workplaceimpacting badly on employees’ efficiency,productivity and health are numerous. However,except some general causes, severe causes forstress are reported to be sector/industry specific.Over years, studies have brought in new andvaried causes for stress in the ever changingindustry environment. Periodical identificationof excessive stress among the employees andmeasures for remedying it are inevitable for theefficient and effective utilization of the mostvaluable resource for business processes andservices.

III. Objective, Methodology and Materials

The study is exploratory in naturedesigned to identify the causes of stress amongthe lower and supervisory level skilledemployees (non-managers) in the IT-BPO sectorworking in the two IT Parks – Ernakulam andThiruvananthapuram – in Kerala. A sample of80 employees, twenty each from the selectedtwo companies in each of the two selected ITParks, is drawn for the study (Table 1). Aninterview schedule loaded with thirty-fivestatements demanding responses on a five-pointLikert-type scale is given to the employees aspart of identifying the causes of stress amongthem. The collection of data was done duringApril-June 2012. Factor Analysis on the thirty-five statements with the Principal ComponentAnalysis (PCA) as an extraction method andVarimax as Rotation method with KaiserNormalization is performed for dimensionreduction and identification of factors. Bartlett’sTest of Sphericity and Kaiser-Meyer-OlkinMeasure of Sampling Adequacy (KMO Test) areperformed to confirm the suitability of the datafor factor analysis. The factors identified have

been cross examined in terms of gender, maritalstatus and category of employees so as toexamine the differences in the responses of theemployees in each of the independent variable.Student’s t test and ANOVA are used forestablishing the mean differences among theindependent variables.

IV. Analysis, Results and Discussion

As stated above in the methodology partof the study, in order to analyze the collecteddata and to identify the dimensions of the causesof stress among IT-BPO sector employees,factor analysis on the thirty-five statements withthe Principal Component Analysis as anextraction method and Varimax as Rotationmethod with Kaiser Normalization isperformed. Bartlett’s Test of Sphericity andKMO measure of Sampling Adequacy areperformed to confirm the suitability of thedata for factor analysis. After that, Kaiser’scriterion is used while performing factor analysisin order to decide the number of factors to beretained. Then several iterations were usedin order to find the items with low loadingson each of the factors so as to eliminate them.

The chi-square value 1433.194 (Table 2)computed while performing Bartlett’s test ofSphericity indicates that it is highly significant,significance level being 0.000, and thus meetsthe criteria of value lower than 0.05 in order toperform factor analysis. The KMO measure ofsampling adequacy computed is 0.627 whichexceeds the minimum value of 0.6, so good forfactor analysis. After these preliminary steps,factor analysis with Principal ComponentAnalysis as an extraction method has beenperformed using the 80 cases. Thecommunalities at the initial stage and afterextraction showed that the extraction values ofall variables are sufficiently high (i.e.>0.50).Using the Kaiser’s criterion for extraction of

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Table 1: Profile of Sample Respondents

Sl No VariablesMale Female Total

No % No % No %

I Age (Yrs.)

1 21-25 21 26.3 25 31.3 46 57.5

2 25-30 22 27.5 7 8.8 29 36.3

3 30-35 2 2.5 3 3.8 5 6.3

4 Total 45 56.3 35 43.8 80 100

II Marital Status

1 Single 37 46.3 26 32.5 63 78.8

2 Married 8 10.0 9 11.3 17 21.3

3 Total 45 56.3 35 43.8 80 100.0

III Category

1 Associate 18 22.5 21 26.3 39 48.8

2 Senior Associate 22 27.5 11 13.8 33 41.3

3 Team Leader 5 6.3 3 3.7 8 3.8

4 Total 56.3 35 43.7 80 100

IV Experience (Yrs)

1 Less than 3 31 38.8 29 36.3 60 75.0

2 3-5 12 15.0 4 5.0 16 20.0

3 5-7 2 2.5 2 2.5 4 5.0

4 Total 45 56.3 35 43.8 80 100.0

Source: Authors’ Data

factors, the performed Principal ComponentAnalysis led to the extraction of only 11factors, meaning that all the 35 variables(questions) should be regrouped to form only11 quality dimensions (only those factors withEigen values greater than 1 is taken as extractedfactors) (Table 3). The model with the 11 factorsis able to explain 72.52 per cent of the totalvariance in all the thirty-five variables.

The descriptive statistics of the elevenfactors (Table 3) confirm that all the elevenstress factors have a score above 70 per centsignalling some sort of severity of stress amongthe employees. Gender-wise examination of thestress score of the eleven factors reveals thatthere is no significant difference in the responsesof the employees regarding the level of stress(Table 4). However, marital status-wise, the

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Table 3: Descriptive Statistics of Factors Causing Stress

Sl. Factors No. of Mean Std. % ScoreNo. Variables Error

1 Low Motivation 6 22.26 .39170 74.20

2 Role Ambiguity 5 18.72 .33938 74.88

3 Low Monetary and NonMonetary Benefits 4 14.66 .37185 73.33

4 Poor Personnel Relations andPhysical Work Environment 4 14.25 .35467 71.25

5 Tight Performance Appraisal 3 11.50 .18826 76.67

6 Lack of Job Security 3 11.03 .22463 75.53

7 Absence of Collective Bargaining 3 10.57 .23247 70.47

8 Excessive Work Load 2 7.51 .15811 75.10

9 Timing of Jobs 2 7.05 .16960 70.50

10 Poor Management Relation 2 7.02 .62236 70.20

11 Personal Health Problems 1 3.82 .10788 76.40

Note: Extraction using Principal Component AnalysisSource: SPSS Generated Result out of Authors’ Data

Table 2: KMO and Bartlett’s Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .627

Bartlett’s Test of Sphericity

Approx. Chi-Square 1433.194

df 595Sig. .000

Source: SPSS Generated Result out of Authors’ Data

level of stress differ in the case of three factorsviz. Poor Personnel Relations and Physical WorkEnvironment (mean value – single 10.80;married 11.88; sig value 0.05), TightPerformance Appraisal (mean value – single18.25; married 20.47; sig value 0.007) andExcessive Work Load (mean value – single10.19; married 12.00; sig value 0.001) (Table5). Category-wise also, the stress scoresignificantly differs for the same three factors

viz. Poor Personnel Relations and Physical WorkEnvironment (mean value – Associate 10.38;Senior Associate 11.57; Team Leader 12; sigvalue 0.014), Tight Performance Appraisal(mean value – Associate 17.82; Senior Associate19.72; Team Leader 19; sig value 0.026) andExcessive Work Load (mean value – Associate9.79; Senior Associate 11.33; Team Leader11.25; sig value 0.004) (Table 6).

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V. Conclusion

Organisational competitiveness is asynergy generated out of the ability of variousresources at the disposal of the organisation toproduce results. Among these resources, humanbeings are the core and their efficient andeffective utilisation is important for ensuringsuccess. Stress bearing and dissatisfiedworkforce hardly yield results. Periodicalidentification and remedy of stress causingfactors are inevitable to build satisfied andhealthy human resource. Irrespective of the typeof industry and nature of job, stress mountingcauses and circumstances are many inworkplaces. Obviously, the IT-BPO sector andother similar sectors wherein human resourceare the mainstay of their service processes shouldhave constant measures to maintain the resourcewith their possible potential to contribute for theorganisation, their own family and to the societyas a whole.

References

Ahmad, S. J. (1991). Organizational Role Stress:A Psychological Study of MiddleManagers. Journal of Personality andClinical studies , 7, 43-48.

Chandraiah, K., Agrawal, S., Marimuthu, P., &Manoharan, N. (2003). OccupationalStress and Job Satisfaction AmongManagers. Indian Journal of Occupationaland Environmental Medicine , 7 (2).

Dewa, C., Thompson, A., & Jacob, P. (2011).Relationships between Job Stress andWorker Perceived Responsibilities andJob Characteristics. International Journalof Occupational and EnvironmentalMedicine , 2 (1).

Gunasundari, M. K., & Ravindran, G. (2012).Causes and Symptoms of WorkplaceStress to Information Technology(IT)Professionals with Special Reference toCoimbatore City. Asian Journal of

Research in Social Science & Humanities,2 (3).

Kumar, C. S. (2011). Job stress and Jobsatisfaction of IT Companies’ Employees.Management and Labour Studies , Vol.36(1), 61 - 68.

Leka, S., Griffiths, A., & Cox, T. (2003). WorkOrganisation Stress: Systematic ProblemApproaches for Employees, Managersand Trade Union Representatives. WorldHealth Organisation.

Mageswari, S., & Prabhu, N. R. (2011). A Studyon Job stress among Employees of IT&ITES in Chennai. The InternationalJournal’s Research Journal of Socialscience and Management , 1 (8).

Malhotra, S., & Chadha, O. (2012). Stress in theContext of Job Satisfaction: An empericalstudy of BPO Sector. InternationalJournal of Research in IT & Management,2 (1), 24-38.

National Institute for Occupational Safety andHealth. (1999). Stress at work. 99-101.

NASSCOM (National Association of Softwareand Service Companies) (2012). NasscomStrategic Review 2012.

Neelamegam, R., & Asrafi, S. (2010). Workstress among Employees of DindigulDistrict Central Cooperative Bank TamilNadu: A study. The IUP Journal ofManagement Research , IX (5), 57 - 69.

Nicolas Benedict, J., Gayatridevi, S., &Velayudhan, A. (2009). PerceivedOverqualification, Job S a t i s f a c t i o n ,Somatization and Job Stress of MNCExecutives. Journal of the IndianAcademy of Applied Psychology , 35 (2),283-289.

Saha, D., Sinha, R., & Bhavsar, K. (2010). Jobstress among the staff of a SuperSpeciality Hospital. Journal of theAcademy of Hospital Administration , 22(1&2), 23 - 27.

Seyle, H. (1956). The Stress of Life. New York,McGraw-Hill.

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Do Co-operatives Lack Co-operation?A Study in the Context of Workers’ Participation

in Management

Dr. Deepu Jose SebastianAssistant Professor

Postgraduate Department of Commerce, Deva Matha College,Kuravilangad, Kottayam, Kerala, India.

E-mail: [email protected]

Dr. Lishamol Tomy Assistant Professor

Department of Statistics, Deva Matha College, Kuravilangad, Kottayam, Kerala, India.E-mail: [email protected]

Abstract

Workers’ Participation in Management refers to the work structures and relationships withinan organisation, which embraces information sharing, work re-organisation, joint consultation,joint decision-making, and self-management. It enables individual employees to influence thedecisions concerning their work and work environment. The concept aims at ushering industrialdemocracy essential for forecasting social justice for industrial employees. The paper is anattempt to throw light on such practices prevailing in the industrial sector in Kerala with specialreference to its public sector and co-operative sector industries. It has been an eye opener thatthe latter, which is an association of workers, lags much behind the former in the matter ofeffectiveness of workers’ participation in management.

Keywords

Workers’ Participation in Management – Co-operative Sector – PISOOLIP – Productivity –State Public Sector

I. Introduction

The essence of the idea of Workers’Participation in Management (WPM) is thecreation of a system of relations in whichindividual workers, in association with theirfellows, directly manage the means, conditions

and results of their labour and thus achievecontrol over the totality of social relations in thecommunity. WPM is basically an exercise in there-distribution of power and authority betweenlabour and management. It is, in essence,conceived as a device of sharing management

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authority with workmen as a part of the strategyof creating a committed workforce in industry(Azeez, 1980).

The father of modern businessmanagement F.W. Taylor has recognised thesignificance of WPM and included the conceptin his philosophy of ‘scientific management’which is centred round the tenet of ‘mentalrevolution’. It means that both the workers andmanagement should abandon their traditionalthinking of an employer and employee. Theemployer should develop the concept ofpartnership and respect for the dignity of theworker as a human being. The worker shouldalso develop the sense of belonging to theenterprise. He should consider the factory as hisown place of work and put his sweat and bloodfor the success of such a joint venture.

II. Review of Related Literature

Though the concept of WPM in India hasa history dating back even to the ancient periods,studies on the effectiveness of workers’participation, over time, have shown mixedresults. Several research studies hint the failureof workers’ participation schemes in Indianindustries (Lavakare, 1977; Kumar, 1978).Although a worker is recognised as a partner ofmanagement in joint bodies, consultative ordecisive, he is not an equal partner in reality.Some scholars are of the opinion thatparticipative management would remain onlyas an imaginative projection with ideologicaldiscrepancy (Tanic, 1969). Another scholar whostudied in-depth the working of jointmanagement councils has found that much tobe desired in terms of its working as well as thepreconditions for its success (Sheth, 1972).

The nature of WPM is multidimensional.It addresses the relationship between the

organisation and its workers and stakeholders;fundamental issues of governance withinorganisations; and the role of employees andexternal stakeholders in all levels oforganisational decision-making. According toBratton and Gold (2003), “employeeparticipation involves workers exerting acountervailing and upward pressure onmanagement control, which need not implyunity of purpose between managers and non-managers.”

The First Five Year Plan document in India(1951) emphasised the importance of workcommittees as a forum for participation. Thedocument further goes on saying that “initiallymuch faith was placed in work committeestaking it as a ‘key of industrial relations’, butsuch committees neither been set up as perrequirement, nor have they functionedeffectively.”

Robertson and Dennison (1960) hasobserved that the logic behind participativemanagement is to create an atmosphere whereworkers and management feel closer to eachother and work in unison to further the cause ofdevelopment and prosperity of the nation. Pandit(1962), after conducting a study about thefunctioning of Joint Management Councils as aforum of participation in four private sectorenterprises concluded that both the managementand workers’ representatives lacked the spiritof co-operation which made the talk about theother important factors like the decision-makingprocess, size of the enterprise, the structure etc.,rather irrelevant.

Sethi (1973) is of the view that workersby virtue of their labour input, contribute to thedevelopment and prosperity of their firm andconsequently they have a vital interest in its

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day-to-day operations. Workers’ participationin management enabled workers to have a sayin it, if not influence, organisational decisions.Participative management is an organisationalconcept that refers to all such measures whichmay be introduced either by the employer, orby legislation, or by collective agreements withthe objective of ushering in co-management bythe owners or their representatives on the onehand, and the chosen representative of theworkmen, on the other, as an adjunct ofcollective bargaining.

Mankidy (1975) in a research workundertaken to study and analyse the type ofparticipative management in nationalized bankswith special reference to board levelparticipation concluded that experiment ofparticipative management through board levelrepresentation has given only meagre results.Though the objective of participation was toachieve better industrial relations and higherproductivity, on account of board levelparticipation there was no improvement inindustrial relations and in employees’ feelingthat they are being represented, rather theexperiment had caused inter-union rivalry.

Pylee (1975) conducted three differentstudies on participative management in aspecified period. The findings were alsodifferent. His first study on a private electronicscompany revealed that the workers had no faithin participation schemes. The finding of thesecond study on a public sector aluminiumindustry was that both the workers andmanagement had belief in the participativecouncils and there existed a high sense ofbelonging too. His third study on hospitalmanagement indicated that the participativemanagement scheme was successful andemployees were satisfied with the scheme.

Leberman and Leberman (1978) has madea comparative study of the implementation ofvarious schemes of participative managementin two industrial enterprises; one in the privatesector and the other in the public sector. Thestudy brought out the positive role that acommitted management, an educated workforceand a strong trade union can have onimplementing a scheme for participativemanagement. On the other hand, where themanagement is not positively predisposedtowards the philosophy of employeeparticipation, and a strong union is absent, theendeavour to establish shop councils and jointcouncils appears to be a token gesture to theworkers to restrict the workers from anysustained movement towards unionism.

Warrier (1978) studied the conceptual andtheoretical issues relating to participativemanagement in the particular context of India.After discussing the working of existingparticipative forums in India and abroad, heconcluded that healthy trade union practices cango a long way in the successfuloperationalisation of the concept. Therefore,according to his study, necessary ground workand preparation is essential before the actualpractice of participative management in theindustrial establishments.

Lall (1984) studied the working of variousparticipative forums in one of the public sectorindustrial undertakings managed by the IndianRailways. The study pointed out that apart fromother factors, absence of genuine bargainingforums also led to the lack of trust between themanagement and workers, leading to eventualineffectiveness of the participatory forums.

Noah (2008) conducted an investigationof the existing level of worker participation in

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management decision-making within a limitedenvironment. The study made a survey of 227non-management employees drawn from twoseparate organizations. The results showed thatemployees in both organisations demonstrate ahigh interest in participation in the decision-making process within their respectiveworkplaces. It was observed that there wassignificant relationship between education andage of the employees and employees’involvement in decision-making as well asbetween frequency of employees’ consultationand their organisational commitment. The studyrevealed a growing desire of non-managementemployees in the Nigerian work environmentto exercise greater involvement in the decision-making process of their enterprises.

III. Objectives and Methodology

The present study is designed to pursuethe magnitude of WPM practices in the StatePublic Sector (SPS) and Co-operative Sector (CS)units in Kerala and thereby assess theeffectiveness in the implementation of theconcept. For the purpose of the study, altogether16 industrial units operating in Kerala have beenidentified as sample units based on purposivesampling method. Eight of these units belongto the SPS and the rest, 8 units, belongs to theCS. Both manufacturing and service units areequally included in the sample. Out of the 18selected units, 288 employee respondents areselected to collect their views on WPM. Astructured survey schedule is used for thesurvey.

