Pratibimb December 2011 - TAPMI's e-Magazine


Mission

T.A. Pai Management Institute (TAPMI) is a premier management institute situated in

Manipal and is well known for its academic rigor & faculty-student interaction. The

Institute has been recently ranked amongst top 1 per cent of B-schools in India & 4th

in the South Zone by The Week Magazine.

Founded by the visionary, Late Shri. T. A. Pai, TAPMI’s mission is to provide much

needed impetus to the task of building professional management capability in the

country. In the process, it has also played a role in strengthening the existing

educational and health infrastructure of Manipal.

We are committed to excellence in post-graduate management education, research,

and practice by nurturing and developing global wealth creators and leaders. We

shall continually benchmark ourselves against the best in class institutions. We shall

foster continuous learning and reflection, achievement-orientation, creative

interdependence and respect for diversity with a holistic concern for ethics,

environment, and society.

About TAPMI

TAPMI was awarded Dewang Mehta Business School Awards for Best Academic

Input (Syllabus) in Finance among B-Schools across India. The award was

presented at the 19th Dewang Mehta Business School Awards, Mumbai. The Award is

supported by Ms. Shaila Mehta-Director, Onward Foundation for Dewang Mehta

awards.

Recent Update

T. A. Pai Management Institute Manipal, Karnataka


About Pratibimb

Pratibimb a reflection of management, is an amalgamation of pioneering thoughts, put forth by some

of the best brains of the crem de la crem of Indian B-Schools and corporates. It brings out a collection

of Ideas concerning the various disciplines of management sciences and provides opportunities to

ponder over various management issues and scenarios, to B-Schoolers across the country. Insights of

Industry stalwarts and revered academicians also find their place in the magazine.

Pratibimb the e-Magazine of TAPMI had its first issue in December 2010. The issue comprised of an

interview of denoted writer Ms. Rashmi Bansal along with a series of articles by students and industry

experts like MadhuSudan Rao (AVP-Delivery, Mahindra Satyam) & Ed Cohen who is a global leader

and chief learning officer who led Booz Allen Hamilton & Satyam Computer Services to the first rank

globally for learning & development. It also introduced a hugely successful and engrossing game for

finance geeks called “Beat the Market” to bring out the application based knowledge of students by

providing them the platform where they were expected to predict the stock prices of two selected

stocks on a future date. The magazine is primarily intended for the development of all round

management knowledge by providing unbiased critical insights into the modern developments.

In sync with TAPMI`s belief of learning not being restricted to classrooms and textbooks, Pratibimb

provides an atmosphere of knowledge sharing and skill enhancement to students and also a

competitive platform which allows B-Schoolers to brainstorm and critically analyse real life

management situations.

Within a short span of time, Pratibimb has been able to create a buzz on most B-school campuses in

the country and currently enjoys the confidence and admiration , reflected in the articles sent for

publication, of various reputed Management Institutions. Pratibimb has featured interviews of eminent

personalities from public and private sector like Ms. Rashmi Bansal (Author of "Stay Hungry Stay

Foolish", Editor - JAM Magazine and IIM A alumnus), Dr. Jagdish Seth (Global Marketing Guru,

Emory University, USA), Mr. Dhanendra Kumar (Chairman, Competition Commission of India), Mr.

Vinit Monga (Head of Finance and Control, Nokia Siemens Network, Bangalore) and Mr. Benny

Augustine (Director - Human Resources, Unisys India). Pratibimb became a monthly e-magazine from

October, 2011.

Views and opinions of long time Veterans of Industry provide a peek into the real churnings of the

Corporate world and rare insights into challenges and concerns of industry, bridging the gap between

Campus and Corporate.

Its commitment to excellence and innovation is growing by leaps and bounds with every new issue,

fuelled by the interest shown by avid readers, subscribers and contributors. A host of new innovations,

features and additions are in the offing as this dynamic offering from students of TAPMI is in the

process of constant reinvention. With better things on the horizon, Pratibimb is poised to be a better

reflection of the management world, and a lot more.

We invite you to become a part of Pratibimb and help us take this to next level by contributing articles

or participating in national level B-School events – “Beat The Market” and “Route To Market”.


I am pleased to state that the team members of PRATIBIMB have continued their sincere efforts to bring out this eighth issue in December 2011. The previous seven issues had a number of management articles written by students of various B-Schools and also from students and faculty of TAPMI. This student magazine is also accessed and appreciated by our alumni and industry and business readers. The magazine provides a platform for our students to use their creativity, imagination and language skills to reflect upon various management areas i.e. operations, marketing, system, HR, finance and entrepreneurship as well as in areas of their interest. It also fosters research culture among students. Research orientation and sharpening analytical mind are crucial for their academic orientation. Generally literary work, research article writing and publication should become part of students’ learning goals while they are in the campus. This would perhaps sow seeds for pursuit for academic career by a few management students after their initial experience in industry and business. It has been observed that on comparison with fast developing country i.e., China in Asia, the focus on research and publishing from Indian students and faculty in management journals and pursuit of Ph.D. programme in leading universities has been moderate in recent past. This situation needs to be improved. To this extent our students and faculty can best express themselves about their creative thoughts, opinions, knowledge and interests by contributing to PRATIBIMB. Let PRATIBIMB grow in content and variety with thoughtful articles in months to come. I congratulate the persistence and continued efforts put in by the team members of PRATIBIMB for timely publishing this volume. I wish them higher performance, joy and success in their endeavor.

Dr. A. S. Vasudev Rao

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editor’s corner Rohit Kumar, Chief-Editor

Ramanuj Vidyanta, Editor-Branding

Sarvesh Joshi, Editor-Creative Designer

Sub-Editors

Abhishek Anupam

Abhishek Dubey

Bijoy Alokkan

Kapil Saraswat

Manish Mishra

Pranaynehru T

Sushmit Sinha

Vandana Soni

Faculty Advisors

Prof. Chowdari Prasad,

Dean (Planning & Development), TAPMI

Dr. Jaba M. Gupta,

Associate Professor and Chairperson - eGPX, TAPMI

Special Thanks

Prof. Vrishali N Bhat, TAPMI

Prof. Vinod Madhavan, TAPMI

IT Team, TAPMI

Alumni Affairs Committee, TAPMI

Dear Readers,

This edition marks a complete one year journey for

Pratibimb in which it grew by leaps and bounds. We are

thankful to all our readers and participants who helped us in

making Pratibimb an excellent platform for sharing

knowledge. In this short span of one year, Pratibimb has

transformed itself from bi-monthly to monthly e-magazine.

Continuing our endeavor, we are pleased to release

December edition of Pratibimb.

We are thankful to all the students from various colleges

who put in great efforts in writing articles on various issues/

topics and worked hard to send entries for “Beat The

Market” and “Route To Market”. The articles have been

selected by the Editorial Team whereas “Beat The Market”

has been judged by Prof. Vrishali N Bhat and “Route To

Market” has been judged by Prof. Vinod Madhavan. We

thank judges for their precious time.

We also thank all those who helped us in improving

Pratibimb through their feedbacks. We would like to take

this opportunity to extend our gratitude to all faculties and

students at TAPMI for their continued support, guidance,

motivation and inspiration to take Pratibimb to the next

level.

We wish our readers a very happy and prosperous new year

in advance.

Please continue to send in your valuable suggestions /

feedbacks at [email protected] so that we can

make improvements in the coming editions.

Happy Reading!!

Rohit Kumar

mailto:[email protected]


contents

Beyond Traditional Banking ? 7

Prof Chowdari Prasad, Dean (Planning & Development), TAPMI

Inclusive Growth Of The Unorganized Labor Force 10

Suvrodip Banerjee , XLRI Jamshedpur

China's Economy post 2025 16

Shashank Mahale, NMIMS

Fit of Social Media with Existing Marketing Strategies 20

Sangeetha, IIM Bangalore

Infrastructure Financing In India - Exploring Alternatives 25

Ankur Bhardwaj, MDI Gurgaon

Debt Capital Market in India: The Way Ahead 30

Sudip Kar, TAPMI

Role of HR during Recession 34

Rajesh Sridhar, SIIB

Disruptive Innovation: A new era of Crowdsourced Data Analytics! 36

Ayush Malhotra, NMIMS

Mutual Fund Industry 40

Krishnakant, SJMSOM, IIT Bombay


Beyond Traditional Banking ?

Recently, a new prefix to “Banking” interested me

to think on all possible facets of banking in India

and world over. This was ‘Tissue Banking’, a

medical concept, of course. But, in the world of

Commercial Banking, there have been several

newer terms coming in from time to time. While

most of these prefixes have technical meaning and

have attained the world-wide acceptance in the

banking and finance industry¸ some popular terms

have also been floating round – like ‘Any where

banking’, “Any time banking” and also “Any How

Banking”!

When we want to find out the various types of

banks that are operating in India, the picture is

always exhaustive and very big. Beginning with

RBI, which was itself formed as a private entity in

1934, inheriting its functions and role from the

Imperial Bank of India, and was nationalized in

1948, we have a host of banks viz., State Bank

Group (State Bank of India and its five

subsidiaries), 19 Public Sector Banks or

Nationalised Banks (with two rounds of

nationalization in 1969 and 1980), Old and New

Generation Private Banks, Foreign Banks,

Regional Rural Banks, Local Area Banks and

Cooperative Banks operating country-wide for

over a century. In the Indian Financial System,

we have three more types of players to complete

the picture. These are Development Financial

Institutions (like IFCI, SIDBI, EXIM Bank,

NABARD, etc), Non-Banking Financial

Companies (including Lease / Hire Purchase

companies, Chit Funds, Nidhis, Merchant

Bankers, Insurance Companies, Mutual Funds,

etc), and National Small Savings through Post

Offices offering a wide range of products and

services.

Business World (Weekly) issue of October 17,

2011 had, under the heading “In Depth Banking”,

published an interesting article with a caption

“Palm-Top Banking” dealing with Micro-ATMs

to increase the rural coverage. It aroused my

curiosity to literally go in depth to find out more

details about the new facility. Having spent about

three decades in hands-on banking at branches and

administrative units of three leading banks and

teaching the subject for over a decade in two

prominent B-Schools, I have been closely

watching enormous changes during the reforms

era with the advent of technology, my interest has

gone up for more details. In fact, being a rural

banker myself in remote backward areas in

Andhra Pradesh as a Branch Manager of

Agricultural Development Branches of SBI during

by Prof Chowdari Prasad, Dean (Planning & Development), TAPMI


eighties, I have also been researching on the

current buzz words like “Financial Inclusion”,

“Self Help Groups”, “Micro Financing” and

“Business Correspondents and

Facilitators” sometimes feeling jealous

of the current generation banking

fraternity for having modern facilities.

