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Chapter 3

Research Methodology

3.1 Introduction

The conflict between stability and growth of the economy is common in case of developing

countries. A detailed review of literature in Indian and global context, for various dimension of

fiscal policy and incentives to industry, provided an understanding and insight on the subject.

Accordingly, it was decided to study the fiscal policy in Indian context by using empirical

models; for this Mundell Fleming model and Domar model has been used to study trend in

public debt and fiscal policy indicators and its impact on price, trade, forex, savings and

investment in India. Inter temporal budget constraint method has been used to study the steady

public debt situation, sustainable primary deficit and implication of FRBM Act (Fiscal

Responsibility and Budget Management Act) on India’s fiscal deficit stance. The present chapter

focuses on the methodology and statistical tools adopted for undertaking the present study.

3.2 Rationale of the Study

India is facing challenge of controlling fiscal deficit crisis since long. Since economic

liberalization in 1991, despite of serious efforts by government and rapid economic growth, the

fiscal problem has become persistent. During this period, the revenue deficit has worsened from

3.3 per cent of GDP in 1990-91 to 4.4 per cent of GDP in year 2002-03 and rose again to 4.5 per

cent of GDP during 2008-09 (Economic Survey 2010-11). In order to finance current expenses,

the government has to take a debt; which government does by issuance of bonds. This recurrent

bond issuance leads to substantial built up of debts; resulting in increased burden of interest

payments. In year 2011-12 budget a sum of Rs. 2756.18 billion was allocated merely to pay

interest on the debt which is 5.28 percent of GDP. This huge sum would have found alternative

use, if India would have adopted a prudent fiscal policy.

Due to comparatively lower inflation rate, during periods prior to 2008-09, the experience of

interest payments was comparatively compassionate. However, the interest in coming years may

not prevail at low levels as it has been during past. This adds a further degree of caution about

soundness of fiscal policy. As per the Fiscal Responsibility and Budget Management (FRBM)

Act, the revenue deficit should be eliminated (earlier, the year was 2007-08, now it has been

extended to the year) by year 2008-09 (by taking consensus from all political parties). Thus,

from the year 2008-09 onwards the government would be able to issue bonds but only to finance

its capital expenditure which creates assets (i.e. creation of debt would not be allowed to finance

current expenditure). Moreover, by this act, the fiscal deficit should be brought down by 0.3 per

cent every year; and maintained below 3 per cent points of GDP.

India has been grappling with issue of tackling and controlling fiscal deficit since long. The

actual issue is determining level of fiscal deficit, which will stabilize debt-GDP ratio and at the

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same time can promote growth. The question is not that whether deficit should be there or not.

The relevant question is the appropriate level of fiscal deficit. Even though fiscal policy plays a

direct role to stimulate investment in the country, there is a little or no direct empirical

relationship available to measure the impact of various fiscal variables on the economy. In a

similar way various fiscal incentives from time to time are designed and applied in order to boost

up the industry’s performance. Various fiscal incentives act as a booster dose for domestic

industry as well as entry of the foreign players. However, many times the incentives given with a

view to influence investment affect other financial decisions like borrowing and saving, and then

the impact of incentive may either be accelerated or neutralized depending on the interrelation

between the incentives, other financial decisions and investment.

A large fluctuation of GDP growth rate reflects the risks of the Indian economy owing to a faulty

framework of public policy. With an aim to suggest reforms in fiscal policy in India, various

committees have been formed from time to time. As per Chelliah Committee, Kelkar Committee,

the corporation tax has been reduced, and many other fiscal concessions have been introduced

over the years in a phased manner. Corporate tax revenue constitutes nearly half of the overall

direct tax collections in India. Hence, it becomes useful to study the behavior of corporate tax

collection. Numerous concessions and incentives are provided to corporate in India. Fiscal

incentives are provided for varied purposes, such as promoting savings, regional development

needs, encouragement to certain industries etc. From time to time concerns have been raised

about soundness of fiscal policy and its components due to relatively poor performance of GDP

and IIP etc. Also the earlier study in India and abroad reveals that the impact of fiscal incentives

on corporate performance is ambiguous. To check this in a present context, it has been analyzed

from MSMEs and SEZs point of view.