The study assesses the effectiveness WPMin terms of eight constructs comprising sufficientnumber of variables. The assessment has beenmade in a unique manner based on the presence

and magnitude of the constructs such as (1)productivity, (2) industrial relations, (3) socialcommitment of the organisation, (4)organizational effectiveness, (5) organisationculture and development, (6) labour welfare andcompensation, (7) industrial discipline, and (8)professional development of the labour amongthe selected sample industrial units.

The magnitude of above mentionedconstructs in an industrial organisation has adirect correlation with the effectiveness ofWPM there. The more their presence, the morewill be the effectiveness of labourparticipation in management. The researchershave coined the term ‘PISOOLIP’ to identifythe above mentioned eight constructscollectively by incorporating the first lettersof those constructs.

IV. Hypothesis

Since the study is in the nature of adescriptive assessment of the effectiveness ofWPM practices in the SPS and CS industrial unitsin Kerala, the following working hypothesis hasbeen set to validate.

H 0 : There is no difference between theWPM practices in the SPS and CS industries.

Vs

HA

: The WPM practices in SPS and CSindustries differ significantly.

V. Results and Discussion

The mean scores of effectiveness of WPMpractices in the SPS units and CS units are givenin Table 2 and Table 3 respectively. As statedin the methodology above, the assessment hasbeen made based on eight variables,paraphrased – “PISOOLIP”.

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The hypothesis has been validated usingZ-test. The results of the test are shown inTable 3. It is obvious that there is significant

difference between these two sectors in thepracticing of WPM.

Table 2: Mean Scores of Effectiveness of WPM in CS Units

Sl. No. Parameters (PISOOLIP) CS Units

Mean Score SE

1 Productivity 18.44 0.190

2 Industrial Relations 17.94 0.217

3 Social Commitment of the organisations 19.56 0.128

4 Organisational Effectiveness 34.50 0.421

5 Organisation Culture and Development 30.56 0.209

6 Labour Welfare and Compensation 51.33 0.303

7 Industrial Discipline 33.56 0.190

8 Professional Development of the Labour 27.11 0.330

Source: Primary data

Table 1: Mean Scores of Effectiveness of WPM in SPS Units

Sl. No. Parameters (PISOOLIP) SPS Units

Mean Score SE

1 Productivity 24.89 0.205

2 Industrial Relations 21.28 0.203

3 Social Commitment of the organisations 24.39 0.281

4 Organisational Effectiveness 43.11 0.477

5 Organisation Culture and Development 40.50 0.275

6 Labour Welfare and Compensation 64.67 0.380

7 Industrial Discipline 40.83 0.295

8 Professional Development of the Labour 30.50 0.183

Source: Primary data

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It is quite clear from Table 1 and Table 2

that the effectiveness of WPM practices is higher

in the SPS units than CS units in Kerala. The

mean score of all the constructs are

exceptionally higher in the case of SPS units.

The hypothesis test results (Z-values; Table 3)

also substantiate the fact that WPM practices are

more effective in the SPS units in Kerala than

the CS units.

VI. Conclusion

It has been an eye opener that the CS units

in Kerala which are the real workers co-

operatives lag behind the SPS units in its

approach and practice of WPM. It should be a

subject matter for another piece of study to

enquire into the reasons behind such a pathetic

performance of our CS units, since co-operative

sector has always been highlighted as a panacea

to solve the industrial backwardness of Kerala.

It is a fact that unless the status of the worker is

raised and he is recognized as a true partner in

the industry and a co-trustee of community’s

welfare along with capital, he could not be

persuaded to put his very best in the work.

WPM may be looked as an instrument

for improving efficiency of industries and

establishing harmonious industrial relations; as

device for developing social education; for

effective solidarity among the working

community and for tapping latent human

resources; as a means for attaining industrial

peace and harmony leading to higher

productivity and increased production; as a

humanitarian act for giving the worker an

acceptable status within the working community

and a sense of purpose in activity; and as an

ideological device to develop self-management

in industry.

Table 3: Comparison of Effectiveness of WPM in SPS Units and CS Units

Sl. No. Parameters (PISOOLIP) Z-value Conclusion

1 Productivity 276.91 Significant

2 Industrial Relations 134.88 Significant

3 Social Commitment of the Organisations 187.71 Significant

4 Organisational Effectiveness 162.40 Significant

5 Organisation Culture and Development 345.33 Significant

6 Labour Welfare and Compensation 329.37 Significant

7 Industrial Discipline 248.62 Significant

8 Professional Development of the Labour 107.81 Significant

Note: Significant at 95 per cent confidence levelSource: Primary data

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References

Azeez, A. (1980). Workers’ Participation inManagement. New Delhi, India: AshishPublishing House.

Bratton, J., Gold, J. (2003). Human ResourceManagement: Theory and Practice. NewYork, USA: Palgrave Macmillan.

Document of First Five Year Plan (1951), NewDehi. India: Government of India.

Kumar, A. (1978). Workers’ participation inOrissa: Indian Journal of LabourEconomics, 22(4), pp. 237-243.

Lall, K.B. (1984). Workers’ participation inmanagement: The Integral Coach Factory,Perambur: Indian Journal of IndustrialRelations, 19(4), pp. 454-468.

Lavakare, S.P. (1977). Workers Participation inManagement: Economic and PoliticalWeekly, 12(9), p. M-22.

Leberman, S.M., Leberman, R.L. (1978). Twocase studies on workers’ participation inmanagement: Indian Journal of IndustrialRelations, 13(4), pp. 467-510.

Mankidy, J. (1975). Participative Managementin Indian Banking Industry, Ph. D. Thesis,University of Bombay.

Noah, Y. (2008). A study of worker participationin management decision making withinselected establishments in Lagos, Nigeria:Journal of Social Sciences, 17(1), pp.31-39.

Pandit, D.P. (1962). Workers’ Participation inManagement: The Indian Experiment,New Delhi. India: Institute of EconomicGrowth.

Pylee, M.V. (1975). Workers’ Participation inManagement: Myth and Reality, NewDelhi, India: N.V. Publishers.

Robertson and Dennison (1960). The Controlof Industry, New York, USA: JamesNisbet and Company, New Edition.

Sethi, K.C. (1973). Workers’ participation inmanagement: Indian Journal of IndustrialRelations, 9(2), pp. 313-317.

Sheth, N.R. (1972). The Joint ManagementCouncil: Problems and Prospects, NewDelhi, India: Sreeram Centre for IndustrialRelations and Human Resources.

Tanic, Z. (1969). Workers’ Participation inManagement, New Delhi, India: Shri RamCentre for Industrial Relations.

Warrier, S.K. (1978). Meaningful Participationin Management: Indian Journal ofIndustrial Relations, 13(4), pp. 445.

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Bhagavad Gita and ManagementDr. C.V. Jayamani

ProfessorSchool of Management Studies

Cochin University of Science and Technology, Cochin, Kerala, India.E-mail: [email protected]

I. Introduction

The history of management is as old asthe history of mankind. Man has been managinghis multifarious activities from time immemorialwith tact and knack. Most slokas in BhagavadGita contain great ideas of modern management.

Abstract

Bhagavad Gita contains several slokas of much significance to the art and science of managementand administration. The main theme of “Management and Bhagavad Gita” is man’s boundenduties and their efficient accomplishment to help attain the ultimate goal. The philosophy ofmanagement and the Gita propound that all human actions are directed towards a goal andthat man will not relent unless and until he attains the goal. Management is getting things doneby others. It is only through direction, coordination, motivation and leadership one can leadothers to attainment of the goal. This is exactly what SriKrishna did in the case of Arjuna inmetamorphosing him into a spirited karma yogi. Action is a natural process while idleness isunnatural. To be active is an enchanting experience. Man may be inherently idle. But he can bestimulated to reach his highest potentials. Modern management is more concerned aboutproductive potentials and spiritual efficiency - spiritual efficiency is the underlying factor inprosperity. According to Gita, yoga is efficiency in action. Spirituality is the energy behindevery success. The quality of work, in fact, is the reflection of spiritual efficiency. It is thisspiritual efficiency reflected in the quality of work that brings prosperity. Bhagavad Gitabeautifully blends the man of action and man of wisdom. Their convergence brings success,development and prosperity. In the modern cyber age, we integrate Human ResourceManagement (HRM) and Information Technology (IT) for facilitating managerial effectiveness.In modern days; we have to transform our society’s impotent idleness into energizedentrepreneurship. Bhagavad Gita is capable in inspiring the idle to be o spirited karma yogis,in revolutionizing the worshippers of idleness into warriors of action.

Key Words : Management –Bhagavat Gita – effective management – human resource managemet

They include planning, direction,

communication, coordination, motivation,leadership etc. Right from the first sloka,

dharmaksetre kuruksethre, to the last one endingwith the term matir mama is of significance to

management and administration. Duties and

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responsibilities are important in management.Bhagavad Gita, all along speaks about one’sown duty (mama dharma) and bounden duty(swadharma). All actions should be goal-oriented and those actions should be reinforcedwith dharma (righteousness). There should beethics and values in business and profession.Gita contains 700 slokas. Of the total 18chapters, chapters 3, 6, 12 and 18 are ofparticular importance in regard to management,

Management is essentially man -management. The important task of the manageris to manage the mind of the people around himand the minds are often turbulent. In modernparlance, management (syllabi zed MAN-AGE-ME-NT) is a process of motivating and directing.Man is the first syllable of management. Theaim of management is to attain the goal in anefficient manner (AGE) by transforming eachperson into a motivated entrepreneur (ME) toundertake his own bounden duties, i.e. thenatural task (NT).

MANAGEMENT

MAN : The natural man

AGE : Accomplishment of Goal Efficiently

ME : Motivated Entrepreneur

NT : Natural Task

II. Indian Traditional Management

India is an ancient country with a greattradition and a rich treasury of knowledge. Itmay sound odd that there is lack of managementphilosophy in such a country. We haveillustrious ideas of management scattered in thevarious epics of yore. We Indians, with westernbias and Meccaulian mindset fail to trace outthe treasures of knowledge lying aplenty inMahabharat, Ramayana, Arthsastra, Nitisataka,

Sukraneethi, Viduravakya, Yogavasishta etc. In700 verses across eighteen chapters, BhagavadGita contains beautiful ideas of managementprinciples. All the 700 verses are interpreted tobe of immense interest to our modernmanagement gurus.

Management is a man-making gospelaccording to Sri Ramakrishna Paramahamsa. Tohis disciple Swami Vivekananda, it is a peoplebuilding philosophy. Modern management canbe considered as the karma yoga of kaliyuga.Management is an art, science or a craft ofconverting an idle man to a motivatedentrepreneur, Carrying out his natural task andaccomplishing the goal in the most efficientmanner. In Gita perspective, management canbe defined as a process of making an alarmingperson (inactive idle man) a spirited karma yogifor attaining his ultimate goal (moksha) througha dharmic way of doing things. Dharma, karma,yajna and sreya are its pre-requisites. Theteachings of Bhagavad Gita will be of immensehelp to modern managers in attaining their goalin an efficient manner. Gita is thus a guide togood management.

III. Bhagavad Gita and Management:The Linkage

III (A) Getting Things Done by Others

Management is the art of getting thingsdone by others. It directs and motivates thepersons towards the set goals. It persuades othersto cooperate and coordinate their efforts inachieving the pre-set goals. The style adoptedby the modern management is to inspire the idleminds so as to be pro active. Gita does exactlythe same. It stimulated the deluded Arjuna andtransformed him into a spirited karma yogi. Therelentless actions of the subordinates help reachthe goals easily. The kadopanishaidic principle

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- “awake, arise, stop not, till the goal is reached”becomes a pertinent management principle.

III (B) Arjuna Vishada Yoga Vs Peter Principle

Core competence and competitiveadvantage are two terms which are currentlydiscussed across the globe. According to PeterPrinciple, in an organization, there are certainpeople who cannot perform because of theirinherent incapability. Such people whenpromoted to higher posts “tend to becomeincompetent to carry out their job”. It will createa situation where “an employee tends to rise tohis level of incompetence”. Arjuna never hadany inherent weakness. But in a difficultsituation, he proved the product of theenvironment and a slave to the situation, therebyshowing symptoms of incompetence

III (C) Efficiency in Action

Several management experts haveattempted to study the attitudinal changes ofworkers in order to activate and motivate themto become efficient entrepreneurs. Motivationis the process of impelling the idle and inactiveinto dynamic action. Lord Krishna applied thismotivational technique to transform the deludedArjuna into a spirited karma yogi. In this contextSriKrishna advises Arjuna to get rid ofklaibhyam. Klaibhyam in Sanskrit meansunmanliness, or chicken heartedness. SriKrishnainspires Arjuna and exhorts him to arise andawake, true to the spirit of a warrior. Wagingwar is the natural task of a ksatriya. It is hisbounden duty to fight to the finish. He has toundertake this assigned task with due sense ofpride and privilege, with a sense of service andsacrifice (yajna bhavana). He should overpower and annihilate the enemy for theprotection of the fellow beings, for the welfare

and well-being of the society (loka samgrahamevapi). He has to do his bounden duties withdexterity, with utmost efficiency (kausalam).Yoga Karmasu Kausalam says the Gita meaningefficiency in action is yoga.

III (D) Work; as Natural as a Game

Gita says that for human beings work is anatural phenomenon. Nobody can remain idle.Lord Krishna says that even if one is assignedno specific duty in these three worlds, he doeshis duties himself continuously. Krishnasuggests that if one remains idle, those whofollow him also tend to remain idle. In modernmanagement, every work is as natural as agame. Work is an enchanting experience. Theentertainment part of the work will prompt everyperson to work hard. The sportive spirit in thegame keeps off boredom. It is true thatmanagement perceives man as inherently idle.But every effort is taken to transform his basicpassiveness (immaturity) to activity (maturity)says Chris Argiris in his Maturity-Immaturitytheory of Motivation. With regard to relentlesswork, worshipful work, devotion to duty, naturaltask etc. there is not much difference betweenBhagavad Gita and modern management.

III (E) Productivity and Prosperity

Modern management is more concernedwith productivity and prosperity. These areachieved through planning, direction,motivation coordination etc. These actions aregenerally called management functions.According to modern management principles,goal can be achieved through coordination ofefforts. Bhagavad Gita also emphasizes thisaspect emphasising that prosperity (sreyas) canbe attained through cooperation (parasparam

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bhavayantha). If one does this natural duty withdevotion and dedication, Gita says, one canattain not only growth and development, but alsosuccess (vijayam), prosperity (sree) andprogress. Spirituality is the energy behind everysuccess.

III (F) Well-being of the Society

Often we do our duty for self-developmentand self-satisfaction. Gita says, if we do notperform our duties properly even the protectionof our body is not possible. Besides self-development, one has to aim at developing thesociety too. Gita argues that one has to do hisduties for the welfare and well being of thesociety (lokasamgrahamevapi). In this context,the words of Robert Owen (UK 1771-1858), theFather of Personnel Management is noteworthy.He said, “Management is a philosophy forhuman welfare development” to quote FWTaylor (USA 1856-1951) “the principal objectof management should be to ensure maximumprosperity to the individual.

III (G) Total Quality Management

There are several synonymous ideas inBhagavad Gita which are tantamount to theTQM. A spiritually charged person can neverremain idle. He will pursue his goal and not stoptill the goal is reached. He is conscious aboutthe quality of his work. This mind set leads himto perfection and excellence. Ethics orrighteousness is very vital in any activity. It isthe ethics in work that maintains the quality ofthe work. According to modern managementwork + ethic = efficiency. Gita says, thedexterity in action is yoga (Yogasu karmasukausalam). The action that is reinforced withethics is called efficient action. This is really avalue addition to the natural task.

III (H) Man of Wisdom and Man of Action

Modern management beautifully blendsthe knowledge, skill and experience for attainingthe goal. Action and wisdom are two wings onwhich one can fly sky high in their performance.In management, brainpower and bran power areblended beautifully. In Bhagavad Gita, Vyasavisualized this convergence in the mostscientific manner. In the last sloka, Yathrayogeswara krishno yathra partho dhanurdhara,for success growth and prosperity, the man ofaction (dhanurdharas) and the man of wisdom(yogeswaras) are to be in harmony. In the cyberage, we integrate HRM and IT which are veryimportant in management

III (I) Manifestation of Perfection

Man and his mind are two importantfactors for prosperity. The mood and motivepropel man into action. Action leads toachievement. What we perceive as progress inthis world is the manifestation of human actions.It is the expression of one’s behaviour. Actionis one way of expression. Education accordingto Swami Vivekananda is the manifestation ofperfection within man. It should not be themanifestation of perversion. An integratedapproach to human life, a holistic living, is whattakes us to the path of perfection. We Indians,right from the period of Upanishad, are theworshippers of perfection which leads us tospirituality and prosperity.

An economic policy aims at the progressand prosperity of the people. It can never beanti-people, but has to be always pro-people andpeople friendly. It should be aimed at the welfareand well being of the society. Gita as aphilosophy of prosperity perceives growth,prosperity and firm policy to the people. It aimsat the welfare of one and all. The interests of

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the have and the have-not, the rich and the poor,are all taken into consideration. The course ofaction followed is cooperation, coordination andcollective responsibility.