ATMs have almost equaled the

number of bank branches affording

24x7 services to the best satisfaction

of customers of all types in all centers

– metro, urban or rural areas.

Outsourcing is being permitted to be

used by the banks in all sectors for

business development and ensuring

customer satisfaction.

In recent times, electronic banking and

innovative products and services in

banking industry seem to have bridged

the gap between the haves and have-

nots as also the rural and urban

clientele. It was in 1969 when the first

nationalization of fourteen private

sector banks was carried out and

introduction of Lead Bank Scheme and

Priority Sector lending norms were

defined to take the banking services to

the grass roots level with a condition

that the per branch population served

be brought down from the 65,000 to a

challenging level of 15,000, the whole

banking industry was put to the acid

test of branch expansion, recruitment

and training of staff, rendering of

satisfactory customer service with

productivity and profitability began.

After experiencing several troubles

and tribulations during the seventies

and eighties, the industry was blamed

to be ‘inefficient’ and was exposed to

the ‘reforms’ with introduction of

concepts like Prudential Norms, Capital

Adequacy Ratio, Non-Performing Asset

Management, de-regulation of interest rates, Asset

Liability Management, Risk Management,

Benchmark Prime Lending Rate, and so on.

While technology has been playing a very

dominant role in changing the face of banking

industry in India, a whole gamut of new

terminology in banking surfaced which are listed

out in the table below. These comprise of both

traditional and non-traditional banking concepts,

co-existing in the twenty-first century.

(Source: Business World)


The above terminology has been captured from

Business Magazines, News Paper articles, and

search engines like google.com, Wikipedia.com,

etc. Concepts like Unit / Branch Banking,

Central / Commercial / Corporate/ Cooperative /

Developmental / International / Innovative /

Investment / Lombard / Overseas / Personal /

Pigmy / Priority Banking, etc form part of the

traditional banking. Others like Anywhere / Any

Time / Barefoot, Business, Convenience, Core,

Door Step, e-Banking, Internet, Islamic /

Inclusive / Lazy / Mobile / Narrow / Online / Palm

Top / Paper less / Private / Retail / Relationship /

SMS / Tele / Universal / Video / Virtual / Village /

Women’s World Banking etc have emerged in the

post reforms era. And the remaining phrases like

Eco-Friendly, Ethical, Faceless, Girigiri, Green,

Shadow, Sustainable, Transaction have all

emerged in recent times with entirely new

dimensions and call for detailed study by all those

who are deeply in to the field of banking in

modern times.

01.Agricultural 02.Anywhere 03.Any Time 04. Barefoot 05. Branch

06. Business 07. Cooperative 08. Commercial 09.Convenience 10. Core

11. Corporate 12. Central 13.Developmental 14.Door Step 15. e-Banking

16.Eco Friendly 17.Ethical 18.Faceless 19. Girigiri 20. Green

21. Innovative 22. International 23. Internet 24.Investment 25. Islamic

26. Inclusive 27. Lazy Banking 28. Lombard 29. Mobile 30. Narrow

31. Online 32. Overseas 33. Palm Top 34. Paper less 35. Personal

36. Pigmy 37. Priority 38. Private 39.Retail 40. Relationship

41. SMS 42. Shadow 43. Sustainable 44.Tele 45.Transaction

46. Universal 47. Unit 48. Video 49. Virtual 50. Village

51. Wholesale 52. Women’s

World Banking

Table no.1. Many facets of Banking Today


Inclusive Growth of the Unorganized Labor Force

The Unorganized Workforce of India

Productive, sustained and decent employment

opportunities along with welfare of workers is one

major factor on which overall inclusiveness of

growth needs to be judged. An estimated one

million people will enter the Indian workforce

every month for the next 20 years which is already

over 500 million strong currently and majority of

these will be in the unorganized sector.

The unorganized workforce constitutes of 93% of

the total Indian workforce including the

agricultural workers (70% excluding the

agricultural workers) and is generally categorized

into the following segments:

Unpaid family workers

Landless and marginal farmers

Domestic servants working even on part-time

basis with many employers

Self-employed

Full time apprentices in shops, establishments,

assistants to street vendors

Regulated but casual wage workers like

construction workers

Workers engaged on sub contracts

All other casual workers

The increasing population of unorganized labor

force in India could be attributed to the following

reasons:

Shifting recruitment preferences of

industries: Increasing tendency of Indian

and foreign firms operating in India to

employ casual and contract workers in the

name of cost cutting and avoiding Indian

labor regulations and trade unionism among

organized workers.

Jobless Growth: Though investments have

flowed in trillions in the country and GDP

growth has been an average 7% over the last

decade, the rate of blue-collared job creation

in labour intensive industries have not

matched the investments (growth in

employment was about 1.4% from 1999-

2008) . Most of the job creation has been in

the high skilled services sectors. This has led

to decrease in permanent positions in

industries further leading to increased casual

workers and growth in self-employed

population.

Lack of Land reforms: Barring few states,

failure to implement a comprehensive land

reform policy and increased contract

farming have led to increase in landless and

by Suvrodip Banerjee, XLRI Jamshedpur


marginal farmers

Boom in non-traditional sectors like

construction where the workers were

historically unorganized

Large scale migration of rural people to

urban areas due to diminishing incomes

from agriculture

Though they contribute about 50% of India’s

GDP, only 6% of these unorganized workers are

included in the legislated social security schemes

of the country. They earn just about 10% of the

national income. Majority of these unorganized

workers belong to the ultra poor category of the

society who are bereft of the minimum subsistence

income.

Why they need to be made a part of the inclusive

growth process?

Economic capability of an individual is to a very

large extent determined by the status of

employment. Decent Employment and work

conditions not only ensure economic security and

dignity, but also promote general participation in

society and economy, promoting better health and

education not only for the employed but also for

their dependents.

The Directive Principles Of State Policy of the

Indian Constitution (Articles 41 and 42 and Items

23&24 under the List III of Schedule VII) urges

the state to take appropriate steps within its limits

to ensure decent and productive employment and

living opportunities to all Indian citizens, yet the

unorganized labor force of the country remain

largely excluded from the mainstream of

development and progress.

Unorganized workers constitute about 45% of

the total population, and considering their

dependents this figure is close to 70% of the

population. Majority of this population is ultra

or upwardly mobile poor. They constitute

about 90% of India’s poor population.

Including them in the growth process means

solving India’s poverty issues to a great extent

A majority of this unorganized workforce

represent the SC and STs of the country.

Inclusive growth of the unorganized workers

means fighting their non-inclusiveness in the

mainstream

By including this neglected workforce in the

mainstream, the system removes the barriers to

other forms of exclusion like in the field of

health, education, finance not to mention the

social inclusion and providing them with the

dignity of a human being which is denied to

them otherwise

Overall socio economic stability, decreased

crime rates, improved HDI scores are the

direct benefits of this inclusion

Barriers to Inclusion of Unorganized Workers

CAPABILITY DEPRIVATON:

Capability deprivation happens in terms of

inadequate employment, low earnings, low health,

low skills, low education etc.

A vicious circle of poverty engulfs these workers

due to capability deprivation as shown below:

The unemployment rate of India is around 10%


currently while the incidence of poverty is around

40%.This implies that a considerable proportion of

those involved in employment where productivity

is low and hence the remuneration is lower than

the minimum wages. The wages vary in favor of

organized to casual workers, in favor of salaried

(who have a price determined wage) to other wage

employment, in favor of male to female and in

favor of urban to rural areas.

Low remuneration prevents means low skill up-

gradation and low health which further reduces

their productivity.

LACK OF SCHOOL EDUCATION:

Lack of school education definitely adds to the

inadequate skill training. The mean year of

schooling of an Indian is 4.2 as per NSSO. One

third of the 400 plus unorganized workers are

illiterate. The main reasons of dropouts among the

6-17 year age group are financial constraint, lack

of interest of parents and lack of interest on the

part of the children. Public expenditure on

education is just about 4% of GDP, thus making

financial constraint a huge impediment for

education among the poor. Skill enhancement of

these sections through a series of steps is vital for

their inclusiveness.

INADEQUATE AND OUTDATED

TECHNICAL EDUCATION SYSTEM:

The need of an efficient technical and vocational

education system lies in the fact that it imparts

necessary skills to improve employability of

workers and thereby improves their quality of life.

However the bulk of the technical and vocational

institutes are private unaided (ICTs) and almost

47% of the students go to these institutes. The

government aided ITIs are suffering from

structural deficiencies like outdated infrastructure

and curriculum. The ICTs are almost double as

expensive as ITIs (GOI report 2010) and hence

majority of students cannot afford them.

LACK OF FALLBACK MECHANISM IN

CASE OF CONTINGENCY:

To overcome the capability deprivation, these

labor forces should have a support mechanism to

meet contingency situations.

On the state front, most social security benefits

have been directed towards the organized sector

through various social legislations against loss of

income due to unemployment & disability,

maternity, old-age, minimum wages, bonuses and

other employment risks.

Only 6% of the 400 million plus unorganized

workers have access to such benefits. Provident

funds are there for certain casual workers only.

A list of impediments to increasing the reach of

the social security systems among the unorganized

workers are:

a. Identification of Beneficiaries: Legal

obligation to issue identity cards is on the

part of employer/contractor concerned. In

practice however the employers/

contractors do not show all the workers on

their record to avoid recovery of PF

contributions, excise duty & cess. Many

workers are home based and do not have

employer-employee relation and hence

difficult to track. Also many genuine

workers are left out of the system while

many bogus workers gain access to the

benefits through dubious means.

b. Setting the income ceiling: What should

be the income ceiling of providing relief?

In a country where poverty figures vary

considerably across studies, setting a

scientific income ceiling below which the

relief should be provided becomes

complex.

c. Administration and monitoring costs of

such programs are very high.

LACK OF KNOWLEDGE ABOUT

RIGHTS:

Research shows that agencies take advantage of


the ignorance of the uneducated workforce about

their rights. In a recent incident a contractor for a

FMCG MNC kept casual workers out of ESIC

benefits citing the excuse that ESIC is applicable

to only graduates. Strangely, even the MNC did

not take any action against the contractor though it

knew of its unscrupulous practices.

LACK OF TRADE UNIONS TO GUIDE:

TUs are often criticized for their policies and

practices. But the unorganized workers in the

absence of TUs, have nobody to guide them on

their rights and fight for them. The TUs have

avoided the unorganized sector due to the

migratory nature of the workforce, lack of

enthusiasm among the workforce itself and lack of

will on part of leadership

LACK OF ADMINSITRATIVE WILL

POWER:

As is the case with most of India’s failure stories,

an in-efficient and corrupt bureaucracy has been

unable to draft a comprehensive plan for the

upliftment of unorganized workers. It is only in

the eleventh five year plan that a proper focus has

been on these sector.