3.3 Objectives of the Study

Prudent fiscal management plays a crucial role to affect investment, savings, GDP and other

component of macroeconomic variables. Also, haphazard policy design with short term objective

may result in to nothing but the accumulation of debt, higher inflation and poor revenue growth

for the government. India is facing fiscal crisis since long. Since economic liberalization, despite

of serious efforts by government and rapid economic growth, the fiscal problem has become

persistent. During this period, revenue deficit has worsened from 3.3 per cent of GDP in 1990-91

to 4.4 per cent of GDP in year 2002-03 and rose again to 6.09 per cent of GDP during 2008-09

and 7.59 percent of GDP in year 2011-12 (Economic Survey 2010-11). Therefore, it has been

attempted to analyze fiscal deficit, impact of fiscal deficit on savings and investment and steady

state debt situation in India by using Mundell Fleming Model, Inter temporal budget constraint

method and Domar Model. Also the earlier study in India and abroad reveals that the impact of

fiscal incentives on corporate performance is ambiguous. To check this in a present context, it

has been analyzed from MSMEs and SEZs point of view.

The objectives of study are as follows:

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3.3.1 Objectives

1. To study fiscal policy and study the impact of fiscal deficit on trade balance, foreign

exchange reserve, prices and output in India by applying Mundell Fleming Model.

2. To derive a steady state debt income ratio and sustainable primary deficit by

applying Inter temporal Budget Constraint Method for a period of 1980-81 to 2011-

12.

3. To study decade wise decomposition of accumulation of debt relative to GDP by

using Domar Model.

4. To study the level of awareness and availing of different incentives by MSMEs.

5. To compare and analyze the effectiveness of various incentives for financial and

strategic decision of the MSMEs and firms in SEZs.

6. To study the impact of various direct and indirect fiscal incentives on financial and

strategic decision of MSMEs and SEZs.

To study first three objectives and to analyze fiscal policy and its components Mundell Fleming

model, Inter temporal budget constraint method and Domar Model are used from year 1980-81

to 2011-12. To study objectives 4, 5 and 6 it was decided to survey and interview

managers/owners of MSMEs and SEZs firms in Gujarat to get the knowhow about how fiscal

incentives affect corporate performance.

3.4. Research Methodology

A research methodology provides a framework to be used as a guide in collecting and analyzing

data.

3.4.1 Type of Research:

Descriptive Research

Descriptive Research is used to study fiscal policy and its constituents in India. The effectiveness

of fiscal policy and fiscal incentives has been studied by analyzing their impact on financial and

strategic decision of MSMEs and SEZs.

3.4.2 Sampling:

To understand the fiscal policy and debt empirics, (objectives 1, 2 and 3) time period of 1980-81

to 2011-12 was selected. Non probability convenient sampling is used for selection of

respondents (to study the objectives 4, 5 and 6). The data has been collected from a total of 318

industrial firms which are surveyed. Out of which information has been collected through

separate questionnaire from 216 MSMEs owners / senior managers of industrial firms located at

various GIDCs and 102 SEZs firm owners to study the impact of fiscal incentives on corporate

performance.

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3.5 Sources of Data

To conduct the study by using above mentioned models, various issues of Economic Survey,

Socio economic Review, RBI bulletin, CMIE reports, and Indian Public Finance Statistics were

studied for collection of relevant data. For primary data collection through survey cum interview

method; it was decided to visit industrial units of GIDC24

and SEZs units of Gujarat.

3.5.1 Primary Data

For the survey cum interview of the MSMEs and SEZs firms, two separate sets of structured

questionnaires are administered based on the pilot input study, discussion with MSMEs and

SEZs commissioners and managers of large, MSMEs and SEZs firms. The details of incentives

were collected from Udyog Bhavan, Gandhinagar and websites of Government of Gujarat25

.

Following large scale companies were visited and discussion with their respective General

Managers (Account and Finance) supported the study by giving their views: Krishak Bharti

Cooperative Limited, Gujarat Narmada Valley Fertilizers Company Limited, Gujarat Alkalies

and Chemicals Limited, NTPC and Alkem Lab. To study the impact of various fiscal incentives

on financial and strategic decisions, 216 MSMEs and 102 SEZs firms of Ahmedabad, Surat,

Sarigam, Sachin, Vapi, Navsari, Daman and Kutchh were personally visited.

3.5.2 Secondary Data

The data and information on fiscal policy and debt indicator were collected from various issues

of Handbook of Statistics on Indian Economy26

, Indian Public Finance Statistics27

and CMIE

Reports.