III (J) Lift Thyself by Thyself

Bhagavad Gita preaches the philosophyof self-management. Gita’s philosophy is tokeep everybody independent, self-contented,self-stimulated and self-motivated.Development through self-development is thepolicy of Gita. Gita says that we have to raiseourselves, by ourselves. Do not depend onothers. We ourselves are our friends and weourselves are our enemies too (Udharet atmanatmanam na atmanam avasadayet). Weourselves create our own hell and heaven forus. Never blame others and never pass thebuck. Do your duty, take up yourresponsibility. Do not shirk duties. Do yourduties in a selfless manner with a sense ofservice.

III (K) Gita and the Cyber-age Challenges

The modern concept of cybernetic is notalien or averse to India. India is the land whereeveryone prays “akhanda mandalakaramvyaptam yena characharam” which meansthe supreme power which is widespread theentire world over. This traditional Indianconcept is akin to the modern World WideWeb (www). In modern times we find a visibleshift in paradigms. Majority of them aremodifications of earlier concepts or a naturaltransformation of ideas. Very often thereoccurs a positive change on an idea wellconceived in our ancient scriptures. Forexample, the new phrase of ‘global village’and ‘globe as a small village’ was well-

conceived millenniums back by ourforefathers as vasudhaiva kudumbakam ,which means world is one family.Bharthruhari in his famous book Nitisathakaalso mentioned this concept beautifully asyetra viswam bhavat eka needam , whichmeans world has become a bird’s nest. Thenew concept of knowledge society was also

not unknown to our ancestors. The ideas

conceived by the Great Guru Vyasa still hold

good in modern management and other

disciplines.

The new age technologies, no doubt, have

given a new impetus to modern life. They have

given the required order and speed to life. They

have helped human efforts a lot. But never did

it replace the human head, heart or hand. For

all our achievements, human actions are highly

essential. But we have to transform the casual

aimless actions into conscious ones. In the

modern times, one has to convert efforts into

endeavour, efficiency, effectiveness and finally

into excellence. As Gita puts it efficiency in

action (karmasu kausala) is yoga (the ultimate

perfection).

Mind is the mechanism, which makes one

transform the efforts into excellence. It changes

according to the mood and motive. Computer

cannot change the mood and motive of an idle

mind. It can, at best, carry out the task assigned

in a systematic manner at a high speed.

Bhagavad Gita and similar other ancient

philosophy can activate an idle person into a

spirited karma yogi. That is why such

philosophies retain their privileged position

even now. And that is the relevance of Gita in

modern computer age.

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III (L) Idle Mind -Devil’s Workshop

An idle mind is a devil’s workshop.Impotent idleness is on the increase Lazinessand lethargy has gripped all walks of lifeIdleness is an important problem faced bymodern people. Indians always believed innishkaama karma (work without wages. Servicewithout salary) now modern Indian has changedthe paradigm into nisharmakamis (wageswithout work, salary without service)

IV. Conclusion

We have to transform our society’simpotent idleness to energizedentrepreneurship. We have to take the peoplefrom passivity to activity. Bhagavad Gita iscapable for guiding the lazy people to spiritedkarmayogis, transforming the worshippers ofidleness into warriors of action. Gita impartsstrength and stability in the minds of ourpeople for taking up the new challenges ofthe global economy. We need a balanced andstable mind unaffected by gain or loss, painor pleasure, praise or contempt, brickbats orbouquets. Such strong willed person can onlysucceed. Spirituality is the secret of successand that is the strength of Bhagavad Gita. Gitacan effectively solve several problems of thepresent cyber age.

References

Bharatiya Vichar Kendram. (2001), BhagavadGita and Modern Problems, Trivandrum.

Chakraborty, S.K. (1995). Ethics inManagement: Vedantic Perspective,Oxford India, and New Delhi.

Chakraborty, S, K. (2003). Values and Ethicsfor Organisation, Oxford India, NewDelhi.

Jayamani, C.V. (2000). Health Management- ANew Perspective, IMDR, Trivandrum.

Jayamani C.V. (2007). Lectures on BhagavadGita and Management, Bhartiyea VicharaKendra, Thiruvananthapuram.

Khandelwal N.M. (2001). ManagementConcepts from Mahabharath, NewCentury Publication. New Delhi.

Kumar Srivastava (1990). New Horizons ofManagement, Printwell Publishers, Jaipur.

Nalini. V. Dave (2002). Vedanta andManagement, Deep Deep Publications,New Delhi.

Pitamber Bhat (1984). Management, VishalPublications, New Delhi.

Swami Chinmayananda (2001). The Holi Gita,Chinmaya Mission Trust, Faridabad.

Swami Ranganathananda (2001). The UniversalMessage of Bhagavad Geeta, AdvaitaAshram, Calcutta.

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Chit Fund – Is it an Ideal Financial Instrument?

Dr. B. JohnsonAssociate Professor

Dept of Commerce and Management Studies University of Calicut, Malappuram, Kerala, India.


I. Introduction

The development and prosperity of aneconomy depends on how successfully thenation can mobilize its domestic savings.Individuals used to save a part of their incomefor meeting their future needs and also to meetcontingencies. The funds so saved need to bechannelized for financing productive activitiesto augment the process of economicdevelopment of a nation. The domestic savingsin India originate from 3 sectors viz., publicsector, private corporate sector and householdsector.

In India, more than 65% of the domesticsavings come from household sector. In orderto mobilize this household sector savings,

Abstract

Chit funds are considered as the poor men’s banks in India. Individuals who live in rural andsemi-urban areas find chit fund as a means of finding solution to their financial problems to agreat extent. Presently, the chit fund business in India is governed by Indian chit fund Act 1982.Chit funds operate in different forms like private organized institutions, private unregisteredinstitutions, co-operatives and government sector institutions. The various principles of chitfund business are equity, assurance, probability, co-operation, reward and legitimacy. Chitfund is a dual financial instrument as money can be invested in it in anticipation of a fair returnand it offers loan facility, on the guarantee of the amount invested, at a reasonable rate ofinterest.

Key Words: Chit Fund, financial instrument, prize money, net rate of return

banking and non-banking institutions areoperating in our country. A chit fund is one ofthe important non-banking financial institutions.Government, private and co-operative sectorsrun their own chit funds business based on thechit fund act. These chit funds function as animportant agency for mobilizing the householdsector savings towards productive purposes.

II. Chit Fund – The Concept

According to section 2 of the Indian ChitFund Act 1982, “chit means a transactionwhether called chit, chit fund, chitty, kuri or byany other name or under which a person entersinto an agreement with specified persons thateveryone of them shall subscribe a certain sumof money (or a certain quantity of grain instead)

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by way of periodical installments over a definiteperiod and that each such subscriber, shall, inhis turn, as determined by lot or auction or insuch other manner in the chit agreement, beentitled to the prize money”.

III. The Research Problem

The chit fund business is considered aspoor man’s bank. Basically it caters to therequirements of low income people in the ruraland semi-urban areas. Chit funds maintain abalance between savings and borrowings. It isan organization where savers and borrowersmeet together. Chit fund is considered as inimportant institutions which relieve the commonpeople from the clutches of money lenders. Therate of borrowings and savings is determinedinternally based on demand and supply formoney. In India, nearly 10% of the peopleassociate with the operation of chit fundbusiness. Chit fund is considered as an importantfinancial instrument of the common man. Beinga financial instrument it should satisfy therequirements like profitability, safety, liquidityand transferability. In this context, it is highlyrelevant to examine whether the chit fund canbe considered as an ideal financial instrumentboth from the point of investors and borrowers.

IV. Objectives of the Paper

The specific objectives of the paper are;

1. Examine the structure and types of chit fundbusiness prevailing in the country.

2. Identify the principles of chit fund business;and

3. Assess whether chit fund is an idealfinancial instrument or not.

V. Methodology and Data

The study makes use of both secondaryand primary data. Secondary data are collected

from books, articles and reports of differentagencies. Primary are collected through a seriesof formal discussions with the foremen of chitfunds in the private (registered), co-operativeand Government sectors. Data are also gatheredfrom the clients of these three sectors throughformal means. Personal discussions are also heldwith clients to collect their views and attitudesas investors and/borrowers of the chit funds.

VI. Operational Terms and Definitions Used

VI. (A) Gross Amount (Sala) of Chitty

The agency/individual or firm which isregistered with the registrar, will determine thegross value of chitty amount out of pastexperience and expectation by using theformula:-

Gross Amount of Chitty = MonthlyPremium × Duration in months.

For e.g., Rs. 1000 × 50 months = Rs.50,000, where Rs. 1000 is the maximummonthly contribution needed from a subscriber,50 is the duration of the chitty in months andRs. 50,000 is the maximum sum assured. Theduration of the chitty equals to the number ofsubscribers, as there must be one subscriber (notmore or less) to receive the prize money everymonth.

VI. (B) Prize money determination

The minimum prize money is determinedas per the norms given in chitty Act. At presentit is fixed at 70 per cent of the gross amount ofthe chitty. If more than one subscriber is willingto accept the minimum prize money, lots areconducted and the lucky subscriber gets the prizemoney each time. In the absence of anysubscriber willing to accept the minimum 70 percent prize money, a reverse auction is conductedwhere subscription open-bid for lowest amount.The following illustration elaborates the prizemoney determination process.

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VII. Results and Discussions

The results obtained from examination ofthe secondary sources and discussions held withrespondents are given below.

VII. (A) Forms of Chit Funds Operation

The chit funds operation in India take placein 3 forms (1) Simple chits (2) Prize chits and(3) Business chits.

1. Simple Chit Funds: It is a non-profit earningscheme. The rules and regulations are oraland mutually agreed upon by the interestedparties. There is no official promoter. Eachmember agrees to contribute a specificamount at regular intervals. The prizewinner is selected by lot out of the regularand needy subscribers.

2. Prize Chit Funds: This is also called aslottery chitty. It involves an element ofgambling. The promoter of the chit fund

Illustration

Gross amount of chitty Rs. 50,000

Monthly premium Rs. 1000; Number of months 50

The prize money = 50,000×70% = Rs. 35000

Total discount = Gross amount – Prize money

= 50,000 – 35000 = Rs. 15000

Discount per member =

= = Rs. 300

When the bid is fixed at Rs. 45000;

Total Discount = Gross Amount – bid amount

= 50,000 – 45,000 = 5,000

Discount per member = = = Rs.100

Total discountNo. of members (No. of instalment)

Rs. 150050

Total discountNo. of members

500050

invites the public to join the scheme andenrolls more subscribers than the numberof installments. The prize winners’ namewill be removed from the list of subscribersand they need not pay further installments.The other members get back the totalsubscription plus interest on the terminationof the chitty. No commission is chargedbecause the promoter derives enormousprofit by way of interest from prize chittybusiness.

3. Business/Auction Chitty: This is the onlytype of legally approved chit funds businessin India.

Based on the authority which conduct thechit business, chit funds are grouped as follows:-

1. Private chit funds

2. Co-operative chit funds, and;

3. Government chit funds.

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A brief description of each type is givenbelow.

1. Private Chit Funds: The private chit fundsmay be organized sector chit or unorganizedsector chit. Organized sector chit funds arefunctioning as sole proprietorships,partnerships and joint stock companiesregistered with the Registrar. The interestof both the foreman (promoter) andsubscribers are legally protected.

The unorganized sector in the private chitfunds covers unregistered units. It functionsusing personal contacts, influence and otherforms of relationships. The interests of anyof the parties to such a chit fund are notlegally protected.

2. Co-operative chit funds – The co-operativesocieties can conduct chit fund business byregistering with the registrar of co-operativesocieties. Primary co-operative societies,employees’ co-operative societies etc. canundertake chit fund business subject to theprovisions of both the Co-operativeSocieties Act and Chit Fund Act, and therelated rules and regulations.

3. Government Chit Funds – Kerala StateFinancial Enterprises (KSFE) Ltd. is the soleagency of conducting chitty business in thegovernment sector in the state of Kerala. Itwas formed in 1969 with a capital of Rs. 2lakh. It is a non-banking financial institutionconducting chits of different gross valuesranging from monthly subscription of Rs.500 to Rs. 250,000 with different durationof 30, 40, 50, 60 and 100 months. Atpresent KSFE Ltd. has a customer base ofmore than 25 lakh and the annual businessof Rs. 14,646 crores as on 31-3-2012.

VII. (B) Principles of Chit Funds Operation

A close examination of the operationalmechanism of chit funds reveals that it followsthe important principles in economics,commerce, management and co-operation. Theimportant principles of chit fund business are;

1. Principle of Co-operation: A chit fund isan association of subscribers to meet theirfinancial requirements. It follows the mottoof ‘each for all and all for each and self helpthrough mutual help’.

2. Principle of Probability: Every subscriberof a particular chit fund has the sameprobability of winning the prize money. Nosubscribers have any preference overothers. In other words, all the subscribers’probability of getting the lot remains thesame.

3. Principle of Equity: Though a member didnot get the prize money, he is eligible toget the share of discount (Veethappalisa)on an equitable basis. The share of discountper member will be equal to total discountdivided by total number of members.

4. Principle of Assurance: The right of everysubscriber to receive the sum is legallyprotected by the chit funds Act 1982. Thereis no uncertainty in getting the sum assuredor prize money either at lot or at the end ofthe chit funds.

5. Principle of Reward: Chit fund is aneconomic activity as it is designed to areturn. The promoters of the chit funds(foremen) shoulder the risk of gathering agroup of persons to contribute towards thechitty. As a reward of his service, 5% of thegross value of the chitty will be thecommission for him.

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6. Principle of Economics: The chit fundbusiness follows the important principle ofeconomics like laws of demand and supply.When there are more members to take partin the lot or bid, the prize money reducesand the amount of discount per memberincreases and vice versa.

7. Principle of Legitimacy: Chit fund is formedin accordance with the Chit Fund Act

passed in India. The chitty operations

in the various states were conducted subject

to the different Acts passed in the respective

states as shown in Table 1. At present, the

func t ion ing of a l l the ch i t fund

activities in the country are governed

by the Indian chit fund Act 1982 which

came into effect from April 30, 2012.

Table 1: Chitty Fund Acts Prevalent in States

S. No Name of State Chit Fund Act

1 Tamil Nadu 1961

2 Pondicherry 1966

3 Andhra Pradesh 1971

4 Goa 1973

5 Maharashtra 1974

6 Kerala 1975

7 Uttar Pradesh 1975

8 New Delhi 1982

9 Karnataka 1983

VII. (C) Chit Fund – As an Instrument of Investment

An investment always ensures someincome subject to the risk involved in the classof investment. In addition to return, thecharacteristics of an ideal investment includeliquidity, transferability, and certainty. Whether,chit fund is an ideal investment avenue or notcan be examined with the following example.

Gross value of the chitty (Sala) Rs. 100000(monthly installment of Rs. 2000 and duration50 months). Suppose the chitty is auctioned at18th installment to Mr. A at 11% discount.

The prize to be received by Mr. A at the

19th installment would be Rs.100000 – 11% =

Rs.89000/-

Assume that Mr. A intends to invest the

Prize money in the chitty business (Chit fund as

an investment) and the rate of interest available

is 10% p.a. Interest at 10% interest for the

remaining period of the chitty 31 months (50

months – 19 months) will be

Rs.89000 ×10% for 31 months = Rs. 23,733.

Total cash inflow of Mr. A = Principal + Interest

= Rs. 89000 + 23733 = 1, 12,733

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Total costTotal no. of months

If the total dividend earned by Mr. A during 50months period

= Rs. 6000.

Mr. A’s net cash outflow for 50 months chitty

= 100000 – 6000 = Rs. 94000

Net surplus of Mr. A = Total cash in flow –Total cash out flow

= Rs. 112733 – 94000 = Rs. 18733

Average return per month

=

Gross average rate of return per annum

= × 100 = 18.75%

Net average rate of return

= = 23%

In a nutshell, if Mr. A invests the prizemoney in the chitty business, he is expected toget a gross margin of 23% and a net margin of18.75%

VII. (D) Chit Fund – As a Borrowing Instrument

Chit fund can be used for borrowingfinance also. The various factors that are usuallyconsidered for borrowing money will be;

· rate of interest payable

· security to be offered

· period of repayment

Consider the same example of the chittyhaving gross value Rs.100000 (2000 × 50)

Mr. X. borrows money from the chit funds

(Chit fund – A borrowing instrument)

If the chitty is auctioned to Mr. X at themaximum discount of 30%.

Total amount receivable by Mr. X= 1,00,000 – 30,000

= Rs. 70,000

Annualized cost of borrowing

= =

= 7.2%

Also assume that if the total auctiondiscount for the period of 50 months is Rs. 6000.

Net cost of the chitty = Gross discount –discount

= Rs.30, 000 – 6,000 = 24,000

Net annual cost of borrowing

= = 5.76%

When the duration of chitty increases, say60, or 100 months, the cost of borrowing willfurther come down.

In short, If Mr. X borrows money fromthe chit fund business, his gross cost ofborrowing will be 7.2 per cent and net cost ofborrowing will be 5.76 per cent.

VIII. Conclusion

Chit fund is a conventional form ofmobilizing finance for the rural and semi urbanpeople. It is considered as the poor man’s bank.People who need financial aid associatethemselves and mobilize money to meet theirrequirements. It is a meeting place of depositorsand borrowers. In other words, every memberof a chit fund discharges dual roles, one as asaver and the other as a borrower.

