a journal of management - integral university...

Department of Business ManagementFaculty of Management and Research

Lucknow-226026

U.P. (India)

p-ISSN : 0974-8032

e- ISSN : 2278 6120

A Journal of Management(Indexed at J-Gate and EBSCO)

Vol. 6 No.2 December -2013IRJM

SERV II TN Y,U L ULA C

R KG N

E OT WNI

A Journal of Management

Editor-in-chiefProf Aftab Alam

Faculty of Management and Research, Integral University

Chief PatronProf S.W AkhtarVice ChancellorIntegral University

PatronProf. S.M. IqbalChief Academic ConsultantIntegral University

Sub-EditorDr. Adeel MaqboolAssociate ProfessorHead, Dept. of Business ManagementIntegral University

Joint EditorAnis Ur RehmanAssistant ProfessorDept. of Business ManagementIntegral University

Prof. D.C. ThaparAcademic ConsultantIntegral University

Prof. Azhar KazmiCollege of Industrial ManagementKing Fahad Univ. of Petroleum & MineralsDhahran, Saudi Arabia

Prof. Shahid SiddquiMarketing & International BusinessLong Insland UniversityC.W. Post Campus, USA

Prof. Rekha PrasadFaculty of Management StudiesBHU, Varanasi

Prof. Serajul BhuiyanFaculty of Marketing communication & MediaUniversity of AuburnMontgomery, USA

Advisory Board

Asma FarooqDept. of Business ManagementIntegral University

Dr Yasir Arafat ElahiDept. of Business ManagementIntegral University

Associate Editors

Rizwana AtiqDept. of Business ManagementIntegral University

Dr. Gaurav Bisaria Dept. of Business ManagementIntegral Univerisity

December 2013, All Right ReservedNo part of this publication may be reproduced or copied in any form by any means without prior written permission. The

Faculty of Management and Research, Integral University, Lucknow press holds the copyright to all article contributed to its publication. In case of reprinted articles, the Faculty of Management and Research. Integral University, Lucknow press holds the copyright for the selection, presentation, and publication.

Dr. Tauhidur RahmanAssociate ProfessorDept of Agriculture and Resource EconomicsArizona University, Tucson, USA

Prof. T. UsmaniPro Vice ChancellorIntegral University

Prof. Ashfaq Ahmad ZilliDeanFaculty of EngineeringIntegral University

Prof. Mirza S. SaiyadainDean Faculty of BusinessBSAS UniversityChennai, Tamilnadu

Prof. Kaleem Mohd. KhanFaculty of Mgmt. Studies & ResearchAMU, Aligarh

Prof. Abid HaleemFaculty of Engg & TechnologyJMINew Delhi

Dr. Jabir AliAssociate ProfessorCentre for Food and AgribusinessManagement, IIM, Lucknow

Zahid Raza KhanDept of Business Management,

Integral University

C O N T E N T S

Author(s) Research Papers Page No.

José G. Vargas-Hernández

Sustainable Development And Environmental 26-38Conservation: Opportunities And ChallengesFor The 21st Century

Manjula Sharma "Skill Development For Employment 39-49Himanshu Sharma Sustainability In Developing Countries-

Especially In India"

Akram A. Khan Biotechnology And Agricultural Development 50-58Mohd Farhan

Anis Ur Rahman The Global Financial Crisis and the Role of 59-69Yasir Arafat Elahi Regulator in Minimizing its Adverse Impact

on Indian Insurance Industry

Purna Prasad Sharma Microfinance And Gross National Happiness 70-83(GNH) – A Study on The Impact of LivingStandards of the Poor

Raj Shree Verma Case Study“Effect Of Stone Quarrying On 84-100Socio-economic And Environmental Condition- How Far Sustainable??A Case Study From Jharkhand State”

Zahid Raza Khan Book Review 101-102Organisation Behaviour

Punita Duhan Social Media : A Paradigm Shift in Integrated 1-12Anurag Singh Marketing Communication

Income Distribution in Multinational Firms 13-25Through Transfer Pricing

Joshua. O. Miluwi

Abstract:

To achieve their goals and objectives marketers have been employing various promotion mix

tools in an integrated fashion for many years to create a synergistic impact in the market. However the

advent of internet enabled social media platforms have opened up new vistas for marketers to

communicate with customers albeit with a difference. Social media has titled scales in favor of

consumers and has empowered them in an unprecedented way. All this has led to a paradigm shift in

marketing communication as the unidirectional nature and control of marketers over traditional

integrated marketing communication has been scarified on the altar of the social media. This paper is an

attempt to analyze this paradigm shift in Integrated Marketing Communication due to induction of social

media platforms in the arena of marketing communication. The paper examines the Paradigm Shift in

Integrated Marketing Communication (IMC) by reviewing various published secondary literature

sources and leads to the findings that a planned approach to marketing communication incorporating an

appropriate and judicious mix of traditional and social media is desirable for the efficient and effective

achievement of organizations objectives and to ensure success in the market.

Key Words: Social media, Integrated Marketing communication

Introduction

There is no denying the fact that the need and importance of marketing communication to

inform, to remind, to educate and to persuade customers for achieving goals and objectives of

organizations cannot be underestimated. Various available promotion mix tools have been employed in

an integrated fashion by marketers over all these years to create a synergistic impact in the market to

achieve their goals and objectives. However, the advent of internet enabled social media platforms have

opened up new vistas for marketers to communicate with customers albeit with a difference.

Social media has titled scales in favor of consumers and has empowered them by providing abundant

opportunities to gather information, to share and exchange their views, to disseminate their feelings

about various product and services and in turn to influence the fellow customers using various platforms

provided by social media in an unprecedented way (Efthymios et al, 2008). All this has led to a paradigm

shift in marketing communication as the unidirectional nature and control of marketers over traditional

1Integral Review- A Journal of Management, Vol. 6 No. 2, December 2013

SOCIAL MEDIA: A PARADIGM SHIFT IN INTEGRATEDMARKETING COMMUNICATION

1Punita Duhan

2Anurag Singh

1.Punita Duhan, Research Scholar Faculty of Management Studies, Banaras Hindu University, Varanasi-2210052 Dr. Anurag Singh, Assistant Professor,Faculty of Management Studies, Banaras Hindu University, Varanasi-221005


integrated marketing communication has been scarified on the altar of the social media. The present

paper is an attempt to analyze this paradigm shift which has been brought in to Integrated Marketing

Communication (IMC) due to inclusion of social media.

Methodology

Secondary literature, drawn from various in-house and proprietary sources available at their

websites have been used along with the various relevant books, research papers published in journals and

news agencies portals etc. The data has been cross-checked and validated to provide the latest and

unambiguous information. This study is able to provide information to be used as hypothesis for further

research.

Objectives

1. To briefly discuss the concept, development and importance of IMC.

2. To study the concept of social media and to analyze the factors leading to its evolution and

fast emergence globally.

3. To establish the need for incorporation of social media as an integral element of IMC.

4. To analyze the paradigm shift in marketing communication due to induction of social media

in IMC.

Rationale

Web 2.0 platforms due to availability of open source, user friendly applications offer a unique

experience to both customers as well as organizations. Also, social media's fast growth, changing media

habits of consumers and introduction of online customer driven touch points have motivated

organizations to embrace the social media platforms. All these developments have prompted the authors

to analyze the changes which are warranted by the social media platforms in existing Integrated

Marketing Communications model.

Originality/Value

The paper offers an accessible review of the currently available platforms of social media and

the impact of these on IMC, which will create the interest in academics working in marketing

communication and information technology departments in universities and colleges and students

studying in these disciplines.

The paper has been organized around five sections. A brief overview of the development of the

concept of IMC along with its importance has been provided in the first section. In second section

concept of social media and its worldwide rapid growth has been contemplated along with the factors

1Punita Duhan2Anurag Singh


responsible for this growth. Need for inclusion of social media in IMC has been pondered upon in third

section. Fourth section focusses on various fundamental changes in patterns of communication which are

the resultant of inclusion of social media in IMC. The concluding section briefly explains the cautions to

be taken while including social media in IMC along with the findings.

1. Integrated Marketing Communication: An Overview

The various practices of marketing have always been centered on customers and their needs.

The promotion mix or marketing communication mix, an important constituent of the marketing mix,

has been employing various tools like advertising, sales promotion, personal selling, public relations and

direct marketing to cater to the diverse needs of the customers as per their media consumption preference.

However, towards the last decade of the 20th century, a major communication development, named as

integrated marketing communication (IMC) took place. (Wikipedia, Sisodia et al, 2010). Various factors

like decreasing message impact and credibility of advertising, decreasing cost of databases, increasing

client expertise, increasing mergers and acquisition of agencies, increase in global marketing, increasing

media and audience fragmentation, increasing number of products led to the idea of integrated marketing

communication with a central objective of increased revenues with lowered costs in the organizations

(Wikipedia). A dire need was felt for creation of one-voice by bundling together diverse promotional mix

elements (Kitchen et al, 2004).The basic idea to integrate various promotional mix elements in a

synergistic manner is due to some inherent strengths and weaknesses, which can be neutralized by

combing these elements together. By using integration, markets could not only realize the value of each

separate element but also the value of this juxtaposition. (Wikipedia, Sisodia et al, 2010)

Smith et al. (1999) have defined IMC as “the strategic analysis, choice, implementation and

control of all elements of marketing communications which efficiently (best use of resources),

economically (minimum costs) and effectively (maximum results) influence transactions between an

organization and its existing and potential customers and clients”.

The concept of IMC has its foundation in the basic tenets of coherence (logical connections

between different communication), consistency (messages are not contradictory to each other),

continuity (consistency of the message over time) and complimentarity (creation of synergistic impact)

(Chaffey et. al, 2006). The underlying theme of entire IMC process is to integrate and emphasize the

strategic role of various promotional tools, approaches and resources in order to identify and assess

customer need, to tailor messages and media to customers and prospects, to maximize consumer impact

at various customer touch points and to evaluate the success of these efforts to minimize waste, to gain

competitive edge in the market and to maximize profits thereby transforming marketing from an expense

SOCIAL MEDIA: A PARADIGM SHIFT IN INTEGRATED MARKETING COMMUNICATION


into a profit-center. Using outside-in thinking, it is a data-driven approach that focuses on identifying

consumer insights and developing a strategy with the right (online and offline combination) channels to

forge a stronger brand-consumer relationship. In simpler terms, “IMC refers to speaking with one voice,

eliciting a response” (Sisodia et al, 2010)

Connectivity, convergence, collaboration and transparency provided by various digital and

social media has lent more weight to the basic tenet of IMC strategy to project a consistent brand image

across various media using synergistic communication. The multiplicity of social media platforms

coupled with their interactive nature, collective wisdom, content creation feature and easy access has

escalated the challenges of IMC.

2. Social Media: An Overview

Social media though dawned on the world scenario only around two decades ago, it is no longer

in nascence and is continuing to evolve at a much rapid pace turning social networking into a global

phenomenon (nielsen.com, 2012; Vehr, 2012; morganstanley.com, 2009). More than 200 thriving social

communities are available to netizens(Wikipedia), so much so that now we have a networking site for

almost everything like Face book (a more than billion people social network), Path (social network for

150 most intimate friends), Pair (social network only for your spouse), YouTube (social network for

videos) (Mishra, 2013). We have new entrants to the scenario like Google + and Pinterest which are fast

emerging social networks at the global scene, where as there are others losing their sheen. Some like Face

book, Twitter, YouTube are endorsed globally whereas Youku (China), bharatstudent (India) are their

regional counterparts (nielsen.com, 2012; morganstanley.com, 2009).

2.1 Then what is Social Media?

Various attempts to define the term social media and Web 2.0 have led to few definitions, albeit

with some disagreement as to the extent of coverage under the term (Efthymios et al, 2008; Kaplan et al,

2010). Some like to use both the terms interchangeably whereas others use web 2.0 in reference to the

whole gamut of online applications and social media in reference to only the social aspects viz.

connectedness, community, participation, conversation etc. of web 2.0 (Efthymios et al, 2008)

Kaplan et al, (2010) said that Social Media are internet based applications that build on the

ideological and technological foundations of Web 2.0 and that allow the creating and exchange of user-

generated content.

Mayfield,(2008) said that Social media can be taken as a group of new kinds of online media

which is characterized by participation (by obfuscating division between media and audience as it invites

contributions from anyone and everyone), openness (characterized by feedback, participation, voting,



comments with no barricades, anyone can access and use available content), conversation (two way

conversations are permitted instead of broadcasting), Community ( allows quick community formation

and permits effective, fast and relevant communication centered around some common themes in

communities) and Connectedness (hallmark of social media as it flourishes on connectedness by making

use of links of other sites, resources and people)

2.2 Majorly social media can be divided into following categories

Social Networks: allow people to have personal home pages to upload content, give facility to

connect and chat with friends, to play games & to send virtual gifts e.g. Face book etc.

Blogs: are online journals/diaries, the most known and fastest-growing category, having entries

in chronological order starting from more recent ones with colloquial language (Mayfield, 2008;

Efthymios et al, 2008). These are maintained by some identified author/authors and can be related to a

particular topic or can be centered on some general topic. Links and backtracks can be found on blogs and

generally a comment section/ message board/ debate section is given towards the end of the blog.

Wikis: are communal documents or databases to which people either add or edit content.

Wikipedia is a famous example in this category.

Podcasts: refer to audio/ video files (term vodcasts is also used for video content) that are

published in cyberspace and available to users on subscription. Capacity of private people to build

regular audiences, viewers and communities around their shows has resulted in tough competition for

traditional media organizations for getting customers' attention. Podcasts' ability to let people watch or

listen to uploaded content anytime, anywhere has lead to a shift in media consumption patterns called

time-shifting. Apple iTunes is an excellent example of podcasts (Mayfield, 2008).

Forums: are areas of online discussions (called threads), mostly found around some specific

topic like cars, music, are an established form of social media. Organizations may build these in their

websites but these can also be found in a stand-alone format. These discussions are shaped like face to

face conversations and a wide spectrum of conversations ranging from heated debates to frivolous

conversations can be found. Forums are managed by an administrator.

Content Communities: are network communities which are in some ways similar to social

networks like a home page, connection with friends, but the major difference lies in the fact that these

communities share and exchange a particular kind of content like Flickr. (Mayfield, 2008; Efthymios et

al, 2008)

Micro Blogging: is the combination of social networking and small sized blogging which is

distributed online and also using mobile networks. Twitter is the most popular example of micro blog.

The suitability of micro blogs to break news in real time has encouraged BBC and CNN to introduce



twitter feeds (Mayfield, 2008).

2.3 Growth of Social Media Worldwide

Exponential growth in the internet usage can be attested by the fact that number of internet users

in world has gone up from 16 million in 1995 to 1650 million in 2010 (internetworldstats.com, 2013).

Thereby, organizations seeing a lot of potential stepped in and started using online communication

platforms initially using static communication channels like websites and later on with the introduction

of web 2.0, more dynamic two way communication platforms (Efthymios et al, 2008). The internet

penetration in India is 11.4% (IAMAI, 2012) and the face book penetration was 5.2% as on December

31st, 2012 (internetworldstats.com, 2013).

Social networking sites are being heavily endorsed by people worldwide as they want to

connect, communicate and watch video via wired or wireless internet. (Vehr, 2012; morganstanley.com,

2009). Social sites are more favored by people in the age group of 15-34, out of these young adults being

heavy users (Li, 2007; Lenhart et al, 2010). Time being spent by people on social media has gone up

considerably (Vehr, 2012). Youngsters' usage rate and time spent on social media is relatively higher , to

the extent that for them it is no longer any other online activity but a central and indispensable element in

their life (Lenhart et al ,2010) rather it is their life online (Li, 2007). Desire to connect and communicate

with friends is one of the main reasons cited by a majority of the users to join SNS (Social Networking

Sites). However, the age and usage rate affects the opinions of the users towards SNS. Different age

segments like to be active on different SNS as per their suitability and taste. Face book has emerged as the

most favorite site, with membership exceeding 517 million across 212 different countries

(internetworldstats.com, 2013), and dominant way of connecting with people both for customers as well

as marketers. You tube is another social networking platform gaining momentum at a fast pace.

(morganstanley.com, 2009; Lenhart et al, 2012; Stelzner 2009, 2010, 2011 & 2012).

2.4 Social Media's Use by Business Organizations

Marketers have also embraced social media with open arms. In comparison to 2009, when they

were just warming up to the use of social media in business marketing (72% had started using it (Stelzner,

2009)), by 2012, large majority was not only using it rather was also attuned to the fact that social media

is important for their businesses (Stelzner, 2012) and instead of raising basic queries like “where do I

start' were already talking about social media ROI and metrics. With the settling of business use of social

media, trend is towards putting the social media strategies and plans in place. Some have started

outsourcing their social media marketing activities in order to seek help of Digital marketing experts, a

trend completely missing in 2009. Time being spent on social media activities also increased from 5

hours a day to 11 hours a day in some cases (Stelzner 2009, 2010, 2011 & 2012).



2.5 Factors Responsible For Growth of Social Media

Device features (like data enabled handsets, qwerty keypad, inbuilt multimedia, browsers and

applications, at affordable pricing, of as low as INR 2000/- in case of India, by local OEMs), higher speed

of data access due to 3G and 4G networks along with the availability of sachet pricing plans for mobile

internet, Government's appropriate policy framework and other initiatives (viz. digital highway project

of Govt. of India) along with the private players' initiatives to increase mobile internet availability, and

availability of right content (such as access to applications stores like Android, iTunes, Nokia app stores

and Social Networking apps) as a whole offer an enhanced online experience leading to incremented

quality of engagement for “mobile-first” markets (i.e. A market in which mobile is the primary and only

way to access the internet for the population) and are the key drivers to the growth of mobile internet

worldwide (IAMAI, 2012). All these factors together contribute to the popularity of Social Networking

Sites as heavy traffic is being contributed on these sites by mobiles. 46 % of social media users access it

over smartphones and wireless connectivity has given them the freedom to access it from anywhere and

everywhere (nielsen.com, 2012). This tremendous rate of growth of web based services and applications

have led to the promotion of online communities which provide a common virtual platform to the

members of that community to exchange information amongst them.

3. Need for Induction of Social Media in IMC

Social media or Web 2.0 has provided newer online platforms to consumers to integrate, to

communicate, to share, to entertain, to socialize, to learn, to decide and even to make purchases by

opening gates to them of enormous, hitherto unbeknownst, pools of information and that too sitting in the

comforts of their homes and offices at the one click of mouse and even while on move in their palms at

their smartphones. It has become new lodestone for youngsters and professionals due to its abundant

possibilities. Social media also offers huge potential to marketers due to availability of plenty of

differentiated communication platforms, each suitable for different customer segments, for different

marketing functions and for different organizations and their organizational needs. (Rudloff et al, 2010)

Social media has been touted to alter the individual as well as group behavior of consumers and

taken as a game changer in the market place with the power structures shifting in favour of consumers due

of users' content generation capacity and personalized nature of the medium. Social media is being

considered as a powerful consumer empowerment tool as the marketing information which was till now

in the control of marketers and organizations is now in hands of consumers because of interactive nature

of the media (Efthymios et al, 2008; Kaplan et al, 2010). The trends indicate that traditional mediums of

communication have lost their sheen and majority of consumers, have no interest, do not trust and do not

get influenced by the promotional messages of marketers. In comparison, a vast majority likes to read



user generated content in the form of blogs, reviewer sites, face book pages, recommendations of friends

etc on the social media (Kotler, 29/02/2012).