In order to develop a conceptual base for the study, the relevant earlier studies were referred. For

this annual report of the companies, various journals, websites and reports of various committees

were studied.

3.6 Research Instrument

The research instrument is in form of structured questionnaires cum interview. The primary data

is collected by two separate set of questionnaires namely MSMEs and SEZs.

3.7 Scale

Factor Analysis, Pearson’s Correlation and Spearman’s Correlation, Durbin Watson is used for

analysis purpose. Chi Square is used for testing hypothesis at several instances. Cluster Analysis,

Correlation Matrics, KMO and Bartlett’s Test, Communalities, Total Variance Explained,

24

For MSMEs units 25

http://www.vibrantgujarat.com 26

published by RBI 27

published by Ministry of Finance

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Component Matrix was obtained as a part of factor analysis. Results were also obtained by

applying Varimax Rotation Method using SPSS software to observe any varying conclusions.

3.8 Variables Studied

Relevant variables were studied and collected for above mentioned models. As any policy

decision takes time to stabilize, to measure its impact; all these variables related to fiscal policy

were studied from 1980-81 to 2011-12. Information about various fiscal incentives offered to

MSMEs and SEZs were collected from Udyog Bhavan, Gandhinagar and website of Gujarat

government.

3.8.1 Fiscal Policy

Fiscal policy is used for promoting desirable production in economy. The Mundell Fleming

model, Inter temporal budget constraint method and Domar model are used to study fiscal policy,

fiscal deficit and impact of fiscal policy on savings and investment of the economy. For this

purpose variables like fiscal deficit, revenue deficit and primary deficit to GDP, India’s foreign

trade, foreign exchange reserves, combined liability of central and state government, interest rate

of central and state government security, GDP at market prices, GDP deflator, real interest rate,

actual debt/GDP ratio, actual primary deficit/GDP ratio, interest rate/GDP, combined deficit of

central and state government, interest payment/GDP, interest payment/revenue receipt, revenue

receipt/GDP, fiscal deficit/GDP, savings relative to GDP of household, private corporate and

public sector, investment relative to public and private sector, gross domestic saving and gross

domestic formation of public sector relative to GDP, combined capital expenditure of central

and state government are studied from year 1980-81 to 2011-12.

To study impact of fiscal incentives on corporate performance following variables related to

MSMEs and SEZs were studied

3.8.2 MSMEs

For analysis purpose industrial areas such as Vatva, Odahav, Naroda, Kathawada and Kalol are

considered of Ahmedabad region; Sayan, Delad, Pandesara, Udhana Udyognagar, Hazira,

Bardoli, and Tarsadi are considered of Surat region; areas near to Navsari and Valsad such as

Sarigam, Vapi, Valsad, Billimora and Daman are considered of Valsad region. From table 3. 1 it

can be seen that out of total 216 surveyed MSMEs units, 91 were from places of Surat; 83 units

are visited and surveyed from Valsad district, remaining 42 units are from Ahmedabad in

Gujarat.

Table 3.1 Location of the MSMEs Unit

Region Frequency Percent

Ahmedabad 42 19.4

Surat 91 42.13

Valsad 83 38.42

Total 216 100.0

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The below table 3.2 shows distribution of selected units according to their location in respective

GIDCs.

Table 3.2 Units surveyed as per GIDC

Ahmedabad GIDC 42

Vatva 19

Odhav 8

Kathwada 9

Naroda 4

Kalol 2

Surat GIDC 91

Sayan 10

Delad 33

Pandesara 39

Udhana Udyognagar 2

Hazira 2

Bardoli 2

Ankleshwar 1

Tarsadi 2

Valsad GIDC 83

Sarigam 35

Vapi 41

Valsad 2

Billimora 3

Daman 2

For MSMEs, parameters like list of direct and indirect incentives given by Government of India

(GoI) and Government of Gujarat (GoG) are studied. A variety of incentives provided are as

given below.