Lack of monitoring mechanism means funds

meant for various schemes like NREGS gets

diverted, workers have to bribe officials in order to

get their rightful wages and the list is long.

Overcoming the Barriers

Inclusive growth of the large part of country’s

labor force should stress on equality of

opportunity in terms of access to markets,

resources and unbiased regulatory environment for

business individuals. India needs to focus on areas

like opportunity creation, education, social

security, administrative reforms, including the

private sector and innovation in order to conceive

inclusive growth for the unorganized workforce.

Education

Education plays an important role in

unemployment and under employment. So there

should be an equal focus on school education and

technical education.

For School education, the Kothari Commission set

up in 1966 suggested at least 6% of the national

income to be allocated for the purpose. However

the last budget allocated Rs 52057 crore which is

just 0.58 % of the GDP of 2010-2011 pegged at

Rs8980, 860 crore for primary, secondary and

tertiary education. Even after including the

contribution from the states, the best of optimists

cannot take these figures to more than 4% of the

GDP (US $ 80 billion in PPP terms). Compared to

US (US $ 815 billion) and China (US $ 138

billion) our budget for education is abysmal and

the per capita allocation for reaping the benefits of

our demographic dividend stands at as low as

Rs6531/year. The increase in allocations for Right

To Education by 40% is also very less according

to experts. In order to improve our K-12 education

system on which 60% of our children depend, the

system needs immediate reforms including

increased budget allocation, setting up of village

level monitoring committees consisting of local

leaders and parents with clear role setting for the

committees, monitoring mechanisms on teacher

absenteeism through ICT and incentives for

teachers for better performance.

For improving the technical and vocational

training the GOI upgraded 500 ITIs with domestic

and World Bank help and set up new centers

through Public-Private partnership under the

National Skill Development Mission 2007. The

following can increase the quality and quantity of

vocational training:

Increasing the intake capacity of the ITIs

Revision of the existing system from supply

based to demand based

Stricter governance monitoring through setting

up of various bodies and committees.

Developing competency based modular


Vocational courses of varying durations.

Provision of joint responsibility of institute

and industry for making a person employable.

Orientation programs for trainees in industries

Increasing employment opportunity

NREGA is one of the best examples of how

opportunities can be created at the grass root level.

Though suffering from various structural

drawbacks, the scheme has been able to generate

productive employment for the rural people thus

increasing wage rates and building sustainable

rural infrastructure. However there is need to

streamline the scheme using Information and

Communication Technology, increase funding,

removing corruption by giving more power to the

Gram Panchayats and extending the scheme

among urban poor too. A system of performance

appraisal for each village using checklists should

be implemented to monitor the program. The

differential wage rates for men and women should

be done away with as it violates the constitutional

idea of “Equal Pay for Equal Work”. NGOs must

create awareness and monitor progress through

Social Auditing, Work Measurement, Muster Roll

Checking, and Work Organization.

For more employment generation labour intensive

and high employment elasticity sectors should be

promoted and re-skilling of retrenched workers for

redeployment undertaken.

The minimum wages fixed by states should be

price adjusted like the organize sector.

There should be focus on self employed through

access to credit and involving the private sector in

the process. Bosch, for example helps self

employed rural artisans by providing them with

power tools at easy finance and training them to

put to use the tools. Vivo, Brazil’s largest telecom

provider, helps individual fishermen to thrive by

providing free 3G enabled phones and service at

minimum rates with real time information on

weather, high catchment areas in the sea and

information on prices in local markets. Hence

private sector has to play a key role in increasing

employment opportunities for unorganized

workers.

The agriculture should be regenerated through

increased investments and the second green

revolution should be extended to other states as

well.

Social Security

Labor reform is necessary in India. Organizations

should have more flexibility to hire and fire, the

percentage of casual/contract workforce is

definitely going to go up. But alongside the social

security cover must be extended to the

unorganized workers on a priority basis. The

Unorganized Sector Social Security Act 2008 has

been enacted but not enforced yet. The income

ceiling has not been defined in the act and there is

confusion regarding whether the scheme should be

contribution scheme or benefit scheme.

For the unorganized sector a benefit defined

scheme would be more desirable. Here the

benefits are first determined, then costs and finally

the contributions required. The contributions are

collected via a cess on organizations. This cess,

prevents increasing the reach of the social

security. In future the contributions should be

from government (some states have already started

this) and from employees too.

In order to determine the target beneficiaries of the

programs NCEUS recommends distributing smart

cards to all unorganized workers after a detailed

home to home survey based on an income ceiling

(may be the nationally accepted BPL ceiling). The

surveys need to be carried out by Self-help Groups

in collaboration with local authorities. This has to

be done in phased manner. Spot verification of

unorganized worker status need to be done along

with consultation of the local SHGs who would

collect information about the person and through

employers/contractors.

The administration of the social security systems

should be on a federal structure with center


providing the umbrella legislation and states

building on it and implementing it through local

bodies.

There should be strict penalty clauses for violation

of rules.

Organizing the unorganized

In order to prevent exploitation of the unorganized

workers, in order to make the aware of their rights

and in order to bring them within the ambit of

inclusion, the role of organizing them into trade

unions is vital. The trade unions need to be

pragmatic in the sense that they should understand

labor reforms are inevitable, that industries need

more flexibility in terms of hiring and firing and

hence their focus should be on making sure that

the unorganized workforce, the contract and casual

workers are provided with social security,decent

work conditions , scope of improving their skill

sets and more opportunities. The TU leadership

should change their strategy to make sure

unorganized workers are represented and focus

more on plugging the loop-holes in the

implementation of the schemes rather than

opposing reforms in an archaic system.

Conclusion

The degree and pace of inclusiveness of the

unorganized workers would to a large extent

determine the rate at which India can reduce her

dismal poverty levels, meet her Millenium

Development Goals and improve her HDI scores.

This is a mammoth task and needs prudent

planning, faster decision making and flawless

execution. The private sector has a huge part to

play in the process and reluctance to act may lead

to more situations like the strike in Maruti. The

middle class and intelligentsia has a big role to

play too in order to ensure that the government

acts fast and competently. Failure to include our

400 million plus unorganized workforce in the

mainstream of development will mean destroying

the balance of our socio-economic-political

structure and may lead to India turning into a

failed state.

.

References

P.Goel,Vijay, Technical and Vocational

Education and Training System In India for

Sustainable Development

National Rural Employment Guarantee

Scheme and factors contributing to the success

and failure n implementation., http://

www.napsipag.org/pdf/NEENA.pdf

Education in India, http://

www.worldbank.org.in/WBSITE/

EXTERNAL/COUNTRIES/

SOUTHASIAEXT/

INDIAEXTN/0,,contentMDK:21493265~page

PK:141137~piPK:141127~theSitePK:295584,

00.html

Dilip Thakore, Union Budget 2011-12 - Mr.

Bumble Mukherjee’s grudging provision for

public education, educationworldonline.net,

April 2011, http://educationworldonline.net/

index.php/page-article-choice-more-id-2650

http://www.worldbank.org.in/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/INDIAEXTN/0,,contentMDK:21493265~pagePK:141137~piPK:141127~theSitePK:295584,00.html







http://educationworldonline.net/index.php/page-article-choice-more-id-2650

http://educationworldonline.net/index.php/page-article-choice-more-id-2650


“It doesn't matter if a cat is black or white, so

long as it catches mice.”

- Deng Xiaoping

While most of China was walking the path of

communism shown to them by their charismatic

leader Chairman Mao Zedong, another prominent

figure in the Communist Party of China (CPC) –

Deng Xiaoping had a

different vision on the means

to achieve progress in China.

It was with this in mind that

he quoted the above phrase,

which implied that it did not

make a difference whether

the policy was socialist or

capitalist so long as it brought

about economic development

for the nation. Although

Deng harbored these views

before the Cultural

Revolution, he put them into

action in the year 1978, which

heralded a new wave of reforms – mainly

economic reforms – in China. The first phase of

the reforms (late 1970s to early 1980s)

concentrated on agriculture, foreign investment

and entrepreneurship, while the second phase (late

1980s to early 1990s) focused on privatization and

creating a level playing ground for all the players

in the economy. This led to a rapid growth of the

economy which was stagnated in the erstwhile

socialistic setup.

While the GDP grew at a sustained rate of around

9.5 per cent from 1978 to 2009, the per capita

GDP grew at a similar pace as the population

growth was tightly controlled by the ‘one-child’

policy in China. The graph in Chart 1 shows the

trends in the growth of these three factors.

This unprecedented growth, fuelled mainly by

exports, has placed China in the spotlight in the

international economic order, which faces major

uncertainties given the condition of the largest

economies in the world, the United States of

America, and more so of the nature of its debt.

Much of this debt is owned by China, the second

largest economy as of today, making its future as

uncertain as that of the US. Hence, it is interesting

China’s Economy Post 2025

by Shashank Mahale, NMIMS

Chart 1: Comparative analysis of growth in GDP, population and per

capita GDP


to investigate the future of the Chinese economy

and the factors that could impact it the most. For

this purpose, a PEST analysis of the Chinese

economy in 2025 has been described in this

article. Since these aspects (Political, Economic,

Social and Technological) are interrelated, the

PEST analysis has been carried out by assessing

the impacts of two of the most dominant

phenomena that are occurring or expected to occur

in China by 2025.

1. Increase in the GDP per capita

The tremendous pace of growth in China has

caused the per-capita GDP to shoot up from as low

as USD 155 in 1978 to USD 3744 in 2009. The

intensity of this increase can be appreciated by

looking at the graph of GDP per capita over the

years (Chart 1). While this increase has caused the

standard of living of the Chinese populace to

increase manifold, it has also reduced the

competitiveness of China’s exports. This is

because the main factor which led to China

becoming a hub for carrying out standardized

processes such as manufacturing is the relative

difference in wages of the Chinese workers to that

of the workers in the developed countries. This

activity known as ‘wage arbitrage’ is successful

only as long as the cost of production (including

the risk of operating in a foreign country) and

transportation of the goods to the markets is lesser

than producing the same goods in the home

country. Once a country moves from being a low-

income economy to a mid-income economy, the

possibilities of a wage arbitrage disappear and

companies find it more profitable to move out of

the economy and operate elsewhere.