The products and services marketed by organizations are being talked (good or bad) at the social

media without any intervention or effort from organizations. This uncontrollable and unlimited

information about products influences consumer behavior (Efthymios et al, 2008) and commands a

systematic effort to incorporate social media in to IMC to influence consumer behavior favorably.

4. Social Media leading to “PARADIGM SHIFT” in Communication

Web's capacity to permit frictionless flow of information and knowledge can be befittingly

termed as a “paradigm Shift” in communication (Hoffman et al,2000) and the social media supported by

this smooth flow of information coupled with interactive, many to many, multidirectional,

communication platforms has completely revamped the classical one to many, passive, unidirectional

communication model. The two main functions of the marketing communication i.e. to remind and to

inform may be handled by traditional communication model in which Firms (denoted by F) provide

content through some medium to a mass market of consumers (denoted by C). However, the traditional

model is rendered ineffective in handling the persuasion function whereas Social media because of its

interactive nature may prove to be effective (Hoffman et al, 2000).

Medium ContentContent

Con

ten

t

Con

ten

t

F

F

F

FC

C

CC

MediumContentF

C

C

C

C

C

Figure 1

Traditional Marketing Communication Model

(Source: Hoffman et al, 2000) Figure: 2

New Marketing Communication Model

Social media exhibits abundant potential to be used as an advertising medium, direct –response

medium, sales transaction platform, a lead generation medium, distribution channel, customer service

platform and relationship building platform (Chaffey et al, 2006).

4.1 Features of Social Media Causing Paradigm Shift

Some of the characteristics features of social media which have led to the transformation in

traditional marketing communication have been enlisted below:



Company Customer

Pull/Push

Intelligence

Company Customer

Direct response

Traditional TV, print, radio mediaDirect mail communications

Interactivity

Dialogue not monologue

Two-way feedback

(a)

(b)

Push4.1.1 Interactive Nature: of social media augurs well

with pull strategy. Communication flow is bidirectional

in the form of a dialogue. Customer is the initiator of the

contact, actively seeking information. In a significant

departure from traditional media where marketer has to

vie for the customer attention and customer has a lean

backward tendency, it is characterized by high intensity

and is a lean forward medium as once on the social

sites, customer gives his 100% attention to the content

displayed on the media. Customer exercises more control over the content and instead of one to many,

poorly targeted, uniform message communication to all the segments, a clear shift is towards one- to

–one, one to some and many to many communication based on niche or micro segmentation with mass

customization and personalization of the message. Power to customer to add, edit and comment on the

content provided by firms and to generate their own content and hence to influence other customers is a

radical departure from traditional communication model.

4.1.2 Intelligence:

In comparison to traditional media, web analytics facilitates the collection and analysis of

individual customer's responses like customer preferences, perceptions and behavior, according to

individual's content consumption patterns, on various social media platforms at much reduced cost.

4.1.3 Individualization:

Social media works on principles of narrowcasting. Intelligence gathered helps marketers to

individualize the messages to suit the needs of the customers. Sense and respond marketing and mass

customization facilitated by social media, are difficult to be achieved in traditional media.

4.1.4 Integration:

Advent of social media has led to the removal of structural impediments in the further growth

and development of IMC as it is forcing the organizations to go with a quick response model. Social

media offers tremendous potential for integration of Outbound communication (content uploaded by

organizations) and inbound communication ( feedback, post purchase comments, views, suggestions

and complaints), thereby addressing the problems and issues quickly at times in real time, which is not

possible in case of traditional mediums.

4.1.5 Industry Restructuring:

Social media has led to the disintermediation (removal of media intermediaries) and reintermediation

(introduction of newer agencies like digital marketing companies and experts) in the communication

Figure 3: Communication Models (a) Traditional media(b) Social media (Source: Chaffey D., et al, 2006)



model.

4.1.6 Impersonalization Removal:

By assigning identifiable staff to manage the conversations taking place on Social media,

organizations can offset the impersonal nature of traditional media.

4.1.7 Independence of Location:

Unlike traditional media, the reach of social media is global, thereby opening opportunities in hitherto

untapped markets e.g. inaccessible local and foreign markets.

4.1.8 Alteration of Standard Marketing Communication Tools:

Social media supports the consumer behavior which warrants detailed product information and

independent opinions. Also the constraint like high costs of media time and space are less pronounced

here. Consumers want detailed, real-time flow of information as per their suitability. Social media

provides consumer more control of contact and content in comparison of traditional communication tool

(Chaffey et al, 2006).

5. Findings and Conclusion

Mzayfield, (2008) said that Social media is a genie that will not be disappearing back into its

bottle. Hence success of a communication plan lies in its ability to judiciously integrate various

traditional and social media according to their strengths and weaknesses. Simultaneous media

consumption portrays the largest opportunity for marketers therefore an IMC strategy should project a

consistent image of a brand through synergized communication in various media channels. This is

becoming more and more pertinent in the digital era in which connectivity, convergence and social

networking impacts consumers.

As most of us spend our time in both the worlds real as well as virtual, an IMC strategy integrating

multiple channels from both the worlds and supporting mixed-mode buying would be most apt for

marketers. Brands are now in the hands of audience that buy them, advocate for them, criticize them and

defend them. Companies need to make sure that they are communicating to all of these audiences with

the right message at the right time through right channels and all this requires well coordinated approach

but as per Kaplan et al, (2010) marketers need to be active, interesting, humble, unprofessional and

honest in order to have maximum impact in the market when using social media.

References:

lChaffezy, D., Chadwick, F.E., Johnston, K. and Mayer, R. (2006). Internet Marketing:

Strategy, Implementation and Practice. 3rd Edition, FT Prentice hall, Financial times

lEfthymios, C. and Fountain, S. J. (2008). Web 2.0: Conceptual foundations and marketing



issues, special issue papers, Journal of Direct, Data and Digital Marketing Practice (2008) 9,

231 – 244, DOI: 10.1057/palgrave.dddmp.4350098

lHoffman, D. L., Novak, T. P. and Chatterjee, P. (2000). Commercial Scenarios for the Web:

Opportunities and Challenges. Retrieved on 4th January, 2013 from http://jcmc.indiana.edu

/vol1/issue3/Hoffman .html

lInternet and Mobile Association of India and Analysys Mason (IAMAI) (2011). Evolution of

Mobile VAS in India: Imperatives for Exponential Growth. Retrieved on 31st May, 2013

from http://www.slideshare.net/AnalysysMason/iamai-aml-mobile-vas-report-launch-

presentation-201107

lInternet World Stats: usage and population statistics (2013). Retrieved on May 05, 2013

from http://www.internetworldstats.com/stats.htm

lKaplan, A. and Haenlein, M. (2012). Users of the World, Unite! The Challenges and

Opportunities of Social Media. Business Horizons, pp. 59-68

lKitchen, P.J., Brignell J., Li, T. and Jones, G.S. (2004). The Emergence of IMC: A

Theoretical Perspective. Journal of Advertising Research, pp. 19-30

lKotler, P. (29/02/2012). Beyond Advertising. The Economic Times, Bennett, Coleman &

Co. Ltd.

lLenhart, A., Purcell K., Smith, A. and Zickuhr, K. (2010). Social Media and Internet Use

among Teens and Young Adults. A Project of Pew Research Centre. Retrieved on 4th

January, 2013 from

http://www.pewinternet.org/~/media//Files/Reports/2010/PIP_Social_Media_and_Youn

_Adults_Report_Final_with_toplines.pdf

lLi, Charlene (2007). How consumers use social networks. Retrieved on 2nd February, 2013

from http://www.eranium.at/blog/upload/consumers_socialmedia.pdf

lMayfield, Antony (2008). What is Social Media. e-book, http://www.icrossing.com/ebooks

lMishra, Gaurav (2013). The Future of Social Networking, Retrieved on April 04, 2013 from

http://gauravonomics.com/future-social

lStelzner, Michael A. (2009, 2010, 2011, 2012). Social Media Marketing Reports, 2009 2010,

2011 and 2012 Sponsored By Social Media Examiner. Retrieved on January 3rd, 2013 from

h t t p : / / m a r k e t i n g w h i t e p a p e r s . s 3 . a m a z o n a w s . c o m / s m s s 0 9 / S o c i a l M e d i a

MarketingIndustryReport.pdf, http://marketingwhitepapers.s3.amazonaws.com/Social

MediaMarketingReport2010.pdf, http://www.socialmediaexaminer.com/SocialMedia

MarketingReport2011.pdf and http://www.socialmediaexaminer.com/SocialMedia



MarketingIndustryReport2012.pdf

lRudloff, S., Frey, B. (2010). Social Media and the impact on Marketing communication.

Bachelor thesis, Department of Business Administration and social sciences, Luke

University of Technology, Augsburg, ISSN:1402-1773-ISRN-CUPP—101239—SE

lSisodia, S., Telrandhe N., (2010). Role of Integrated Marketing Communication in Modern

Indian Business. Researchers world-journal of arts science & commerce,

www.researchersworld.com Vol.– I, Issue –1, pg 134-138

lSmith, P.R., Berry, C., Pulford, A. (1999). Strategic Marketing Communications, Kogan

Page, London.

lVehr, Nicolas J. (2012). Vehr Communications, 2012 Social Media Usage Survey. Retrieved

o n M a y 0 5 , 2 0 1 3 f r o m h t t p : / / w w w. v e h rc o m m u n i c a t i o n s . c o m / w p -

content/uploads/2012/02/2012-Social-Media-Usage-Survey-PRINT-FINAL.pdf

lWikipedia: Integrated Marketing Communications. Retrieved on May 05, 2013 from

http://en.wikipedia.org/wiki/Integrated_marketing_communications.

lwww.morganstanley.com, Stanley, Morgan (2009). Mobile Internet Report. Retrieved on

24th December, 2012 from www.ms.com/techresearch

lwww.nielsen.com, Nielsen nmIncite (2012). State of the Media: The Social Media Report

2012, retrieved on 5th May, 2013 from

http://postmediavancouversun.files.wordpress.com/2012/12/nielsen-social-media-report-

20122.pdf


Abstract

The objective of this paper is to analyze the procedures used by multinational enterprises to

distribute the income generated by its foreign subsidiaries, and how they allocate the taxes paid on this

income through the fiscal jurisdiction in which they operate, from the institution based view. The analytic

research method was applied, through the revision of the available literature in order to determine the

causes and effects of income shifting, as a fiscal strategy applied by MNE. It can be concluded that MNE

use organizational strategies to take advantage of the comparative advantages of the different countries

in which they operate, resulting in intercompany trade. When setting the transfer prices in which

companies trade goods and services, the opportunity arises so that MNE shift their extra income to

jurisdiction with lower corporate tax rates, and therefore minimize its fiscal burden.

Key words: Multinational firms, transfer pricing, income shifts.

JEL: D33,D40,E31,F02,F13,F23,F42,G12,G13,H26,H32

1. Introduction

The increase in the number of multinational firms operating in the international economy has

led to greater dynamism in the inter-firm trade. Multinational firms have the purpose to provide goods

and services of equal value and quality in relation to price to consumers and costumers as the primary

claimants around the world, regardless of their personal characteristics, nationality, ethnic origin and

religious creed. Intrafirm transference of prices between the different subsidiaries may determine the raw

materials and commodities intrafirm are flows plus the logistics costs derived of locations. Taxation rates

on foreign investments of multinational firms play a crucial role in alternative locations choices

(Devereux and Griffith, 1998). Interfirm commerce is sustained on a shared production scheme with

artificially established export prices to favor transference of earnings to the home country while jobs

created are subsidized by Mexican economy.

This has forced the tax authorities of the jurisdictions in which they operate these companies to

implement more stringent regulations on transfer pricing in order to avoid shifting income to lower tax

rate jurisdictions. About this Robbins (2002) notes that although international business has been around

for centuries, multinational firms are relatively a recent phenomenon. They are a natural result of the


INCOME DISTRIBUTION IN MULTINATIONAL FIRMSTHROUGH TRANSFER PRICING

1José G. Vargas-Hernández

1.José G. Vargas-Hernández, M.B.A.; Ph.D. Lic. Belisario Valencia-Sepúlveda ,Centro Universitario de Ciencias Económico Administrativas,Universidad de Guadalajara,Periférico Norte N° 799, Núcleo Universitario Los Belenes, C.P. 45100 Zapopan, Jalisco, México


global economy. Multinational firms use their operations around the world to develop global strategies.

Rather than confine themselves to their domestic borders, search the world to find competitive

advantages. Multinational firms should be required by national and global institutions to fulfill policies

regarding accountability, transparency on some relevant issues such as profits, taxes, etc.

Multinational enterprises are defined as firms operating with foreign direct investment (FDI)

directly control and manage value-added activities in other countries (Peng, 2010). It has been assumed

that foreign investments should be highly responsive to local differences in the investment climate,

institutional financial arrangements, rates of return, taxes and other regulations and labor costs. In the last

years, foreign direct investment have grown in less developed countries, attracted by tax incentives,

environmental flexibility and some other advantages offered by cheap labor, etc. There are several

variables considered as determinants of FDI such as macroeconomic stability, labor costs, corporate

taxation, corporate governance, cultural and language features, etc. variables considered in the context.

Multinational firms can be regarded as important factors in the globalization process.

Governments compete to attract multinational firms, hoping to increase tax revenues, create

jobs and stimulate economic activity. In order to attract FDI, governments offer incentives to

multinational firms such as tax exemptions, government support agreements, grant infrastructure or lax

environmental and labor regulations. Among the contributions foreign-owned companies have to

demonstrate are the inward flow of foreign capital and technology, tax and balance of payments

contributions, spillovers on local business and communities, rate of employment rise, improvement of

competitive advantages, etc.

Other variables may be considered for location choices in international markets such as

corporate taxation. Foreign capital restrictions are not significantly related to the taxation levels.

Multinational firms are likely to deter their operations in locations where the corporation taxation is high

unless the after-tax rate of return of investments is also high (Mooij and Ederveen, 2003).

Robbins (2002) notes that managers of multinational firms face a very wide range of challenges,

in areas where they operate, such as different political systems, laws, cultures and customs. But these

differences may originate both problems and opportunities. For example, currency devaluations of the

Mexican peso lower export prices and raise import prices, and provoke the adoption of direct

protectionist forms which may cause some important effects on trade adjustments and induce FDI

reshufflings within Mexico. One of the challenges facing governments and multinational firms, tax

collection due to multinational enterprises operating in multiple tax jurisdictions that have different

rules, regulations, policies and procedures. Thus, multinational corporations cannot be considered as an

isolated unit but as a group of firms operating in a complex international environment. An important



aspect of multinational firms is the inter-firm trade. Durán and Ventura (2003) define intercompany trade

and commerce that takes place within companies under the same organizational structure and ownership

of capital between parent and subsidiary or subsidiaries or between the subsidiaries and affiliates.

This situation places multinational firms in a favored position. A key reason why the

intercompany trade differs from trade of full competence results from the fact that multinational business

can alter their transactions to minimize their tax burden around the world. For example, firms may use

transfer pricing techniques that allow them to shift profits to jurisdictions with low tax rates and thus

minimize their overall tax burden (Clausing, 2000). It is known as transfer pricing, the price at which the

parties exchange goods or services related. Guidelines Applicable to Transfer Pricing and Multinational

Enterprises Tax Administrations of the Organization for Economic Cooperation and Development

("OECD") states that the transfer prices are significant for both taxpayers and tax administrations

because that largely determine the income and deductions, and therefore the tax base of the associated

companies in different tax jurisdictions (OECD, 1993).

More than 60 governments have adopted regulations regarding transfer pricing. Regulation of

transfer prices are based on full competence principle ("arm's length principle"). This means that the

transfer prices of goods and services on intercompany transactions must be based on an analysis of prices

agreed in comparable transactions between two or more unrelated parties in a fully competitive market.

In Mexico, the institution responsible for compliance with these regulations is the Tax Administration

Service (Servico de Administración Tributaria, SAT), the rules and regulations applicable to transfer

pricing in Mexico are described in Articles 86 paragraphs XII, XIII and XV, 215, 216, 216-bis and 217 of

the Law on Income Tax of Mexico (Ley del Impuesto sobre la Renta, LISR). Article 216-bis of the

Income Tax Law refer to the special rules applicable to companies in the maquiladora industry. In

addition, as part of the tax report issued by the external auditor should reveal the transactions carried out

with related parties abroad and in Mexico, and answer the questionnaires concerning the revision of

taxes.

This paper analyzes the organizational strategies employed by multinational firms around the

world, in order to exploit the competitive advantages of host countries. In particular, the tax regulations

applicable to transfer pricing to minimize their tax burden by placing income in tax jurisdictions with

lower tax rates. This is in response to different tax rates observed within the member countries OECD.

This document is divided into the introduction and four sections. The next section reviews the

economic literature available in relation to the phenomena of multinational firms, international

production, intercompany trade and relevant aspects of transfer pricing. The same section also tries to put

all this information in the framework of the theory based on institutions. The second section presents

INCOME DISTRIBUTION IN MULTINATIONAL FIRMS THROUGH TRANSFER PRICING


three types of organizational strategies that correspond to the evolution of multinational firms. These

strategies give rise to intercompany trade. The third section presents a discussion of the problems faced

by multinational firms and tax authorities to determine the taxable base and the application of transfer

pricing methods to determine that the intercompany transactions are agreed on the principle of full

competition. Finally, the fourth section, it is illustrated the way in which multinational enterprises can

minimize their tax burden through transfer pricing.

2. Inter-firm trade and transfer pricing:

A review of the theoretical framework.

In order to explain the phenomenon of multinational firms is necessary to start reviewing the

classical theories of international trade, which have their origin in the theory of Adam Smith's absolute

advantage and comparative advantage of David Ricardo, which were systematized by Eli Heckscher and

Bertil Ohlin. The Heckscher-Ohlin model states that countries export products that use their abundant

and economic factors of production and import products using scarce factors of production in the country.

During the 1970s, emerged the "new trade theory" addressing issues of trade specialization, and also the

location of productive activities in different countries and regions (Helpman and Krugman, 1985).

As for research related to inter-firm trade, Durán and Ventura (2003) argue that the interest of

economists associated to inter-firm trade in relation to international production, mainly to the impact of

multinational firms in the international distribution of income, and tax issues arising from transactions

between related companies. The research was focused on explaining the internationalization of

production and its relationship with FDI. Among the most prominent studies include: Vernon (1996)

studied the life cycle of the product. The issue of internationalization of production has been discussed by

authors such as Hymer (1976), Kindleberger (1990), Caves (1971), among others. In these works the

concern is for interfirm trade that appears as a side issue.

However, the Japanese researchers, Kojima and Ozawa (1984), based on the Japanese

experience, suggested that FDI would be an efficient conduit of trade in intermediate products between

the companies involved and those on investment (subsidiaries) that can benefit from comparative

advantages complementing the activities of their parent companies. As for the research on transfer

pricing, transfer of goods, technology and services between related parties located in different countries,

it is suggested that the price agreed in such transactions within the multinational firms, it is set based on

various conditions determined by company management (Durán and Ventura, 2003). Early studies in this

line were those of Cook (1955) and Hirshleifer (1956), followed later by Horst (1971), and Itagaki

(1982). These works share the concern that the transfer prices erode the tax bases of host countries.