Direct fiscal incentives such as interest subsidy (7 percent for micro and 5 percent for MSMEs, 1

percent extra for young/women entrepreneur), venture capital assistance (max. Rs. 10 crores),

cash subsidies, backward area subsidy, investment subsidy for establishment of new units,

rehabilitation subsidy were studied as independent variables. Also, indirect fiscal incentives such

as 50 percent reimbursement of fees for skill enhancement (formal training, workshop attending

etc for a max. 25 employees), 50 percent of cost reduction of original for quality certification

(ceiling of Rs. 6 lakhs), 50 percent grant of original cost for technology enhancement (max. Rs. 1

crore including royalty payment), assistance @ 50 percent subject to maximum Rs. 10 lakhs for

patent, 50 percent cost of energy/water audit conducted for conservation purpose (reimbursement

basis), incentives for packaging designing purpose, assistance for participation in international

trade fair, support for the vendor development, electricity duty exemption for a period of five

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years for the cluster associations if they set up common power plants or common waste recycling

plants or common affluent treatment plants, quality up gradation scheme for a maximum of Rs.

25000 per scheme as grants from the government and overall Rs. 1 lakh per SSI firm’s (ISO

9000 and 14000), energy and water conservation assistant, cash subsidy for assessment of water

consumption, assistant for environment management (up to 25 to 50 percent of fixed capital

investment: ceiling Rs. 10 lakh per project), scheme for ‘Green’ practices and environmental

audit (up to 25 to 50 percent of fixed capital Investment), need based support to R and D

institution and rehabilitation of sick firms (interest subsidy @ 5 percent per annum limited to

Rs. 10 lakhs per year and experts advice) have been studied for the MSMEs firms.

In order to study how industries perceive such fiscal incentives following questions were

discussed with owners/managers of MSMEs and impact of various direct and indirect incentives

is measured. The questions were discussed on investment in plant and machinery and

equipments, turnover of the organization, procurement of the funds, obstacles faced by MSMEs

to grow and develop; and awareness and availing of for various types of fiscal

incentives/schemes. Questions were asked how different fiscal incentives impact on various

financial and location decisions of the firms. Also questions were asked which types of

incentives are important for the firm. Lastly, owner/managers of MSMEs were asked about

problems faced by them to avail different types of incentives. In open ended questions MSMEs

mangers/owners were asked to give their opinion for various incentives and their impact on

economy.

Following dependent variables were studied to assess impact of fiscal incentives on various

facets of corporate performance. MSMEs owners/managers were asked to judge the impact of

various direct fiscal incentives on various financial parameters like investment, less borrowings

(can reduce borrowing requirements), reduced cost of capital, sources of funds, working capital

purpose, and how it improves margin and liquidity. Similarly, indirect fiscal incentives were

judged on the basis of several general and strategic parameters like improved competitiveness,

better financial performance, increased sales, capacity enhancement, technology enhancement

and improved quality.

3.8.3 SEZs

Total 102 SEZs units were surveyed cum interviewed to study the impact of fiscal incentives on

their performance. Below table shows the distribution of 102 SEZs units surveyed from Gujarat.

Table 3.3 Location of the SEZs units

Region Frequency Percent

Ahmedabad 1 1

Kutch 37 36.3

Surat 64 62.7

Total 102 100

From table 3.3 it can be seen that out of 102 SEZs units majority (64 units) are surveyed from

Surat, while 37 units were surveyed from Kutch. Only 1 unit was surveyed from Ahmedabad.

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For firms located in SEZs, direct incentives such as 100 percent income tax exemption on export

income for SEZ firms under Section 10AA of the income tax act for first 5 years (50 percent for

next 5 years thereafter and 50 percent of the ploughed back export profit for next 5 years U/S

10AA after 1st April, 2006), for plant and machinery (IB of section 10A), exemption of

electricity duty for 10 years (section 15- subsection II of GoG SEZ Act), exemption from

minimum alternate tax under section 115JB of the income tax act, DDT exemption, exemption

from central sales tax, exemption from state sales tax and other levies as extended by the

respective state governments, export incentive or export promotion scheme, duty free

import/domestic procurement of goods for development, operation and maintenance of SEZ

firms; exemption from securities transaction tax, exemption from service tax, custom duty

exemption, excise duty exemption, exemption from levy of stamp duty and registration fees on

loan agreements, credit deeds and mortgages and exemption from sales tax, purchase tax, motor

spirit tax, luxury tax, entertainment tax, and other taxes and cess payable on sales and

transactions were studied for financial and location decisions of SEZs.