Every subscriber’s interest is legallyprotected by the chit fund Act. The total amountof discount (Veetha Palisa) is equitablydistributed among all the members. Principlesof co-operation, equity, probability, reward,

Total surplusTotal months

1873350

== = Rs. 375

3752000

3751625 (2000 – 375)

3000050

× 12

2400050

× 12

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assurance and economics are the hall marks ofchit fund business. The whole chit fund businessin India is presently governed by Indian chit fundAct 1982, which ensures the safety andprotection of all those who are involved in thebusiness. Chit fund is considered as an idealfinancial instrument as it gives high rate of returnto the investment. At the same time, the cost ofborrowing from chit fund is comparatively less.Therefore, it may be concluded that chit fundcan be treated as an ideal financial statement.At one side, it saves the subscribers from theindigenous money lenders and on the other side,subscribers are relieved from the enormous legalformalities associated with the bankingtransactions.

References

Antony, K.A. (1969). The Role of Chit funds ina Developing Economy, Madras SudarsanTrading Co. 24.

Ashkant, (1981). Savings with banks – Trendsin Accretion of deposits, EconomicSurvey, Vol. XXI, No.8.

Balasubhramanyam, M. (1971). Guide to AndraPradesh Chit fund Act, Hyderabad, NewIndia Publications.

Bhadran, K. (1975). ‘Chit funds – An ObjectiveStudy’, Commerce Supplement, Vol. Nos.9-11, October 13, 1975.

Chester, C.D. (1954). Report on Rural Creditof India, Government of India.

Friend, Irwin (1954). Income, Savings andInvestment Pattern in Rural India, NewDelhi, Ashish Publishing House.

Jagadisan, G. (1975). Chit funds – SomeMeasures of Effective Regulation, Madras,IFMR Publications.

Kapoor, M., Auttoinete, Schoar. (2006). ChitFunds as an Innovative Access to Financefor Low Income Households.

Muraleedharan, D. and Raju, G. (1999). CostBenefit Analysis of Chitty, Finance India,Vol. XXIII, No. 3, September 1999.

Nayar, C.P.S. (1973). Chit finance, Bombay,Vora and Company Publications, Pvt. Ltd.

Pillai, K.S.C. (1973). ‘Chit funds – Boon orFrands’, Commerce, August 1973.

Radhakrishnan, S. (1997). Model Act Chit fundBill, Madras, Jupiter Press (P) Ltd.

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Antecedents of Patients’ Satisfaction atGovernment Hospitals in Kerala:

An Exploration

Rehin K.R.Research Scholar

Department of Management Studies, Kannur University, Kannur, Kerala, India.Email: [email protected]

Dr. P.T. RaveendranProfessor

Department of Management Studies, Kannur University, Kannur, Kerala,IndiaEmail: [email protected]

Abstract

Kerala is a state with nearly 100 per cent literacy and the people are very much concernedabout their health and well-being. Apart from that marginal section of the population which iseconomically sound, majority of population rely on the public health care system for meetingtheir healthcare needs. As such, the quality of health care facilities provided by the publichealth care institutions is one of the major factors impacting the health status of the people ofKerala. No doubt, it is the perceived quality of care that induces or restraints a person fromutilising the public health services. The present study tries to find out the most important attributesimpacting service quality as perceived by the patients based on data collected from 250 patients.Regression Analysis confirms that ‘thorough testing and proper diagnosis of diseases’ and‘timely availability of nursing services’ are the key determinants of patient care quality whileother aspects like ‘post discharge care’ are found to be less significant.

Key words: Patient Satisfaction – Perceived Quality – Patient Care – Post Discharge Care

I. Introduction

Health is often considered as ‘absence ofdisease’. The World Health Organization (WTO)defines, “Health is a state of complete physical,mental and social well-being and not merely theabsence of illness or infirmity”. Later, thedefinition was modified to include the abilityof the people to sustain a “socially andeconomically productive life”. Health has

various attributes, each of which is significant,but the relative importance of each with respectto the other depends on the scenario in which anindividual or community functions (Misra, 2007).With the world’s national economies shiftingfocus from producing natural resources to addingvalue to resources through manufacturing, andnow to the rise of service economy andinformation management, the allocations for

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developing national infrastructures will more orless shift to investing in the human capital. Onlyby improving the health and learningopportunities of the next generation humancapital, the most valuable infrastructure for anation’s future be solidly built (Jenkins, 2005).

There is a wide variety of health caresystems around the world, with as many historiesand organizational structures, as there arenations. While the health care systems in somecountries are fully controlled by the privateplayers, there are countries where the healthcareplanning and delivery is purely looked after bythe government. In a country like India, with avast majority of middle class population,ensuring the health and well-being is primarilythe responsibility of the state. While the lower-middle class people as well as those belowpoverty line depend heavily on public healthinfrastructure, the private sector meets the healthcare needs of that segment of population whichis economically better-off. Kerala is noexception to this.

Kerala has to its credit a fairly developedpublic healthcare infrastructure. One indicatorof the government’s commitment to healthservices delivery is the extent of governmentexpenditure set apart for health sector. Since theformation of Kerala, the government’s budgetallocation for health sector had been consistentlyrising. Social sectors, mainly comprisingeducation and health, accounted for the majorchunk of government’s developmentexpenditure (Kutty, 2000).

As a state with nearly 100 per cent literacy,the people of Kerala are highly conscious aboutthe health status. While the wealthier peopleusually rely on the private sector, theeconomically weaker segment of the populationis almost fully reliant on the public health caresystem for their health care needs. It is theperceived quality of healthcare services at the

government hospitals that determines the extentto which people makes use of the public healthfacilities. There are numerous factors thatinfluence the patients’ perception about thequality of services rendered at governmenthospitals. As such, it is very important tounderstand the key factors impacting thepatients’ perception about the service quality atgovernment hospitals. This, in turn, can bringabout a positive change in the service qualityand thereby encourage more people to makeuse of the public health facilities. Hence, thepresent study aims to understand the key serviceattributes impacting the perception of patientsregarding the quality of services offered atgovernment hospitals in Kerala.


Quality measurement and management isone of the important aspects in all services,including health care. Though there are manystructured and unstructured efforts to measurevarious aspects of quality, health care systemstill lacks a unified process for assessing thevarious aspects impacting service quality. Giventhe complexities of health care services anddifficulty of service quality evaluation, it is notsurprising (Piligrimien & Buiknien, 2008). Thesignificance of the well-recognized health care“quality chasm” has been highly acknowledgedby a variety of stakeholders, who haveresponded with efforts to identify, understand,and correct specific shortcomings in health caredelivery (Mittman, 2004).

Healthcare service quality has beendefined differently by different stakeholdersinvolved in health care delivery process, namelypatients, service providers and various otherparties. The most commonly accepted definitionof health care quality was proposed by Instituteof Medicine (2001) where quality of care wasdefined as the degree to which health servicesfor individuals and populations increase the

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likelihood of desired health outcomes and areconsistent with current professional knowledge.To some extent, quality is in the eye of thebeneficiary. That is precisely the reason whyexpectations associated with different aspectsof care can possibly vary across variousstakeholders (McGlynn, 1997).

Patients tend to define quality in terms oftheir values and expectations, and this leads toquality definition focusing on satisfaction withhealth care and the results such as the level ofrecovery, mortality functional status etc. Whentalking about the quality of personal contactbetween the service provider and the client,health care professionals have always agreedto the fact that satisfying patients is essential toensure quality of care. However, at the sametime, physicians have often neglected theimportance of patients’ view point of care statingthat the patients have very little knowledgeabout the constituents of technical quality andalso that it is very difficult to measure patients’perceptions accurately and reliably. Patientstend to evaluate health care quality based onthe responsiveness to their tailored needs. Mostpatients define quality as efforts of physiciansto help them in every possible way at times ofneed. They often focus on effectiveness,accessibility, interpersonal relations, continuityand tangibles as the most important attributesof quality (McGlynn, 1997).

Health care professionals (physicians)usually defines quality in terms of the variablesand outcomes of care, and this definition stresseson the technical quality with which care isprovided as well as the nature of interactionsbetween doctor and patient. Technical qualityof health care has two aspects: theappropriateness of the service provided and theskills with which appropriate care is performed.High technical quality involves doing the right

thing right. To do the right thing requires thephysicians to take the right decision regardingcare for each patient. Physicians also tend tobalance between efforts to minimize costs, theirown judgments about best ways of treatmentand demand to consider the values and beliefsof patient while making treatment choices(McGlynn, 1997).

The role of government in ensuring thatits country’s healthcare system provides the bestservices to its population has been greatlyemphasized upon by Blendon, Kim & Benson(2000). Improvement in the quality of primaryhealthcare services along with increasingaccessibility and affordability has become amatter of grave concern for the developingnations in the recent years. However, themeaning of quality in healthcare system hasbeen defined differently by different writers.Ovretveit (1992) identified three components ofquality namely client, professional andmanagerial perspectives. From the client’sviewpoint, it is the process of meeting thepatient’s unique need and want (Atkins,Marshall & Javalgi, 1996) at the lowest possiblecost (Ovretveit, 1992), provided with courtesyand on time. However, professional qualityinvolves implementing the right procedures andtechniques necessary to meet the client’srequirement; and managerial quality meansoptimum and efficient utilization of resourcesto achieve the objectives set by higherauthorities. Hence, the concept of health carequality is a multi-dimensional concept meaningdifferent things to different stakeholders suchas government, service provider, hospitaladministration, and patients (Sharma, & Narang,2011).

Atkins, Marshall, & Javalgi (1996)discuss six factors relating to the service qualityas perceived in both the public and private

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hospitals at Northern Cyprus. These are empathy(giving priority to the needs of inpatientsrelationship between staff and patients),professionalism of staff, food and the physicalenvironment. They also revealed that theexpectations of inpatients on various aspectshave not been met either in the public andprivate hospitals.

According to Rajagopal (2010), the publichealth care system has failed considerably inproviding the requisite health care facilities tothe poor people. On the other side, private healthcare providers could offer better facilities interms of inpatient and outpatient care. Aproactive role by private hospitals along withsupport from the government and society atlarge can undoubtedly provide an ‘opportunityspace’ for the poor who seek good medical care,the author opined.

III. Methodology

The researchers adopted a descriptiveapproach while conducting the study. Data arecollected from inpatients at various district andgeneral hospitals across Kerala. A pre-testedstructured questionnaire was administeredamong a sample of 250 patients from variousdistrict hospitals across Kerala selected basedon the convenience of the researchers. Thequestionnaire tried to solicit the opinion ofrespondents on various aspects of care deliveryprocess like the behaviour of doctors and nurses

who are the most integral part of service deliveryprocess so as to measure their satisfaction withthe quality of care provided at these hospitalsas well as to identify scope for improvement.

Factor Analysis is used to identify the keyvariables influencing the satisfaction level ofpatients with the services rendered atgovernment hospitals. These variables werereduced into certain factors based on commonproperties. Regression is performed to identifythe most important factors impacting thesatisfaction level of patients as far as the genderof the respondents was concerned.

IV. Results and Discussion

For factor analysis to work there has to besome kind of relationship between the variablesand this is tested using the Bartlett’s Test ofSphericity. This test indicates whether factoranalysis is appropriate for a given set of data.Factor analysis can be considered appropriatefor a data only if the significance value is lessthan 0.05 (Field, 2000). As the significancevalue for the present data is 0.000 (Table 1),factor analysis is appropriate for this data. Thepresent data set also satisfies sampling adequacy(KMO test 0.602 – Table 1) and, therefore,factor analysis is appropriate. A KMO-value of0.5 or above means that the sample is adequateand we can proceed with factor analysis; whereasif it is bellow 0.5 we have to collect more data(Field, 2000).

Table 1: KMO and Bartlett’s Test Result

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .602

Bartlett’s Test of Sphericity

Approx. Chi-Square 476.638

Df 120

Sig. .000


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Table 2: Communalities

Variables Initial Extraction

Doctors thoroughly tested patients before giving medicines 1.000 .493

Prescriptions given by doctors were clear 1.000 .649

Clear instructions were given about how and when to takemedicines 1.000 .708

Doctors gave medical advice in an understandable way 1.000 .592

Doctors clearly explained to me the results of tests done. 1.000 .668

Doctors correctly diagnosed my disease. 1.000 .526

Doctors clearly explained my health condition to my relatives 1.000 .762

Doctors clearly explained the medical care to be taken afterdischarge 1.000 .566

Team spirit of doctors. 1.000 .702

Duty consciousness of doctors 1.000 .671

Nurses were always polite and approachable. 1.000 .515

The service of nurses was available whenever required 1.000 .683

There was good co-ordination between doctors and nurses. 1.000 .693

Nurses helped me follow the instructions given by doctors 1.000 .745

Nurses showed concern for my worries and anxieties 1.000 .618

Behaviour of nurses. 1.000 .558

Extraction Method: Principal Component Analysis.


Table 2 shows the commonalities beforeand after extraction. Principal ComponentAnalysis works on the assumption that allvariance is common. So before extraction allcommonalities are 1. Column two, i.e., theextraction column, indicates the percentage ofcommon variance associated with eachquestion. Hence from Table 2, we can say that49.3 percentage of variance associated with thevariable ‘Thoroughness of Testing BeforePrescribing Medicines’ is common, 64.9

percentage of variance associated with thevariable ‘Clarity of Prescriptions Given byDoctors’ is common and so on. The table clearlyshows the percentage of common varianceassociated with each variable.

Table 3 lists out the eigen values withrespect to each factor before extraction, afterextraction and after rotation. Before extractionthere were16 eigen values as there were 16variables included in the analysis. The eigenvalues associated with each factor shows the

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variance associated with each factor. It alsoshows eigen values in terms of percentage ofvariance. For eg. the first factor, i.e.,‘Thoroughness of Testing Before PrescribingMedicines’, explains 16.26 percentage ofvariance. It is clear from Table.3 that the firstfew factors explains relatively larger amount ofvariations in comparison to the later ones. TheSPSS then takes out those factors with eigenvalues greater than 1, which leaves us with 7factors which are shown in the second part ofTable 2 labelled as ‘Extraction Sums of SquaredLoadings.’ The values in this part of the tableare same as the values before extraction exceptthat the values for factors other than those witheigen values above 1 are ignored. The last partof the table, i.e., ‘Rotation Sums of SquaredLoadings’, displays the eigen values of factorsafter rotation. Rotation more or less optimizesthe factor structure leading to equalization ofimportance of all factors. Before rotation the firstfactor accounted for 16.26 percentage ofvariance while the remaining factors contributedto hardly 10 per cent of the variance whereasafter rotation all the factors contributed in therange of 7 to 10 per cent of variance therebymore or less equalizing the importance of allfactors.

Table 4 shows the rotated componentmatrix which is the matrix of factor loadingsfor each factor into each variable. A cut-off pointof 0.4 is fixed for factor loading. The factorsconverged at 18 iterations. The variables arelisted in the descending order of size of theirfactor. As evident from Table 4, factor rotationresulted in the extraction of 7 factors assignificant determinants of patients’ satisfactionwith service quality at government hospital.Factor 1 loaded across three variables, i.e.,‘Nurses Help in Following Doctors’Instructions’, ‘Co-ordination Between Doctors

and Nurses’ and ‘Thorough Testing by DoctorsBefore Prescribing Medicines’ which will jointlybe termed as ‘Joint Effort by Doctors andNurses in Patient Care’. Second factor loadedacross three variables namely ‘ClearExplanation of Test Results’, ‘Correct Diagnosisof Diseases’ as well as ‘Proper Medical Adviceto Patients’ which will hereinafter be referredto as ‘Proper Diagnosis and Communication’.Factor 3 loaded across three variables ‘TeamSpirit of Doctors’, ‘Duty Consciousness ofDoctors’ and ‘Behaviour of Nurses’ which willbe labelled as ‘Teamwork in Patient Care’.Fourth factor loaded across three factors whichare ‘Timely Availability of Nursing Services’,‘Politeness of Nurses’ and ‘Through TestingBefore Prescribing Medicines’ which willhenceforth be referred to as ‘Timeliness ofNursing Care’. The fifth factor loaded acrossthree variables namely ‘Clarity of InstructionsRegarding Medication’, ‘Behaviour of Nurses’and ‘Concern of Nurses for the Worries andAnxieties of Patients’ which will be termed as‘Quality of Nursing Care’. Factor 6 loadedacross two variables which are ‘Clarity ofPrescriptions Given by Doctors’ and ‘Nurses’Concern for Patients’ Worries and Anxieties’which will be labelled as ‘Concern in NursingCare’. The last factor again loaded across twovariables, i.e., ‘Clear Explanation of HealthCondition to Relatives’ and ‘Clarity of PostDischarge Medical Care Instructions’ whichwill be together called as ‘Post Discharge Care’.These are the seven most important factorsinfluencing the satisfaction of patients with thecare delivered at government hospitals.

To further refine the results, regressionanalysis was performed by taking the factorscores of factor analysis as independentvariables and gender of the respondents as thedependent factor at 5 per cent significance level.

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Table 5 clearly shows that when we takegender of the respondents as the dependentfactor, ‘Proper Diagnosis and Communication’and ‘Timeliness of Nursing care’ have beenemerged as the two most prominent factorsinfluencing the satisfaction level of patients atgovernment hospitals in Kerala. The first factor,‘Proper Diagnosis and Communication’ ,comprises of three variables such as ‘ClearExplanation of Test Results’, ‘Correct Diagnosisof Disease’ and ‘Proper Medical Advice toPatients’ and the second factor, ‘Timeliness ofNursing Care’ comprises of another set of threevariables such as ‘Thorough Testing BeforePrescribing Medicines’, ‘Timely Availability ofNursing Services’ and ‘Politeness of Nurses’.