Moreover, from the point of view of the leader strategies on strategy, vision-based institutions,



provides a framework within which to develop this work. It can start from the definition of institutions

provided by North (1990), who defines institutions as humanly planned constraints that structure

political interaction, economic and social development. These consist of informal institutions (sanctions,

taboos, customs, traditions and codes of conduct), and formal institutions (constitutions, laws, property

rights). An institutional constraint such as formal and informal rules, affecting entrepreneurship,

although this entrepreneurship flourishes around the world, their overall development is uneven (Peng,

2010: 130). The vision-based institutions can help to explain how taxes affect intercompany trade

patterns of multinational firms and explain the fact that multinational enterprises invest in subsidiaries

around the world in order to exploit the comparative advantages of different countries.

3. Organizational strategies of multinational firms

According to the United Nations Conference on Trade and Development (UNCTAD, for its

acronym in English), the ability of multinational firms to contribute to international economic

integration is a result of their own attributes and how they respond to the political environment and

economic context in which they operate (UNCTAD, 1993). Mexican multinationals, large and medium

size businesses operate in many different industries using their organizational and technical capabilities

and competencies to develop and deliver market-based products and services that meet the needs of local

consumers.

To achieve these tasks, Mexican multinationals design and implement strategies to create scale

and scope economies; engaging in strategic alliances, joint ventures, partnerships, and associations with

other partners, NGOs, community developers, supply and distribution chain partners; leveraging

logistical networks; decreasing prices; removing and liberating market constraints, Etc. (Rangan,

Quelch, Herrero and Barton, 2007, UNDP, 2008). Strategies of multinational firms evolve as they

responded to various pressures, challenges and opportunities, among which can be mentioned the

advances in information and communication technologies, convergence of consumption patterns around

the world, intensifying competition and opening markets, etc.

Some markets in developed and developing countries are expected to tighten in the next

following years due to increased price competition and consolidation among manufacturers, leaving

Mexican multinational firms to seek out new markets in other developing and emergent economies.

CEMEX operated in a highly protected legal environment and no significative competition on price until

the 1990s and controlled 65 percent of the market share in Mexico. Other good example is the recent

success of Wal-Mart, with its proprietary distribution sites and aggressive supplier price targets, has

helped alter the retail food landscape and set new competitive standards in Mexico. With no value added

tax on food, the efficiencies have had impact across the supply chain and have been passed on as lower



prices to consumers (Goldstein, 2007).

One important lesson to be learned by multinational firms is to manage price strategies to

improve their market performance in less developed economies through the scalability of innovations

and by discarding traditional approaches to price-performance improvements. These new strategies

involve significant changes in the way production is organized across borders, which has led

multinational firms to locate a wider range of value-generating activities abroad (UNCTAD, 1993).

Under the strategy of vertical expansion, the multinational firms exploits a comparative

advantage in terms of production factors and prices, etc by locating intangible assets and human

resources in foreign economies, either through backward vertical expansion to procure production and

distribution of a raw materials, inputs and components, or through a forward vertical expansion by

distributing and selling goods and services. Vertical foreign investment encourages multinational firms

to undertake foreign production in order to give more certainty to supply and asset specificity

Multinational corporations operating in low income market segments are consciously cost

management systems oriented for innovation, organization, manufacturing, distribution, etc., to achieve

a competitive price performance, capital efficiency and sustainable profits. NAFTA has resulted in

reallocation effects of productive sectors based on changes in relative prices, with very poor impact on

the performance at firm-level learning, technical inefficiencies and lack of innovation. Below are three

types of organizational strategies, described in the World Investment Report published by UNCTAD

(1993), corresponding to the evolution of multinational firms. All these organizational strategy can result

in inter-firm trade.

A. Strategy of party autonomy

This strategy consists in establishing subsidiaries operating independently in the host countries.

The main link between the parent and its subsidiary abroad is by controlling shareholder. Other

relationships may include technology transfer and provision of long-term capital. The parent company

exercises little control over the subsidiary, while it is profitable. In general, an independent subsidiary is

responsible for most of the generative process of production value, through which develops relationships

with local suppliers and subcontractors. It also employs local workers and managers, conducts its

financial transactions with local financial intermediaries, and may participate in international trade with

other countries. Companies can control many natural autonomous subsidiaries, each one serving a

different host country (UNCTAD, 1993).

An independent subsidiary can be seen as a replica of the parent of the multinational firms in its

new location. According to UNCTAD (1993), there are three organizational strategies that can take the



multinational firms. The evolution of strategies of multinational firms can be schematically shown in the

following diagrams (See Figure 1).

B. Outsourcing strategy (Outsourcing)

Some multinational firms participate in international production through subcontracting

(outsourcing). The activities in host countries are linked to processes performed in another territory,

mainly in the country of origin of the multinational firms (Figure 2). In the case of services, some

multinational firms use foreign affiliates or subcontractors to process information or develop software.

Services have become tradable due to technological advances in computing and communication

(UNCTAD, 1993).

The international outsourcing of production represents the transfer of value generating

activities of territories, other than the country of origin of multinational firms. Also this transfer of value

generating may be different than other end-use countries where the products are destined. The principal

reason for outsourcing is to exploit the comparative advantages of host countries. Production is

controlled by the multinational firms through stock controls or through contracts with local firms, which

allows the multinational enterprises to concentrate in some certain parts of the value chain, while the

subcontractor is specializing in the production, or other intensive labor process (UNCTAD, 1993).

Source: UNCTAD (1993). World Investment Report 1993, Transnational Corporations and integratedInternational Production, New York, No. E.93.II.A.14 Graphic V.2, p. 119.

Source: UNCTAD (1993). World Investment Report 1993, Transnational Corporations and integratedInternational Production. New York, No. E.93.II.A.14 Graphics V.3, p. 120.


Figure 1. Strategy autonomy of parties

Figure 2. Strategy of subcontracting or outsourcing


C. Complex integration (Integrated Production Systems International)

For some multinational firms, international production can occur almost anywhere in the value

chain. The complex integration strategy is based on the firm's ability to locate their production, or supply

of resources, where more profitable. Under the complex integration, any subsidiary operating in any

territory can perform for the whole multinational firm. Each transaction is valued in terms of its

contribution to the value chain. The complex integration required to locate various functional activities-

not only production but also research and development, finance, accounting, etc., where they can be

more successfully performed according to the strategy of the multinationals (UNCTAD, 1993). Under

the complex integration model, there is an interrelationship between the functions, processes and various

territories in which the MNE operates. However, not all elements of the value chain are integrated in the

same grade (Figure 3).

4. Multinational firms transfer pricing and taxes.

Due to the growth of FDI and increased activities of multinational firms, a greater number of

activities in the value chain of enterprises groups of companies take place in different countries. This

generates complex questions about where taxable income is generated by multinationals, as this is

distributed among firms located in different countries, and as distributed taxes paid on this income

between tax jurisdictions (UNCTAD, 1993). To answer these questions, it is necessary to know the

position of tax authorities regarding tax rates applicable to multinationals operating in two or more tax

jurisdictions. The tax rates of each country will depend on whether the country uses a tax system that is

based on residence, based on the origin, or both.

Source: UNCTAD (1993). World Investment Report 1993, Transnational Corporations and integratedInternational Production, New York, No. E.93.II.A.14 Graphic V.3, p. 120.


Figure 3. Strategies of complex integration


In a tax system based on residence, a country will include in its tax base all or part of the revenue,

including revenue generated outside the country, any person or entity considered a resident in that

jurisdiction. In a tax system based on the origin, a country includes in its tax base all or part of the revenue

generated within their tax jurisdiction, regardless of the taxpayer's residence. Often, because these

systems are applied together, usually it is given to treat each independent entity within the group of

multinational firms. The OECD member countries have adopted this approach, independent entities as

the most reasonable to achieve equitable outcomes and minimize risks of double taxation. Thus, each

group member is subject to a tax on income derived from the country of residence, based on the origin

(OECD, 1993).

To apply the approach of independent entities, when goods cross borders through the internal

channels of multinational firms, it is necessary for tax purposes to agree in a transfer price. Transfer

prices are the prices at which companies transfer tangible and intangible goods, or provide services to

related parties (OECD, 1993). However, when tax rates differ among the jurisdictions in which they

operate a multinational firms. The multinational firms have an incentive to agree on transfer price so as to

reduce their tax burden, reporting higher profits in the country where the profits are recorded more

slightly (Bernard and Weiner, 1990). The number of multinational that agree upon transfer prices in a

way that minimizes their tax liability restricted by the regulations of their countries of origin and host

countries and the tax authorities' ability to enforce these regulations (Bernard and Weiner, 1990).

In Mexico, the laws applicable to transfer pricing are found in Articles 86 paragraph XII, XIII

and XV, 215, 216, 216-bis and 217 of the Income Tax Law. Article 215 of the Income Tax Law establishes

the use of arm's length principle ("arm's length principle") to evaluate the transfer pricing agreed with

related party abroad. Article 216 establishes the transfer pricing methods that taxpayers may use to assess

compliance with arm's length principle. Article 86 Section XV, establishes the hierarchy of transfer

pricing methods in the order laid down in Article 216, starting with the traditional transactional methods:

Method comparable uncontrolled price (Método de precio comparable no controlado, "MPC"),

compares the price agreed in the related party transactions with or the price agreed between independent

parties in comparable transactions.

Resale price method (Método de precio de reventa, "MPR"), compares the gross profit obtained

when an entity sells products to a party related to the gross profit obtained with or between independent

parties in comparable transactions. As added cost method (Método de costo adicionado, "MCA"), which

is to determine the selling price of goods, the provision of a service or compensation of any other

transaction between related parties, multiplying the cost of goods, services or the operation concerned by

the result of adding to the unit the gross profit percent that would have been agreed with or between



independent parties in comparable transactions. On the other hand, there are transactional methods based

on utilities: Utility partition method (Método de partición de utilidades "MPU"), which is to allocate

operating income obtained by related parties in the proportion that had been allocated to or between

independent parties.

Residual method of utilities partition (Método residual de partición de utilidades "MRPU"),

which is to allocate minimum operating income obtained by related parties in the proportion that had

been assigned with or between unrelated parties, and then determine the residual value of the transaction.

The residual profit is allocated among the related parties involved in the operation taking into account,

inter alia, significant intangibles used by each, in proportion as it had been distributed with or between

independent parties in comparable transactions.

Transactional margin method of operating income (Método de márgenes transaccionales de

utilidad de operación "MMTUO"), which is to identify related party transactions, income from

operations that have obtained comparable companies or independent parties in comparable transactions

and operations, based on factors that take into account profitability variables such as assets, sales, costs,

expenses or cash flows. These methods fulfill the application of arm's length principle set forth in the

Guidelines Applicable to Transfer Pricing for Multinational Enterprises and Tax Administrations of the

OECD.

5. Minimizing tax burden through transfer pricing

Politicians constantly worry about the difference between the tax rates of countries, particularly

fear that if tax rates are too high may lose economic activity, discourage investment, which can be moved

to countries with lower tax rates (Bartelsman and Beetsma, 2001). As the government needs to ensure

that in designing their tax systems, maintain their tax base and provide a favorable climate for business

and investment (UNCTAD, 1993). However, the difference between the tax rates not only induces shifts

in the business, but also can generate countable income shifts between firms across countries. These

income shifts are not prominent in the political debates. However, if politicians were concerned about the

shift of income, so it's about moving countable income of industrialized economies to the so-called "tax

havens" small countries with very low rates of corporate taxes (Bartelsman and Beetsma, 2001) .

The empirical analysis developed by Bartelsman and Beetsma (2001), shows the import of the

shift in income between industrialized economies as a result of differences in tax rates. There are two

ways in which multinational firms can shift their income from countries with high tax rates to countries

with lower tax rates. First, the financial structure of the subsidiaries is relevant to the taxation of

multinationals. In particular, it is relatively more attractive financing to subsidiaries in countries with

high tax on credit, instead of capital, with loans extended by the parent or other subsidiaries in different



countries. The second channel for income shifting through borders refers to prices that are used in

interfirm transactions in the international trade in goods and services (Bartelsman and Beetsma, 2001).

Many times the strict application of arm's length principle, it is difficult to put into practice. For

example, for many transactions interfirm there is no comparable transactions between third parties

independent or not. Therefore it is difficult to apply a traditional transactional method. Thus,

multinational firms can reduce their tax liabilities reporting transfer prices as low as possible. The shift of

income leads to differences between reported income and the "true" income generated in the business.

The usefulness of the reported production is reduced or increased in countries with relatively high or low

in taxes, because the companies agree lower or higher prices than the market in their interfirm

transactions (Bartelsman and Beetsma, 2001).

6. Conclusion

Multinationals are firms that operate with FDI, generating value-added activities in different

territories. Multinationals make the decision to locate in certain countries because it has the opportunity

to exploit comparative advantages of these countries, so it is no longer possible to consider the

multinational firms as an isolated unit but rather as a group of firms operating in a global context.

Organizational strategies of multinational firms generate inter-firm trade across borders, so that

multinational firms are forced to agree a transfer price to exchange goods and services. This has created

challenges and opportunities for governments and multinational corporations, especially in fiscal

matters. For this reason the tax authorities of more than 60 countries have adopted regulations regarding

transfer pricing, which are based on the principle of full competition, and the traditional transaction

methods and based on earnings embodied in the Guidelines Applicable to Mater of Transfer Pricing for

Multinational Enterprises and Tax Administrations of the OECD.

However, due to the existence of different tax rates between different jurisdictions in which a

multinational may operate, there is an incentive for these agreed upon transfer prices as low as possible,

and thereby it displaces the extra revenue to the jurisdictions with a lower tax rate. For this reason it is

necessary that the tax authorities apply more efficient regulations on transfer pricing to avoid the tax

bases of governments to be eroded by such strategies put into practice by multinational firms.

Intergovernmental agreements between the involved nation-states to regulate operations and

activities of multinational firms should emerge to have cross-national policies to control on issues such

as accounting guidelines and procedures, investments, financial accountability, tax and profits, transfer

of prices, social corporate responsibility, etc.



References

lBernard, J. T. Y Weiner R. J. (1990). Multinational Corporations, Transfer Prices, and Taxes:

lEvidence from the U.S. Petroleum Industry, Taxation in the Global Economy, The

University of Chicago Press, Chicago,123-154.

lBartelsman, E.J. y Beetsma R.M. (2001). “Why Pay More? Corporate Tax Avoidance

through Transfer Pricing in OECD countries”. Journal of Public Economics 87, 2225- 2252.

lCaves, R. (1971). "International corporations: The Industrial Economics of Foreign

Investment",

lEconomica, Vol 38, febrero, 1-27.

lClausing, K. A. (2000). “The Impact of Transfer Pricing on Intra Firm Trade.” In Hines, J. R.

lInternational Taxation and Multinational Activity, University of Chicago Press, Páginas

173-200.

lCook, P. (1955). “Decentralization and Transfer Pricing Problem”. Journal of Business, 28,

87-94.

lDevereux, M.P. and R. Griffith, (1998), Taxes and the Location of production: evidence from

a panel of US multinationals, Journal of Public Economics 68: 335-367.

lDurán, J. E. y Ventura, V. (2003). Comercio intra-firma: concepto, alcance y magnitud,

CEPAL,

lDivisión de Comercio Internacional e Integración, diciembre.

lGoldstein, A (2007) Multinational companies from emerging economies. Palgrave

McMillan: New York.

lHelpman, E. Y Krugman P. (1985). Market Structure and Foreign Trade. Cambridge. MIT

Press.

lHirshleifer, J. (1956). "On the Economics of Transfer Pricing", Journal of Business, 29, 172-

189.

lHorst, T. (1971). "The theory of the multinational firm: Optimal behavior under different

tariff and tax rates", Journal of Political Economy 79, 1059-1072.

lHymer, S. H. (1976). The International Operations of National Firms: A Study of Direct

Foreign Investment. Cambridge. MIT Press.

lItagaki, T. (1982). "Systems of Taxation of Multinational Finns under Exchange Risk,"

Southern Economic Journal vol. 48, 437-448.

lKindleberger, C. (1990). The International Corporation. The MIT Press, Cambridge,

Massachusetts.



Kojima, K, y Ozawa, T. (1984), "Micro and Macro Economic Models of Foreign Direct

Investment: Towards a Synthesis". Hitotsubashi Journal of Economics, 25: 2:1-20.

lMooij, R.A. de, and S. Ederveen, (2003). Taxation and Foreign Direct

Investment: A Synthesis of Empirical Research, International Tax and Public Finance 10,

673-693.

lNorth, D. (1990). Institutions, Institutional Change, and Economic Performance

(Chapter 1: An introduction to institutions and institutional change). Cambridge University

Press, New York, 3-10.

lOCDE (Organización de Cooperación y Desarrollo Económico) (1993), Transfer Pricing

Guidelines for Multinational Enterprises and Tax Administrations, OCDE Letter, Paris.

lPeng, M. (2010). Estrategia Global, 2da. Ed., México, Cenage Learing.

lRangan, V. K., J. Quelch, G. Herrero and B. Barton (2007). Business Solutions for the Global

Poor. Jossey-Bass, San Francisco.

lRobbins, S. P. (2002). Comportamiento Organizacional, 7a. Edición, México, Pearson. SAT

(Sistema de Administración Tributaria), Ley del Impuesto sobre la Renta, México.

lUNCTAD (Conferencia de las Naciones Unidas sobre el Comercio y el Desarrollo) (1993).

World Investment Report: Transnational Corporations and Integrated International

Production.

lNaciones Unidas, New York.

lUNDP. (2008). Creating Value for All: Strategies for Doing Business with the Poor, United

Nations Development Program.

lVernon, R. (1966). "International investment and international trade in the product cycle",

Quarterly Journal of Economics, Vol. 80, mayo, 190-207.

l


Abstract:

Historically, the extraction of mineral reserves has always resulted in varying degrees of

environmental resource degradation and social impacts, including displacement, all across the globe.

Whilst acknowledging that no mining can be entirely free of all negative impacts, there is sufficient

ground to suggest that all-round performance on this subject in the mining sector needs to be urgently

and substantially improved in the country. This paper emphasizes (in the Asian context) the fact that

sustainable development and environmental conservation require simultaneous consideration to be

given to the economic, social, political and environmental aspects of policy formulation. Governance,

centralization and decentralization of economic decision-making and property rights must be taken into

account in considering such issues. There is at present a strong focus (partly on environmental grounds)

on decentralization of economic decision-making and the empowerment of local communities has been

felt rigorously and has evidence of such decentralization in Asia, especially in India. This paper is some

sort of a process to evaluate the trend which has against the adage "think globally, act locally". Because

of global international and interregional ramifications of local or regional decisions, mechanisms have

to be sought to reconcile local and regional interests with the interests of the wider community, especially

in environmental matters. Major environmental externalities from local and regional economic

activities to wider communities are being illustrated in the Asian context concentrating on India.

Environmental concerns raised by India's energy sector are given particular consideration because coal

use in India has many serious consequences for air pollution, often over wide geographical areas. In

conclusion, some environmental policy initiatives for Asia, many of which require international and

interregional co-operation, are canvassed.