SEZs firms were asked to indicate their choices for indirect incentives such as exemption of

capital gains on transfer of assets in case of shifting of industrial undertakings from urban area to

SEZ (section 54 G (SEZ ACT 2005)), external commercial borrowing by SEZ firms up to US $

500 million in a year without any maturity restriction through recognized banking channels,

exemption of capital gains on transfer of assets in case of shifting of industrial undertakings from

urban area to SEZs, deductions in respect of certain incomes of offshore banking firms and

international financial services centre, facility to retain 100 percent foreign exchange receipts in

the export earners foreign currency accounts, facility to realize and repatriate export proceeds

within 12 months, duty free procurement of capital goods (including second hand capital goods),

raw materials and consumable spares from domestic market, full freedom for sub contracting,

single application form for approval, clearance, license, registration and no objection certificate

under one or more laws, submission of single return under different law, single window

clearance, liberalized labor laws, compensation through carbon credit exchange programme and

backward and forward linkages were studied for financial and location decisions of SEZs.

Other incentives which are of general nature such as availability and cost of land, availability and

cost of power, availability of water supply, facility of telecommunication, solid waste

management, medical and food facilities, mass transportation, distance of raw material and

finished goods from the market, warehousing facility, banking facility and climate of the

surroundings were studied for their impact on location and financial decision of the firms.

SEZs firm owners were asked questions for eliciting information on above parameters (direct,

indirect and other incentives offered to them) in order to judge how they perceive various

incentives offered to units in SEZs. The questions discussed relates to investment in plant and

machinery and equipments, turnover of the organization, procurement of the funds, impact of

direct, indirect and other benefits offered to SEZs firms, most preferred and least preferred

incentives as per the SEZs firms and implications of SEZs policy on overall economy.

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3.9 Period of Data Collection

To understand scenario related to fiscal policy and debt dynamics in India; relevant data for

study collected pertaining to a period from year 1980-81 to 2011-12.

Primary data collection through survey cum interview of MSMEs and SEZs took place from

June 2009 to June 2011.

3.10 Sample Size

Sampling plan informs regarding sample composition and its size. Usually formulas are used to

determine sample sizes; but they suffer from serious limitations. By using a blend of theory,

practical limitations, and experience in the pilot study, it was decided to go for non probability

convenient sampling. For the fiscal policy and debt dynamics relevant variables are collected

from time period of 1980-81 to 2011-12. Primary data were collected by survey cum interview

method from 216 MSMEs and 102 SEZs firms from different regions of Gujarat.

3.11 Inclusion and Exclusion Criteria

Both sets of questionnaires- one for MSME firms and other for firms in SEZs were modified

after going through the pilot study.

3.12 Data Analysis and Statistical Tools Used

For fiscal policy and debt dynamics, Mundell Fleming Model, Domar model and Inter temporal

Budget Constraint method was used; and ANOVA and Durbin Watson test28

were undertaken for

study. Statistical Package for Social Sciences (SPSS) of version 17 was used for statistical

analysis. For the MSMEs and SEZs different statistical tools like frequency, factors, cluster,

cross tabulation, chi-square was conducted.

3.13 Scope of the Study

The study has used Mundell Fleming Model, Inter temporal budget constraint method and

Domar model to measure the fiscal deficit and impact of present fiscal policy on savings and

investment decisions of firms in the economy. The study focuses on fiscal policy, its components

and debt dynamics for a period of 1980-81 to 2011-12 only. A total of 216 MSMEs and 102

SEZs firms of Gujarat were surveyed by interacting with owners/managers. The survey is

conducted only at selected industrial area of Gujarat like Ahmedabad, Vapi, Valsad, Surat,

Daman, Kalol, Ankleshwar for MSMEs, while for firms in SEZs Ahmedabad, Surat and Kutchh

were visited and surveyed.

28

To check autocorrelation

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3.14 Hypothesis

Tax incentives and public welfare expenditures are an important tools to accelerate investment

and thus to boost up the economy. The various incentive tools adopted by the government from

time to time can be very effective to achieve the goal of the economy. Prudent fiscal policy

positively affects the savings and investment level in the economy and sustainable level of debt

component; and revenue receipt boost ups the level of capital expenditure. The Hypothesis is

based on following assumptions. Fiscal incentives are highly important in a decision to invest,

establishment of plant and to increase turnover of the firms. Thus, incentives and concession in

various forms motivates to invest. Fiscal Incentives make any project attractive by increasing

return.

Hypothesis (Null Hypothesis)

H0 1: There is no significant impact of fiscal incentives on turnover of the MSMEs.

H0 2: There is no significant relationship between investment in plant and machinery and

turnover of the MSMEs.

H0 3: There is no significant relationship between incentives and location of the MSMEs.