So, altogether there are six variables as the realdeterminants of patients’ satisfaction atgovernment hospitals.

V. Conclusion

The above discussion leads us to theconclusion that though there are various aspectslike ‘co-ordination between doctors and nurses’,‘thorough testing by doctors before prescribingmedicines’, ‘clear explanation of test results’,‘correct diagnosis of disease’ as well as ‘propermedical advice to patients’, ‘duty consciousnessand team spirit of doctors’, ‘politeness andbehaviour of nurses’, ‘timely availability ofnursing services’, ‘clarity of prescriptions’ and‘instructions regarding medication’, ‘nursesconcern for patients’ anxieties and worries’,

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‘clarity of post discharge care’ etc. that have asay in the satisfaction level of patients, the mostprominent factors determining the ultimatesatisfaction of patients with the servicesrendered at government hospitals are ‘thoroughtesting before prescribing medicines’, ‘correctdiagnosis of disease’, ‘proper medical adviceto patients’, ‘clear explanation of test results’and ‘politeness of nurses’. As such, theauthorities concerned should focus on theseaspects so as to enhance the service quality andin turn the satisfaction level of patients.

References

Arasli, H., & Ahmadeva, L. (2004). “No moretears!” A local TQM formula for healthpromotion. International Journal ofHealth Care Quality Assurance, 17(3),135-145.

Atkins, P. M., Marshall, B. S., & Javalgi, R. G.(1996). Happy employees lead to loyalpatients. Survey of nurses and patientsshows a strong link between employeesatisfaction and patient loyalty. Journal ofhealth care marketing,16(4), 14-23.

Blendon, R. J., Kim, M., & Benson, J. M. (2001).The public versus the World HealthOrganization on health systemperformance. Health Affairs, 20(3), 10-20.

Brace, N., Kemp, R., & Snelgar, R. (2006).Multiple regression. SPSS forPsychologists.

Field, A. P. (2000). Discovering statistics usingSPSS for Windowsadvanced techniquesfor the beginner, Sage.

Institute of Medicine (US). Committee onQuality of Health Care in America.(2001). Crossing the quality chasm: A new

health system for the 21st century.National Academies Press.

Jenkins, C. D. (2003). Building Better Health:A Handbook of Behavioral Care(Vol.590). Pan American Health Org.

Kutty, V. R. (2000). Historical analysis of thedevelopment of health care facilities inKerala State, India. Health Policy andPlanning, 15(1), 103-109.

McGlynn, E. A. (1997). Six challenges inmeasuring the quality of healthcare.Health Affairs, 16(3), 7-21.

Misra, R. P. (2007). Geography of Health: ATreatise on Geography of Life and Deathin India. Concept Publishing Company.

Mittman, B. S. (2004). Creating the evidencebase for quality improvementcollaboratives. Annals of internalmedicine, 140(11), 897-901.

Ovretveit, J. (1992). Health Service Quality. Anintroduction to quality methods for healthservices. Blackwell ScientificPublications.

Piligrimien, •., & Buiknien, I. (2008). DifferentPerspectives on Health Care Quality: Isthe Consensus Possible?. EngineeringEconomics, (1 (56), 104-110.

Rajagopal, N. (2010). Transformational Processof Health Care Choice of Poor inKerala. Journal of HealthManagement, 12(2), 123-135.

Rietveld, T., & Van Hout, R. (1993). Statisticaltechniques for the study of languagebehaviour. Berlijn: Mouton de Gruyter.

Sharma, J. K., & Narang, R. (2011). Quality ofhealthcare services in rural India: the userperspective. Vikalpa, 36(1), 51.

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Growth of Micro, Small and Medium Enterprisesin Chittoor District, Andhra Pradesh

ISSN 2321 - 371X

K. Munaswamy ReddyResearch Scholar

Department of Commerce, S.V. University, TirupatiEmail: [email protected]

P. SankarappaResearch Scholar


Dr. B. Bhagavan ReddyProfessor of Commerce


Abstract

Andhra Pradesh (AP) is known for its diversity in terms of geography, human and naturalresources and composition of industry. Rayalaseema is a backward region in terms of per capitaincome, employment opportunities, pace of industrialization and so on. Chittoor district is oneof the four districts of Rayalaseema region. In this paper, an attempt is made to evaluate thegrowth of MSMEs in terms of number of units, capital employed to procure plant and machinery,total capital invested in aggregate assets and employment generated from the period of enactmentof MSMEs Development Act, 2006. The study revealed that there is a rapid and significantgrowth in small and micro enterprises in terms of number of units, investment and employmentgeneration when compared to medium enterprises in the district. The trend in the growth isspectacular in the case of small enterprises relative to microenterprises. The revision/modificationof definition in terms of investment limit in the MSME Act and positive initiatives of governmentsuch as subsidy, incentives, rebates, concessions, provision of raw materials etc, have broughtin significant changes in the industrial outlook of Chittoor district in the recent past as comparedto the period before 2006.

Keywords: Industrial Development – MSMEs – Chittor District – Andhra Pradesh

economic development of a country like Indiawhere millions of people are unemployed orunderemployed. Today, poverty andunemployment are the burning problems of the

I. Introduction

Micro, small and medium enterprises(MSMEs) play a momentous role in the overall

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country. This sector solves these two problemsthrough provision of immediate large-scaleemployment, with lower investments. Accordingto Dr. Manmohan Singh, the Prime Minister ofInida, “the key to our success in employmentlies in the success of manufacturing in the smallscale sector” (Selvaraj, 2005). The economicdevelopment of a country primarily dependsupon the establishment of industries, which inturn depends on the availability of adequatecapital. In a country like India where capital isscarce and unemployment is wide spread andhigh, growth of MSMEs is vital to achievebalanced economic growth. The strength ofMSMEs lies in their wide spread dispersal inrural, semi-urban and urban areas, fosteringentrepreneurial base, shorter gestation period,and equitable distribution of income and wealth.

The Govt. of India has set up severalagencies and institutions at different levels,central/state/regional/ and local, to promoteMSMEs. These agencies are pursuing the policyof protection and promotion and also offerseveral incentives and concessions for thegrowth and development of MSMEs. Since thelaunching of Five-Year Plans, the SSI sector hasgrown at a phenomenal rate in the length andwidth of the country. This sector comprises 95per cent of total industrial units in the country,accounting for 40 per cent of aggregateindustrial production, 34 percent of nationalexports and 250 lakh persons’ industrialemployment (Antony, 2007). Thus, this sectorhas emerged as a bosom and dynamic part ofIndian economy. In fact, it is one side of thecoin. The other side is the sad story of decliningtrend in the small-scale industries in India. Theimportance of government has shifted fromlabour-intensive industries to capital-intensiveones due to the adoption of liberalization,privatization and globalization (LPG) policies.

II. Definitional Issues

Ever since the official recognition of small-scale industrial units in the Independent Indiaduring 1950s, the definition of small-scaleindustry has been revised many a time takinginto consideration the felt needs and theemerging changes in the socio-economic,political, cultural and industrial environment ofthe country. A brief review of small industry’sdefinition over the years since 1955 brings tolight the modifications/changes that took placeconcerning the scope of small industry. During1955, the Small-Scale Industries Board (SSIB)defines small industry as a unit employing lessthan 50 persons if uses power and less than 100persons without use of power, and with capitalassets not exceeding Rs. 5 lakh (Govt. of India,1955). The Ministry of Commerce and Industry,Govt. of India has modified this definition during1959. In the modified form, the restriction ofemployment was made applicable separately toeach shift. Then a unit working double or tripleshift could get the benefit of government policyand programme even when it employed doubleor triple the number of workers admitted in theaforesaid definition.

Owing to the development of small-scaleindustries, it was felt necessary to alter thedefinition once again in 1960. In the reviseddefinition, the employment condition wasaltogether removed. As per this definition, small-scale industry includes all industrial units witha capital investment of not more than Rs.5 lakh,irrespective of number of persons employed. In1962, with the interest of developing viableancillary units, a relaxation of Rs.5 lakh limit infixed capital has been incorporated to small-scale units, which supply parts/components tocertain specified large-scale industries. A limitof Rs.10 lakh has been adopted for this purpose(Govt. of India, 1959). Thus, a new kind ofsmall-scale industry has emerged in the country.

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These units were defined as ancillary units andthe investment limit was fixed at Rs.10 lakhinstead of Rs.5 lakh.

During 1966, on the recommendations ofSSIB, the government of India has raised theinvestment limit from Rs.5 lakh to Rs.7.5 lakhfor non-ancillary units irrespective of numberof persons employed and it had retained at Rs.10lakh for ancillary ones. Capital investment forthis purpose will mean investment in plant andmachinery only (Govt. of India, 1967). In thecontext of rising prices, once gain small scaleand ancillary industries were redefined during1974. The investment ceiling in plant andmachinery has been raised from Rs.7.5 lakh toRs.10 lakh and from Rs.10 lakh to Rs.15 lakhto small and ancillary units respectively (Govt.of India 1979). The tiny sector was recognizedand brought into the policy frame in theIndustrial Policy Resolution of 1977. Tinyindustries were defined as those with investmentof not more than Rs.1 lakh and situated outsidethe metropolitan areas (Govt. of India, 1982).Once again in 1980, the Government revisedthe definition of tiny, small and ancillaryindustries. Tiny units were those with investmentin plant and machinery not exceeding Rs.2 lakhand situated in areas with a population of less

than 50000. Small units were those withinvestment in plant and machinery notexceeding Rs.20 lakh and ancillary units withinvestment in plant and machinery notexceeding Rs.25 lakh (Govt. of India, 1982).

III. Concept of MSMEs

The Section 7 (1) of the Micro, Small andMedium Enterprises Development Act, 2006takes into account ‘enterprise’ in place oferstwhile ‘industry’. Enterprises have beenbroadly classified into two categories: (i)enterprises engaged in the manufacture/production of goods and (ii) enterprises engagedin providing/rendering of services. In the caseof manufacturing sector, units with aninvestment of less than Rs. 25 lakh in plant andmachinery are treated as micro enterprises, Rs.25 lakh - Rs. 5 crores small enterprises and thosewith Rs. 5 crores - Rs. 10 crores mediumenterprises (see Table 1). With regard to servicesector, enterprises with an investment up to Rs.10 lakh are considered micro, Rs. 10 lakh – Rs.2 crores small and those with Rs. 2 crores - Rs.5 crores medium. The government support isbased on the aforesaid criteria from the date ofimplementation of MSME Act in the country.

Table1: Investment Slabs in MSMSs

Category Size of unit Investment limit

Manufacturing

Micro enterprises Up to Rs. 25 lakh

Small enterprises Rs.25 lakh - Rs.5 crores

Medium enterprises Rs.5 crores - Rs.10 crores

ServiceMicro enterprises Up to Rs. 10 lakh

Small enterprises Rs.10 lakh - Rs.2 crores

Medium enterprises Rs.2 crores - Rs.5 crores

Source: www.smallindustryindia.com

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IV. Objective and Methodology

The study attempts to evaluate the growthof MSMEs in terms of number of units, capitalemployed to procure plant and machinery, totalcapital invested in aggregate assets and theemployment generated. The study covers aperiod of seven years from the enactment ofMSMEs Development Act, 2006 (2006 to2012). It is based on the secondary datacollected from various Govt. Reports, books,journals and websites. Simple Average andCompound Annual Growth Rate (CAGR) areprimarily computed to interpret the data.

V. Results and Discussions

The particulars of factories registeredunder the Factories Act in the Chittoor districtup to the year 2010 are provided in Table 2.The total number of factories in the districtcounts 1258, the number of men workers inthese factories is 23,678 and the womenworkers figure 3,338. The men workers are7.08 times higher than that of the womenworkers. After the enactment of MSMEsDevelopment Act, 2006, the industrial unitsin the district are divided into medium, smalland micro categories.

V (A). Growth of Medium Enterprises

The growth statistics of mediumenterprises in the Chittoor district during 2006-2012 are presented in Table 3. It can be observedfrom the table that the number of mediumenterprises which stood at 19 at the end of 2006gone up to 29 by the end of 2012. The CAGRof increase is 6.23 per cent. The amount of plantand machinery in these units amounts toRs.29,727 lakh in 2006 against and Rs. 36,876

lakh in 2012 (CAGR 3.13 per cent). The totalcapital invested figures Rs. 41,231 lakh in 2006vis-à-vis Rs.53, 115 lakh in 2012. The numberof employees working in all these units figures679 in 2006 as against 2,320 in 2012 (CAGRof 19.19 per cent). It may be concluded that themedium enterprises measured in terms ofnumber units, investment in plant andmachinery, total capital employed and numberof employees show progressive trend.

Table 2: Factories Registered under Factories Act in Chittoor District (2010)

S. No. Items Figures

1 Number of factories 1,258

2 Number of men workers 23,678

3 Number of women workers 3,338

4 Average workers/factory 21.47

5 Average male workers/factory 18.82

6 Average female workers/factory 2.65

Source: Hand Book of Statistics: Chittoor District

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Table 3: Medium Enterprises in Chittoor District (2006-2012)

Year No. of Units Plant & Machinery Employed No. of Employees(in Lakh) TotalCapital (in Lakh)

2006 19 29,727 41,231 679

2007 21 31,235 44,217 854

2008 23 32,653 46,110 1,740

2009 25 34,034 47,903 1,947

2010 26 34,807 49,498 2,040

2011 27 35,307 50,698 2,135

2012 29 36,876 53,115 2,320

CAGR (%) 6.23 3.13 3.68 19.19

Source: Compiled and computed from the records of District Industrial Center, Chittoor

V (B). Small Enterprises

The small enterprises in Chittoor districtfor the period 2006-12 is depicted in Table 4.The number of small units increased from 100in 2006 to 559 in 2012 (CAGR 29.14 per cent).The investment in plant and machinery whichstood at Rs. 5,974 lakh in 2006 reached Rs.45,054 lakh in 2012 (CAGR 33.46 per cent).

Similarly, the total capital employed which stoodat Rs. 7,826 lakh in 2006 rose to Rs. 71,724lakh in 2012 (CAGR 37.23 per cent). Theemployment generated by these units to 2,549persons in 2006 rose to 16,679 persons in 2012(CAGR 30.78 per cent). It may be summed upthat there is a continuous progress in the numberof units established, investment in plant andmachinery and total assets.

Table 4: Small Enterprises in Chittoor District (2006-12)

Year No. of Units Plant & Machinery TotalCapital Employed No. of(in Lakh) (in Lakh) Employees

2006 100 5,974 7,826 2,549

2007 179 10,950 16,991 4,504

2008 286 18,854 29,459 7,692

2009 366 26,375 42,508 1,0805

2010 446 33,365 53,132 13,213

2011 523 39,690 63,331 15,115

2012 599 45,054 71,724 16,679

CAGR (%) 29.14 33.46 37.23 30.78

Source: Compiled and computed from the records of District Industrial Center, Chittoor.

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V (C). Micro Enterprises

The details of micro enterprises in Chittoordistrict during 2006-2012 are shown in Table5. The number of micro enterprises whichfigures 278 in 2006 increased to 870 in 2012(CAGR 17.7 per cent). The amount invested inplant and machinery which amounts to Rs. 1,630lakh in 2006 rose to Rs. 4,669 lakh in 2012(CAGR 16.22 per cent). The total capital

employed in all the assets put together hasincreased from Rs. 2,007 lakh in 2006 to Rs.7,216 lakh in 2012 (CAGR 20.05 per cent). Thenumber of employees in all the units rose from2,930 in 2006 to 9,470 in 2012 (CAGR 18.25per cent). It may be concluded that there is anincreasing trend in the number of units,investment in plant and machinery, total capitaland labour force employed with respect to microenterprises during the study period.

The micro enterprises in Chittoor districtare classified into 10 sub-groups such asEdibles, Granite, Storage, Plastic, Forest,Beverages, Construction, Machinery, Printingand Others. A look at the Table 6 reveals that‘Plastics’ rank first with a share of 21.15 percent in number of units, 27.65 per cent ininvestment in plant and machinery, 25.75 percent in total capital employed and 27.55 per centin the labour force. Next to it is the ‘Others’

category. This has formed 20.32 per cent, 13.24per cent, 15.38 per cent and 20 per centrespectively in the aforesaid criteria. Of theremaining categories, the order of priority inrespect of number of units is construction,edibles, printing, machinery, beverages, granite,forest based and storage. With regard to plantand machinery, a similar trend prevails exceptbeverages and granite. They have occupied thesixth and seventh places serially. In the case of

Table 5: Micro Enterprises in Chittoor District (2006-2012)

Year No. of UnitsPlant & Machinery Total Capital Employed No. of

(in Lakh) (in Lakh) Employees

2006 278 1,630 2,007 2,930

2007 303 1,777 2,269 3,192

2008 405 2,312 3,195 4,847

2009 491 2,661 3,833 6,266

2010 604 3,186 4,806 7,327

2011 710 3,710 5,694 8,230

2012 870 4,669 7,216 9,470

CAGR (%) 17.7 16.22 20.05 18.25

Source: Complied and computed from the records of District Industrial Center, Chittoor.