Key Words: Sustainable Development, Environmental Conservation, India, Asia, Poverty

1. Introduction

While there are many definitions of sustainable development, most individuals are agreed that it

is development designed to attain and maintain the things that we desire whether these be in the

economic, social, political or environmental spheres. It is sometimes however difficult, if not impossible,

to get complete agreement about what it is desirable and in addition satisfy simultaneously our


SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL CONSERVATION:OPPORTUNITIES AND CHALLENGES FOR THE 21ST CENTURY

1 Joshua. O. Miluwi

1.Dr. Joshua. O. Miluwi, Associate Professor, Commerce & Management, Career College,and Visiting faculty Career institute of international management, Barkatullah University Bhopal, M.P.


aspirations in all the above spheres. Nevertheless, we can try and we can expect to reach a better solution

than would be possible in the absence of our sincere efforts to accommodate divergent views and deal

with the real constraints of this world.

The question has arisen of whether the economic, social, political or environmental spheres

should have primacy in the quest for sustainable development. Some writers suggest that environmental

conservation should have primacy. This is mostly because the continuing existence of mankind depends

on the preservation of the biosphere (Tisdell, 1991, Ch.1). Through the food chain, mankind depends on

other living things for life and cannot survive without adequate air and water supplies. This is the bottom

line, so to speak. Unless the biosphere is appropriately conserved, the welfare and very existence of

mankind is imperiled. While the above relationship is undoubtedly very important, it does not entitle us

to neglect the other spheres. This is because all these spheres or systems are interdependent. For example,

economic systems impact heavily on the environment or the biosphere, and social and political systems

influence the operation of economic systems.

However, this interdependence is neither one way nor linear. Interconnections are numerous

and these systems often evolve or change together; co-evolution occurs (Gowdy, 1994). In order to

amplify the above, consider governance and property rights. Forms of governance of societies and

resources and types of property rights have altered with the passage of time and show some variation

from country to country (Tisdell and Roy, 1991). They belong to the political and social spheres and form

part of the institutional and cultural framework of any society. Nevertheless, they are of fundamental

significance for economic performance of a society and its conservation of the environment. This is

being increasingly emphasized by development agencies such as the World Bank (1992, 1994).

It is well recognized that inappropriate sets of property rights, such as in some cases open-

access to natural resources and the use of the environment, can have deleterious economic and

environmental consequences. Uncertainty about actual property rights adds to these problems. In

general, the way in which the use of resources is governed (of which systems of property rights are a part)

are of crucial importance for their beneficial use and conservation of resources. This includes the matter

of whether resource-use is controlled or governed by local communities at the regional level, centrally at

the national level, or even internationally. Let us discuss the matter of centralized versus decentralized

government, or centralized versus regional or local governance in relation to the environment and

resource-use paying particular attention to Asia especially India and then touch on significant

environmental issues in Asia involving air, water, marine resources biodiversity and energy, before

briefly discussing environmental policy possibilities, including global and trade aspects of the

environment.

Joshua. O. Miluwi1


Empowerment of Local Communities - The Environment and Regions in Context

It is not infrequently claimed that it is important to empower local communities and regional

bodies in order to ensure sustainable development and environmental conservation. This raises many

questions. How is a local community to be determined? How local should it be? Also exactly what is a

region? In reality these are man-made classifications and the appropriateness of any particular one of

these entities is liable to change from problem to problem. For example, the size of regions and

characteristics used to determine regions can vary considerably. Sometimes countries or groupings of

countries are treated as regions of the world but on other occasions provinces of countries may be the

regions considered. Classifications may not be based purely on political boundaries but on physical or

human geographical characteristics. Usually a region is characterized by spatial connectivity and is part

of a larger geographical unit. As a rule a local community, such as a village, is part (often a small part) of a

region but the concept of a local community also has fluidity.

Empowerment of local communities has to do with forms of governance. As mentioned earlier,

the World Bank (1992, 1994) and many other development agencies are stressing the importance of good

governance as a factor making for sustainable development. This has been interpreted to mean smaller

central government, greater devolution of power to local government and communities and more scope

for individual decisions about resource-use. The latter can be achieved by extending market systems and

private property rights, either legally or in practice. The emphasis is therefore on decentralization of

decision-making about resource-use. Such a 'vision' is closely connected to the structural adjustment

policies (SAPs) advocated by bodies such as the World Bank. Nevertheless, some advocates of

decentralization advocate greater control of resource-use by local communities on a communal basis

than do SAPs.

Advocates of SAPs appear to put more emphasis on private decisions and on private property as

a desirable development. For whatever reason, changes along the above lines can be observed in Asia. In

India, following the market reforms from 1978, onwards the relative power of provincial governments

over resource-use has increased in comparison to the central government (Jia and Tisdell, 1995/96,

1996). Greater decentralization has been evident. Furthermore, within the provinces, increasing

economic empowerment has occurred at the township, village and local level, as witnessed by the

impressive economic growth of township and village enterprises which in recent years have 'outshone'

state enterprises in their economic performance (Tisdell, 1993). In addition, private property rights of a

type are evolving as under "The Household Responsibility System" for the allocation of agricultural land

and the "Two Mountains System" for the allocation of other rural land introduced in 1982 (Zhuge and

Tisdell, 1996), and the market system has been greatly extended in India since 1978. In other parts of

SUSTAINABLE DEVELOPMENT AND ENVIRONMENTAL CONSERVATION


Asia, there are also trends towards decentralization of decision-making about resource-use, not only in

transitional economics but in nation states which have not embraced communism e.g. India and the

Philippines. Furthermore, it seems that most governments have become more prepared to consult with

local communities before making decisions that affect local environments and livelihoods. For example,

there is greater application of Rapid Rural Appraisal techniques and consultative methods which involve

interaction with local communities. They are for example being increasingly used in Yunnan (Zhu,

1995).

Think Globally, Act Locally

It is sometimes said in relation to environmental issues and sustainable development that we

should think globally and act locally. While this statement is open to a variety of interpretations, it brings

attention to a range of important issues. These include the following:

lAll resource-use takes place at local and regional levels. The real actors are present at these

levels. Although central bodies may think that they are actually carrying out decisions about

resource-use, it is at the local level that the plans of any central bodies must be executed. This

means in many cases that central bodies are highly dependent on local communities to fulfill

plans or carry out regulations. Local bodies often have considerable leeway in determining

whether and how to realize central plans or objectives.

lActions about resource-use at the local or regional level often have consequences for other

localities or regions and can have global impacts when considered in combination. A

problem is how to permit beneficial local and regional decision making about resource-use

and at the same time control unfavorable environmental spillovers or externalities imposed

on other localities and regions, or even globally. If spillovers and market failures of this type

are present, some central or global regulation or control over local decision-making about

resource use is usually called for. Complete decentralization in such cases is not really a

sensible policy option. However, in some circumstances bargaining between regional groups

or local communities experiencing environmental interdependence may enable agreement

to be reached on rectifying environmental spillovers.

lCooperation between different regional groups and cooperation between centralized and

localized bodies in sharing knowledge and technologies with favourable environmental

consequences needs to be encouraged. Furthermore, discussion between these bodies can

result in better understanding of motives and aspirations of the parties involved and this is

likely to make for greater likelihood of success in policies to achieve sustainable

development and environmental conservation.

Joshua. O. Miluwi1


While thinking globally and acting locally seems an admirable objective, many individuals and

communities are not prepared to make economic sacrifices for others, especially if they do not belong to

their local community. Individuals and communities are strongly influenced in their choices by their own

self-interest. When this self-interest conflicts with the broader interest of the community, means may

have to be devised to bring the former into line with the collective interest, however it is determined.

Mere admonition to individuals to think of the global or wider community interest when determining

their own actions is usually not enough to promote the common good. Specific government or global

policies to influence individual choices and those of local communities may be required. But in adopting

such regulations care is needed not to stifle beneficial local and private initiatives and actions. In this

respect, policy design is very important. In designing environmental policy, the environmental problem

must be approached as a whole: its biophysical aspects must be determined and its socio-economic

dimensions must also be taken into account. The main reason why all decisions about resource-use

affecting the environment cannot as a rule be left to the free will of individuals or local communities is the

presence of environmental spillovers or externalities impacting on individuals and communities beyond

those generating these. However, the patterns of these effects can vary greatly. Let us just consider a few

possibilities. One possibility is that environmental impacts occur in a serial one-way pattern. For

example, consider three communities (A, B and C) located along a river with A being towards it

headwaters, B at an intermediate point and C being located further downstream. Water withdrawals by

the upstream community A, will have a serial impact on B and C. Pollutants entering the water will show

a similar pattern. The externalities are all one way ── in the direction of the flow of the river. This

simple linear case is illustrated in Figure

A

B

C

Figure 1:

Source: A.K. Gill (2012)



In Asia, this type of problem is quite common for waters of rivers shared between regions or

countries e.g. the Yamuna /Ganga River. If air flows continually in a particular direction and the air is

polluted by sources on the way, externalities will also be of this nature. In the case of air flows, however,

the predominant flows often change by season as in parts of Asia. Consequently mutual interdependence

in pollution or environmental impacts occurs, the geographical direction of these impacts varying

seasonally. In this case, the direction of impacts is linear but their direction varies with time. However,

diffused environmental processes also occur such as in cases where pollutants enter large water bodies

such as lakes and in some cases in underground water bodies. In this case, all polluters are liable to be

directly affected by the pollution of others, whereas this is not so in the case illustrated in Figure 1. The

different patterns of interdependence have some bearing on the willingness of polluters or users of

natural resources to change their behaviour in a bargaining situation or to accept controls on their

behaviour. It may be more difficult to get agreement in the type of case illustrated in Figure 1 than when

all parties are being damaged by their collective action.

One method of trying to reconcile global or wider community environmental demands with

actions of regions and local communities is to allocate regional pollution or environmental targets to

regions or local communities, and then leave it to local communities to devise their preferred way of

meeting these. At the regional level for example, pollution taxes or charges may be used to control the

level of pollution from enterprises or in certain circumstances, marketable pollution permits or

transferable rights to use natural resources, such as water, could be employed. For example, in the case of

a river flowing through several regions, quotas for water withdrawals may be allocated to each region and

each region may be left to allocate its quota within its region. This could be done for example by means of

transferable water rights in each region. Air pollutants can also be controlled in a similar manner, even on

a global scale. Nevertheless, it is not easy to devise ideal environmental policies and even the above

policies may not always be ideal. Furthermore, the workability of different environmental policies

depends on the socio-economic context in which they are to be applied.

Strains on Natural Resources and the Environment in Asia, especially East Asia ─ General Issues

Rapid economic growth has been experienced in East Asia in recent decades and this has

resulted in rapid environmental changes. Air quality has declined in many developing countries in Asia,

and furthermore water quality has deteriorated. In addition, water is becoming scarcer (relative to

demands) and in some river systems, water is more variable in its availability, partly as a result of

increased deforestation. Significant deforestation has occurred in Asia in recent decades and increased

loss of biodiversity has occurred. Marine areas in Asia are also experiencing environmental stress, e.g.

Joshua. O. Miluwi1


the frequency of red tides in the India Sea appears to have increased and fish catches in the Northwest

Pacific have peaked, indicating that the limits of sustainable harvest has been reached or even exceeded.

The issues involved are of major importance to all countries in the Asia-Pacific (and even globally) but

especially to countries in East Asia.

All countries in the East Asia region have high aspirations for economic growth. India, for

example, hopes to become a medium-income country in the 21st century. Yet environmental problems

and natural resource constraints could make it very difficult for India to achieve its income targets and

sustain its higher levels of income once achieved. Environmental impacts between countries in the

region, e.g. on water availability and water and air quality may grow in magnitude and result in

deteriorating international relations unless better means of regional cooperation can be achieved.

Problems may arise not only for the developing countries in Asia but for other countries utilizing

resources in this region.

The connections between economic growth and the state of the natural environment are still

subject to debate, as are the limits to economic growth. However, there is widespread belief that as

economic growth proceeds, environmental quality initially deteriorates and subsequently improves, so

that the relationship between environmental quality and per capita income levels forms a U-shaped

curve, sometimes described as a Kuznets environmental curve. For some environmental characteristics

this appears to be so, but it is less clear that it is so for all. For instance, loss of biodiversity may show a

positive relationship with income levels. Nevertheless, it seems likely that environmental quality will

deteriorate further in a number of Asian countries before it improves. Despite the above debate, it is

becoming increasingly difficult to ignore the interdependence between economic systems and the

natural environment. The natural environment provides a large number of resources of value to the

economic system. It is a receptor and in many cases an assimilator of wastes from economic systems. It

provides inputs to economic systems. For example, air and water are used in productive processes and in

human consumption, outdoor recreational facilities are provided by natural environments and natural

raw materials, such as minerals, are used by industry. The way in which one economic system operates

and evolves is influenced by the social, political and institutional framework of a country. This however

evolves with and is influenced by the economic system. The economic system cannot be sensibly

assessed in isolation from the social framework of a country and the state of its natural environment as

indicated by the interrelationship shown in Figure 2 (Cf. Braat and van Lierop; 1987).

India's economic reforms commenced in 1978, have provided considerable stimulus for its

economic growth but has placed extra strain on its stock of natural resources and its natural environment.



However, to the extent that India's market reforms have improved economic efficiency and stimulated

investment in new machinery, they may have lowered the intensity of pollution in India relative to its

production. Under central command systems of economic organization, pollution intensities tended to be

larger than in the market economies ( Tisdell 1996 Zilch, 1994). Nevertheless, many indications exist

that absolute levels of pollution have continued to rise in India. Wu and Flynn (1995, p.4) indicate that

sulphur dioxide emissions in India increased by more than one third in the period 1982 - 1993 and that

many air pollutants more than doubled. About 26 percent of deaths in India are attributed to poor air

quality (Bingham, 1993, p.12). Chinese authorities estimate that almost 7% of India's GDP is lost due to

pollution. The largest loss is believed to be due to water pollution followed by air pollution and then

pollution from solid wastes and pesticides. Moreover there has been a decrease in the area of forest and

woodland in India in recent years. On the basis of the statistics of the World Resource Institute et al. (

1994, Table 17.1), the area of India covered by forest and woodland decreased by 6.5% between 1979 and

1991, and in 1992 only 13.6% of India was covered by forest and woodland. Deforestation in some parts

Inputs Wastes

Social, Political, Institutional

Framework (Governance)

Economic Systems

Natural Environment, Natural

Resources

Figure 2. : Inter-Relationship of Economics System

Source: Joshua O. Miluwi (2013)

Joshua. O. Miluwi1


of India as in Yunnan has been accompanied by increased soil erosion and by loss of biodiversity.

India faces serious water shortages (World Bank, 1992); not only is its per capita availability of

water low, this is expected to decrease as India's population increases. Seasonal shortages of water are

severe in some regions of India e.g. in parts of its northeast such as Tianjin. In fact, India's shortage of

water is more severe than indicated by its per capita availability because its largest supply of fresh water

is in the south so there is considerable regional imbalance between supply and demand. Moreover, this is

the case with India's energy resources. India relies heavily on coal to produce energy and most of its coal

deposits are located in its north and west whereas India's population is concentrated in the east and south

which are short of coal reserves which are inexpensive to extract. Given the importance of energy

resources for modernization and the state of the environment, let us consider some aspects of India's

energy sector.

India's Energy Sector and Environmental Concerns.

Although India has the world's largest known reserves of coal, much of its coal is high in

sulphur. According to Hoagland and Roland (1994, p.212), "India faces two main challenges in its energy

policy: 1) to provide adequate energy supplies to foster economic growth, and 2) to limit environmental

damage from energy production and consumption".

India is now the world's leading coal producer having overtaken the United States in 1983. Both

India's GDP and energy production and consumption have increased remarkably since the establishment

of the People's Republic. Between 1953 and 1980 India's GDP grew at an average rate of 6% p.a. and its

energy use expanded at 9.8% p.a.. After India's market reforms, its GDP grew at an even faster rate

averaging 9% p.a. in the 1980s and its energy use expanded at 5.5% p.a. in the 1980s. India's rate of

growth of GDP is now even larger than in the 1980s. From the above figures, it is clear that India's

intensity of energy use in relation to its GDP rose in the 27-year period prior to 1980 and declined during

the 1980s. This reflects both restructuring of India's economy and India's improving economic

efficiency. Consequently, although absolute emission of pollutants increased in India in the 1980s, the

intensity of this emission in relation to GDP may have declined. Nevertheless, because aggregate

pollution levels in India have continued to rise, dangers to human health from pollutants have grown.

Although the intensity of India's use of energy has fallen, its energy consumption in relation to

its GDP appears to be very high by world standards. In 1989, it was almost three times that of a

comparable country, India, over two times that of India and more than four times that of the United States

(Hoagland and Roland, 1994, p.217). There may be many reasons for this: (1) India's GDP may be

underestimated. (2) The economy may not have fully restructured following its forced emphasis on high-

energy using industries during the pre-reform era (Tisdell, 1993). (3) Technology used in its power



generation industry and technology employed in industry using energy may be relatively inefficient. (4)

Proper procedures may not be in place to encourage users to economize in energy and more demand

management is needed. While India's production of coal will show expansion throughout the 1990s, its

rate of growth (about 2.8% p.a.) will be less than in the 1980s and so India will record a further fall in its

intensity of energy use because of the much higher rate of growth of its GDP in the 1990s. India still has a

long way to go to reach the levels of per capita energy consumption of high income countries. Its energy

consumption would need to increase more than five times to reach per capita levels comparable to those

of India and more than twelve times to reach a similar per capita level to the United States. In many parts

of India electricity is still considered to be in very short supply by local communities e.g. in parts of

Yunnan. It is interesting to note that the bulk of the expansion in India's coal production in the 1980s

came from local mines operated by township and village enterprises rather than from state mines

(Hoagland and Roland, 1994). Whether or not this has meant less attention to environmental

externalities in mining activities is not known. Not only does the high sulphur content of Chinese coal

constitute an environmental problem, but only a very low proportion of it is washed because of the

shortage of water in major mining areas. This adds to the burden of transporting coal to power stations

and elsewhere and significantly increases emissions of particulate matter when the coal is burnt.

Particles in the air are a significant source of respiratory diseases. Because of inadequate water supplies

in areas where most of India's coal is mined, it has to be transported long distances to its power stations.

This adds to cost and transport constraints cause bottlenecks in energy supply.

Sulphur dioxide emissions, with other compounds such as nitrogen oxides, from coal

combustion are a serious source of air pollution in India and result in acid rains in several parts of India.

The effects are pervasive. They are not confined to the locality or province where fuel combustion occurs

and international impacts are occurring. For example, prevailing winds from India's industrial

Northwest bring acid rains to India (cf. Foell, 1994, p.229, Fig 2) and to and from Korea. India's

emissions of SO2 are also rising. As growth in use of coal and other fossil fuels increases in Asia, acid

rain problems can be expected to become more serious, and will call for greater interregional co-

operation to deal with the problems. The interregional dimensions of this problem ( and many other

environmental problems) in Asia should not be neglected. As is well known, developing countries in

Asia such as India are predicted to increase substantially their consumption of fossil fuels thereby

becoming major contributors to greenhouse gas emissions. How best to deal with the threat of the

greenhouse problem still remains a major issue (Tisdell, 1995). It is one that will require both regional

and global co-operation.