Economic impact: China, which is a

manufacturing hub, faces this problem due to a

sharp increase in the wages of its workers. While

some companies have already shifted bases from

China to other low-wage countries including India,

Vietnam and the Philippines, this is expected to

increase in the future when China completely

transitions to being a mid-income economy. This

would result in many of the workers in the export-

oriented industries being unemployed.

Social impact: The workers thus made

unemployed would resort either to illegal activities

to sustain their lives or protest for a dole to be

meted out to them. In either of the scenarios, the

government would be hard-pressed to control the

problems caused. The government may try to curb

unemployment by employing the labor force for

infrastructure development of the nation, but even

this is more of a band-aid solution than a

permanent fix.

Political impact: An increase in the need for

social security would have the Chinese

government face more ‘incidents’ (read protests),

asking for more involvement of the people in the

decision-making process i.e. a democratic form of

government. Thus the repressed economy which

has hitherto been kept satisfied through a fast

growing economy would be more difficult to be

appeased when the growth slows down.

Technological impact: A fall in the

competitiveness for wage arbitrage means that

China (or any other economy with a similar

model) would have to provide more value for the

price it quotes for its products and services. This

can only be achieved if the economy upgrades the

quality of its products and services, through

innovation. Thus, with an increasing per capita

GDP, China will be moving towards innovations

in products and processes to improve its

competitiveness.

2. Ageing population

After the implementation of the one child policy in

China, the population growth was drastically

reduced. By this measure, the job of the

government to provide better living conditions for

its populace was made much easier. This was due

to the fact that in its early days, China had scarcity

of funds to be used for providing healthcare,

education and infrastructure to the people and a

rapidly growing population could have easily


overburdened the reserves.

This move led to changes in the demographic

structure where consumption fell sharply due to a

decrease in the dependent population and the

economy had an investment-led growth due to the

move towards savings. But as the economy

matures, the number of people in the later stage in

their lives increases and the consumption goes up

giving rise to a consumption-led growth for the

economy. This growth is sustainable only as long

as there are young people in the economy who are

able and willing to work. But with a one-child

policy, this will be difficult as the population

matures at an accelerated rate. This phenomenon

can be seen through the age-pyramids shown in

Chart 2.

Economic impact: The rise in the number of

dependents strains the economy as there are

increasingly fewer working age people to support

them. This is also known as the "four-two-one"

problem; which means that with a one child

policy, when the child comes of age, he or she has

to support two parents and four grandparents.

Thus, if the state welfare system fails and children

are unable to care for their elders, then these

generations would face extreme hardships to

sustain their lives.

Social impact: With the one-child policy, the

parents are more inclined to have a male child who

would support them in their old age. This concept

is similar to what we see in India, where there is a

rule in place against determining the sex of an

unborn child. This is done to avoid the cases of

female foeticide which were rampant in India. But

in China, sex determination is still not banned and

hence, the female foeticide still takes place. This

has already led to a badly skewed gender ratio,

which is worsening by the minute.

Political impact: The one-child policy is strictly

enforced by the government in China. This is seen

by many as a repressive measure, which

encroaches on the human rights of the citizens of a

country. If the social tensions caused as an

outcome of this policy evoke such feelings in the

populace of China, they may protest against the

government to remove this policy. The

government may find it difficult to deal with such

protests and may resort to violence to crack down

on the protesters, leading to further discontent

among the people. This would lead to a vicious

circle where the discontent among the people is

aggravated by the repressive regime.

Another issue is that on an ageing population

which would need more social security entailing

more government spending. For the government,

Chart 2: Age-pyramids of the population of China through the years


making such lasting provisions for social security,

in the world of an increasing life expectancy

(shown by a death rate lower than the birth rate –

in Chart 3 – and increasing medical innovations),

would mean a large and sustained investment,

which it may not be in a position to bear. This

would lead to protests from the older section of

society, which would form a large part (around 20

percent) of the total population by 2025.

Technological impact: Since there are more

elderly people in the Chinese economy post-2025,

there will be an increased need for healthcare

facilities. Also, there have been many outbreaks of

infectious diseases in China, such as the outbreak

of SARS and Bird-Flu. To cater to these needs

there will be a host of innovations taking place in

the area of medicines by the Chinese.

Conclusion

The biggest problems faced by China in the years

to come would be due to the changes in its

demography, which would be counterproductive

to its present core competence of manpower. This

will herald a new era in the social and political

structure of the nation.

Thus it can be said that although China, by 2025

will be a powerhouse in terms of the GDP, given

its rapid growth, it will face such tough challenges

that will not only be difficult for the government

to resolve, but some that would put to test the very

basis on which the government operates and the

economy is flourishing.

References

World Bank data

Ray Medeiros, Corporations Are

Moving Out Of China To Even Lower

Wage Countries, politicususa.com, May

2011, http://www.politicususa.com/

en/china-move-out

Human Development – Demography,

http://www.china-europe-usa.com/

level_4_data/hum/011_7a.htm

Chart 3: Trends in birth and death rates

http://www.politicususa.com/en/china-move-out

http://www.politicususa.com/en/china-move-out

http://www.china-europe-usa.com/level_4_data/hum/011_7a.htm

http://www.china-europe-usa.com/level_4_data/hum/011_7a.htm


Social Media Marketing is becoming one of the

most effective means of marketing. A lot of

companies and products leverage Social Media,

especially Small and Medium businesses to enable

them to compete at equal footing with the sector

majors. Usually B2C companies use social media

marketing. Consumers use social media to get the

information, feedback and opinion of different

people before buying a product.

360BuzzAds Pvt. Ltd. claims to be the first

integrated Social Media Marketing engine which

helps businesses monetize Social Media by

growing their online user engagement. Mr.

Subramanya R Jois, CEO of 360BuzzAds Pvt.

Ltd. says that the number of people visiting the

Forum mall in Bangalore has increased from

40,000 to 60,000 on an average during the

weekdays after the usage of social media

marketing.

Benefits to companies using social media

Used to build Viral communities across

Social Networks, reducing cost and time to

Market

Availability of Facebook on mobiles has

enabled companies to reach customers more

easily

Companies can receive the qualitative

feedback from users easily

They can also leverage it to promote their

products and convey any offers/discounts

Cons of using social media

There are chances of customers of another

product giving some negative comments or

opinion about the product. That would have

a very bad impact. So the companies should

keep track of the negative feedback and

should take action

Resources should be allocated to keep track

of the post and reply to the users queries

Social Media: the game changer

Social media has provided, both existing and

prospective customers, a channel to voice their

opinion in much more powerful way than ever.

Any company trying to ignore it would risk losing

market share and reputation in long run. Earlier,

relation between a company and its customers

were either:

One to Many: With companies having the

higher ‘preaching’ ground and unidirectional

communication through various advertising

mediums.

Fit of Social Media with Existing

Marketing Strategies

by Sangeetha, IIM Bangalore


One to One: Mainly while

addressing customers’ complaints,

occasionally during promotional events.

However, now with advent of social media

bandwagon companies need to realize and

treat social media channels as a very

important complimentary channel to their

existing marketing channels, which unlike

others enable two way communications

and hence, often perceived as a threat

by many marketers who now need to be

answerable and more responsible in

terms of their strategies as the

communication has now turned to

become Many to Many.

Many to Many: In fact, as the

following figure shows that since the

world wide web has equipped

customers’ with the tools and abilities

to interact with each other, irrespective

of geographical boundaries, companies

have been forced to use the same

channels to engage with the customers in a

bi-directional communication, initially only

to minimize the damage but now to

maximize their value proposition delivery.

Reasons for using Social Media Marketing

Mary J. Culnan et al, (2010) have discussed on

how firms should use social media to interact with

customers and how their use varies by industry.

They also stated that in order to gain benefit from

social media, firms need to develop

implementation strategies based on three elements:

mindful adoption, community building, and

absorptive capacity.

The reasons for using Facebook by companies of

Source : 360Buzz Ads.com


various sectors identified by 360BuzzAds are for

Branding/awareness, Engagement, Transaction,

Loyalty and Recruitment purpose.

Branding/ Awareness

FMCG companies extensively leverage digital

marketing for brand awareness. They have

different pages for the different products they

offer. Information on promotions, gifts and

greetings are updated frequently. Videos, pictures

and Store locator facility of the product are shared

in their page. Loyal users of the brand create

communities which help in viral marketing.

Engagement

Few brand pages look beyond brand awareness.

They engage with the customers by conducting

surveys, quizzes and polls to find the expectations

from the customers. Some of them also reward the

users for these events. They appoint a person to

answer all the queries of the user which can

happen through text or video chat. For example in

Apollo hospital Facebook page people used to

query the availability of the doctors. This brings

an attachment and satisfaction of the customer

towards the product/service.

Social Commerce/Transaction

Companies also use Facebook for the transaction

purpose. Customers can buy the goods directly

from the link provided in Facebook. The

transaction will take them to the payment gateway

where they can pay for the product. This is very

mostly used by the retail companies. Sometimes

exclusive discounts are

offered for Facebook

customers. There are few

products that cannot be sold

online via Facebook like

baby foods and

supplements, medicines and

liquor due to the regulatory

norms. So the companies

selling these products can

only use Facebook for

awareness and not for

transaction.

Loyalty

Companies were found to encourage loyalty

amongst their existing customers or signalling

benefits amongst potential customers by giving

special discount, some meant for Facebook users

only, on the basis of number of purchase and for

inviting their friends to join the page. To further

reward loyal behaviour and continuous following

some companies maintain leader boards, with

leaders determined through their contribution to

discussions and participation in contests, etc.

Recruitment

Now companies have started uploading the job

notifications on the Facebook page. People also

use this medium to enquire about the job

requirements and vacancy. Summer interns and

new hires query about their joining date and

posting location.

Tools used by companies to analyse the inputs

from Social Media

Twitter Sentiments

Tools like Twitter Sentiment are used to find the

positive and negative sentiment of people

commenting on a particular topic in Twitter. This

will help companies to track the negative

sentiments and work on it to resolve it.

Twitter Sentiment for Apollo


Social Mention

Social Mention is another website that provides

statistics related to use of a keyword on various

social media platforms, similar to ‘Google Alerts’

but more focused. A snapshot of the website is

shown below with the search term ‘Apollo’ and

associated statistics on various social media

platforms:

Social Mention for search on Apollo

Conclusion

On one hand Social media (specifically Facebook)

provides great opportunity for Small and Medium

businesses primarily to increase their reach, on

other hand it could be perilous too if not properly

managed. Establishing presence on Social media

and announcing its products would not only

suffice for a company but it would also have

continuously monitor the on-going dialogue

between its existing and potential customers. This

could also improve companies’ perception in

terms of customer service, garnering positive

mentions and corresponding network effects

through the social networks of a customer.