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employment generation, income creation andasset formation is industrialisation. In thisregard, to boost the pace of industrialisation,emphasis is bestowed on village/cottage/tiny/small units. The MSME Act, 2006 wasintroduced to boost the process. Evidently, thereis a rapid and significant growth in small and

VI. Conclusion

The Chittoor district is endowed with richresources like forest, mineral, agricultural,manpower etc. But in the recent past due toinadequate rainfall, the district was frequentlysubject to recurrence of famine and draughtconditions. The alternate strategy for

Table 6: Category-wise Micro Enterprises in Chittoor District (2012)

YearNo. of Units Plant & Machinery TotalCapital Employed No. of

(in Lakh) (in Lakh) Employees

Plastic 184(21.15) 1,291(27.65) 1,858(25.75) 2609(27.55)

Others 176(20.23) 618.49(13.24) 1,110(15.38) 1894(20.00)

Construction 135(15.52) 540.9(11.58) 866.28(12.00) 1182(12.48)

Edibles 125(14.37) 535(11.46) 907(12.58) 947(10.00)

Printing 91(10.46) 508(10.90) 659(9.14) 767(8.10)

Machinery 47(5.40) 141(3.03) 243(3.38) 295(3.12)

Beverages 41(4.71) 481(10.31) 824(11.43) 495(5.23)

Granite 31(3.56) 338(7.25) 404(5.60) 287(3.03)

Forest based 22(2.53) 81(1.75) 209(2.90) 268(2.83)

Storage 18(2.07) 132(2.83) 132(1.83) 725(7.66)

Total 870(100) 4,669(100) 7,216(100) 9470(100)

Note: Figures in parentheses are percentage to respective column totalSource: Complied from the records of District Industrial Center, Chittoor.

across different categories are (normally) many.Some of the categories of micro enterprises arecapital-intensive as compared to the rest. Inshort, the average capital and labour per unitdiffer from industry to industry.

total capital employed, the exceptions areedibles, beverages and granite. These camethird, fifth and seventh in the order sequentially.The reasons for difference in ranking betweennumber of units, investment and labour force

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micro enterprises in terms of number of units,investment and employment generation whencompared to medium enterprises in the district.The trend in the growth is spectacular in the casesmall enterprises relative to micro enterprises.It may be concluded that as a result of revision/modification of definition in terms of investmentlimit in the MSME Act and positive initiativesof government such as subsidy, incentives,rebates, concessions, price preference, provisionof raw materials etc. there has been significantchanges in the industrial outlook of Chittoordistrict in the recent past as compared to thescenario existed prior to 2006.

References

Govt. of India (1959). Report of Small ScaleIndustries Program of Work for the ThirdFive Year Plan, Planning Commission,

New Delhi.

Government of India (1967). Report of Ministryof Industries, Department of CompanyAffairs, New Delhi.

Government of India (1979). Report of SmallScale Industries Development Organi-zation, Development Commissioner(SSI), New Delhi.

Government of India (1982). Guidelines forIndustries, Ministry of Industry.

Govt. of India (1955). Report on the Village andSmall Scale Industries, PlanningCommission, New Delhi.

Selvaraj, A. (2005). SSIs Deserve a Better Deal,The Hindu, June 20.

Antony, Valasamma (2007). Small Scale SectorAt Crossroads: An Overview, Southern

Economist, 10( 6),10-29

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Abstract of Doctoral Dissertation1

The Role of District Tourism Promotion Councilsin the Promotion of Tourism in Kerala

I. Introduction

Tourism is one of the most successful andfast growing business activities in the world.Economic diversification and technologicalimprovement has created a very conduciveenvironment for tourism development. Tourismacts as a driving force for employmentgeneration, poverty alleviation and socialharmony. It is considered as an agent of socialchange bridging gaps among nations, regionsand people. Travel and tourism is one of theworld’s largest industries, employing over 235million people and generating 9.2 per cent ofglobal GDP in 2010.

Tourism, being the largest service industryin India, contributes 6.23 per cent to the nationalGDP and 8.78 per cent of the total employment

Dr. T. Subash(Research Scholar)Associate Professor

KNM Govt. College, Kanjiramkulam, Kerala, India.Email: [email protected]

Dr. R. Vasanthagopal(Research Supervisor)

Assistant ProfessorInstitute of Management in Kerala

School of Business Management and Legal StudiesUniversity of Kerala, Thiruvananthapuram, Kerala, India


in India. The Foreign Tourist Arrivals (FTA) inIndia during 2010 was 5.58 million and theforeign exchange earnings from tourism in Indiaduring 2010 were Rs.64889 crore. Thegovernment of India has taken concerted stepsin the promotion and development of tourismindustry at national, regional and local levels.

Kerala, being a role model in tourismdevelopment among Indian States, is consideredas a ‘tourist paradise’. has been significantlysuccessful in its tourism endeavours through afocused promotion. A balanced climate, greenvegetation, natural tourist spots, fully literatepopulation etc can be considered as Kerala’sstrength in tourism. Tourism in Kerala is reallynon-seasonal in nature. In 2010, Kerala attracted6.59 lakhs of foreign tourists and 85.95 lakhs

1 The thesis submitted to Mahatma Gandhi University, Kottayam, Kerala, India, for the award of Ph.D. Degree inAugust 2012, awarded in March 2013.

ISSN 2321 - 371X

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of domestic tourists, thus making it one of the

fastest growing tourism destinations in the

world. As a major economic activity, tourism

contributes 9.0 per cent of GDP of Kerala during

2010. The total revenue generated from tourism

comes to 17348 crore.

II. Statement of the Problem

The flagship of tourism industry in Kerala

is the Department of Tourism. KTDC, BRDC,

TRKL, DTPCs, KITTS, KIHMS and a host of

government departments such as Forest and

Wildlife, Irrigation, Museum, Zoo and

Archaeology are the other important state

sponsored institutions which play a key role

in the tourism sector of Kerala. Among the

promotional agencies, DTPCs set up by the

government of Kerala in all the 14 revenue

districts, exploit the tourism potential of the

State through sustained efforts by coordinating

various government departments, voluntary

agencies and other agencies interested in

travel and tourism, and by ensuring local

initiatives and mobilization of resources at

local levels. More than 250 distinct tourism

spots of varying degree of importance and

potential can be found across the State.

Moreover, the State has innumerable project

possibilities which have to be identified and

implemented from time to time based on

emerging trends. At present, nearly one-third

of the identified tourism spots in Kerala are

promoted and maintained by DTPCs. This

shows the significant role played by DTPCs

in The Role of District Tourism Promotion

Councils in the Promotion of Tourism in

Kerala the promotion of tourism in Kerala.

However, based on the available literature, it

is revealed that the role of promotional

agencies in Kerala particularly the DTPCs has

not been addressed by the social scientists.

Thus, by considering the vast and varied

potential of tourism in the State and the

promotional efforts of DTPCs in Kerala in

creating a key platform for the State and

positioning itself competitively in the

international market, a detailed study on the

role of DTPCs in the tourism development of

Kerala is found to be pertinent. It is against

this backdrop that the present study has been

carried out.

III. Scope of the Study

The study attempts to evaluate the role

of DTPCs in the promotion of tourism in

Kerala. It aims at reviewing the tourism

promotion in India and abroad with specific

reference to the organizational structure and

functioning of DTPCs and evaluation of

various activities undertaken viz., awareness

and product promotion programmes and

amenities/facilities provided at tourist

destinations. Identification and implementation

of programmes, effectiveness of programmes

and the benefits of the projects of DTPCs to

the host community are also covered under

the purview of the study. The study has been

conducted based on the perception of

officials, tourists and host community of the

selected six DTPCs in Kerala.

IV. Objectives of the Study

The present study is undertaken with a

view to evaluate the role of DTPCs in the

promotion of tourism in Kerala, from the point

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of view of officials, tourists and hostcommunity. The specific objectives are:

1. To review the tourism promotion in Indiaand abroad and also the organizationalstructure and functioning of DTPCs inKerala.

2. To enquire into the identification andimplementation of the projects of DTPCsfor the promotion of tourism in Kerala.

3. To assess the effectiveness of theprogrammes of DTPCs in Kerala.

4. To assess the benefits of the projects ofDTPCs in Kerala from socio-cultural,economic and environmental point of view.

V. Hypotheses

The following hypotheses have beenformulated on the basis of the objectives of thestudy.

H01

: Not more than one half of the hostcommunity perceives that tourism awarenessprogrammes of DTPCs in Kerala through mediaare effective.

H02

: Not more than one half of the hostcommunity perceives that tourism awarenessprogrammes of DTPCs in Kerala throughcampaign are effective.

H03

: Not more than one half of the touristsperceive that the product promotionprogrammes of DTPCs in Kerala are effective.

H04

: Not more than one half of the touristsare satisfied with the facilities at the destinationsof DTPCs in Kerala.

H05

: Not more than one half of the touristsperceive that the price charged for facilities atthe destinations of DTPC in Kerala are high.

H06

: Not more than one half of the hostcommunity perceives that the projects ofDTPCs in Kerala are beneficial to the hostcommunity.

VI. Methodology

The present study is empirical in nature

based on both primary and secondary data.

Multi-stage sampling has been used to select the

sample. In the first stage, sample DTPCs has

been selected. In the second stage the tourists,

host community and Officials at the destinations

maintained by the sample DTPCs have been

selected.

VI. (A) Selection of Sample DTPCs

All the 14 DTPCs functioning in the 14

revenue districts of Kerala form the population

for the study. The southern region comprises of

four DTPCs (Thiruvananthapuram, Kollam,

Pathanamthitta and Alappuzha), the central

region consists of five DTPCs (Kottayam, Idukki,

Palakkad, Thrissur and Ernakulam) and the

northern region comprises of the remaining five

DTPCs (Malappuram, Kozhikkode, Kannur,

Wayanad and Kasargode). For the intensive

study, two DTPCs were selected from each of

the three regions on judgment sampling

technique by considering the DTPCs which hade

a large number of tourists and maintained a wide

variety of tourism products. Accordingly,

Thiruvananthapuram and Alappuzha (repre-

senting the south), Idukki and Ernakulam

(representing the central) and Kozhikkode and

Wayanad (representing the north) were selected

(Table 1).

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population. A total of 480 tourists consisting of360 domestic tourists and 120 foreign touristswere selected conveniently for the detailed study(Table 2).

VI. (B) Selection of Sample Tourists

The monthly average of tourists for thepeak season (September to February) during thelast three years from 2008-2010 constitute the

South

Central

North

1.Trivandrum

2.Alappuzha

1.Idukki

2.Ernakulam

1.Kozhikode

2.Wyanad

Table 1: Selection of Sample DTPCs

Region DTPCs in Kerala DTPCs Selected

1. Trivandrum

2. Kollam

3. Pathanamthitta

4. Alappuzha

1. Kottayam

2. Idukki

3. Ernakulam

4. Thrissur

5. Palakkad

1. Malappuram

2. Kozhikode

3. Wayanad

4. Kannur

5. Kasargode

Total 14 6

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VI. (C) Selection of Officials at DTPCs and Host Community

There were 41 project officials in all thesix selected DTPCs. All the officials were

VI. (D) Collection of Data

The primary data were collected from threecategories of respondents – tourists, hostcommunity and officials of DTPC with the helpof three separate sets of scientifically pretestedstructured interview schedules. The secondarydata were collected from the official reports of

selected for the study. For selecting the hostcommunity, 25 persons from variousdestinations of each DTPC were selectedconveniently and thus it constituted a sampleof 150 (Table 3).

the Ministry of Tourism, Govt. of India; theDepartment of Tourism, Govt. of Kerala; theState Planning Board as well as from thepublished and unpublished research reports ontourism of various tourism promotional agencies,research articles, market research agencies,books and the Internet.

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VI. (E) Tools of Analysis

For data analysis, Statistical Package forSocial Sciences (SPSS) has been used. Theanalyzed data were interpreted with the help ofarithmetic and statistical tools such as average,percentage, compound annual growth rate(CAGR), chi-square test, analysis of variance(ANOVA) and Z test. The mean was applied todetermine the relative order of preference of therespondents. The chi-square test was applied toexamine the significant variation in the opinionamong respondents in the three regions ofKerala. CAGR was calculated to find out thegrowth rate in FEE and tourist arrivals. ANOVAwas used to find out the relationship ofdemographic variables on selected groupvariables. Z test was applied for testing thehypothesis.

VI. (F) Period of Study

The study limits itself to a ten year periodstarting from 2001 to 2010. It was during thisperiod that the government recognized theimportance of a district level agency for tourismpromotion by giving priority in allocatingsubstantial amount to the DTPCs foridentification and maintenance of tourismdestination and also for creating awarenessamong host community. However, secondarydata related to the preceding and succeedingyears have also been incorporated in some areasof the study, wherever found essential fordrawing conclusions. The interview forcollecting primary data was conducted duringthe peak season of tourism in Kerala fromSeptember 2010 to February, 2011.

VII. Limitations of the Study

The study has the following limitations.

1. The statistical data published by differentagencies on various aspects of tourism arefound to be different.

2. For assessing the benefits of projects ofDTPCs, the details of the employmentgenerated from its different projects and thefund utilized for the projects have not beenmade use of and the details on these aspectsare not available with the DTPCs.

3. The sample of tourists for the study has beenselected conveniently as the data on thenumber of tourists visited in each of thedestinations of DTPC are not available.

4. Some of the officials of DTPCs werereluctant to give information regarding theeffectiveness of programmes undertakenand their level of satisfaction towards thefacilities at the destinations.

VIII. Presentation of the Report

The study report is presented in sevenchapters.

Chapter 1 Introduction

Chapter 2 Tourism Industry – Growth andDevelopment

Chapter 3 Tourism Promotion in India andAbroad

Chapter 4 Identification andImplementation of the Projectsof District Tourism PromotionCouncils in Kerala

Chapter 5 Effectiveness of theProgrammes of District TourismPromotion Councils in Kerala

Chapter 6 Benefits of the Projects ofDistrict Tourism PromotionCouncils in Kerala

Chapter 7 Summary of Findings,Conclusion and Suggestions

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IX. Major Findings of the Study

1. Majority of the host community areunemployed and are born at tourismdestinations and have no relationship withtourism.

2. Most of the domestic tourists are Keralites(47.5%). The share of other South IndianStates is 40.3 per cent. The percentage sharefrom Central and North Indian States is only12.2 per cent. The highest percentage offoreign tourists is from European countrieswith a share of 45 per cent, followed byAsian and Australian countries, North andSouth American Countries and Africancountries.

3. Nearly 50 per cent of the domestic touristsare youngsters in the age group of 28 yearsor less. At the same time, majority of theforeign tourists are in the elder generationof 45 years and above. The youngstersamong the foreign tourists represent only26.7 per cent. Further majority of thedomestic tourists are regular travelers butmajority of the foreign tourists are irregulartravelers.

4. Considering the source of informationabout destination, tourists ranked travelagencies as the first, followed by tourisminformation centres and websites. It isfurther noted that all the tourists assignedthe last rank to websites of DTPC irrespectiveof the region.

5. As regards the purpose of visit at touristdestinations, tourists assigned the first rankto historical monuments followed by scenicbeauty, good climate, peaceful atmosphere,pollution free environment andentertainment as the second, the third, thefourth, the fifth and the sixth rankrespectively.

6. Kerala and Andhra Pradesh are the twoStates in India where tourism has becomethe affair of district level authority. DTPCsin Kerala are registered as individual unitsfunctioning at each of the 14 revenuedistricts. There is no uniformity in the staffpattern of DTPCs in Kerala. Most of theemployees in DTPCs are appointed ontemporary/contract basis and even the postof Secretary is on deputation basis.

7. It was found that the primary resource ofDTPC is the project specific funds allottedby the DoT and most of the DTPCs arefunctioning with the assistance ofgovernment. It was observed that theseDTPCs they conduct feasibility studies -economic, environmental, social andcultural-before implementing a project.More over, they themselves developedprojects.

8. While the Planning Officer in the DoT isresponsible for implementing CentrallySponsored Schemes, the Assistant PlanningOfficer is responsible for implementingState Plan Schemes.

9. Regarding the difficulties in theimplementation of projects, it was observedthat protest from host community was thefirst difficulty, followed by lack of basicinfrastructure, shortage of staff, financialconstraints and environmental issues.

10. Visual media and publicity boards are themost effective, while website is moderatelyeffective and print media is the least effectivein creating awareness among hostcommunity.

11. Campaign among general public, campaignamong small entrepreneurs and campaignin educational institutions are viewed asmoderately effective in awareness creation.

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12. The print/visual media and the functioningof information centres are the most effectivetool for product promotion. But websitesand exhibitions are moderately effective.

13. Tourists are highly satisfied with the wastemanagement and tourist guide facilities andmoderately satisfied with the functioning ofinformation centres, safety and securityfacilities and parking facilities at thedestinations of DTPCs.

14. With regard to the level of satisfaction ofvarious facilities, it was revealed that touristsare not satisfied with entertainment,shopping, telecommunication, food andbeverage, drinking water, local conveyanceand sanitation at the destinations of DTPCs.

15. It was found that the price charged forfacilities viz., entertainment, tele-communication, local conveyance,sanitation, tourist guide and parking at thedestinations of DTPCs were average.However price charged for shoppingfacilities at the destinations was high.

16. The level of benefits of DTPCs projects wasmoderate in ensuring restoration ofhistorical building and promotion of culturaladvancement of the destinations and low insupporting the revival of traditional art, craftand culture, preserving the cultural identityof destination, providing cultural exchangeand education and promotion of socialinteraction of the destinations.

17. The level of benefits of DTPC projects washigh in providing job opportunities,motivating the expansion of local businessunits, increasing the standard of living,investment income and infrastructure in thedestinations but moderate in increasing theirshopping opportunities.