Naturally, India has considered the question of whether it can use 'cleaner' means of generating

Joshua. O. Miluwi1


electricity than from coal. In its Agenda 21 - White Paper on India's Population, Environment and

Development in the 21st Century (State Council, 1994) alternatives to using coal for energy generation

are given particular attention. Hydro-electricity is given particular emphasis in this respect. While India

has significant potential for expanding its production of hydro-electricity, there are some problems. The

greatest potential is in the southern inland of India. This area is not well located for supplying northern

areas and coastal areas of India with electricity where there is the greatest demand for electricity because

of the regional location of India's population and industry. Large amounts of investment are required.

Furthermore, dams associated with hydro-electricity generation are not without environmental costs and

risks. For example, they may flood areas of value for biodiversity conservation and for nature-based

tourism, flood productive farmlands, interfere with water flows especially if there is associated

irrigation and result in increased salting of rivers and in navigation problems in rivers. In any case it

seems that India will remain heavily dependent on coal for most of its energy requirements for a long

time to come (Cf. Hoagland and Roland, 1994).

Concluding Observations on Environmental Policy in a Regional Context

That environmental interdependence occurs between regions and countries is now well

established and a significant policy consideration (Cf. WCED, 1987). As the world becomes more like a

global village as a result of growing levels of economic activity and trade, and as awareness of

environmental issues is enhanced partly by research and partly as a result of improved systems of

communications and travel, the importance of these issues grows. The importance of these issues is

probably greater in East and South Asia than elsewhere due to the very large human population in this

area, the rapid economic growth experienced by many Asian countries in recent decades, and the fact

that such growth is expected to continue and become widespread in this area. There is both a need for

regional co-operation to deal with these problems and for action at the level of individual countries,

regions and localities. To address these issues calls for a wide agenda. This agenda should include

international and interregional research and sharing of information about environmental issues,

environmental education, attention to the design and application of appropriate economic and other

instruments for implementing environmental policy, reconsideration and modification (where required)

of governance and property structures affecting care of the environment and natural resource

conservation. Particular attention needs to be given to developing and transferring technologies, e.g.

from higher income countries, which are relatively efficient and environmentally friendly. This can

promote sustainable resource-use or the more efficient use of non-renewable resources. We need also to

become more aware that physical (material) production and consumption are not the sole or main

purposes of human existence. Attitudes of individuals and governments towards material production



and support for accumulation of capital for accumulation's sake need to be modified. Otherwise there is a

risk in the long term that real poverty will result (that is, unsustainable development) as well as

intellectual and spiritual poverty because of the destruction of nature. Asia must play its role in the re-

evaluation of development and in charting new directions for socio-economic development.

Nevertheless the rest of the world must in addition play its part given the global dimensions of the issues

involved. At the same time, Asia would be unwise to wait on the rest of the world to act before addressing

its own regional environment problems, many of which primarily affect those living in Asia or nearby.

References

lBingham, A. (1993) "India's Phenomenal Growth has Environmental Tag", Pollution

Prevention (Asia/Pacific Edition), Vol.1, No.4, pp.10-22.

lBraat, L.C. and van Lierop, W.F.J. (1987) "Environment Policy and Modeling". Pp.7-19 in

L.C.

lBraat and W.F.J. van Lierop, Economic-Ecological Modeling Elsevier, Amsterdam. Foell,

W.K. (1994) "Acid Rain in Asia: Regional Analysis and Policies". Pp.227-239 in T.

lHoagland, T. and Roland, K. (1994). "Environmental Coordination for Chinese Energy

Policy". Pp.212-226 in T. Sterner, Economic Policies for Sustainable Development, Kluwer

Academic Publishers, Dordrecht.

lHuang, Y. and Manderson, L. (1992) "Schistosomiasis and the Social Patterning of

Infection" Acta Tropica Vol. 51, pp.175-194.

lJia, L. and Tisdell, C.A. (1995/96) "Resource Transfers and Trade Within India: Economic

Efficiency and Regional Inequality Consequences" Regional Development Studies, Vol.2,

pp.4- 63.

lJia, L. and Tisdell, C.A. (1996) "Resource Redistribution and Regional Income Inequality in

India", Asian Economies, Vol.25, No.2, pp.48-72.

lMahmoud, A.A.F. (1987) Clinical Tropical Medicine and Communicable Diseases:

Schistosomiasis, Vol.2, No.2, Baillie Tindall, London.

lSterner (Ed.), Economic Policies for Sustainable Development, Kluwer Academic

Publishers, Dordrecht. Goody, J. (1994) Co evolutionary Economics, Kluwer, Boston.

lSleigh, A.C. and Mott, K.E. (1986) "Schistosomiasis", Clinics in Tropical Medicine and

Communicable Diseases Vol.1, No.3, pp.643-669.

lSobha, P. and Apothem, E.S. (1990) Snail Hosts, Life-Cycle and Tegument Structure of

Oriental Schistose, UNDP/World Bank/WHO, Geneva.

lState Council (1994) India's Agenda 21 - White Paper on India's Population, Environment

Joshua. O. Miluwi1


and Development in the 21st Century, India Environmental Science Press, Beijing.

lTisdell C.A. and Roy, K. (1997) "Good Governance, Property Rights and Sustainable

Resource Use: An Institutional Perspective with Indian Ocean Rim Examples", The South

African Journal of Economics (forthcoming).

lTisdell, C.A. (1996) "Protection of the Environment in Transitional Economies: Strategies

and Practices", Regional Development Dialogue (forthcoming).

lTisdell, C.A. (1991) Economics of Environmental Conservation, Elsevier Science

Publishers, Amsterdam.

lTisdell, C.A. (1995) Economic Development in the Context of India, Macmillan London.

lTisdell, C.A. (1995) "Asian Development and Environmental Dilemmas", Contemporary

Economic Policy, Vol.13, pp.38-49.

lWCED, World Commission on Environment and Development (1987) Our Common Future,

Oxford University Press, New York.

lWorld Bank (1994) Development in Practice, Governance: The World Bank's Experience,

The World Bank, Washington D.C.

lWorld Bank (1992) World Development Report: Development and the Environment, Oxford

University Press, New York.

lWorld Resources Institute, United Nations Environment Programme and United Nations

Development Programme (1994) World Resources 1994-95, Oxford University Press, New

York.

lZhuge, R. and Tisdell, C. (1996) "Land-Use Issues and the Sustainable Development of the

Jingpo Communities of Yunnan, India: Impacts of Governance, Institutions and Culture

onResource Management", a paper presented at the international conference on

"Governance Issues and Sustainable Development in the Indian Ocean Rim Countries" held

at The University of Western Australia and organized by the Centre for Migration and

Development Studies, Department of Economics, The University of Western Australia.


Abstract

Employment generation is a resultant of economic growth in a country and the productivity of

employment itself reduces the extent of poverty attributed to unemployment .So, economic growth,

employment and poverty are well interwoven. But does that mean that every person who has done a

secondary or graduate education has the same employment opportunities? The obvious answer is no. So,

first need is to identify the need for certain skills and develop these skills and train them while they are at

secondary/graduation level. Skills and knowledge are the driving forces of economic growth, thus

employment and ultimately social development for any country. Countries with higher and better levels

of skills adjust more effectively to the challenges and opportunities of work and professional life and have

greater success rate. Skilled and knowledge full human resources would provide sustained and steady

growth to economy, industry and business which will help in tapping the potential of employment. There

is strong interrelationship between economic growth, generation of employment and alleviation of

poverty in a developing economy. However, even after economic growth and inspite of newly generated

employment opportunities, people may not get employment because there may not be vocationalisation

of education at the right level and of right kind. This may result into demand supply gap between

existence of employment opportunities and the availability of skills of a particular kind.

Keywords: Skill Development, Funding, Employable Skills, Vocational Training, Productivity, Public

Private Participation (PPP).

1. Introduction And Review Of Literature

Employment generation is a resultant of economic growth in a country and the productivity of

employment itself reduces the extent of poverty attributed to unemployment .So, economic growth,

employment and poverty are well interwoven. But does that mean that every person who has done a

secondary or graduate education has the same employment opportunities? The obvious answer is no. So,

first need is to identify the need for certain skills and develop these skills and train them while they are at

secondary/graduation level. Skills and knowledge are the driving forces of economic growth, thus

employment and ultimately social development for any country. Countries with higher and better levels

of skills adjust more effectively to the challenges and opportunities of work and professional life and


"SKILL DEVELOPMENT FOR EMPLOYMENT SUSTAINABILITYIN DEVELOPING COUNTRIES - ESPECIALLY IN INDIA"

1Manjula Sharma

2Himanshu Sharma

1. MANJULA SHARMA (Lecturer),DEPARTMANT OF HOME SCIENCE ,J.S. HINDU (PG) COLLEGE,AMROHA2. HIMANSHU SHARMA, (Administrative Staff) HINDU COLLEGE,MORADABAD


have greater success rate. Skilled and knowledge full human resources would provide sustained and

steady growth to economy, industry and business which will help in tapping the potential of employment.

However, every employment doesn't have same rate of growth in their respective field due to various

economic, social, legal, environmental or technology reasons i.e. a carpenter makes wooden goods till

the wood is available, thereafter, some time carpenter may be unemployed/or nor productively employed

(which is no less than a serious problem) due to scarcity of woods, or paper mill will be closed due to

deforestation or environmental laws. So this kind of employment can't give us a steady and sustainable

growth to the individual or to the nation. This paper aims to highlights the need for appropriate need

development and then funds it through joint efforts particularly through joint efforts of government,

corporate sector and international development agencies.

A document named "The skill development landscape in India and implementing quality skills

training” has been prepared by ICRA Management Consulting Services Limited (I Macs) to serve as a

background note for the 3rd Global Skill Summit of the Federation of Indian Chambers of Commerce &

Industry (FICCI) August 2010. DFID (Department for International Development) practice paper

discussed engaging the private sector in skills development, why invest in skill development, bringing

Employers workers and government together, role of skill development(2008). ILO (International

Labour office) G20 Training Strategy Leaders pledged to continue to support national strategies for skills

development, building on the G20 Training Strategy. In preparing this strategy, the ILO worked closely

with employers and workers whom it consulted widely. It drew on the Conclusions on skills for improved

productivity,employment growth and development adopted by the International Labour Conference in

June 2008. Skill development (Sector profile) was discussed in the frame of financing sector for skill

development with the support of government and private enterprises. Upcoming Project with 'European

Union & India launch Skills Development Project' of 6 million Euros project will be carried out in four

and a half years. Launching the project Dr João Cravinho, Ambassador of the European Union said in

New Delhi in May, 2012, "Skills development is the central thread of 'Europe 2020' strategy, as well as

the Indian National Skills Development Mission. We are very happy to partner with India in this area.

With this project both EU and India will engage in tackling challenging issues like new skills for the ever

changing employment market."

2. Skill Development And Funding In India

2.1 Government Sector

2.1.1 Initiatives of Ministry of Rural Development & Urban Development and Poverty

Alleviation

The Ministry of Rural Development has launched schemes that aims at empowering young

Manjula SharmaHimanshu Sharma


people from the poor and weaker sections of the society through schemes like “Special Projects for

Placement Linked Skill Development of Rural BPL youth under Swarna Jayanti Gram Swarozgar

Yojana (SGSY-SP) with an objective of ensuring time bound training aimed at bringing a specific

number of BPL families above the poverty line through placement services. And Rural Development

and Self Employment Training Institutes (RUDSETI) were launched with an objective of setting up a

dedicated Skills development infrastructure in each district in the country aimed towards

entrepreneurial development. The Ministry of Urban Development and Poverty Alleviation had

launched the Swarna Jayanti Shahari Rozgar Yojana (SJSRY) in 1997 to address the Skill development

issues of the urban poor.

Table 1 : Other Ministries' initiatives

(Source: FICCI-Ernst & Young: Knowledge Paper on 'Strategic and Implementation Framework for Skill Developmentin India. September 2011)

2.1.2 Other Ministries' initiatives



2.1.3 Courses offered by Planning Commission of India under NSDC:-

Skill Development Initiative Scheme (SDIS) are based on modular employable skills.

Some examples of offered courses are as follows-

1. Automotive repair

2. Banking & Accounting

3. Beauty culture and hair dressing

4. Carpet

5. Chemical

6. Electrical

7. Electronics

8. Fabrications

9. Garment Making

10. Fashion Designing

11. Gems & Jewellery

12. Hospitality

13. Information and Communication Technology

2.1.4 Financing the Sector

Skills development is an area that spans across all sectors of the economy. From manufacturing

to services and agriculture, skilled labour is a key requirement to fuel the growth engine of any economy.

The key stakeholders in skills development are the Industry (both the Service and the Manufacturing

sectors), Labour, Academia, and the Government.

Growth and productivity in any part of the value chain in a sector will substantially contribute to

the national economy and automatically attract FDI inflows. Productivity is directly affected by the

efficiency of labour and capital inputs. Therefore, labour needs to be sufficiently skilled as per the

changing industry dynamics, in order to contribute to growth. India has seen increased FDI inflow in

recent years especially in the manufacturing sector. SSCs (Sector Skill Councils) have been set up across

various sectors such as automobiles, retail, security services, food processing and so on, to bring together

all the stakeholders on to one platform. The NSDC is the leader in setting up of these SSCs.

Funding from National Skill Development Corporation (NSDC)

NSDC, a non-profit Company under Section 25 of the Companies Act, has been set up under the

Ministry of Finance. It has a equity base of Rs 10 crore of which 49% is contributed by the Govt and 51 %

by the private sector. It has so far approved 39 proposals, including six proposals for setting up Sector



Skill Councils, involving a total financial commitment of ` 1019.82 crore. Out of these, 21 proposals,

involving a total financial commitment of ̀ 549.57 crore, have so far been funded. A sum of ̀ 115.46 crore

has so far been disbursed.

Joint initiative of NSDC and Central Bank of India

National skill development corporation (NSDC) has signed an agreement with the Central Bank

of India (CBI) by virtue of which students at NSDC-funded institutions can avail skill loans from the

CBI. Discussions are on with other state-run banks on a suitable financing model for vocational

education and training courses that would enable people at the bottom of the pyramid to enroll at skills

development centers in larger numbers. NSDC Partners in many instances have also entered into

arrangements with corporate groups on enterprises refunding the course fee of trainees after a certain

minimum year of service in those enterprises

(Source: FICCI-Ernst & Young: Knowledge Paper on 'Strategic and Implementation Framework forSkill Development in India. September, 2011)


Table 2 : Joint initiative of NSDC and CBI


(Source: FICCI-Ernst & Young: Knowledge Paper on 'Strategic and Implementation Framework forSkill Development in India. September 2011)

2.2. Private Sector Investments

The private sector has been taking various initiatives on its own and in collaboration with the

government and international entities, to upgrade in-house training facilities and also to provide training

to potential employees to make them job ready.

Many large corporations like Larsen & Toubro, Bharti Group, Hero Group, Maruti, ITC,

Infrastructure Leasing & Finance Services Ltd. Etc., have established training facilities that offer world

class training programs that create an environment of e-learning and innovation A lot of private sector

companies are investing into the skill development of the work force Tata Motors contributes to skill

development through a four pronged approach of upgrading existing technical training institutes while

establishing New Technical training Institutes through public private partnership. They also provide

special technical training to the economic and the socially disadvantaged, through social partnerships

and in-house training.



(Source: FICCI-Ernst & Young: Knowledge Paper on 'Strategic and Implementation Framework forSkill Development in India. September 2011)

2.2.1 IL&FS education has a joint venture with NSDC called the IL&FS Skills Development

Corporation (ISDC), established with an objective to build and manage 100 multi skill schools

across India. ISDC aims to train around 2 million people (over the next 10 years) across various

skill sectors including textiles, engineering, construction, leather, auto and various service

sectors. ISDC plays a major role in addressing India's demand for highly skilled workers.

2.2.2 Fiat India has launched a social initiative, 'Diksha' for providing technical training and

educational avenues for the Indian youth. The company came together with the Don Bosco

Vyawasaik Prashikshan Kendra in Pune for beginning this initiative. The main aim behind this


Table 3.1 : Private Sector Investments - Manufacturing Sector

Table 3.2 : Private Sector Investments - Services Sector


programme is provide a respectable means of livelihood for the poor, disadvantaged and

orphans who are deprived from having good educational amenities.

2.2.3 Bharti-Walmart in partnership with the Directorate of Employment Training and Karnataka

Vocational Training and Skill Development Corporation has launched the Bharti Walmart Skill

Centre at Bangalore. The skill centre will train 100 candidates every month and make them

eligible for employment in the retail sector. The programmes are of weeks' durations and will

award certificates for floor assistants, sales assistants and team leaders to participants. Bharti-

Walmart runs similar centres in Delhi and Amritsar in partnership with the Punjab and Delhi

Governments.

2.2.4 OP Jindal Group gives the OP Jindal scholarship services for engineering and management

institutes in India. The scholarships aims to identify meritorious post graduate/graduate

students who emulate Shri OP Jindal's vision and values and have the potential to become

leaders in entrepreneurial and innovation excellence.

2.2.5 The Mahindra Pride School provides vocational training to the youth from socially and

economically disadvantaged communities, giving young people from scheduled castes and

scheduled tribes access to skills that empower them to earn a livelihood for themselves and for

their families. It offers three- month training programs in hospitality, customer relationship

management, and IT-enabled services. Each student also receives training in English, Life

Skills, and Computer Applications. It coordinates its training programs with the skill

manpower requirements of booming sectors with high growth potential to make sure that all the

students find rewarding employment after completing the courses.

2.2.6 Volkswagen India focuses on employment and education initiative for locals - training, skill

development and activities related to economic empowerment of local people and this includes

donations and sponsorships, especially in local communities in the Khed district, local people

in the state of Maharashtra and at national level. Through all these activities Volkswagen India

would ensure sustainable partnerships in shaping the communities where its employees live

and work.

2.2.7 Hero Mind mine, part of the Hero Group, is one of the India's premier and leading organizations

providing Training and Development services to Multinational corporations, Indian blue-chip

clients and Government. It brings in best practices and deep local knowledge to each of its

engagements, through global alliances and partnerships with a reputed Indian training

organization with decades of experience.



3. International Collaborations

3.1 The UK India Skills Forum (UKISF) established in April 2002 is an initiative led by the UK

India Joint Economic and Trade Committee (JETCO). It provides a platform for organizations

across the technical and vocational education sectors in UK and India, to tap the business

opportunities in the sector by exchanging ideas for delivery of skills training by collaborations

between the two countries. The UK India Business Council (UKBIC) acts as the secretariat for

the UKISF and the first point of contact for the UK skills providers, while the FICCI acts as the

main point of contact for Indian skills providers. The UKISF works closely with UK Trade and

Investment (UKTI). Opportunities shared among the UKISF members are made available

through UKTI's free Business Opportunities alert service. Other services of the UKISF include

UKBIC's Online Sector Service, and UKTI's Overseas Market Introduction Service (OMIS).