To conclude a check-list of Do’s and Don’ts,

especially useful for budding companies trying to

gain foothold but equally valid for established

ones:

Do’s

Define your target customer segment and

develop a communication strategy with

proper tones

Develop a style of interaction matching the

brand personality one wants to project

Define level of moderation

Use all the possible & relevant applications

available as each can enhance or affect one

of the five parameters discussed earlier

Try to create apps/games specific to your

brand/product, increasing their attractiveness

Focus on loyalty building measures, a part

often neglected by many

Keep the sales pitch subtle with more

emphasis on ‘Engagement’ to influence

customers purchasing decisions

Don’ts

Use Social media for corporate

communication purposes – it is not the right

platform to find and address relevant

audience, and it will alienate the end

customers who usually doesn’t have an

interest in this


Forget to regularly update the content and

come up with ideas to keep customers

engaged with your brand/product

Try to thwart a dissenting customer by

engaging in a duel of words or trying to

discredit/malign his or her image as this

could disenchant other users from actively

participating due to fear of similar actions

Use same page to communicate about

different product segments with possibly

different customer segments; create separate

product pages in such cases rather than one

single brand page

Varying the aim of communication with

different Social media channels which is

perceived differently and cause a scattered

brand image projection

References

http://web.ebscohost.com/ehost/pdfviewer/

pdfviewer?sid=c979e4c8-104e-4a44-985d-

200e26cff18c%

40sessionmgr15&vid=2&hid=17,

DOLLARS, SENSE AND SOCIAL MEDIA

MARKETING

http://web.ebscohost.com/ehost/detail?

sid=f2af76b9-2bf1-4a74-b03b-

215818b09820%

40sessionmgr14&vid=1&hid=17&bdata=Jn

NpdGU9ZWhvc3QtbGl2ZQ%3d%

3d#db=bth&AN=58657254, HOW LARGE

U.S. COMPANIES CAN USE TWITTER

AND OTHER SOCIAL MEDIA TO GAIN

BUSINESS VALUE.

Beat the Market

As Jim Cramer, a former hedge fund manager, and a best-selling author put it, “As long as

you enjoy investing, you'll be willing to do the homework and stay in the game… I mean I'm

not smarter than the market, but I can recognize a good tape and a bad tape. I recognize

when it's right and when it's wrong and that's what my strength is.”

Stock markets have never been predictable, you may apply the best of logic and reasoning, but there could be a

possibility that you may falter if the emotions of the investors take control.

Beat the Market is a game designed to prove your mettle in stock market analysis. This time onwards, we will

provide you the name of one listed company from NSE. You need to analyze stock movements of this company till

18th Dec, 2011. On the basis of fundamental and technical analysis you need to give us your share price estimate of

this stock as on 30th Dec, 2011. Fundamental & Technical analysis will carry 70% weight while 30 % weight will be

given to Accuracy of the estimated prices in the final score.

The winning entry will receive a letter of appreciation and prize money of Rs. 1000 /-

Rules:

Company to be analyzed is Pantaloon Retail (India) Limited

You may analyze in a team of not more than 2 members

The file should not be more than 7 pages long including cover page, the cover page should contain the team

name, team members name, Institute name, contact number

File name should be BTM_<TEAM_NAME>_<INSTITUTE_NAME>

Upload entries at http://www.tapmi.edu.in/student-life/pratibimb/participants-submission by 8:59 am, 18th

Dec, 2011

The winning entry of ‘Beat the Market’, November 2011 edition will be declared on dare2compete.com.

The entries of this contest have been judged by Prof. Vrishali N Bhat, TAPMI.

http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=c979e4c8-104e-4a44-985d-200e26cff18c%40sessionmgr15&vid=2&hid=17




http://web.ebscohost.com/ehost/detail?sid=f2af76b9-2bf1-4a74-b03b-215818b09820%40sessionmgr14&vid=1&hid=17&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&AN=58657254






http://www.tapmi.edu.in/student-life/pratibimb/participants-submission






Infrastructure is the backbone of economic activity

in any country, but unfortunately, India suffers

from Osteoporosis in this. Time and again various

policy measures have been taken to boost

infrastructure, but no major progress has taken

place barring on telecom infrastructure front. To

fuel India’s ambitious growth rate and meet distant

targets, a major restructuring is required on

governance, legal, administrative and financial

front. According to Global Competitiveness

Report (GCR) 2009-10, India ranks very low at 76

in infrastructure domain. Also India spends only

about 6-7% of its GDP on infrastructure.

Finance is one of the most basic requirements for

carrying out infrastructure projects, which are

capital intensive and are in high risk domains. The

low levels of public investment have made India’s

physical infrastructure incompatible with large

increase in growth. Any further growth will be

moderate without adequate investment in social,

urban and physical infrastructure.

In 11th 5 year plan, 30% of total infra investment is

expected to be from private sector & 48.1% of

total infra investment is expected to be from Debt

sources. This emphasizes the need for availability

of cheap and easy finance options for private

sector.

Percentage Contribution in projected

investment in 11th 5-Yr Plan

Source: 11th 5 year plan document, planning

commission

Challenges in Infra Financing

There a lot of hindrances in achieving easy

financing for infra projects in India

Savings not channelized – Although India’s

saving rate may be as high as 37%, but

almost one-third of savings are in physical

assets. Also financial savings are not

properly channelized towards infra due to

lack of long term savings in form of pension

and insurance.

Regulated Earnings – Earnings from

projects like power and toll (annuity) may be

regulated leading to limited lucrative options

for private sector and difficulty for lenders.

Infrastructure Financing in India

Exploring Alternatives

by Ankur Bhardwaj, MDI Gurgaon


Also any increase in input cost over the

operational life is very difficult to pass on to

customers due to political pressures.

Asset-Liability Mismatch – Most of the

banks face this issue due to long term nature

of infra loans and short term nature of

deposits.

Limited Budgetary Resources – With

widening fiscal deficit and passing of FRBM

act, government has limited resources left to

meet the gap in infra financing. Rest of

funds have to be met by equity / debt

financing from private parties and PSUs.

Underdeveloped Debt Markets - Indian

debt market is largely comprised of

Government securities, short term and long

term bank papers and corporate bonds. The

government securities are the largest market

and it has expanded to a great amount since

1991. However, the policymakers face many

challenges in terms of development of debt

markets like

• Effective market mechanism

• Robust trading platform

• Simple listing norms of corporate

bonds

• Development of market for debt

securitization

Risk Concentration – In India, many

lenders have reached their exposure limits

for sector lending and lending to single

borrower (15% of capital funds). This

mandates need for better risk diversification

and distribution

Regulatory Constraints – There are lot of

exposure norms on pension funds, insurance

funds and PF funds while investing in

infrastructure sector in form of debt or

equity. Their traditional preference is to

invest in public sector of government

securities.

Exploring Alternatives

To overcome these challenges and find a way for

easy availability of funds for infra finance, we can

explore following alternatives:

Developing domestic bond market, Credit

Default Swaps & derivatives

India receives substantial amount of FII

investment in debt instruments. But most of this

investment is concentrated in government

securities and corporate bonds

FII investment limit in infrastructure bonds has

been increased from USD 5 billion to USD 25

billion. However investments of only USD 109

million materialized till August, 2011. This deficit

in target investment levels need to be reduced.

Just like a well-developed equity market, India

needs efficient bond market so that long term debt

instruments are available for infrastructure.

Currently FIIs can trade Infra bonds only among

themselves. Also if credit derivatives are allowed,

then FIIs will be encouraged to invest more in

these infrastructure bonds due to the presence of

credit insurance and better management of credit

risk. RBI is in the process of introducing CDS on

corporate bonds and unlisted rated infrastructure

bonds by Oct 24 2011. However much progress is

sought is this domain like minimizing multiplicity

of regulators, removing TDS on corporate bonds,

stamp duty uniformity, etc.

Priority sector status to Infra

Hitherto, infrastructure financing doesn’t come


under the ambit of priority sector like agriculture,

small scale industries, education etc. For every Rs

100 lent to non priority sectors, banks have to lend

Rs 140 to priority sectors. Giving priority status

will help banks to lend more to this sector.

Take out financing and loan buyouts

One major problem faced by banks while

disbursing loans to infrastructure projects is the

asset liability mismatch inherent with these

projects. Therefore many such projects are denied

financing by banks.

One way out from this predicament will be the

taking over of loans by institutions like IDFC after

the medium term. This will allow banks to finance

these projects for a medium term by sharing some

of the risks with institutions like IDFC. This

reduced risk exposure will allow banks to increase

their financing of infrastructure projects.

Rationalizing the cap on institutional

investors

Rationalizing the cap on investment in infra bonds

by institutional investors like pension funds, PF

funds and life insurance companies will lead to

more investment in this sector. Currently

insurance companies face a cap of 10% of their

investible funds for infra sector.

Tax free infrastructure bonds by banks

Currently only NBFCs can float tax free

infrastructure bonds. If banks are also allowed to

float these bonds, they can raise long-term

resources for infrastructure projects, thus reducing

the asset liability mismatch.

Fiscal Recommendations

The following fiscal policy medications can allow

more funding of infrastructure projects.

Reducing withholding tax

Currently foreign investors pay withholding tax as

high as 20% depending on the kind of tax treaty.

It increases borrowing cost as the current market

practice is to gross up the withholding tax. So this

recommendation would reduce the borrowing

cost.

Tax treatment on unlisted equity shares

Unlisted equity shares attract larger capital gains

tax than listed ones. Currently capital gains on

unlisted equity shares are taxed at 20% instead of

10% for listed equity shares. Most private players

in the infrastructure sector are not able to raise

capital through public issues. Therefore for these

players unlisted equity will be their dominant

source of equity capital. Therefore they are

adversely affected because of the tax treatment

meted out to unlisted equity shares. Hence special

consideration should be given to private players in

the infrastructure sector to encourage investments.

Foreign borrowings

With respect to foreign borrowings, several

options are there like increasing the cap rate for

longer tenure loans, relaxing refinancing criteria

for existing ECBs/FCCBs; allow Indian banks for

credit enhance ECBs (which is currently allowed

only for foreign banks), etc.


Utilizing foreign exchange reserves

India’s foreign exchange reserves stand at USD

311.5 bn (Sep 2011).

These reserves are primarily meant to provide a

buffer against adverse external developments. But

they do not add value to any real sector as they are

invested in foreign currency assets such as

government bonds. So, the returns on these

reserves are quite small.