18. It was revealed that the level of benefits ofDTPCs projects was moderate in increasingthe environmental awareness but was lowin conserving and preserving the nature.

X. Suggestions Based on the Findings ofthe Study

1. DTPCs should initiate wide propagandaamong the host community to make themaware of its programmes and to ensure theirparticipation to a great extent. To boost thetourist’s inflow, DTPCs should conductextensive product promotion campaign byorganizing Kerala festivals, road shows indifferent parts of the country and abroadand by hosting international and nationalconventions, fairs, traditional sports andgame events, and ethnic food festivals inKerala.

2. DTPCs should either construct a new website or to revamp the existing one to moreuser friendly by incorporating informationregarding how to reach the destination, thedistance from important centres, primaryattractions, climatic conditions, precautionsto be taken, if any, types of accommodationavailable and its rate, culture of the people,handicrafts and local commodities available,fruits and vegetables and food habits/patternof the locality etc. More over, Create adatabase of tourists who visited at thevarious destinations of DTPCs in Kerala.

3. DTPCs should resort to additional sourcesof funds by way of grants, loans, donations,etc from financial institutions, local bodies,co-operatives, NRIs, NGOs and even fromindividual investors. The DTPCs can alsoapproach the government to increase theproject specific funds to meet the emergingneeds.

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4. Constitute a State level apex body called‘STATE TOURISM PROMOTIONCOUNCIL’ for coordinating the activities ofDTPCs. In addition, the Governing Bodyand Executive Committee of the DTPCsshould be reconstituted by reducing theproportion of non-official members and alsoensure that they must have considerableknowledge in the area of tourism.

5. Diversify the activities of DTPCs by settingup multiplexes, shopping malls anddepartmental stores at important places toattract and entertain the tourists. In addition,issue license to tourist guides and theirservice should be monitored periodicallyand measures should be taken to improvetheir service by conducting enrichmentprogrammes.

6. In addition to promotional activities, theDTPCs should also should give due weighton the conservation and preservation of theculture and tradition at its sites.

Clean and hygienic conditions should beensured at the destinations of DTPCs byoutsourcing the upkeep and maintenanceto NGOs, local bodies etc.

XI. Conclusion

The concept of DTPC is a unique featureof the tourism scenario in Kerala. The DTPCmainly concentrates on tourism promotionactivities like marketing of local productsthrough private/public participation,improvement of quality/standards and evolvingprocedure for certification of tourism products,improvement of signages and sanitation,heritage conservation and preservation,coordination of tourism clubs, creation oftourism awareness and preparation of hostcommunity, information dissemination andlocal infrastructure building with the cooperationof local bodies. From a close analysis, it isrevealed that the DTPCs in Kerala undertake anumber of programmes for awareness creation,product promotion and provision of amenitiesat tourist destinations. But it is observed thatthese programmes are not found to be effectivefrom the perspective of the tourists and the hostcommunity. However, the DTPC projects arebeneficial to the host community from the socio-cultural, economic and environmental point ofview. Hence, from the study, it is concluded thatthe DTPCs in Kerala are engaged in a host oftourism promotion programmes, which cannotgive the veritable satisfaction to the beneficiariesas envisaged by DTPCs.

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Abstract of Doctoral Dissertation1

Momentum and Contrarian Strategiesin the Indian Stock Market - An Evaluative Study

I. Introduction

Indian Stock Market is one of the oldestin Asia. Its history dates back to nearly 200 yearsago. Over the period, the Indian securitiesmarket has become more dynamic, modern, andefficient securities market in Asia. It nowconforms to some of the best internationalpractices and standards, both in terms ofstructure and operating efficiency. The profileof the investors, issuers and intermediariesapproaching Indian markets also has changedsignificantly.

Technological upgradation and onlinetrading have modernized our stock exchanges.The bullish run of Indian stock market can verywell be associated with a steady growth ofcountry’s GDP by around 6 per cent and theescalation of many Indian companies as MNCs.

Dr. Asha E. Thomas(Research Scholar)Assistant Professor

Post Graduate Department of Commerce, St. Paul’s College, Kalamassery, Kerala, India.Email: [email protected]

Dr. M.C. Dileep Kumar(Research Supervisor)

Associate Professor & HeadP.G. Department of Commerce and Research Centre, The Cochin College, Kochi, Kerala, India.


The Indian markets have been dulyaccessible and by the end of 4th quarter ofFY2010 the Sensex is expected to become thethird best performing index amongst the majorglobal indices, registering annual returns of 80.5per cent, behind only Russia and Indonesia andmuch better than the 67.8 per cent logged byBrazil and 31.6 per cent by China.

Among all investing options, securities areconsidered to be the most challenging as wellas rewarding. Investing in stock markets is amajor challenge even for seasonedprofessionals. It carries the risk of heavy loss ifthe choice of securities is wrong or if they arenot bought /sold at the right time.

Investors take into account several factorswhile taking an investment decision. Theyconsider fundamentals of the economy, industry

1 The thesis submitted to Mahatma Gandhi University, Kottayam, Kerala, India, for the award of Ph.D. Degree inApril 2010, awarded in June 2011.

ISSN 2321 - 371X

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and company to decide whether the stock isworth buying at the prevailing price. Manyinvestors also consider the moods of otherinvestors and buy only when others buy. Suchinterdependency leads many market participantsto behave in a similar manner. Internet boom isa recent example of herd mentality of humanbeings. It is being observed that large stockmarket trends often begin and end with periodsof frenzied bubbles or selling. Followers oftechnical analysis school of investing considerthis herding behavior of investors as an exampleof extreme market sentiment. They often saythat this irrationality is driven by emotions i.e.greed in bubbles and fear in crashes.

The academic study of behavioural financehas also identified this collective irrationality ofinvestors. There were several such instances liketulip and bulb craze, ‘South - sea bubble, thegreat depression of 1929, the crash of 1987, theAsian crisis and the Dotcom crash, in thehistory.

Investment in securities is faced with thegreatest problem of choosing from among a largenumber of securities. Decision always dependson the risk-return characteristics of securities.The basic strategy to be followed in theseinvestments are buying the under pricedsecurities and selling the overpriced ones. Thereare mainly two schools of thought in findingout these ‘mispriced’ securities and this processis otherwise called security analysis. Technicalanalysis and fundamental analysis are the twomain approaches to security analysis in thefinancial markets. Technical analysis looks atthe price movement of a security and uses thisdata to predict its future price movements.Fundamental analysis, on the other hand, looksat economic factors, known as fundamentals.

By looking at the balance sheet, cash flowstatement and income statement, a fundamentalanalyst tries to determine a company’s value,

also known as company’s intrinsic value. Infundamental analysis, if the price of a stocktrades below its intrinsic value it is good forinvestment. Technical analysts, on the otherhand, believe that there is no reason to analyzea company’s fundamentals because all these areaccounted in the stock price itself. They believethat all the information they need about a stockcan be found by concentrating the pricemovements.

Technical analysis is the study of past orhistorical price and volume movements so as topredict the future stock price behaviour.Whether technical analysis actually works is amatter of controversy all through these years.Many investors claim that they haveexperienced positive returns by practicingtechnical analysis. But many academicappraisals often find this method as one havingvery little predictive power.

Fundamental analysts make theirdecisions by relying on accurate informationabout companies and markets before itbecomes available to general public.However, as technical analysts do not believethat it is possible to receive and process allthese information quickly enough, many ofthe advantages related to technical analysiscorrespond directly with the disadvantages offundamental analysis.

II. The Problem in Brief

Stock market is a volatile place to investmoney. Still a large number of people aroundthe world try their luck in it .There are manyreasons for people investing their money in stockmarket. The first and foremost reason is thatthey do not prefer to rely on a single source ofincome. People like to diversify their portfolioof investments to mitigate the risk factors. Risingcost of living and inflation is yet another driverfor stock market investments. People go for stock

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market investments in order to earn some extraincome.

In India also, the percentage of people whoinvest their money with stock market hasincreased considerably over the last few years.At present, the daily turnover of the country’smost prominent stock exchange NSE is morethan 10000 crores. Considering country’scurrent growth rate and the economic scenario,it is very evident that the number of people whoare involved in stock market operations will onlyincrease in near future.

To invest in stock market, one must knowthe right time to purchase and sell a security.The fundamentals will help the investor toidentify the right security to be purchased but itwill seldom indicate the right time to purchaseit or sell it. For this purpose the investors canuse technical analysis tools.

Technical analysis, despite of all fancy andexotic tools, it employs just studies on thesupply and demand in a market, in an attemptto determine the direction or trend to becontinued in future. In other words, suchanalysis attempts to understand the emotions inthe market by studying the market itself.Technical traders take a short-term approach inanalyzing the market.

The importance of technical analysis isworld renowned and admitted by even thestrongest advocate of fundamental analysis. Thereason is simple: technical analysis tries to doaway with the complexity by basing everythingon price action, which includes all the economicanalysis.

In this context, it would be highlyrewarding to examine the efficiency of varioustechnical analysis tools in helping the investorsto gain superior returns. Research is conductedto evaluate the efficiency of two populartechnical analysis tools i.e. Momentum and

Contrarian strategies in predicting the share pricemovements in the market. The study alsoanalyses the possibility of making excess returnsin the market using these tools of technicalanalysts.

Market efficiency of Indian stock marketwas tested because if market is efficient noneof these strategies work. Interdependency ofIndian stock market with other emergingcountries stock markets were also studied toanalyze the possibility of making superiorreturns by doing effective portfoliodiversification.

III. Significance of the Study

Unlike in past, stock markets have nowbecome more dynamic, more volatile and moreunpredictable due to further global integrationof economy. During the past few years, Stockmarket investors had overreaction to theeconomic or political events. Markets alwayshad a move much ahead of real economy. Ifreal economy suffered in early 2009, stocks fellby October, 2008. If economic conditions willimprove by early 2010, stocks will rise by late2009.

One should take into consideration thispsychological aspect along with businessfundamentals before arriving at a conclusionregarding the investment strategy to be adoptedin Indian Stock Market. It has become verydifficult to time the stock market investments.In India, it is said that 80per cent of the pricevariations occur in just 20per cent of the totaldays which is the time of maximum profits andlosses.

Contrarian Strategy essentially meansdoing reverse of what market does. Hence undercontrarian investment strategy past losers arebought and past winners are shorted or sold.This strategy requires an active intervention of

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a portfolio manager in the form of portfoliorebalancing.

On the other hand Momentum Strategybelieves that markets are slow to react and ifa stock is strengthening, it would increasefurther. It reckons that the market is cautiousand the price does not adjust to informationinstantaneously. If a stock is weakening it willgo down further because market takes timeto readjust to the information. In other words,it takes time for the crowd to form andintensify the action. Momentum strategy wantsto exploit, such slow movements in the trend.Under this strategy, past winners are boughtand past losers are shorted or sold. If themarkets are efficient, then both the strategieswill fail.

The present study is conducted primarilyto assist the investors in Indian Stock Market tomake wise investment decisions in the securitiesmarket .The study also aims at testing theinterdependency of Indian stock market withother leading stock markets in emerging nationsand there by evaluating the possibility ofmaximizing returns through portfolio diver-sification in these markets.

IV. Objectives of the Study

Following are the important objectives ofthe study

1. To examine whether Indian Stock Marketis efficient or not

2. To study and evaluate the existing theoriesin technical analysis

3. To analyze the effectiveness of Momentumstrategy in giving superior returns in theIndian Stock Market

4. To analyze the effectiveness of Contrarianstrategy in giving superior returns in theIndian Stock Market

5. To select the best strategy among the twosuitable for Indian stock market.

6. To examine the interdependency of IndianStock market with other emerging markets.

7. To make recommendations on the basis ofthe study

V. Hypotheses

The following hypotheses have beenproposed for the study

1. Indian Stock Market is efficient and hencethere is no scope for technical analysis

2. Momentum Strategy does not give superiorreturns to the investor in the Indian CapitalMarket

3. Contrarian Strategy does not give superiorreturns to the investor in the Indian CapitalMarket

4. No significant difference is noticed betweenContrarian and Momentum Strategies inmaking superior returns from Indian CapitalMarket.

5. Nifty Index movements does not have anycorrelation with Shanghai Composite Indexmovements

6. Nifty Index movements does not have anycorrelation with Hangseng Index move-ments

7. Nifty Index movements does not have anycorrelation with Nikkei Index movements

8. There is no interdependency of Indian Stockmarket with other emerging stock markets

9. The possibility of making superior returnsin Indian stock market by studying themovements of other emerging markets isnil.

10. Investors cannot depend on technicalanalysis tools for making superior returns.

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VI. Database and Methodology

VI. (A) Market Efficiency

Statistical tools like Autocorrelation, andRun Test were used to test the weak form marketefficiency. One-Sample Kolmogorov-SmirnovTest was used to find out how well a data seriesfits a particular distribution. Semi-strong formmarket efficiency was tested by taking dailyreturns of companies included in the formationof NIFTY Index and compared with the dailyindex returns.

Beta value for the stocks was calculatedto arrive at the residual return. Residual returnis the difference between the actual return andthe expected return. If the difference betweenthe actual return and the expected return is zeroor near to zero the market is said to be efficient.The formula used for calculating expected returnwas,

Expected Return = ± + ² (mr), where m

r is

market return. The entire study period was

divided in to different segments of three monthseach and the process was repeated for betterresults.

VI. (B) Momentum and Contrarian Strategies

The steps involved in the formation andevaluation of portfolios for studying Momentumand Contrarian strategies are as follows:

1. Mean of daily returns of stocks for theformation period was taken and then rankedthem in the descending order. For this study,the formation period was one month. Basedon the ranking, two equal weight portfolioswere formed - one comprising of top sevenstocks referred to as the winner portfolioand the other comprising of bottom sevenstocks referred to as the loser portfolio.

2. The daily returns of these two portfoliosover the next H-week holding period were

computed. ‘H’ takes the value of 2 to 8weeks.

3. Momentum returns are calculated as themean of the daily returns arising from thewinner portfolio for the holding period i.e.‘H’ value

4. Contrarian returns are calculated as themean of the daily returns arising from theloser portfolio for the holding period i.e. ‘H’value

5. The performance of momentum andcontrarian portfolios is evaluated bycomparing their daily index returns duringthe respective periods.

6. The portfolio formation and evaluationprocess is repeated for the years 2004-2009with formation period of one month andholding period of 2,3,4,5,6,7 and 8 weeks.

7. To study the profitability of momentum andcontrarian strategies for various formationsand holding periods, the t-test was used. Itwas used to find out whether momentumand contrarian strategies yield significantpositive returns when compared with thebench mark, i.e. index return

VI. (C) Impact of Recession

In order to bring more validity to the result,the period in which Indian markets were severelyaffected by global crisis was studied separately.The period under study was 2007 October to2008 April.

VI. (D) Interdependency of Indian StockMarket with Other Emerging Markets

Researcher tested interdependency ofNIFTY Index movements with ShanghaiComposite Index, Hangseng index and NikkeiIndex from 2006-2009 using simple correlationtechnique.

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VI. (E) Collection and Analysis of Data

The collected data were edited, compiledand then entered in a master chart by theinvestigator. Microsoft Excel programme wasapplied for achieving the same. Each item inthe database was strictly checked before it wasentered in the master chart. Tables were preparedand by using these as the guidepost the datawere analyzed by referring to the objectives andhypothesis of the study. Utmost care was takenwhile employing the analytical tools. Tools wereemployed by considering the type of data.Statistical Programme in Social Sciences(S.P.S.S.) has also been used for the study.

VI. (F) Sources of Data

The study was conducted with wide scopeboth in terms of depth of analysis and breadthof coverage. It has taken a period of 6 years(2004-2009) and daily prices of shares includedin the formation of NIFTY index. The datarequired for the study were collected fromvarious secondary sources such as publicationsof Reserve Bank of India, Bombay Stockexchange, National Stock Exchange andSecurities Exchange Board of India, Journalssuch as Finance India, Economic and Politicalweekly, Journal of Finance, Company Reportsand many websites like Yahoo Finance, RBI.org,Bloomberg.com and so on.

VI. (G) Resume of the Work Done

a) Analysis of data to test the weak formefficiency of Indian stock market.

b) Semi-strong form market efficiency ofIndian stock market was tested by takingdaily returns of companies included in theformation of NIFTY Index and comparedwith the daily index returns

c) Testing the efficiency of momentumstrategy in gaining superior returns overindex returns

d) Testing the efficiency of Contrarianstrategies in gaining superior returns overindex returns

e) Comparison between momentum andcontrarian strategies

f) Interdependency of Indian stock marketwith Shanghai Composite Index

g) Interdependency of Indian stock marketwith Hangseng index

h) Interdependency of Indian stock marketwith Nikkei Index

i) Indian stock market efficiency duringglobal financial crisis

j) Effectiveness of momentum strategy ingaining superior returns during acuterecession

k) Effectiveness of contrarian strategy ingaining superior returns during acuterecession.

VI. (H) Reference Period

The reference period of the study was from2004 to 2009 is i.e. for a period of 6 years andconsidered daily prices of shares included in theformation of NIFTY index.

VII. Limitations of the Study

a) The present study covers only the pricemovements of shares included in theformation of NSE Index due to thevoluminous nature of the topic. Howeverdata on a daily basis had been taken toachieve the best possible result.

b) Conclusions and recommendations arebased on the results got during the studyperiod. Investors will have to incorporatefurther changes in the market conditionsbefore taking decisions on the basis of therecommendations of the study.