Efforts are being made to make the forum more active to foster the partnerships between UK and

Indian Institutions. Two meetings of UKISF were organized in April and September. The UK -

India Skills Forum Awards 2011 were announced in 4 categories in 2011. FICCI is coordinating

the working group under JETCO. The FCCI is also exploring the possibilities of partnerships to

promote UKIERI 2, UKCES - NSDC partnerships.

3.2 Germany, a pioneer in the manufacturing industry has been providing both financial and

technical assistance to India since 1958 through Ministry of Economic and Cooperation.

Institutes like Foremen Training Institute (FTI), Bangalore; National Instructional Media

Institute, Chennai or the Central Staff Training and Research Institute (CSTARI), Kolkata were

all set up with assistance from Germany. Presently the German side has suggested setting up

'Vocational and Educational Training' in India based on the 'Dual Education' system in

Germany. A meeting of the Indo-German Joint Working Group on Vocational Education and

Training saw a consensus on creating a Public Private Partnership on the pattern of the German

Dual system. German assistance would be received for up gradation of the vocational training

centers and development of competency standards. The National Occupation Standards was

established several decades ago in Germany and has been constantly subject to change, in light

of the changing market dynamics. Several countries have modeled their policies on these

Standards.

3.3 A joint statement issued in the meeting of Indo-German Joint Commission on Industrial and

Economic Cooperation emphasized on the potential for German Companies to invest more in

India and take advantage of the enormous business opportunities available in India. It

emphasized on the robust growth in the Indian manufacturing and industrial sectors providing a



good base for Indo- business joint ventures, given Germany's proven performance in the

manufacturing sector. Further emphasis was laid on how German companies can enhance their

global competiveness by leveraging India's skills in the service sector. In this regard the

German side has suggested to set up 'Vocational and Educational Training' in India based on the

'Dual Education' system in Germany. Recently leading German Automobile Volkswagen

started an apprenticeship program in India based on the dual system of vocational education

and training in Germany.

3.4 Australia is also collaborating with India in various skill development initiatives so as to share

expertise and experiences. This is facilitated through the new bilateral Australia India

Education Links website. The website is an information portal which supports education and

training collaborations between Australian and Indian education and training institutions,

business and industry. A forum for facilitating linkages in the skills area is the Bureau for

Vocational Education and Training Collaboration (BVETC), established by Australia and India

in 2010. The BVETC meets regularly to consider collaboration proposals from the vocational

education and training sector and provide advice on the best ways to achieve successful

partnerships between the countries. Recently Senator Chris Evans, Australia's Minister for

Tertiary Education, Skills, Jobs and Workplace Relations, announced closer collaboration with

India to train skilled labour for mining and construction, to satisfy manpower demand for its

booming industry. The training will be accredited by Australian Agencies. Chris Evans said that

it will support Australia and India in building a 'highly- skilled and well-trained workforce'.

3.5 India and U.K also have together undertaken several collaborations and initiatives on skills

development. The UK India Education and Research Initiative aims to work with a range of

different skills and training bodies to enable participation and facilitation of skill development

requirements in both these countries. It aims to promote long term collaborations between both

the countries on skills development.

3.6 The New Zealand Open Polytechnic is government owned and funded, and delivers distant

learning courses across New Zealand as well as internationally. Over 100 qualifications and

1200 courses ranging from technical, vocational to higher professional and continuing

education courses have been developed in consultation with the industry and other appropriate

professionals. It has adopted internationally proven models for distant learning course design,

student support and quality control. It has also been continuously increasing the range of its

online services and courses.



4. Conclusions

It is concluded that there is strong interrelationship between economic growth, generation of

employment and alleviation of poverty in a developing economy. However, even after economic growth

and inspite of newly generated employment opportunities, people may not get employment because

there may not be vocationalisation of education at the right level and of right kind. This may result into

demand supply gap between existence of employment opportunities and the availability of skills of a

particular kind.

For this, government supported initiatives are required either independently or in cooperation

with private sector ( Public Private Participation, PPP) and international developmental agencies. It is

then required that the government bodies collect and provide all information about the skill requirements

and strength of human resources in a particular area or industry to the concerned agencies and industries'

associations and seek their support and cooperation for tapping the employment potential to the fullest

extent. For this, international collaborations may be studied by the funding agencies including

government and the results shared in public domain. At the same time, it is the obligation of the industry

and its associations to estimate demand -supply gap in the relevant and communicate it to the concerned

agencies for skill development in a certain area for tapping the employment potential to the maximum.

References

1 Dunbar, Muriel, DFID (Department for International Development) “Engaging the private

sector in skills development (Guidance note: A DFID practice paper )

2 DFID (2008) Jobs, Labour Markets & Shared Growth: 3. The Role of Skills. A DFID

Practice Paper

3 International Labour Office, 2010 “A Skilled Workforce for Strong, Sustainable and

Balanced Growth: A G20 Training Strategy” Geneva

ISBN 978-92-2-124278-9 (Web pdf)

4 ILO (2007) Portability of Skills

http://www.ilo.org/public/english/region/ampro/cinterfor/nqf/gb_esp3e.pdf

5 John, Nitin, Skills Development, (SECTOR PROFILE)', Federation of Indian Chambers of

Commerce and Industry (FICCI)

www.ilo.org/publns


http://www.ilo.org/publns

Abstract

The state of Indian agriculture sector is far from satisfactory. It is facing several challenges; be

it drought, scanty rainfall, new pests, diseases or farmer suicides. The comparison in terms of yield levels

with other countries is not creditable as it is ranked much lower. It is important for us to use agriculture

biotechnology to increase our food production to feed the growing population. The significance of

transgenic crops lie in the fact that it increases crop yield and reduces crop loss by making plants

resistant to pests, weeds, herbicides, insects, viruses, salinity, temperature, weather and other forms of

environmental stress. GM crops are the most studied crop ever produced. The success of Bt cotton in

India is an excellent example. But Precautionary bio-safety policies have kept these crops out of the

hands of farmers. Transgenic crops should be given a chance in India to help solve the country's food,

agriculture and human security challenges.

Key words : agricultural biotechnology, transgenic crops, yield, bt.cotton, environment, farmers

1. Introduction

Agriculture in India is facing several challenges; be it drought, scanty rainfall, new pests,

diseases or farmer suicides. The 2011 Global Hunger Index report of the International Food Policy

Research Institute, Washington, has placed India at 67 out of 81 countries, even below Pakistan, Nepal,

Rwanda and Sudan. Indian government has mooted an ambitious Food Security Bill which will require

over 65 million tonnes of additional food grain procurement.

The area under cultivation is not likely to increase from the present 142 million hectares.

Therefore any increase in food production will have to come from increased productivity. The food

security of the country should be through self-sufficiency in agriculture and home-grown food and not

through imports. To feed a billion-plus population of our country by relying on conventional methods of

cultivation is next to impossible. The agriculture sector of India is in peril. Although it had achieved self-

sufficiency in food grains but the growth rate of Indian agriculture for the last two decades is lagging

behind its potential. (V.K.G.B. 2012).

2. Aim of the study

Biotechnology and the new science of genomics, gives us new insights into how genes function


BIOTECHNOLOGY AND AGRICULTURAL DEVELOPMENT

1Akram A. Khan

2Mohd Farhan

1. DR. AKRAM A. KHAN (ASSOCIATE PROFESSOR), DEPT. OF AEBM, FACULTY OF AGRICULTURAL SCIENCES, ALIGARH MUSLIM UNIVERSITY.2. MOHD FARHAN (RESEARCH SCHOLAR) , DEPT. OF AEBM, FACULTY OF AGRICULTURAL SCIENCES, ALIGARH MUSLIM UNIVERSITY.


but we have not been able to fully utilize the potential of safe and modern agriculture technologies to

address the various challenges faced by our farmers to improve productivity. It is important for us to use

agriculture biotechnology to increase our food production to feed the growing population. Given the high

level of poverty, malnutrition and hunger and the low level of agricultural productivity in India, GM

technology has great potential to offer solutions. Biotech crops have been cultivated globally for the

past 16 years with no negative impact on human beings, animals and environment. However, in India,

Agricultural biotechnology is not widely practiced. India, which allowed commercial cultivation of Bt

cotton in 2002 has imposed a moratorium on Bt brinjal since February 2010.The success of Bt cotton has

set an excellent example in the past decade as to how GM technology can turn around our agriculture

sector. This success needs to be replicated for other crops. The US (The United State of America)

continues to be the leading producer of GM crops globally. But the Indian policies towards it have not

been encouraging. Bt. brinjal has passed all the regulatory procedures of the government of India and yet

the government has imposed a ban on its cultivation. This has put a question mark on the future of GM

foods in India (Bandopadhyay, R. et al., 2012).This paper is attempts to highlight the contribution of

Agricultural biotechnology in agricultural development and also review its impact on the environment

and farmers.

3. Need of Transgenic Crops in India

Indian agriculture is suffering from low productivity. Farmers in India are facing pre and post

harvest crop losses due to insects, diseases, weeds, and droughts which has resulted in low and

fluctuating yields as well as risks and fluctuations in incomes and food availability. There has been a loss

of dynamism in the agriculture and allied sectors in recent years. A gradual degradation of natural

resources through overuse and inappropriate use of chemical fertilizers has affected the soil quality

resulting in stagnation in the yield levels. Public investment in agriculture has declined and this sector

has not been able to attract private investment because of lower and unattractive returns to rejuvenate

agriculture and improve farm income (Economic Survey 2007-08). Though India is one of the leading

producers of many major crops in the world like rice, wheat, pulses, sugarcane, spices, and plantation

crops, the comparison in terms of yield levels is not creditable as it is ranked much lower in many of these

crops. Low yield per unit area across almost all crops has become a regular feature of Indian agriculture,

“Table.1”. For example, the estimated yield of paddy per hectare in 2010 was less than that of world

average and only about a third of Egypt, which had the highest yield level in the reference year. Similarly,

in wheat, India had average yield slightly lower than the global average and about one- third of the

highest level estimated for the UK in 2010. For coarse grains, Indian yields are one- third of the global

average and about one-eighth of USA yield.

Akram A. KhanMohd Farhan


S.No. Countries Wheat Yield

Countries Rice Yield

Countries Coarse Grain Yield

1 U.K. 7.7 Egypt 9.4 USA 9.0 2 Germany 7.3 USA 7.5 Italy 7.6 3 France 7.0 Peru 7.3 France 7.2 4 Denmark 6.6 Uruguay 7.1 Egypt 6.5 5 India 2.8 India 3.3 India 1.2 World 3.0 4.9 3.6

Table 1International Comparison of Yield (Selected Commodities for 2010)

(Metric Tonnes / Hectare)

Source: FAO Statistical Yearbook 2012

Since there has been enormous increase in Indian population, it is estimated that India would

need an additional 50 MT of food grains over next 10 years to meet the domestic demand (IARI). Hence,

the country faces the stiff challenge of feeding its growing population. As a result of fall in per capita food

availability and other factors including increase in population, food security situation is expected

worsen in upcoming years particularly 2050 and thereafter,

4. Significance of Transgenic Crop in Agricultural Development

The significance of transgenic crops significance lie in the fact that it increases crop yield and

reduces crop loss by making plants resistant to pests, weeds, herbicides, insects, viruses, salinity,

temperature, weather and other forms of environmental stress. The most important trait is Herbicide

tolerance (Padgette, S. R. et al 1996; Devine, M. D. 2005).The second most important agronomic trait is

insect resistance leading to decreased use of insecticides (Brookes, G. and Barfoot, P. 2006). The cost of

accessing transgenic technology worldwide in 2006 was US$2687M, leaving farmers worldwide with

net benefit of US$6915M. Of these totals, farmers in developing countries paid only US$742M for the

technology and achieved benefits of US$3713M, ( .In India, conventional

cotton consumed more pesticide than any other crop. In 1998, the total pesticide market of India was

US$770 million and approximately 30% (US$ 231million) of the total pesticide was used in cotton

production. In 2006, the total pesticide market of India increased to US$900 million but cotton

insecticide market decrease from 30% to 18%.This difference was approximately US$162 million.

4.1 Protecting the Environment

GM crops have contributed to a reduction in greenhouse gases and helped in mitigating the

climate change in two principal ways. Firstly it has resulted in permanent savings in carbon dioxide

(CO2) emissions through reduced use of fossil-based fuels associated with fewer insecticide and

Brookes and Barfoot, 2008)


http://onlinelibrary.wiley.com/doi/10.1111/j.1467-7652.2010.00565.x/full


herbicide sprays .Secondly by providing a better environment by saving 473 million kg active

ingredients of pesticides; in 2011 alone reducing CO2 emissions by 23.1 billion kg, conserving

biodiversity by saving 108.7 million hectares of land, ( 12). Besides, no-till farming better

conserve topsoil then conventional farming by ,reducing soil erosion and increase the storage of organic

matter in the soil, which help to retain soil moisture (Christoffoleti et al., 2007). It has increased the

population of earthworm and allowed the growth of natural fungi on plant roots which produce

glycoprotein that maintain proper quantity of carbon in the soil. When heavy tillage equipment is no

longer driven over minimum-tillage fields, large topsoil particles are not ground-down to smaller

particles by abrasion and are able to absorb more rainfall (Wang et al 2008).

4.2 Impact of Transgenic Cotton

From 1996 to 2011, biotech crops contributed to food security, sustainability, and climate

change by increasing crop production valued at US$98.2 billion. It helped in alleviating poverty by

helping 15.0 million small farmers and their families totaling 50 million people who are some of the

poorest people in the world (ISAAA, 2012).

The yield of conventional cotton was approximately 200 kg/hectare between 1980 and 2002 in

India. Introduction of biotech cotton resulted into sharp increase in yield up to 530kg/hectare (since

1980 to 2008), “Fig.1” .Thin line represents trend in production and thick line represents production

yearly. Between 2003–04 and 2006–07 cotton yields in India indicate a significant yield advantage of

more than 30% with Bt cotton in comparison to conventional varieties and also corresponding increase

observed in farm income (Karihaloo & Kumar, 2009) .

5. Progress and Achievements in Biotech Crops

2012 marked an unprecedented 100-fold increase in GM food hectarage from 1.7 million

hectares in 1996 to 170 million hectares in 2012. This 100-fold growth makes GM the fastest growing

ISAAA, 20

Figure 1Represents the Average Cotton yield in India (Kg/ha) between 1980 to 2007.

Source :( ICAC) 2007/08


http://onlinelibrary.wiley.com/doi/10.1111/j.1467-7652.2010.00565.x/full


crop technology adopted in modern agriculture. A growing body of evidence documents increased crop

yields, higher farm income, and health and environment benefits associated with GM crops. In the period

1996 to 2012, millions of farmers in approximately 28 countries worldwide adopted GM crops at

unprecedented rates. GM crops delivered substantial, sustainable, socio-economic and environmental

benefits. Developing countries planted more GM crops (52%) than industrial countries (48%),

see“Fig.2” and “Fig. 3”. This is contrary to the prediction of critics who prematurely had declared that

GM foods were only for industrial countries and would never be accepted and adopted by developing

countries. Economic gains at the farm level of US$78 billion were generated globally by GM crops

during the fifteen year period ,1996 to 2010, of which 40% were due to reduced production costs (less

ploughing , fewer pesticide sprays and less labour) and 60% due to substantial yield gains of 276 million

tons,(Brookes and Barfoot, 2012, Forthcoming). Relatively large numbers of transgenic events have

been approved for cultivation in the developed world as compared to developing countries. This gap in

approvals is unfortunate, because crop biotechnology, if appropriately applied, has the potential to

address key production constraints affecting the poor (Cohen,J.I. et al., 2003).

Figure 2Indian and Global Status of Biotech Crops (Million Hectares)

0

50

100

150

200 Global area

India

Source: ISAAA, 2012

Figure 3Share of Developed and Developing Countries in Biotech Crops (Million Hectares)

0

20

40

60

80

100

1996

1997

1998

1999

2000 1 2 3 4 5 6 7 8 9

10

11

12

developed Countries

D

e

ve

l

op

i

ng

Co

un

t

ri

e

s

Source: ISAAA, 2012



6. Conclusion And Suggestions

Farmers and consumers have benefited from advances in agricultural technology for centuries.

But the most recent innovation, transgenic modification of crops, has generated enormous controversy.

And the fact is that Foods derived from GM crops have undergone more testing than any other food in

history. Before any GM food can enter the market, it has to be exhaustively tested by the developer and

independently evaluated for safety by scientists and experts. The safety assessment is based on a

comparison of the modified food to its traditional (non GM) counterpart in terms of molecular,

compositional, toxicological and nutritional data. Even after these and other questions about the GM

food answered, there are still more steps in the approval process before the GM food can be

commercialized. In fact, GM foods are the most studied food products ever produced. Most of India's

actual policies toward GM crops are far from promotional. Precautionary bio-safety policies are

keeping these crops out of the hands of farmers. Critics of GM crops have been able to work within

India's open and democratic political system to secure a far more cautious approach. By filing law suits

against RCGM (Review Committee on Genetic Manipulation) for authorizing Bt. cotton field trials in

1998 and by sponsoring physical attacks against those field trials, anti- GM activist groups in India have

transformed the bio-safety approval process into a highly politicized and at times paralyzed policy

struggle. RCGM and GEAC (Genetic Engineering Appraisal Committee) have moved slowly on bio-

safety approvals, fearing criticism from anti- GM NGOs. Impact of all this has been a precautionary

approach towards GM crops. On the other hand, our neighbor China has embraced a more permissive

bio-safety policy toward GM crops. One reason has been its greater insulation from the international

influences that seem elsewhere to be promoting caution. Around the globe, GM crop-producing

countries have benefited by improved crop productivity, food security and quality of life. Evidence

shows that GM technology has great potential to improve agricultural productivity and farmers'

livelihoods in developing countries. Transgenic crops should be given a chance in India to help solve the

country's food, agriculture and human security challenges.

Consumers in developing countries like India have more serious food safety risks to worry

about than the still hypothetical consumer risks associated with GM food. Rich and well- fed countries

can afford to invest policy resources to protect against this hypothetical risk; but in India priority must be

given to more clearly demonstrated safety risks such as unsanitary food processing or unrefrigerated

storage and also to more fundamental concerns such as availability or affordability of food. As policy

toward this new technology evolves in the years to come, one may hope that the views of the real

stakeholders; consumers, farmers and rural communities will be heard as loudly as the various and

conflicting opinions of GM crop advocates or opponents from the industrial world. Given both the lack of



global consensus on GMOs and the growing need to regulate GMO products, the US may offer a good

example for India and the rest of the world. It is one of the few developed countries to grow GM crops on a

commercial basis (more than 70 per cent of foods in the US contain GMOs) and is a leader in the safe

application of GMO products.

It is time for the country to realize the importance and potential of biotech crops and to evolve an

effective regulatory mechanism and promote its trustworthiness in the country. Strengthening, not

demeaning the existing regulatory mechanism is the call of the day. Any attempt to discredit scientific

opinion and regulatory process would further jeopardize the prospects of biotech crops and public

confidence in the regulatory system. The current imbroglio caused by Bt brinjal moratorium calls for a

new beginning to address issues of public confidence and trust in biotech crops in a more logical and

systematic manner.