The Deepak Parekh committee on infra financing

is also in favour of allocating a small fraction of

total reserves for infra purpose. This method of

funding is already being used in some Asian

countries like Singapore. After accounting for

liquidity purposes, external shocks, high rate of

domestic monetary expansion & real risks of

disruptive reversals of capital flows; some of

funds can be used for infra.

Future cash flows as tangible security

The loans given to infrastructure project

consortiums by banks are not secured & fall under

the unsecured loans asset class for banks.

Currently RBI mandates that provisioning of such

unsecured loans is kept at 15% (additional 10%

for sub standard unsecured loans). Therefore total

amount of loans to infrastructure projects are

constrained because of the sub standard unsecured

nature of these loans.

The primary source of repayment of these loans is

the future cash flows accrued from the project

once they are completed and ready for public use.

These cash flows can act as a security under

certain conditions and debt covenants. For

instance in case of road/highway development

projects, RBI passed an order that a) annuities

under build-operate-transfer (BOT) model and b)

toll collection rights where there are provisions to

compensate the project sponsor if a certain level of

traffic is not achieved, be treated as tangible

securities..

References

The Global Competitiveness Report, 2009-

10, World Economic Forum

RBI Staff Studies – Infrastructure financing

– global pattern and Indian experience

Deepak Parekh Report on Infra Financing

DNB Research – BFSI Sector – Regulatory

& Policy environment

Sebi revises bidding norms for FIIs in infra

bonds, economictimes.indiatimes.com,

September 2011, http://

articles.economictimes.indiatimes.com/

2011-09-30/news/30228797_1_investment-

limit-fiis-bidding-norms

RBI- Guidelines on Credit Default Swaps

(CDS) for Corporate Bonds

Deepak Parekh Report on Infra Financing

RBI Weekly Statistical Supplement


Mr. Mitesh Thacker (PGDM 1997-1999)

Alumnus of the Month – December 2011

The Alumni Affairs Committee (AAC) is pleased to announce Mr. Mitesh Thacker (PGDM 1997-

1999) as the Alumnus of the Month (AoM) for December 2011.

Mr. Mitesh is a stock market professional with

expertise in the field of Technical research. He is

the Chief- Trading Strategies and Mentor at

www.miteshthacker.com. It was his love for

numbers that drew him to stock markets and in

particular technical research.

Mr. Mitesh gained quick recognition in the field of

technical research while working with some of the

best stock broking establishments like Kotak

Securities / Edelweiss etc. He has been regularly

invited by TV channels and business publications to

share his trading outlook on stocks and indices. He

is currently associated with ET - NOW the leading

English news channel (of the Times of India /

Economic Times group) where he shares his

insights and trading strategies every day at the

opening and closing hours of stock markets.

Mr. Mitesh is now venturing in the field of

Algorithmic (mechanical / software / signal driven)

trading, which he believes would be the next trigger

on capital markets. He is delighted that fellow TAPMIAN / batch mate and close friend Harsh Kumar is

working alongside him on this project.

His memories of TAPMI include wonderful friends, the super active hostel life and learning ‘how the

speed of working can be inversely proportional to the time for deadlines.’ On a personal front, he loves

to read / collect old currency and spend time with his kids.

by Alumni Affairs Committee

http://www.miteshthacker.com


Introduction

The Indian financial system is now at the

threshold of a new era with massive changes

beckoning in its awake. The liberalisation and

policy change programme which started back in

the early 1990’s have almost successfully played

its part in converting once a closed economy into a

financial behemoth. Quite obviously, the capital

market in the country has played its role in this

regard. The two important pillars of the Indian

capital market are-the equity market and bond

market. While the equity market has expanded in

leaps and bounds, the bond market in India has

lagged considerably. Boasting one of the largest

debt capital market in Asia with market

capitalization of 711.1 billion of US dollars, there

are still lots of structural defects that we encounter

as we delve deeper into this market.

The debt market in India has almost always been

overlooked by the policy makers and the corporate

in terms of strengthening its infrastructure and

regulatory policies. Although there had been

various examples of how a well developed debt

market can help an economy stay afloat during

severe economic crisis (Asian financial crisis,

1997), the policymakers in India seem to be

lackadaisical in understanding and implementing

the same. One of the most important committee

report in this regard, “The Patil Committee

Report” has made many important

recommendations of which many had been

implemented, while many still remains to be

enacted upon.

The Debt Capital Market- Current

Scenario

The bond market in India is typically classified

into three categories viz. the government, the

corporate and the financial. Of these three the

government bond market constitutes 85% of total

DCM followed by the financial (10%) and

corporate market (5%). The issuers of these

securities are mostly the central and state

government, government agencies, corporate and

private sector banks. The investors mostly consist

of RBI, banks, individuals, PFs and MFs with the

whole system coming under the purview of SEBI,

RBI and the Ministry of Corporate affairs. The

government bond market, at present is quite

established and has almost reached its point of

critical mass. However the most under-developed

part remains the corporate debt market, where

even more than 95% of the debt being issued

today, are in the form of private placements. Also

the non-uniform stamp duty prices and long

gestation periods to bring the bond issuances into

the market remain other deterrent factors which

Debt Capital Market in India The Way Ahead

by Sudip Kar, TAPMI


have retarded the growth in this sector.

According to one study in this field, *2[it has been

estimated that in India, financial liberalization

remains one of the most important control

variable, driving approximately 70% of the growth

in the debt capital market. Economic development

and demographics contribute the other 20% and

10% respectively.] Going forward we do not

foresee a huge deviation from

this given data, provided the

fact that the country still

remains an emerging

economy, where much remains

to be acted and done upon with

regards to financial

liberalization and economic

development. Among the

mature economies, it is the

aging population which drives

the demand for bonds as the

investors look out for more

and more pensions and life-

insurance schemes. But India,

possessing relatively younger demographics

(median age of 25 today to hover around 27 by

2016), cannot sustain on this factor and hence

need to concentrate on the other controlling

variables.

Route to Market

The market has always been unpredictable for the companies. This holds more significance in the

case of international brands trying to enter new emerging markets. Every brand wants to be

recognized globally so that they can tap the new markets easily. The role of marketing managers in

this age of globalization becomes more important in providing the companies with correct strategy to

enter new market. We give our readers a platform to experience this challenge through “Route To

Market”.

The primary objective that the participant is expected to fulfill is to provide a “Market entry strategy”

for an international brand/product into the Indian market. The overall strategy would be divided into

three stages:

Rules:

Brand for which entry strategy needs to be crafted is “Relaxzen – Day flight and Night Flight

Shots ”

Document size should not exceed 4 pages & a maximum of 2 members are allowed in a team

The participant is expected to justify his stand – point in each deliverable

Each stage should be clearly mentioned under sub – heading

Upload entries with file name as “RTM_<TEAM NAME>_<INSTITUTE NAME>” at http://

www.tapmi.edu.in/student-life/pratibimb/participants-submission by 11:59 pm, 18th Dec, 2011

The winner will receive a cash prize of Rs.1000 /-

The winning entry of ‘Route to Market’, November 2011 edition will be declared on

dare2compete.com. The entries of this contest have been judged by Prof. Vinod Madhavan, TAPMI.

Fig.1: Indian bond market over the years (Goldman Sachs, BIS

Report March 2011)








Future of the market

Central projections by the government and various

agencies have predicted that a continual gradual

reform in this sector will result in a phenomenal

progress by 2016. Goldman Sachs has estimated

the debt capital market in India to grow to about

$1.5 trillion by 2016, which is almost twice its

present size, or roughly 43% of GDP today. This

would make a market capitalization of almost 45%

of French debt market today, or 15% larger than

that of the present UK debt market. The estimate

also goes on to say that the most growth would

take place in the non-government sector, which

would increase by 5.5 times to $575 billion by

2016.

However, if India goes on to pursue the financial

liberalization more aggressively; there are high

chances that the bond market will emulate the

expected scenario much before 2016. One of the

most controversial issues in this regard is the

question of fuller capital account convertibility.

While few are of the view that opening the Indian

resources to world would enable it grow faster

through improved participation of FIIs and other

foreign investors, few others believe that the

Indian economy is yet too young to move up to

this challenge.

Macroeconomic Outlook

Of course, in India, another important component

which will decide the fate of the bond market is

the macro-economic condition. The structural

reforms which had started two decades ago, have

now rendered a much more favourable

macroeconomic condition for India which can be

utilized to strengthen the debt market. The

economy has been on a growth trajectory now for

almost a decade with GDP averaging around 8.5%

-9%. Of the ground estimates by IMF shows the

GDP to hover around the 8% for the next decade

or so. This coupled with increased savings &

investment, higher productivity growth and rapid

urbanization clearly points at a much more

favourable economic outlook.

The gross domestic savings of the

country has remained at a high for

the past few years touching Rs

2320 billion (RBI) mark recently.

This reinforces the huge potential of

the market and the need to bring in

all the investors. Also the gross

fiscal deficit as a percentage of GDP

has decreased drastically from 10%

of the GDP a decade ago to around

5% in the present times. This has

served the purpose of reducing

chances of crowding out effect and

lowering of interest rates. The public

debt, too, has remained within nominal

range and has boosted the investor’s sentiment.

Also, the rise in the net capital inflows driven by

rising NRI deposits, FDI and external commercial

borrowings have resulted in a strong economic

outlook which together with low external debt and

huge foreign reserves (more than $300bn) have

resulted in a market which is resilient to both

external and internal shocks.

Conclusion

The actual future of the Indian DCM and it true

potential will only be realized if the government,

policy makers and regulators function in a

Fig.2: Potential Size of India’s DCM (CCIL Research Paper *7,

Goldman Sachs Report *2)


coordinated and prudent manner. With huge

inflow of funds required in the coming years for

ambitious infrastructure projects and other capital

intensive industry, the demand for debt market is

ought to increase. Also with India’s increasing

connectivity with the outside world and the

country’s attractiveness to the FIs, more funds are

destined to flow. The technological advancements

in other economies along with invention of other

exotic instruments, too, will be another deciding

factor. In this regard, improvement on market

infrastructure and putting appropriate checks and

balances in place will become absolutely

mandatory. The SEBI, RBI and other regulators

till now, however, have performed their job quite

well. All in all, the future of the market and its

potential to realize its capacity will be decided by

the course of action to be taken by our policy

makers and their willingness to become harbingers

of change.