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c) Global financial crisis which occurredduring the study period could have affectedthe results of the study. However, theresearcher had tried to overcome thisdifficulty by conducting a separate studyduring the time period of 2007 October to2008 April, i.e. the time period in whichIndian markets were severely hit by the saidfinancial crisis.

d) All the inherent limitations and drawbacksof a study based on secondary data areapplicable to the present study also eventhough the researcher has tried to minimizesuch errors as far as possible.

Despite of these limitations, the studywould be very useful to investors of Indian stockmarket and to other practitioners andacademicians interested in studying aboutcapital markets in India and those in otheremerging nations.

VIII. Presentations of the Study

The content of the research work issummarized under seven chapters.

Chapter I- Introduces the subject of the studyand outlines the general framework of the study.

Chapter II- Reviews and discusses literature andrelated research studies in the context of marketefficiency, technical analysis, and momentumand contrarian strategies both in India as wellas in other major markets across the world.

Chapter III - The chapter gives a clear pictureof the Indian Stock market in its present scenario.

Chapter IV - This chapter contains theoreticalconcepts on technical analysis, various tools fortechnical analysis, different principles oftechnical analysis and also the importance oftechnical analysis in share price prediction.

Chapter V- The efficiency of Indian stockmarket both in the weak form as well as in the

semi strong form had been studied, analysed,interpreted and presented in this chapter.

Chapter VI- Discusses and analyses theeffectiveness of momentum and contrarianstrategies in the Indian stock market.Interdependency of Indian stock market withother emerging markets is also discussed andanalysed in this chapter.

Chapter VII- Gives the summary of findings,suggestions based on findings, some practicalrecommendations and some definite indicationsfor

IX. Findings and Conclusions

Economic growth of a country greatlydepends on capital market. More efficient is thecapital market, the greater is the promotioneffect on economic growth. It is, therefore,necessary to ensure that our capital market isefficient, transparent and safe.

Government of India along with SEBI hasbeen continuously trying to improve marketdesign in order to bring in further efficiency andtransparency to market. Newer and newerproducts were introduced to meet the varyingneeds of market participants, while protectinginterests of the investors. Some of the recentmeasures adopted in Indian capital marketincludes setting up a central listing authority topace and systematise the listing requirementsand facilitating demutualization of stockexchanges, operationalising T+1 rollingsettlement, consolidation of exchanges and othermarket participants and rationalising margintrading, securities lending and short selling.

Three main sets of entities depend onIndia’s securities market. They are corporatesand government bodies who raise resourcesfrom the securities market for their expansionand development activities and the investorsboth institutional and retail category who invest

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funds to getter better returns. As per 2001-02statistics there were about 20 million investorswho have invested in securities market, whenRs. 226,911 crores was raised by corporatesectors and government bodies.

This underlines the need for furtherimprovement in the working of Indian securitiesmarket. Such measures should bring moretransparency and further efficiency with the aimof protecting the interests of the Indianinvestors.

IX. (A) Indian Stock Market Efficiency

Market efficiency is often studied underthree broad headings: allocation efficiency,operational efficiency and informationalefficiency. While allocation efficiency ensuresthe highest risk-adjusted returns for capitalinflows, operational efficiency ensures thattransactions in a financial market are completedon timely basis with the maximum possibleaccuracy and at the lowest possible cost.

Efficient market hypothesis (EMH) mainlystates the informational market efficiency. In anefficient market the prices of securities fullyreflect all available information. As per thistheory the possibility of making superior returnsfrom efficient market using information isabsent.

The EMH have again categorised theinformational efficiency in to weak-form, semi-strong form and strong form. Efficient markethypothesis (EMH) in the weak form claims thatall past prices of a stock are reflected in today’sstock price. Therefore, technical analysis cannotbe used to predict or beat the market. Semistrong efficiency as per EMH (Efficient MarketHypothesis) implies that all public informationis calculated into a stock’s current share price.So neither fundamental nor technical analysiscan be used to achieve superior gains from themarket. The strongest version of market

efficiency is the so called strong form of marketefficiency. It states that all information in amarket, whether public or private, is accountedfor in a stock price. Not even insider informationcould give an investor the advantage of gainingsuperior returns.

The study had investigated in to the weak-form and semi strong form of informationalefficiency of Indian stock market. The sampleincludes the daily closing price of all the sharesincluded in the formation of Nifty Index. Thestudy period was from 2004-2009. The resultsof both non-parametric (Kolmogrov –Smirnovgoodness of fit test and run test) and parametrictest ( Auto-correlation test )provide evidence thatmajority of the share prices of companiesincluded in the study do not follow randomwalk model .The significant autocorrelation co-efficient at different lags reject the nullhypothesis of weak-form efficiency. So theresearcher had to reject the null hypothesis thatIndian Stock Market is weak form efficient. Theempirical evidence suggests that Indian stockmarket is weak form inefficient.

These results were consistent in differentsub-sample observations and for individualsecurities. The issues are important to securityanalysts, investors and to security exchangeregulatory bodies in their policy makingdecisions to improve the market condition. Theresults also highlight the importance ofconsidering market ecology and of adoptingappropriate modelling procedures andinvestment strategies to fully exploit informationcontained in market prices.

The rejection of null hypothesis that themarket is not Weak form efficient can beinterpreted as that price forming information inIndian market may not be disseminated rapidlybecause of sophisticated communicationtechnology, and lack of intensive marketregulations .Indian markets can reduce the

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exploitation of the profitable trading rules byincreasing the number of listed securities, byincreasing the trading volume and also byattracting more and more investors in to thecapital market.

In the second part of this study researcherpresents the results of the test of Semi-strong formefficiency of Indian Stock market. If the resultsgive evidence that share prices do not reactadequately and quickly to the various information,it means that the market offers opportunities forearning superior returns. However, results of thestudy gives evidence for Semi-strong formefficiency of Indian stock market. Residual returnsof all the companies during the study period had avalue near to zero. The results indicate that thoughthe market is providing scope for high returns inthe recent times due increased participations offoreign investors and through reduction oftransactional cost, the opportunity to makeabnormal profits is very limited. The results of thisstudy are in line with many other previous studiesconducted in the Indian market.

The reason for such observation could bethat most of the companies included in thepresent study are large firms which are includedin the construction of Nifty Index. These firmsare automatically subjected to greater attentionby the investors in the market. So the publiclyavailable information or fundamentalinformation gets incorporated in to the shareprices very quickly. The results could bedifferent for smaller or non popular companies.

The study period of this research was from2004 to 2009 which included a time span inwhich Indian Stock market was severely affectedby Global Financial Crisis. So the researcher hadtaken an effort to test the market efficiency ofIndian markets during this recession period.Period of study was from October 2007 to April2008 i.e. the time span in which Indian markets

were rigorously hit by global financial crisis.Daily closing prices of these shares wereconsidered for the analysis.

The results of the study indicate that theIndian stock market was Weak form inefficientduring the study period. So the chances to earnabnormal returns by studying the past share pricebehaviour existed in Indian market even duringthe crisis. However the test results supportedSemi-strong form efficiency of Indian stockmarket during the period of extreme financialcrisis in India.

There was no evidence of gainingsignificant abnormal returns from Indian market.Hence the researcher accepted the nullhypothesis (H

0) that Indian markets were

efficient in the Semi-strong form during thestudy period.

The answer to the question whether stockmarket is efficient or not is very important fromthe viewpoint of policy makers and otherregulators. The reason is only an efficient marketcan have potentially significant contributions tothe country’s economic development. Suchefficiency only can promote higher savings,more efficient allocation of surplus funds andbetter utilisation of available resources.

An efficient market reduces uncertaintiesand enables appropriate investment choices,whereas in an inefficient market information willbe limited, in many cases unreliable and doesnot adjust instantly to share prices. This makessound investment decisions much complicated.

Uncertainty in the market will also reducecapital supply in the country which will triggerfuture growth. Broadly it can be said that ifmarket is efficient, the amount of governmentintervention required is very less.

For investors in Indian stock market, stockmarket efficiency is important because it is the

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deciding factor for the use of various securityanalysis tools like technical analysis orfundamental analysis in making abnormalreturns from the market. If the market is efficient,all what an investor can do is to buy the securityand hold it for a long time. Basics of technicalanalysis or fundamental analysis will never helphim in making excess returns, rather thanincurring additional transaction cost and cost ofobtaining information.

IX. (B) Momentum and Contrarian Strategiesin the Indian Stock Market

Momentum and contrarian are twotraditional investment strategies that havecaptured tremendous interest of academiciansas well as in vestment professional. Thesestrategies are motivated by behavioral theoryof under reaction and overreaction to newspassed on to the financial market. Theattractiveness of these two strategies is becauseof their simple trading rules. Momentum strategyis based on price continuation and contrarian isbased on price reversals.

Investors following momentum strategybuy past winners and sell past losers whereasthose following contrarian strategy sell pastwinners and buy the past losers. Generallyspeaking, in developed countries, many studieshave confirmed the existence of momentumstrategy and found contrarian strategy to be moreefficient during long-term period. However, noconsistent evidence about momentum strategyand contrarian strategy has been found inemerging markets.

A test of return predictability has importantimplications in security pricing in an inefficientcapital market. According to the efficient markettheory, investors cannot earn extra returnswithout bearing extra risk and using historicalstock prices does not help investors to earn extrareturns, as stock prices move at random.

The special characteristics of emergingcapital markets like thin trading volume, lowliquidity, less informational efficiency, rationalinvestors, and also having low correlation withother emerging markets and developed market,one can expect more return predictability orinefficiency in these markets.

As a first step researcher had tested themarket efficiency of Indian stock market andfound that Indian stock markets were weak-forminefficient during the study period. It meansthere is scope for investors in India to predictfuture prices based on historical prices.

Next step was to test the efficiency of twotechnical analysis tools in predicting futurereturns. The aim of this study was to demonstratethe contrarian and momentum investmentstrategies, their profitability in Indian stockmarket and reasons explaining their existence.

For testing the effectiveness of the twoinvestment strategies namely momentum andcontrarian, entire study period was divided into various formation periods of one month eachfor forming the momentum portfolio andcontrarian portfolio. Daily returns of the sharesincluded in the construction of Nifty index andwhose data which was available for the whole6 years were taken for the study .So the samplesize was 29 companies shares

The study results revealed that there doesnot appear any merits to the momentum andcontrarian strategies as technical analysis toolsin Indian Stock Market. These results weredifferent from many other developed markets.Empirical studies had revealed the possibilityof making superior returns using these twostrategies in those markets.

Stock prices contain some predictability.Results of this study also support the Weak-forminefficiency of Indian stock-market. So

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Investors are left with opportunity to make excessreturn by studying the historical prices,However, this has to be done in a way that itcompensates for the transactions costs oftrading.

Researcher had also analysed theefficiency of momentum and contrarianinvestment strategies in predicting future returnsduring the time period in which Indian marketswere severely affected by the global financialcrisis. The period under study was 2007 Octoberto 2008 April.

Empirical results gave evidence that theredoes not appear any merits to the momentumand contrarian strategies as technical analysistools in Indian Stock Market even duringrecession period. So the researcher had to acceptthe null hypothesis (H

0) that momentum and

contrarian strategies do not give superior returnsover the bench mark.

Both these strategies i.e. momentum andcontrarian strategies unfortunately involved highdegree of turnover because the portfolios haveto be reconstituted frequently. These strategiesalso incur substantial transaction costs. So itremains to be seen whether they would beprofitable in Indian market after such costs arefully accounted for.

IX. (C) Interdependency of Indian StockMarket with Other Emerging Markets

Globalisation and liberalisation havestimulated the concept of integrated financialmarkets between countries and therebyintegrated stock market movements also. Thisincreased interdependency will have impacts onglobal investors also. It is this degree ofcorrelation among returns of securities as wellas those of stock markets which decide whetheran investor is going to have any gains bydiversification of securities and markets.

In integrated stock markets identicalstocks will trade at almost equal prices both indomestic and foreign markets. In such caseportfolio diversification would not generaterequired gains. Hence, interdependency of Indianstock market with other world markets would beimportant for investors in India. They would beinterested to know whether portfolio diversificationacross global stock markets would generate desiredgains.

So an empirical study had been conductedby the researcher with the objective of analysingthe interdependency of Indian equity marketwith that of the rest of the world, especiallyamong different Asian markets.

Researcher tested interdependency ofNifty Index movements with ShanghaiComposite Index, Hangseng index and NikkeiIndex from 2006-2009 using simple correlationtechnique.

Results provide evidence for correlationamong market movements of Nifty Index withthe other three markets studied. The study hadto reject the null hypothesis (H

0) that there is no

interdependency of Indian Stock market withother emerging stock markets.

So from the portfolio diversificationobjective, investors cannot benefit fromarbitrage activities in the long run. If the resultsof this study, regarding the influence of the otherthree stock markets are extended and contrastedwith the previous studies included in literature,it can be concluded that the interdependenciesamong the stock markets in the emergingcountries have increased over the years. Thiscould be because of liberal foreign policies inthe recent years and lowering of barriers forforeign institutional investors. It also accountsfor the recent de-regulation measures adoptedby the government in the domestic market.

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The benefits which Indian capital marketcan expect because of this growinginterdependency with other world markets is thatthe market would become more efficient inallocating resources and mis-pricing prevailingin the market will come down. This would leadto better informational and operationalefficiency of Indian Stock markets.

At the same time these developments in theinternational markets will pose severe challengesbefore the policy makers and regulators of thecountry. These interdependencies can inculcatefinancial distress or crisis in the domestic economyfrom other economies as it had happened in therecent global financial crisis. So it would bedesirable if further policy measures are taken inIndia towards controlling the level of stock marketintegration by tightening or lessening the factorsaffected by the impediments. However suchmeasures should be considered with the expectedcost benefit for Indian economy. This requires abetter understanding about the degree ofconsequences of stock market integration.

X. Recommendations and Policy Implications

1. The inefficiency of Indian stock market inthe weak form also implies financial andinstitutional imperfections. It also pinpointtowards the fact that countries liberalisation,deregulation and privitisation policies havegenerated some level of instability in themarket. Weak-form market inefficiency inIndia is most likely to be caused byinappropriate policy choices. Regulatorshave to take in a long run vision whileformulating and implementing policies andprogrammes for Indian capital market.

2. Indian markets can reduce exploitation ofthe profitable trading rules by increasing thenumber of listed stocks and trading volume.

3. Opening up of markets to more foreigninvestors can bring more efficiency in the

market. It can also bring down the cost ofcapital.

4. Considering the current growth of Indianstock market, the country would need largerand specialised investment institutions tohandle and organize complex financialinformation.

5. Indian market requires more financialproducts to attract investments in to stockmarkets.

6. Investor educational programmes have to begiven more importance in order to attractpotential investors in to stock market.Currently less than 5 percent of Indianpopulation is only engaged in capital marketactivities.

7. India’s regulators have been active inseeking ways to develop the country’sfinancial markets, and a in introducinggreater risk management. Howeverpersistent reforms in the sector only cansupport India’s already impressive growthtrend in the coming years.

8. An important objective of reforms in Indiahas to be integrating the various segmentsof the financial market for bringing about atransformation in the structure of markets,reducing arbitrage opportunities, achievinghigher level of efficiency in marketoperations.

9. Regulators should ensure stability andintegrity in the market. Prompt actions haveto be taken in cases of severe volatility inthe market. This would boost the investorconfidence in the Indian stock market.

10. Market should have better operational andinformational transparency.

11. Investors are recommended to makesystematic study before going for

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investments in stock market. They shouldnever let greed control their investmentdecisions.

12. Credit rating has to be made mandatory forall capital market instruments.

XI. Areas for Further Research

1. Market efficiency as a research topicdeserves a continuous study to reach anultimate conclusion about the level ofefficiency of emerging markets like Indiamarket. The sample selected for this studywas those companies involved in theconstruction of Nifty index. These firms areautomatically subjected to greater attentionby the investors in the market. So thechances of publicly available informationor fundamental information gettingincorporated in to these share prices veryquickly are high. The results could bedifferent for smaller or non popularcompanies. Separate studies on marketefficiency by considering characteristics ofeach industry and taking care of marketcapitalisation of different companies understudy (like classifying them in to large cap,mid cap, small cap) would be advancementin the current topic under discussion.

2. The present study finds no evidence ofgaining superior returns by usingmomentum and contrarian strategies in theIndian Market. However there are manyquestions still remained to be answered for

India. These include “Is there any differencein momentum return patterns for differentsectors in the country”, “Is there anydifference in contrarian return patterns fordifferent sectors in the country”. Studiesconducted in similar area can give furtherevidence to the efficiency of these twotechnical analysis tools in the Indian market.NSE sectoral indices can be used for suchstudies.

3. There are many studies which wereconducted in different markets foranalysing the factors which can improvemarket efficiency. However attempts madein Indian context are very few in number.Separate studies taking in to account theeconomic and financial conditions of therespective country only can give constructivesuggestions and recommendations for thepolicy formulators of the country. So thepresent study identifies this area as a futureendeavor for researchers interested in thisfield.

4. Growing globalization and liberalization inthe country, would promote greaterintegration between world markets in thecoming yeas. So further research can betaken up for evolving policy prescriptionsneeded to protect the country from externalcrisis being inculcated in to the domesticmarket.

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