References:

lAmrasinghe,U.A.,Shah,T.,Singh,O.P. (2007) Changing Consumption Pattern ;Implication

ff Food and Water Demand In India.Research report 119,Colombo,Sri Lanka.

lBandopadhyay, R.,Sinha, P. and Chaudhary, B. (2012) 'Is Bt.brinjal ready for future crop?-A

critical study', Indian Journal of Biotechnology, 11, 238-240.

lBennett, R., Morse, S. and Ismael, Y. (2006) 'The Economic Impact of Genetically Modified

Cotton on South African Smallholders: Yield, Profit And Health Effects. J. Dev. Stud. 42,

662–677.

lBhaduri A., Amarasinghe U. and Shah, T. (2006) Future of Food grain production in India.

Draft paper, NRLP-IWMI (Online) Available; http://nrlp.iwmi.org(accessed 2 April 2013)

lBrookes, G. and Barfoot, P. (2008) 'Global impact of biotech crops: socio-economic and

environmental effects 1996–2006', AgBioForum 11, 21–38.

lChristoffoleti, P.J., De Carvalho, S.J.P., Lopez-Ovejero, R.F., Nicolai, M., Hidalgo, E. and

Da Silva, J.E. (2007) 'Conservation of Natural Resources in Brazilian Agriculture:

Implications on Weed Biology and Management', Crop Prot. 26, 383–389.

lCohen, J.I., Quemada, H. and Frederick, R. (2003) Food Safety in Food Security and Food

Trade International Food Policy Research Institute, Washington, D.C., U.S.A:

(Online)Available;http://www.ifpri.org/publication/food-safety-food-security-and-food-

trade?print (accessed 2 Feb 2013)

lCrossan, A. and Kennedy, I. (2004) 'Are there Environmental Benefits from the Rapid

Adoption of Roundup Ready Cotton in Australia', Sydney, Australia: University of Sydney.



Dev,S.M.(2012) Small Farmers in India: Challenges and Opportunities,WP-2012-014,

Indira Gandhi Institute of Development Research, Mumbai

l Economic survey 2007-08

lFAO statistical yearbook 2012.

lFernandez-Cornejo, J. & M. Caswell (2006) The First Decade of Genetically Engineered

Crops in the United States.EIB-11, USDA, Economic research Service.(Online)

Available;www.ers. usda.gov/publications/eib11/(accessed 2 January 2013)

lIARI (2012) Prime Minister, Dr. Manmohan Singh's address at the Golden Jubilee

C o n v o c a t i o n o f I A R I o n 2 0 t h F e b r u a r y 2 0 1 2 . ( O n l i n e ) Av a i l a b l e ;

http://www.icar.org.in/node/4312 (accessed 2 January 2013)

lInternational Cotton Advisory Committee (ICAC) (2007/ 08) (Online) Available;

http://Bt.Cotton.in/Bt.Cotton-at-the-national-level-observed-effects.html (accessed 2

January 2013)

lISAAA (2009) Gm Crops: Global Socio-Economic and Environmental Impacts

1996–2007,(Online)Available;http://www.pgeconomics.co.uk/pdf/2009globalimpactstudy

.pdf (accessed 6 January 2013)

lJames,C. (2012) Highlights Global Status of Commercialized Biotech/GM Crops: 2012.

(Online)Available;http://www.isaaa.org/resources/publications/briefs/44/executivesumma

ry/(accessed 2 February 2013)

lJames, C. (2008) 'Global Status of Commercialized Biotech/Gm Crops', ISAAA Brief 39.

Ithaca, NY, ISAAA.

lKarihaloo, J.L. and Kumar, P.A. (2009) 'Bt cotton in India – A status report (second

edition)',Asia-Pacific Consortium on Agricultural Biotechnology (APCoBA), New Delhi,

India.

lNewell-McGloughlin, M. (2008) 'Nutritionally Improved Agricultural Crops', Plant Physiol.

147, 939–953.

lPaarl berg, R. L. (2000) Governing the GM Crop Revolution Policy Choices for Developing

Countries. International Food Policy Research Institute,2033 K Street, N.W.

lPadgette SR, et al (1995) 'Development, Identification, And Characterization of a

Glyphosate-Tolerant Soybean Line', Crop Science 35: 1451–1461

lRao, NC and Dev, S.Mahendra (2010) 'Biotechnology in Indian Agriculture: Potential

Performance and Concerns', Academic Foundation, New Delhi

l



V.K.G.B (2012) State of Indian Agriculture Report 2011-2012 (Online) Available

http://win2vin. wordpress.com/2012/03/13/state-of-indian-agriculture-report-2011-

2012/(accessed 3 January 2013)

lWang X., et al (2008) 'Modelling The Impacts of Soil Management Practices on Runoff,

Sediment Yield, Maize Productivity, And Soil Organic Carbon Using APEX. Soil & Tillage

Res 101, 78-88.

l


Abstract:

India has recently emerged as a major political & economic power in the world. The financial

crisis that engulfed the world in 2008 needed developing countries like India to lead the rescue and

recovery, instead of G7 westerns countries who dealt with such crisis in the past. Recently, discussions

and negotiations are going amongst G20 countries regarding a new global financial architecture (G-20

Summit, 2008). The outcome whatever has happened till date and how it will affect the relevant

industries in India has been taken a focal study and has been recommended with a notional trends that

how could it a gear up for a public interest issue through the actuarial profession in the country. Its

overall Incremental trends with more intrusive and costly regulations and red tapes how could help has

also been considered in accordance with (Economic Survey 2009-10).

The objective of this paper is to study the perception of higher level authorities in Insurance

sector regarding the role of regulator in minimizing the impact of global financial crisis. The primary

data has been collected from 200 authorities in insurance industry. The data has been analyzed with

statistical tools like MS-Excel.

On the basis of the findings, various measures and policy recommendations for insurers have

been suggested to minimize the impact of crisis.

Keywords: Global financial crisis, regulatory framework, IRDA, de-regulation, Insurance

securitizations, risk transfers.

1. Introduction

It was found that the current global economic crisis had a major impact on insurance companies

all over the world. In 2008, global Life insurance premiums declined by 3.5% to US$ 2,490 bn. This de-

growth was triggered by a 5.3% decline in Life insurance premiums growth (as against a 4.4% growth

recorded in 2007) in the industrialized countries (Yalman, 2008). The financial crisis and the global

economic downturn severely affected sales of unit-linked products, particularly single premiums,

causing a strong decline in overall premiums in Western European countries like UK, Italy and France

where unit-linked products are quite common (Rangarajan, 2008).

However, the global financial crisis has not had a major impact on the Indian Life insurance


THE GLOBAL FINANCIAL CRISIS AND THE ROLE OF REGULATORIN MINIMIZING ITS ADVERSE IMPACT ON

INDIAN INSURANCE INDUSTRY 1Anis ur Rehman

2Yasir Arafat Elahi

1. Anis ur Rehman is Assistant Professor, Department of Business Management, Integral University, Lucknow, U.P., India.2.Dr. Yasir Arafat Elahi is Assistant Professor, Department of Business Management, Integral University, Lucknow, U.P., India.


sector. This was primarily due to stringent guidelines laid down by the IRDA on solvency margins as well

as investment norms for the industry players to follow (Reserve Bank of India, 2008). Domestic life

insurers are subject to solvency requirements, which stipulate them to maintain a minimum solvency

ratio of 150% (Union Budget, 2010-11). This ensures that life insurance companies remain well

capitalized at all points of time. In addition, IRDA has stringent guidelines regarding the investment of

policyholders' funds. These guidelines cover a gamut of risk management issues for individual

companies as well as the industry including defining acceptable quality of investment and set limits on

permissible exposure to single asset class. IRDA's investment guidelines restrict life insurance

companies from investing in global markets. Thus, the industry does not have any exposure whatsoever

to the international credit instruments. As a result, Indian Life Insurance companies remained relatively

insulated from the financial crisis plaguing the global markets (Jayashree, 2008).

2. Financial crisis and Regulation

As with previous crises the fundamental cause of the ongoing financial turmoil was an

overextension of credit and a mispricing of risk. The crisis has been blamed on short-comings of the

regulatory regime among other reasons. Depending on one's view point, the finger has been pointed at a

lack of regulation (or de-regulation), ill-devised regulation or over-regulation. Given the scope and

complexity of this financial crisis, there is probably some truth in all of these (Dao, 2005).

When tackling regulatory reforms, policy makers need to take into account that the business

model of insurance differs substantially from that of other financial services providers. Insurers are

funded by advance premium payments unlike banks, which rely mainly on short-term deposit or short-

term credit funding. In most cases, they cannot be withdrawn on demand or prematurely – exceptions are

certain life insurance policies (Associated Press, 2004).

Even for life policies, there are generally early-withdrawal penalties, making withdrawal

expensive and less likely. Therefore, traditional insurers are much less susceptible to – or may they

originate – a 'liquidity panic'. In addition, insurance risks represent a high proportion of the risk profile of

insurance companies. They are diversified and to a large extent, uncorrelated with market risks. The

impact of a market crash is partly mitigated compared with banks where the portfolio of outstanding

loans is correlated with general economic conditions (Blair, 2007).

Insurers are infrequently exposed to margin calls at times of rapid market declines, since the

industry rarely uses leverage to enhance investment returns. The long-term investment horizon of

insurers usually has a stabilizing effect in the market environment.

Finally, insurance-linked securitization (ILS) differs from bank securitization in the type of risk

transferred, since the underlying risks are typically not financial or market risks (e.g. exchange or interest

Anis ur RehmanYasir Arafat Elahi


rate, credit, price) but are related to the likelihood of non-financial events. ILS has so far withstood the

financial crisis.

2.1 The Impact of the Financial Crisis on Insurers

Conventional insurers entered the crisis in a comparatively strong position. The specific

characteristics of the insurance business model have protected the industry from the worst impacts of the

financial turmoil. However, the insurance industry is not immune to the effects of the current crisis. The

main reason is declining asset values and its effect on the value of their investment portfolios. Specific

lines of business, like directors and officers (D&O) and errors & omissions (E&O) insurance, are also

likely to be affected by rising claims. The sale of insurance products – in particular new unit linked

business in life - is expected to fall due to the economic slowdown (Naveen, 2008). With macro-

economic conditions deteriorating at the global level, insurers will not be able to escape the negative

consequences of recession in key markets. Some large, complex financial companies were confronted

with losses that originated in their banking divisions and have had to be rescued by governments, in

common with other banks presenting a systemic risk. Financial insurance in particular bond and

mortgage insurers, have correlated risk portfolios and have experienced a significant rise in credit

defaults (Prasad, Eswar, Rajan and Subramanian, 2007).

3. Research Methodology

The Research methodology adopted for this study has been described below:

Objectives of the Study

The main objectives of this study are following:

1. To study the impact of the financial crisis on insurers.

2. To analyze the implications of financial crisis for the insurance industry.

3. To study the perception of higher level authorities in Insurance sector regarding the role of

regulator in minimizing the impact of global financial crisis.

4. To suggest measures and policy recommendations to be followed by insurers to minimize the

impact of crisis.

Process Adopted

In order to gain knowledge about the Insurance market, reading about the Insurance market was

the first step undertaken. This gave not only in depth knowledge about what is been offered but also

proved useful while developing the questionnaire. The main instruments required for survey was a well-

developed questionnaire.

The whole research is based on primary data as well as secondary data. Primary data was

THE GLOBAL FINANCIAL CRISIS AND THE ROLE OF REGULATORIN MINIMIZING ITS ADVERSE IMPACT ON INDIAN INSURANCE INDUSTRY


collected through questionnaire from the employees of various insurance companies. Secondary data

was collected through the magazines, newspapers, insurance companies catalogue, etc. The data was

collected from 200 respondents. The selected respondents were higher level authorities of Insurance

Industry not below the rank of managers. Out of 200 respondents, 88 respondents (44%) were employees

of Public sector companies whereas 112 respondents (56%) were employees of Private sector

companies. The sampling Technique used was Judgemental sampling.

Limitations

1. A higher number of questionnaire surveys from managers in insurance industry would have

increased the credibility of results from the survey analysis.

2. Primary data might not be too realistic and may suffer from personal biases of the

respondents. Also, the managers were having very busy schedule because of which they

were reluctant to give appointment.

3. The research also suffered from regional limitations as the research was limited to Uttar

Pradesh. Although, telephonic interviews were conducted and e-mails were sent in different

cities, the collected data holds a greater percentage of respondents from Uttar Pradesh.

4. Data Analysis

Q.1 Do you agree that global financial crisis has affected the Indian Insurance industry?

Fig. 4.1. Authorities perception about global financial crisis affecting the Indian Insurance industry

Interpretation: The data suggests that majority of respondents (48%) disagree that global financial crisis has affected the

Indian Insurance industry.



Q.2. Do you agree that regulator (IRDA) must introduce reforms to enhance customers trust in the

insurance industry?

Fig.4.2. Authorities perception about Regulators introducing reforms to enhance customers trust

Interpretation: The data suggests that majority of respondents (47%) agree that regulators must introduce reforms to

enhance customers trust in the insurance industry

Q.3. Do you agree that IRDA has stringent guidelines regarding the investment of policyholders

funds?

Fig.4.3. Authorities perception about IRDA stringent guidelines regarding investment

Interpretation: The data suggests that majority of respondents (75%) agree that IRDA has stringent guidelines regarding

the investment of policyholders funds.



Q.4. Does the Indian insurance industry have any exposure whatsoever to the international

credit instruments ?

Fig.4.4. Authorities perception about Indian insurance industry exposure to the International credit

Interpretation: The data suggests that majority of respondents (82%) say Yes to the statement that Indian insurance

industry has exposure whatsoever to the international credit instruments.

Q. 5. While formulating policies to minimize the impact of global financial crisis, should the regulator

(IRDA) take into account the fact that the business model of the insurance industry differs substantially

from that of other financial services sectors?

Fig.4.5. Authorities perception about Regulators should take into account the fact that the business model of the insuranceindustry differs substantially from that of other financial services sectors

Interpretation: The data suggests that majority of respondents (69%) say Yes to the statement that while formulating policies

to minimize the impact of global financial crisis, the regulators should take into account the fact that the business model of the

insurance industry differs substantially from that of other financial services sectors.



Q. 6. Do you agree that compliance frameworks can meet new regulator demands on insurers whose

financial stability is questionable.

Fig. 4.6. Authorities perception about Compliance frameworks to meet new regulator demands

Interpretation: The data suggests that majority of respondents (50%) agree that compliance frameworks can meet new

regulator demands on insurers whose financial stability is questionable.

Q. 7. Do you agree that independent and structured testing is necessary to ensure that regulatory

framework and models are functioning as intended?

Fig.4.7. Authorities perception about Independent and structured testing

Interpretation: The data suggests that majority of respondents (47%) say Yes to the statement that independent and

structured testing is necessary to ensure that regulatory framework and models are functioning as intended.



Q. 8. Do you agree that the well positioned and prepared organizations are able to capitalize on the

dislocation in the market?

Fig.4.8. Authorities perception about well positioned organizations ability to capitalize

Interpretation: The data suggests that majority of respondents (67%) say Yes to the statement that the well positioned and

prepared organizations are able to capitalize on the dislocation in the market.

Q. 9. During the times of global financial crisis, insurance organizations need to protect their assets

and capital base, maintain liquidity, and mitigate the exposures to losses that may be developing?

Fig.4.9. Authorities perception about Insurance organizations mitigating the exposures to losses

Interpretation: The data suggests that majority of respondents (71%) say Yes to the statement that during the times of global

financial crisis, insurance organizations need to protect their assets and capital base, maintain liquidity, and mitigate the

exposures to losses that may be developing.



5. Findings

The main findings of the study are given below:

1. Majority of respondents (48%) disagree that global financial crisis has affected the Indian

Insurance industry.

2. Majority of respondents (47%) agree that regulators must introduce reforms to enhance

customers trust in the insurance industry.

3. Majority of respondents (75%) agree that IRDA has stringent guidelines regarding the

investment of policyholders funds.

4. Majority of respondents (82%) say Yes to the statement that Indian insurance industry has

exposure whatsoever to the international credit instruments.

5. Majority of respondents (69%) say Yes to the statement that while formulating policies to

minimize the impact of global financial crisis, the regulators should take into account the fact

that the business model of the insurance industry differs substantially from that of other

financial services sectors.

6. Majority of respondents (50%) agree that compliance frameworks can meet new regulator

demands on insurers whose financial stability is questionable.

7. Majority of respondents (47%) say Yes to the statement that independent and structured

testing is necessary to ensure that regulatory framework and models are functioning as

intended.

8. Majority of respondents (67%) say Yes to the statement that the well positioned and prepared

organizations are able to capitalize on the dislocation in the market.

9. Majority of respondents (71%) say Yes to the statement that during the times of global

financial crisis, insurance organizations need to protect their assets and capital base,

maintain liquidity, and mitigate the exposures to losses that may be developing.

6. Recommendations

The following measures should be considered to strengthen the role of regulator in minimizing

the impact of financial crisis:

1. Government policies should provide incentives for sound risk and capital management.

2. Large complex financial institutions (LCFI) have to be supervised in their entirety

3. Regulators must step up their efforts to achieve convergence with accounting standards.

4. Much greater transparency is needed for structured financial products.

5. Policy makers reacting to the financial crisis need to take into account that the business



model of the insurance industry differs substantially from that of other financial services

sectors.

6. As the regulatory environment in financial services is being redefined, it is recommended

that new legislation should be targeted, balanced, and calibrated by the expected impact it

will have on the economy. It should also enhance the working of existing regulations,

safeguard the level playing field, and further enhance global consistency.

7. IRDA needs to identify which activities and products need to be regulated and how extensive

the regulation needs to be. It is widely agreed that both unregulated participants, such as non-

bank lenders, and unregulated instruments, such as credit default swaps, have contributed

significantly to the current financial crisis and that any changes to the existing systems need

to address these issues.

8. The government should allow regulators to adapt to market changes as they arise and include

mechanisms for evaluating new market risks.

9. The government should provide regulator with independence from inappropriate influence,

sufficient prominence and authority to carry out their mission and require accountability for

meeting the stated goals.

7. Conclusion

The financial crisis is likely to lead to a redefinition of the role of regulator in the insurance

industry, at national, regional and global levels. In this process, the insurance industry has to be a credible

voice to make sure that policy makers understand the distinctive features of insurance and the potentially

negative consequences of hastily prepared and ill devised intervention and regulation. A close dialogue

between politicians, regulators, insurers and other market participants ensures that we draw the right

lessons from the current crisis. Such a dialogue is key to ensure that reforms make regulatory systems

more resilient and internationally consistent. Ultimately, any reform must act to enhance customers' trust

in the insurance industry.

IRDA has stringent guidelines regarding the investment of policy holders' funds. These

guidelines cover a gamut of risk management issues, including defining acceptable quality of

investment, and set limits on permissible exposure to a single asset class, security, company as well as

industry.

8. Bibliography

1. G-20 Summit (2008) “Financial Markets and the World Economy” held in Washington on

15th November 2008.



2. Government of India, Ministry of Finance 'Economic Survey 2009-10' New Delhi.

3. Government of India, Ministry of Finance 'Union Budget for 2010-11' New Delhi.

4. Henry, Peter Blair (2007), “Capital Account Liberalization: Theory, Evidence, and

Speculation”, Journal of Economic Literature, Vol. XLV, December.