References

BIS Report, bis.org, March 2011, http://

www.bis.org/statistics/secstats.htm

Bonding the BRICs: A Big Chance for

India’s Debt Capital Market, Global

Economics Paper No: 161, Goldman Sachs

report, November 2007, http://

personal.lse.ac.uk/debp/Papers/GP161.pdf

CIA world fact book, https://www.cia.gov/

library/publications/the-world-factbook/

fields/2177.html

Population Projection of Indai and States

2001-2026, Census of India report, May

2006, http://nrhm-mis.nic.in/UI/Public%

20Periodic/

Population_Projection_Report_2006.pdf

IMF statistics

Handbook of Statistics on Indian Economy -

Reserve Bank of India, http://

www.rbi.org.in/scripts/

AnnualPublications.aspx?head=Handbook%

20of%20Statistics%20on%20Indian%

20Economy

Rajesh Chakrabarti, Bond Markets in

India, June 2008, papers.ssrn.com/sol3/

Delivery.cfm?abstractid=1149322

Pronab Sen, Nikhil Bahel, Shikhar Ranjan,

Developing the Indian Debt Capital Markets:

Small Investor Perspectives, July 2003,

planningcommission.nic.in/reports/

wrkpapers/wkpr_debt.pdf

Samir K. Barua, V. Raghunathan, Jayanth R.

Varma, Research in Indian Capital Markets:

A Review, www.iimahd.ernet.in/~jrvarma/

papers/Vik19-1.htm

Emanuele Baldacci and Manmohan S.

Kumar, Fiscal Deficits, Public Debt, and

Sovereign Bond Yields, IMF working paper,

August 2010, www.imf.org/external/pubs/ft/

wp/2010/wp10184.pdf

Fig.4: Reduction in fiscal deficit allows for lower

interest rates (CMIE prowess database, RBI)

Fig.3: GDS (World Bank statistics, RBI)

http://www.bis.org/statistics/secstats.htm

http://www.bis.org/statistics/secstats.htm

http://personal.lse.ac.uk/debp/Papers/GP161.pdf

http://personal.lse.ac.uk/debp/Papers/GP161.pdf

https://www.cia.gov/library/publications/the-world-factbook/fields/2177.html



http://nrhm-mis.nic.in/UI/Public%20Periodic/Population_Projection_Report_2006.pdf



http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of%20Statistics%20on%20Indian%20Economy





http://www.google.co.in/url?sa=t&rct=j&q=Bond%2Bmarkets%2Bin%2BIndia%2Bhave%2Bwitnessed%2Ba%2Bsea%2Bchange%2Bsince%2Bthe%2Bbeginning%2Bof%2Beconomic%2Breforms%2Bin%2Bthe%2Bearly&source=web&cd=2&ved=0CB8QFjAB&url=http%3A%2F%2Fpapers.ssrn.com%2Fsol3%2FDelivery.

http://www.google.co.in/url?sa=t&rct=j&q=Bond%2Bmarkets%2Bin%2BIndia%2Bhave%2Bwitnessed%2Ba%2Bsea%2Bchange%2Bsince%2Bthe%2Bbeginning%2Bof%2Beconomic%2Breforms%2Bin%2Bthe%2Bearly&source=web&cd=2&ved=0CB8QFjAB&url=http%3A%2F%2Fpapers.ssrn.com%2Fsol3%2FDelivery.

http://www.iimahd.ernet.in/~jrvarma/papers/Vik19-1.htm





Recession is that curve on the economic circle

wherein there is a slowdown in the economic

activity characterized by fall in GDP, investments,

spending, household income etc. and a rise in

unemployment rate. In that gloomy state,

executives in the top echelons of a Corporate

would wish for this period to phase out fast. If one

could infuse positivity into the ergonomic setup

during this lull, the positive energy associated,

perceived through a magnification lens, brings

about the much needed vibrancy for reversal in

fortunes. This amplification would widen the

scope of influence and have far-reaching

implications on the future. The above mentioned

positivity could be infused by the HR department

of a business organization and this is one of the

opportunities for it to step in and ascertain its

strategic role in business. In this article, we shall

see how the role of HR during economic recession

can be strategic – creativity, bringing new ideas to

the table, changing/developing HRM processes

and procedures in a cost-effective way.

Economic recession is the time when HR

professionals need to develop and retain talent

amidst retrenchment, recruitment freezes, salary-

cuts, and drop in budgets. They need to be

by Rajesh Sridhar, SIIB

Role of HR during Recession

Strategic Role

of HR

Articulate Communicator

Accommodative Mediator

Motivator

Advisor to CEO

Retention of best talent

Increase affinity quotient

Tech-savvy

Talent Nourishment


proactive and chip in with early interventions as

for any organization to survive during recession

the ability to retain its best talent is must. During

these uncertain times, companies realize the need

to possess competent workforce, which shall

ensure that focus stays on trainings. But ironically

there may be a constraint in training budgets. This

is the time for HR professionals to leverage

technology by implementing e-learning solutions

with rapid authoring tools which enables creation

of content efficiently. The use of technology can

be extended to the usage of messenger services

that offer free PC to PC calls. This considerably

cuts down travelling costs.

An HR professional’s ability to articulate is very

important. He/she needs to be an eloquent

communicator and an accommodative mediator. In

the role of the former, it helps stop grapevine

discussions among employees regarding company

financial position when there is delay in salary/

appraisal. In the role of the latter, it solves

conflicts between the management and the

employees so as to create a distress-free work

environment. It would not be a bad idea to be

transparent and make employees aware of the

status quo. This paves way for an HR professional

to don the hat of a motivator – he/she should

suggest employees required measures to improve

productivity by which they could make a

difference and emerge stand-out performers.

Besides, he/she needs to bring to the attention of

employees the long term plans of the organization

and strategies in place and how they could

contribute to implementing them. This establishes

a feeling of belonging in employees, which is key

to increasing the affinity quotient and thereby

translate the same into higher motivation levels.

As far as the staffing aspect is concerned, it’s an

opportunity to replace hiring with nourishing

talent with extra responsibilities. This helps assess

the potential of employees, future capabilities and

estimate future staffing plans. A check on attrition

rate needs to be maintained as employees,

doubting the financial stability of the company

may feel demotivated and contemplate on queuing

up to quit. This shall enable the organization not

lose credibility which is very important in the long

run. On the flip side, performance evaluations are

to be reviewed to determine the employees the

company can afford to lose – the best time to get

rid of non-performing human resources. This

would be perceived as a natural aftereffect of the

economic recession and do not much harm to the

company’s image as well as to the effectiveness of

its HR policies.

Compensation structure is another facet in which

the HR department can make a significant

contribution. Restructuring could be done in an

intelligent way that would help employees save

taxes. This would lessen the employee perceived

cut in pay. Also, the benefit schemes shall be

marginalized to only the top performers. This

helps achieve cost cutting as well as retention of

best talent in the organization. Professional

Development as a relational reward for top

performers is an economical way to appreciate

employees. The gift of education and provision of

opportunities to hone skills greatly help in future.

Former NASSCOM Chairman, Mr. Ganesh

Natarajan, in a keynote address on ‘The Role of

HR in Trying Times’ organized as part of the

annual conference of the Pune Chapter of the

National HRD Network in 2008, emphasized on

the need for HR managers to perform the role of a

lighthouse and not get carried away by the effects

of the global economic meltdown. He further

stated that in tough times, they must act as

advisors to the CEOs.

A strategic role played by the HRM Function

helps not just cut cost for the organization for a

short time period but also make the organization

more stable and ready for the future. These

measures sow the seeds for rapid economic growth

by retaining the best talent and ensuring

availability of well-equipped and highly motivated

employees.


On Thursday, November 3, 2011, news came out

that Kaggle has bagged $11 million through VC

funding. The money came from Silicon valley

VCs Khosla Ventures, Index Ventures, SV

ventures and others including Paypal. Kaggle

entered the business of solving complex data

analytics problems through contests in April,

2010. Since then it has successfully hosted

umpteen contests and

boasts of having

almost 17000 data

scientists across the

globe. The point that

stands out here is

that there is a real

substance in crowd

sourced data

analytics model.

More so, when

companies are

grappling to manage

“Big Data” which

has exponentially

increased in last five

years; Kaggle’s

success in garnering

coveted VC funding

is a testimony to this

judgement. Let’s analyse the aforementioned

model and its impact on the market.

A brief overview of the model

The business model explained subsequently is

used by crowdANALYTIX which is yet another

revolutionary product in the crowd sourced data

analytics space.

Disruptive Innovation A New Era of Crowd sourced Data Analytics!

by Ayush Malhotra, NMIMS

Source: www.crowdanalytix.com

http://www.crowdanalytix.com


The CA model (read crowdANALYTIX)

encompasses two key aspects: data management

and data analytics. CA model talks about helping

clients to make protect their Big Data repository

by porting it to more trusted integration platforms

like Hadoop and Mahout. Post data integration,

data analytics will be done on a Revolution

Analytics platform, which has strategic

partnership with crowdANALYTIX. The data

analytics process is seamlessly structured in the

following manner:

A client details out their requirements to CA to

begin with. CA has partnerships with lead

analysts, 90% of whom have advanced degrees in

statistics. These lead analysts break the problem

into subparts and each subpart will inturn be a

contest on CA platform. Crowd will solve the

problems and submit solutions. The whole process

will be administered by lead analysts. When

solutions of all the subpart problems are obtained,

lead analyst will aggregate the solution in a

meaningful manner and submit it to the client.

The process adds a significant value over existing

process of data analytics through consulting

enterprises in:

20-30% cheaper than existing alternatives

Access to large base of global professionals

and talents

Quicker delivery of solutions

Impact Assessment

The business model has immense capability to

bring about a paradigm shift in the way data is

managed, analysed and optimized in large and

small enterprises. Below are a few impacts listed:

Analytics, now a reality for SMEs

Analytics till today is understood as a luxury of

the cash rich companies. SMEs generally abstain

from such lavish expenditures and hence they

always had to rely on their own intuitive decision

making. They still don’t have any robust

mechanism to verify their assumptions because

tools like market research and data analytics is not

for them, they believe. Not anymore! Companies

like Kaggle and Crowdanalytix provides them

with such non-expensive and reliable platform for

analytics that SMEs can now espouse structured

decision making in free will.

Analytics market: Now an open field

The issue that small analytics consultants face

today is that they are overshadowed by large

consulting organizations. Small consultants

include both individual consultants and small

boutique consultants. These small consultants

have to fight a stiff battle for every single project.

Even if they win one, their margins are eaten up

by their overboard sales efforts to grab one

assignment. Hence, smaller consultants remain

low on cash. The new crowd souring model brings

them a sigh of relief. Today, they don’t have to bid

for projects; they are up on the web. The

consultant wins money not because of the size of

his organization but solely on his competency.

Second way these consultants earn bucks is by

joining network of lead analysts as mentioned

previously in the article.