H0 4: There is no significant relationship between location and turnover of the MSMEs.

H0 5: There is no significant Impact of the Fiscal Incentives on Turnover of the SEZs.

H0 6: There is no significant relationship between Investment in Plant and Machinery and

Turnover of the SEZs.

3.15 Limitations

As firms were skeptical to reveal financial data; financial data were omitted from earlier version

of questionnaire. Moreover sample size was restricted owing lack of response from firms, both

MSMEs and SEZ firms. The other limitations are:

The study is restricted to the state of Gujarat only.

Some firm owners showed unwillingness to share information and respond to the

questionnaire.

3.16 Outcome of the Study

It is expected that outcome of the study will help macroeconomic policy framers to design and

frame various fiscal concessions in such a way that it can really augment the performance of

corporate sector and hence help to boost up the economy. It is also expected that it will help to

address evolutionary process of governing budget deficits and the derivation of steady state debt

income ratios.

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3.17 Organization of chapters

The thesis titled, “A study of Fiscal Policy in India and its Impact on Corporate Performance

with Special Reference to Gujarat” is presented in seven chapters. The chapter contents in brief

are given below.

Chapter 1:- It deals with the assessment of Indian Economy and policy of Economic

Liberalization. Then the chapter has assessed the component of aggregate demand and supply in

the economy with the empirical framework. It also discusses the various component of fiscal

policy like Capital and Revenue Expenditure and Receipts, Direct-Indirect Revenues,

composition of Capital and Revenue Expenditures etc and its impact on GDP and deficit. It also

covers the interrelationship among them. It discusses the FRBM Act and change in Tax revenue

to GDP ratio from time to time.

Chapter 2:- It is on Literature Review. A brief literature review in Indian and Global context has

been done with respect to fiscal policy, fiscal deficit, fiscal consolidation, fiscal incentives, fiscal

policy and exchange rate, fiscal restructuring, fiscal transfer and reforms, MSMEs and fiscal

incentives, SEZs and fiscal incentives and Fiscal policy and Gujarat etc are thoroughly studied to

get the insight and find gaps in literature and decide objectives

Chapter 3:- It deals with Research Methodology, Rationale for the study, Objectives, Methods of

Data collection, sample size, Hypothesis etc.

Chapter 4:- Objectives 1 to 3 have been studied and analyzed in this chapter. It deals with study

of fiscal policy, debt-sustainability of Indian economy, fiscal deficit, impact of government

capital expenditure, revenue receipts and interest rates etc. These data are collected from Indian

Public Finance Statistics and Reserve Bank of India website. For these data, Mundell Fleming

Model, Inter temporal budget constraint method and Domar Model have been applied from year

1980-81 to 2011-12.

Chapter 5:- Fiscal incentives and its impact on MSMEs performance are studied in this chapter.

It deals with survey and interview method with Senior Managers/Owners of MSMEs firms. Total

216 MSMEs are surveyed with questionnaire cum interview. The results obtained from these

surveys are codified, entered in SPSS and analyzed. Appropriate statistical techniques like factor

analysis, cluster cross tabs, frequency, chi-square etc were applied and relevant hypothesis are

tested.

Chapter 6:- Fiscal incentives and its impact on SEZs firms are studied in chapters 6. Total 102

SEZs firms of Ahmedabad, Surat and Kutchh are surveyed with questionnaire cum interview.

Chapter 7:- Conclusions and Recommendations of the research has been divided in two three

sections namely regarding fiscal policy and its constituents, fiscal incentives and its impact on

MSMEs and impact of fiscal incentives on firms in SEZs.

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The research has been divided in three parts. The first part deals with study of fiscal policy in

India for that Mundell Fleming model, Inter temporal budget constraint method has been used to

find out steady state level of debt and sustainable primary deficit/GDP ratio. By using the Domar

Model, impact of fiscal policy on savings and investment was analyzed.

Second and third part of research deals with impact of fiscal incentives on MSMEs and SEZs

firms respectively. To study the impact of fiscal incentives on corporate performance; data is

collected from 216 firms of MSMEs and 102 firms of SEZs by using survey cum interview

method. By this awareness of incentives, investors’ (i.e. business owners/managers/SEZs firm)

preference for incentives, obstacles faced by them and their overall view about incentives is

studied. Different statistical tools like frequency, factors, cross tabulation, chi-square were

applied.