Hence, the new business model has opened the

field and for the first time grass is not greener on

the other side!

Coupling of data management and data

analytics

As explained earlier, the new crowdanalytix model

will not only help companies solve their critical

analytics problems, but also help clients port their

big data onto platforms like Hadoop, Mahout etc.

This signifies that CA (Crowdanalytix) promises

to be a complete data management and analytics

service provider for enterprises. Do companies

need more to cheer about! Especially in the times

when enterprises are bombarded with data,

petabytes of data, relational data, non-relational

data, data which make them go nuts.


Just to put things into perspective, this is an

essence of a petabyte of data:

Source: http://www.techwhizz.com/visualizing-

petabyte-age-inforgraph/

More so, companies are having a hard time to

locate the “Big Data” experts, who in turn are

having a roll of the lifetime. The new business

model will increase accessibility of companies to

right experts.

Thus crowdsourcing model of analytics and data

management is an out and out winner.

Decision lag will reduce

In the fiercely competitive market, companies

need to make decisions all the time. Decisions

regarding product development, sales promotion

success, marketing planning, operational

efficiency so on and so forth. But even today,

managers rely on their own intuitive judgements

to take decisions with no way to verify decisions.

Why? The reason is the cost of verification of

their decisions which is very high both in terms of

time and money. The model of crowd sourced

data analytics will reduce the time of problem

solving and the cost is significantly less than the

primitive ways of analytics. Hence, as a manager I

can get routine analytics stuff done without facing

complexities of locating analytics companies,

RFP process, Fee negotiation, Handing over the

data and so on. In the new crowd souring process

all I need to do is contact one company and get

the contest on the site very next day. The problem

can be painfully complex to extremely simple.

Hence, managers don’t have to hesitate or panic

before decision making for the lack of channel of

verification of their decisions.

Big analytics companies and management

consulting firms will employ Crowd

sourced Analytics to reduce costs

An interesting observation is that existing large

analytics consultants like Deloitte, HSBC, Boston

Analytics, Oracle etc. will see value in

crowdsourcing some of their work rather and

hence will eventually trim their in-house team

sizes. The process of problem solving in big

analytics companies is that of breaking down

large problem into subparts, finding analytical

solutions to each subpart and merging the

solutions together. In due course of time even

such companies would see a value in transforming

some of their fixed costs (of having full time

analysts on board) to variable costs (of

crowdsourcing some of the analytics problems).

The same is true for management consulting firms

like Bain and Co., Accenture, Booz Allen etc.

It would be apt to say that crowd sourced analytics

is not exactly a competitor for large analytics

firms, rather it is an efficient tool which fits into

their current processes.

After cloud computing, a business model that can

boast of disrupting an existing process is that of

analytics through crowd souring. However, both

the companies, i.e Kaggle and crowdANALYTIX

http://www.techwhizz.com/visualizing-petabyte-age-inforgraph/

http://www.techwhizz.com/visualizing-petabyte-age-inforgraph/


are new to the market. The success of the model is

yet to be tested. The quality of solutions obtained

through this model is yet to be verified. Secondly,

a certain matrix has to be devised to measure the

success of the crowd sourced data analytics model.

Parameters like quality, clarity of

recommendations, lead/lag time of delivery should

be given relevant weightages.

In the present times of weak global economy,

crowd sourced data analytics is nothing less than a

smooth breeze for businesses.

References

Kaggle Raises $11 Million in Series A

Financing Led by Index Ventures and

Khosla Ventures, November 2011, http://

findarticles.com/p/articles/mi_m0EIN/

is_20111103/ai_n58372600/

Deshpande PR, , July 19,2011, 3 barriers for

wide adoption of business analytics in

SMEs, http://www.crowdanalytix.com/

blog/3-barriers-for-wide-adoption-

ofbusiness-analytics-in-smes/

Inviting Articles

We are inviting articles from all the B-schools of India. The articles can be on any field of business

from Marketing, Finance, Operations, HR to Systems.

You can send us articles on:

Recent developments or trends in any of these fields

Articles covering latest trends, innovative practices, strategies, etc. in the global perspective

We also invite articles on management thinker similar to the current section

Apart from above, creative works in relation to any of the fields will be equally appreciated

The best entry will receive a letter of appreciation and a cash prize of Rs 1000/-. The format of the file

should be MS Word doc/docx. Articles should not be more than 2500 words.

The last date of receiving all entries is 18th December, 2011. Please upload entries at http://

www.tapmi.edu.in/student-life/pratibimb/participants-submission with file name as BAC_<ARTICLE

NAME>_<INSTITUTE> by 18th December, 2011.

Best Article: Suvrodip Banerjee, XLRI Jamshedpur

Congratulations!! The winner will receive a cash prize of Rs. 1000 & a letter of appreciation.

http://findarticles.com/p/articles/mi_m0EIN/is_20111103/ai_n58372600/



http://www.crowdanalytix.com/blog/3-barriers-for-wide-adoption-of-business-analytics-in-smes/



http://www.crowdanalytix.com/blog/3-barriers-for-wide-adoption-ofbusiness-analytics-in-smes/










According to the recent figure released by

Association of Mutual Funds in India, the asset

under mutual fund industry was close to 60

thousand crores rupees. In the last five years

(since 2006) the asset under management (AUM)

has grown by 20% compounded annual growth

(Figure.1)

Even though the figure of 20% seems impressive,

there is still a lot of growth potential for this

industry. In India (year 2009) the commercial

banks still account for more than 60% of the total

assets of the financial system (Figure 2),much

larger when compared to 5% share of mutual fund.

Mutual funds are generally classified by their

principal investments. In order to judge the

performance of these funds we compare each of

the funds with the equivalent investment types.

Equity funds and ELSS vs. BSE Sensex can be

compared with stock indices in order to see

whether these funds give a better return than

random investments in any stock.

In the last 3 years (October 2008 -October 2011)

BSE Sensex has increased at a rate of 18.8%

compounded annually (Figure.3). In order to

analyse the performance of equity funds histogram

diagram of last 3 years return (October 2008-

Mutual Fund Industry

by Krishnakant, SJMSOM, IIT Bombay

Figure.1: Source: AMDFI data, Note: As of 31st March of each

year

Figure.2: Source: Reports on trends and progress of

Banking in India, various issues.


October 2011) (compounded annually) of 220

equity funds (excluding tax saving and sector

funds) is shown in Figure.4.

Based on the figures mentioned in table 1, one

can infer that an average mutual fund’s return

(Average return 22.15%, Median return 19.77%)

is better than the return given by BSE Sensex in

corresponding period. The major cause of concern

though is the high variance of 37.88% which

reflects the riskiness of return if an investor

chooses any one of the 220 mutual funds for

investment.

Similar analysis was done with ELSS (Table.2 and

Figure.5), which gives an investor the dual benefit

of tax saving and high return as of stock market.

Key advantages of ELSS over equity funds are:

Money invested in ELSS gets tax deduction.

ELSS has low liquidity compared to equity

funds (generally a lock-in period of 3 years)

The median return of 20.33% is higher and

variance of 29.49% is lower (lower variance

implies lower risk) than equity

fund.

If an investor is looking for high

risk- high return investment

opportunity then for them equity

fund would be a better option than

just randomly investing in stock

market. For someone who can

take advantage of Section 80C of

the Income Tax Act, ELSS is an

even better option.

Debt schemes vs. Bank Deposit can be compared

because debt schemes invests in fixed income

securities whose cash flow behaviour is very

similar to returns from bank deposits. Key points

to note about debt schemes and bank deposits are:

Figure.3: BSE Sensex trend in the last 3 years (Source:

Google Finance)

Figure.4, Histogram diagram of 3 years returns

(annualized compounded) given by top 220 equity

funds

(Source: www.mutualfundsindia.com)

Total no of funds analysed 220

Duration 3 years

Average return 22.15% (compounded annually)

Median return 19.77 % (compounded annual-

ly) Variance in return 37.98%

Table.1: Statistical analysis of 3 years returns given by 220 Equity mutual

funds (Source: mutualfundsindia.com)

Total no of funds analysed 29

Duration 3 years

Average return 20 %

Median return 20.33 %

Variance in return 29.49 %

Table.2: Statistical analysis of 3 years returns given by 29 ELSS

(Source: mutualfundsindia.com)


Bank deposits have low liquidity compared

to debt schemes.

Bank deposits are backed by government of

India hence the risk associated with return is

much lower.

The overall performance of debt schemes in the

last three years have been below par compared to

bank deposit rates. The average bank deposit rate

(above one year maturity) in the last 3 years is

8.44% (Table.3) which is more than both average

(7.46%) and median return (6.86%) given by debt

funds (Table.4). Hence if an investor is looking for

low risk- low return investment opportunity then

for them debt schemes won’t

be an appealing option.

Customer perception and

awareness: According to

Google Insight ‘Mutual Fund’

is most searched phrase by

Indians since 2006 till date when compared to the

phrases like ‘Investment’ and ‘Stock

Market’ (Figure 7). This data implies how much

people are interested for mutual fund. On

comparing figure 1 with figure 7 we can observe

that between 2007-08 people were very interested

(peak in Google search volume) in mutual fund

and at the same time the growth rate of asset under

management (AUM) of mutual fund was also at its

peak. For the last one year the search volume is on

a decline and so is the AUM (declined by 3.5% in

the last 1 year). Overall the trend shows that

interest for mutual fund moves in tandem with the

stock market.

Ease of investment: While mutual fund in India is

metro centric it is also gaining footholds in tier I

and tier II cities. As of march 2009 the mutual

fund industry had around 90 thousand registered

distributors (Source: AMFI). According to the

survey done by CII-KPMG in 2009 the two key

Year 2009 2010 2011 Average

Deposit rate (above one year

maturity) (%)

8.1 7.7 9.5 8.44

Table.3: (Source: Worldbank)

Figure.6: Histogram diagram of 3 years returns (annualized

compounded) given by top 173 Debt funds

Source: www.mutualfundsindia.com

Figure.7: Source: Google Insight


impediments that affects the decision of an

investor from investing in mutual funds are

(Figure.8):

Too many schemes

Complicated product features

The latest figure released by SEBI says that there

are about 1151 mutual funds currently registered

with them, which is good enough to confuse an

average investor.

Overall the mutual fund industry has grown by

leaps and bounds in the last few years and given

the very low penetration, it still holds a lot of

growth potential in near future. We already have

all kinds of mutual funds for almost all different

investment principles but the real challenge for

any asset management will be to match an investor

with the fund he should invest into.

Figure.8


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Pratibimb December 2011 - TAPMI's e-Magazine

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