5. http://164.100.24.207/inputprogram/lecturefiles/Dr.C_Rangarajan.pdf

6. http://consumerwatchdog.org/insurance/pr/pr004625.php3.

7. http://rajyasabha.nic.in/rsnew/publication_electronic/glob_ecocrisis2009.pdf

8. http://www.consumerwatchdog.org/healthcare/rp/rp003103.pdf.

9. ht tp: / /www.drnarendrajadhav. info/drnjadhav_web_fi les/speeches/Global

%20Economic% 20 Dynamics%20-%20Indian% 20 Industry.pdf

10. James Dao, “A Push in States to Curb Malpractice Costs,” New York Times, Jan. 14, 2005.

11. Onaran Yalman (2008).Subprime Losses Top $ 379 Billion on Balance Sheet Marks: Table

From<http://www. Bloom berg. com>

12. Prasad, Eswar S., Raghuram G. Rajan and Arvind Subramanian (2007), “Foreign Capital

and Economic Growth”, Brookings Papers on Economic Activity, 1.

13. Rangarajan.C. (2008) ''The financial crisis and its ramifications'', The Hindu, Nov, 8, 2008.

14. Reserve Bank of India (2008) 'Macroeconomic and Monetary Developments in 2008-09',

Mumbai, April 20, 2009.

15. Reserve Bank of India 'Handbook of Monetary Statistics of India', Mumbai

16. Reserve Bank of India (2008) 'Handbook of Statistics on the Indian Economy', Mumbai

17. Sadhu Naveen (2008). Global financial crisis: The Story so far. From

<http://indiaequity.wordpress.com>

18. Sengupta Jayashree (2008). The financial crisis and its impact on India. From http://www.

observerindia. com

19. “State report says malpractice claims fell,” Associated Press, November 5, 2004.


Abstract:

The study primarily aims to discover the role of microfinance in enhancing the index of Gross

National Happiness (GNH). To do highlight in connection with, microfinance is linked with one of the key

indicators of GNH i.e., the living standards of the poor. Microfinance apparently known as one of the

tools of poverty eradication, has been given due consideration by the policy planners across the globe.

During study it is found that the skill of the poor is worthy in multiplying paltry amount of their disposal

and free from the clutches of avaricious moneylenders. Also, the paper focuses on the capability

development of the poor at micro level through the fighting weapon called microfinance for achieving

happiness at individual level. The study overall relies on secondary data obtained from various sources

such as Centre for Bhutan Studies, United Nation's Development Programme, US Census Bureau,

UNICEF, World Bank, Ministry of Rural Development, BDBL, and NABARD and mainly confined to

India and Bhutan and has made a unique sort of study in this direction.

Keywords: Microfinance, Microcredit, Gross National Happiness, Poverty, Human Development,

Living standard, Self-Help Groups and Capability Development

1. Introduction

The proliferation of microfinance can be traced back to the seventies with the introduction of

this concept in Bangladesh by Prof. Mohammed Yunus, the recipient of nobel peace prize in the year

2006. Since then a number of countries have been found adopting this tool to fight against poverty. The

term microfinance is typically meant “banking for the poor”. Its primary focus is on loans, savings,

insurance, transfer services, and other financial services to the low income clients (Khandelwal, 2007). It

is the “provision of thrift, credit and other financial services and products of very small amounts to the

poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living

standards” (NABARD, 2000).

The concept of Gross National Happiness has been found emphasizing more on the inadequacy

of measuring country's economic development through traditional theory called GDP. Apart from GDP,


MICROFINANCE AND GROSS NATIONAL HAPPINESS (GNH) –A STUDY ON THE IMPACT OF LIVING STANDARDS OF THE POOR

1Dr. Purna Prasad Sharma

1. Assistant Professor, Gaeddu College of Business Studies, Royal University of Bhutan. Email: [email protected] Tel no. 00975-17797588(Mob), 00975-05282249(Res)

2. Professor Muhammad Yunus established the Grameen Bank in Bangladesh in 1983; fueled by the belief that credit is fundamental human right. His objective was to help the poor escape from poverty by providing loans on terms suitable to them and by teaching them a few sound financial principles so that they could help themselves. Today the replicas of the Grameen Bank model operate in more than 100 countries worldwide.


the GNH concept has been found underscoring “four pillar” objective approach that is (i) Balanced

Equitable Development, (ii) Environment Conservation, (iii) Preservation and Promotion of Culture and

Heritage, and (iv) Good Governance in line with Millennium Development Goal (MDG) to introduce as

the vital measurement indicators for measuring the overall economic development of a country. Besides,

the four pillar objective approach, the Centre for Bhutan Studies, concatenating with an international

group of scholars and empirical researchers in Bhutan has identified the nine provisional Gross National

Happiness (GNH) indicators in the name of (i) standard of living, (ii) health of the population, (iii)

education, (iv) ecosystem vitality and diversity, (v) cultural vitality and diversity, (vi) time use and

balance, (vii) good governance, (viii) community vitality, and (ix) emotional well being. The present

study has made an attempt to link microfinance with one of the nine provisional GNH indicators that is

standard of living and finds whether microfinance in real terms is helpful in increasing the living

standards of the poor in India and Bhutan.

The term GNH was coined in 1972 by Bhutan's fourth king, Jigme Singye Wangchuk with the

objective of building Bhutanese economy to serve Bhutan's unique culture based on Buddhist spiritual

values. There is no exact quantitative definition of GNH (McDonald, R. 2005) but the elements that

contribute to GNH are subject to quantitative measurement. One of the real instances of GNH would be

low rates of infant mortality that correlates positively with subjective expressions of well being or

happiness within the country. GNH has been viewed to refer to the concept of quantitative measurement

of well-being and happiness. These two measures are motivated by the impression that subjective

measures such as well-being are more relevant and important than more objective measures for instance

consumption. Albeit, the GNH is not measured directly, the prime factors which are believed to lead

happiness are taken into consideration for measurement. GNH has always been projected as a simple

term but the wide range of its scope of defining “happiness to all” has made it slightly complex to operate

practically.

Happiness is often misunderstood by many by dissecting completely from money component. It

has to be understood that a vast majority of the poor are basically from the rural segment and the

fundamental requirement of many is for their survival and not for their materialistic fulfillment.

Happiness has been perceived differently by the different economic strata of the people. The level of

living standard of the poor could well be related with happiness. As the poor increase their living

standards, they acquire happiness. The amelioration of the living standard and subsequently acquiring

happiness by the poor could well be connected with meeting at least the two bottom layers of the needs

such as physiological and safety (Maslow, 1943). Albeit every individual tries to meet the upper layer of

needs, once the lower layer needs are fulfilled

Dr. Purna Prasad Sharma


2. Objectives:

The present study primarily focuses on attaining the following objective:

(i) To study the scenario of human development and living standard of the people in the

developed countries vis-à- vis developing countries such as India and Bhutan.

(ii) To study the impact of microfinance on the living standards of the poor in particular and on

achieving GNH in general.

3. Scope and Methodologies:

The study mainly concentrates on exploring the level of poverty and standard of living of the

poor in two Asian countries that is India and Bhutan. Also, it pores on the role of microfinance, especially

the microcredit on the eradication of poverty as well as increasing the living standards of the poor in these

two nations. Besides, the level of standard of living of the poor is tried to link with achieving happiness at

an individual level in particular and help increasing the GNH index at large. To draw the appropriate

inferences, the study mainly relies on the secondary data collected from the various sources such as

Centre for Bhutan Studies, United Nation's Development Programme, US Census Bureau, UNICEF,

World Bank, Ministry of Rural Development, BDBL, and NABARD.

4. Limitations:

The study is primarily depending on the secondary data obtained from the various sources. A

few data that relate to poverty level of the poor are found to display varying results by the reporting

agencies. The reason may be the lack of uninterrupted updating of data by them. The very recent and

updated data from the reporting agencies have not been found which would otherwise lead to draw the

latest inferences from the study. Lastly, the findings of the study may not portray the global scenario of

the impact of microfinance on the living standards of the poor as it basically concentrates on India and

Bhutan.

5. Performance Analyses/Impact on capability building and Living Standard.

The analyses of the study begin with tracing out of those countries where Human Development

Index (HDI) is high as well as very high and comparing the same with India and Bhutan. The

comparative picture of HDI facilitates to comprehend the position of India and Bhutan in Human

2. Paper presented by Bandyopadhyay, Saugata on the topic “Microfinance in improvement of living standard and Gross National Happiness” in Third International Seminar on GNH in Nongkhai/Bangkok, Thailand, 22-28 November 2007.

3. Longevity is measured by life expectancy at birth.4. Knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross

enrolment ratio; and5. Standard of living by GDP per capita (PPP US$).



Development with those of other countries. The HDI basically discusses the average achievement by a

respective country in terms of longevity, knowledge, and a decent standard of living. At the later part, the

study demonstrates the overall scenario of microfinance and its impact on capability development and

living standards of the poor. The study at the end traces the important aspects of human life that is

happiness and tries to see whether microfinance or more appropriately, microcredit really helps the poor

in increasing their living standard and contributes really in enhancing the index of Gross National

Happiness (GNH).

5.1 The Human Development Index: Country profile

The close analysis of HDI (Table 1.1) reflects the respective country's position with regard to

human development vis-à-vis their population. The developed countries, like Norway top the HDI

ranking with an index figure of 0.955 followed by Australia (0.938) and Netherlands (0.921). All these

countries are found to surpass the overall world HDI of 0.694. The important element that has been

captured in all these highest HDI ranking countries is their population. Besides other factors, the

controlled and minimal population of these respective countries might have helped gaining highest

position in HDI. In addition, the other countries like Mexico (0.775) and Brazil (0.758) also lead the

world HDI and stand at 61st and 85th position respectively.

India remains at 136th position in terms of human development with the vast population of

1,258 millions. The immense population, especially the rural mass with diverse cultural heritage, varied

Country

HDI

Ranking#

Population (in millions)Very high Human Development

Norway

0.955

1

4.9

Australia

0.938

2

22.9

Netherlands

0.921

4

16.7

High Human Development

Mexico 0.775 61 116.1

Brazil 0.758 85 198.4 Medium Human Development

India 0.554

136

1258.3

Bhutan

0.538

140

0.7

World 0.694 - 6984.9

Table 1.1. Human Development Index (HDI): The country profile

Source: Human Development Report, 2012. Published by United Nations Development Programme (UNDP).# Ranking out of 187 countries. ^ US Census Bureau, World population, 2012



lifestyles, fluctuation of economic system, and different issues with respect to health and hygiene pose a

challenge for human development in this country.

Bhutan, however with a total population of 0.7 million ranks 140th in HDI and stands far behind

in human development. The minimal population does not seem to play a major role for human

development in this country. In depth, the problems of the population need to be checked. The genuine

problems of the population, whether it is small or large is well reflected in the living standards and health

and hygiene conditions which are well captured in life expectancy in years (Table 1.2). The life

expectancy in India and Bhutan are at the range of 66 years to 68 years which is quite low when compared

with other high ranked HDI countries which range from 74 years to 82 years. This connotes low level of

standard of living and poor health of the general population in India and Bhutan as compare to the

countries listed in the table. The problem of population is further aggravated when “under 5 years

mortality” rate is considered. This figure stands at 56 per 1000 live births in Bhutan and rising further to

63 per 1000 live births in India as compare to less than 20 per 1000 live births in the rest of the countries as

listed in the table. The Adult literacy rate which is one of the key indicators of human development is

found to stand below the world literacy rate of 88.1 for India (62.8) and Bhutan (52.8).

Table 1.2. Human Development Index (HDI): Key indicators:

Country HDI (Ranking)

#

Health {(Life expectancy at birth)(yrs)}1

Under 5 yearsmortality (per

1,000 live births)2

Adult literacy rate, both sexes (% aged 15 and

above)3

Income {(GNI per capita in ppp terms

(constant 2005 international $)}4

Very high Human Development

Norway 1

81.3

3

n.a.

48,688Australia 2 82.0 5 n.a. 34,340

Netherlands 4 80.8 4 n.a. 37,282High Human Development Mexico 61

77.1

17

93.1

12,947Brazil 85

73.8

19

90.3

10,152

Medium Human Development

India 136

65.8

63

62.8

3,285Bhutan 140 67.6 56 52.8 5,246World - 67.9* 51** 88.1 11,574***

Source: Human Development Index from Human Development Report, 2012, published by United Nations DevelopmentProgramme (UNDP). # Ranking out of 187 countries. *United Nations World Population Prospects, 2010. **Childinfo,Monitoring the system of Children and Women, UNICEF, 2011. *** World Bank Report, 2012.


6. Life expectancy at birth indicates the number of years a newborn infant would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life.

7. Under five mortality rate is the probability per 1,000 that a newborn baby will die before reaching the age of five, subject to current age-specific mortality rates.

8. Adult literacy rate is the percentage of the population aged 15 and above (both sexes) who can, with understanding, read and write a short, simple statement on their everyday life.

9. GNI per capita is dollar value of a country's final income in a year (Gross National Income or GNI), divided by its population. Purchasing Power Parity (PPP) is an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.

10. United Nations Food and Agricultural Organization. (http://www.bread.org/hunger/global/facts.html)

Integral Review- A Journal of Management, Vol. 6 No. 2, December 2013 75

The high rate of early school dropouts, discrimination involved in educating male and female

child, existence of acute poverty in the rural part, and low inclusive growth are some of the reasons

designated for low literacy rate in these two nations. Also, the GNI per capita income is not favouring

much to these two SAARC countries in terms of income value of per individual as compared to other

countries. All these factors unanimously support the prevalence of low standard of living and poor health

of the people in particular and lower HDI in general in these nations.

6. Prevalence of poverty: Country profile

The existence of poverty and its eradication have always been a major concern for the world's

developing regions. Poverty indicates the condition in which a person is not able to have access to the

basic needs of minimum living standards, adequate for his physical and mental development. Poverty is

the outcome of capability deprivation (Sen, 1999). It indicates deprivation of basic capabilities that are

extremely important rather than lowness of income. The main causes of poverty include lack of resources

for the poor, extremely unequal income distribution in the world and specific countries in particular. The

revised standard criterion outlined by the World Bank in 2008 for identification of poverty is the people

living on less than $1.25 per day. The estimation made by the World Bank vindicates that around 25

percent of the population in developing regions lives below the poverty line with a current threshold of

$1.25 a day (United Nations, 2009). Despite the progress in hunger alleviation, the year 2010 witnessed

Table 1.3. Poverty backdrop in high and medium HDI countries

Poverty estimates

Very high Human Development High Human

Development

Medium Human

Development WorldNorway

Australia

Netherlands

Mexico

Brazil

India

Bhutan

Rural population (as % of total population)2011*

21

11

17

22

15

69

64

48.0

Population living below US$ 1.25 a day (%), 2010-2011***

n.a.

n.a

n.a.

1.2 6.1

32.7

10.2 20^

Population living below US$ 2 a day (%), 2000-2009**

n.a. n.a n.a. 9

10

76

50

48

Population living below the national poverty line (%), 2009-10#

n.a

n.a

n.a

51.3

21.4

29.8

23.2 -

Sources: *World Bank, World Development Indicators, 2012. **Population Reference Bureau (PRB), 2011 World Population Data Sheet. ***Human Development Index from Human Development Report, 2012, published by United Nations Development Programme (UNDP). #Central Intelligence Agency, The World Fact book. Retrieved from https://www.cia.gov/library/publications/the- world-factbook/fields/2046.html on 10th April, 2013.Note:^ indicates self calculation from the data retrieved from:(i) www.worldbank.org/en/news/press-release/2008/09/16/new... on 10th April, 2013 and(ii) www.worldometers.info/world-population on 10th April, 2013



approximately 925 million people who were suffering from it which was attributed to a sudden spike in

global food prices and the onset of a worldwide economic crisis. The poverty is very much pervasive in

the African countries. In Asia, along with many other countries, poverty is very much prevalent in India

and Bhutan. More than 20 percent of the people reside below the national poverty line (Table 1.3). Bhutan

witnessed more than 10 percent population living below $1.25 per day whereas this figure stands at 33

percent in case of India.

The poverty scenario gets more aggravated when the threshold limit is increased to $2 per day.

The figure increased up to 50 percent for Bhutan and 76 percent for India which is quite high as compare

to overall world poverty figure (48 percent). With majority of population residing in the rural areas,

(more than 60 percent in both the countries) and comparatively (with urban areas) the existence of low

literacy rate, low standard of living, low inclusive growth and lack of industrialization and transportation

along with corruption and socio economic disparities contributes more towards the prevalence of poverty

in these nations.

7. Impact of microfinance on poverty and living standards of the poor:

Most of the world's poor are found engaging in self employment. The maximum share of their

hard earned money from different micro business set up such as goatery, piggery, poultry, weaving

baskets etc. goes for their basic survival and finally there is no amount left at their disposal to expand their

business and improve their quality of life. Moreover, poverty remains with them mainly because of the

scarcity of financial support from the formal financial institutions. Traditionally, the poor were termed as

“Non-bankable” by most of the formal financial institutions which led to very low inclusive growth.

However, with the passage of time, the government and the policy planners have been found

emphasizing more on designing small financial products that suit the capability development and

eradication of poverty. Apart from introducing small products, effective delivery models are also

designed to guarantee both delivery mechanism and recovery pattern. The success story of microfinance

delivery models, those designed in Bangladesh, has led to the adoption of the models by most of the

countries worldwide to eradicate poverty and enhance the living standards of the poor. About 21 percent

of the Grameen Bank borrowers managed to lift their families out of poverty within about four years of

participation in microfinance programme (Khander, 1998). Among many south Asian countries, India, is

not very new in the field of microfinance whereas Bhutan is at its nascent stage in this field.

7.1. Proliferation of Microfinance in India: Impact on capability development and improvement in

the living standard of the poor

The small scale provision of finance to the poor is not a new phenomenon in India. SEWA, the



oldest microfinance organization in India, was established in Gujarat in 1972, is a trade union that started

first organizing self-employed women in India. Although the concept of Self-help was discovered by

social-development NGOs in 1980, the introduction of SHG Bank Linkage Model by NABARD in1992

and its success in subsequent years of its operation in terms of its outreach and increasing living standard

of the poor has made this model as one of the largest microfinance programmes in the world. The high

repayment rate of more than 80 percent, as claimed by NABARD, is the key feature of this programme.

This indicates clearly the benefit obtained by the poor which not only helps them in increasing their

living standard but also empowered them in different sphere of their life.

The progress of microfinance, under this model (SBLP) as well as through other MFIs in recent

years could be observed from Table 1.4. As on 31st March, 2011, more than 74 lakhs SHGs had saving

bank accounts with an outstanding savings of ` 70.16 billion as against over 41 lakhs of SHGs with

savings amount of ` 35.13 billion as on 31st March 2007, thereby, recording a growth rate of around

Table-1.4: Progress of the Micro-Finance in India

A. SBLP Model

Sl. No.

No of years

Savings A/c with banks as on 31st

March:

Loan disbursed during the year:

Loan outstanding with SHGs as on 31st March:

No. of SHGs (in

lakhs)

Amount

(in billions)

No. of SHGs (in

lakhs)

Amount

(in billions)

No. of SHGs (in

lakhs)

Amount(in billions)

1

2006-07

41.61

35.13

11.06

65.70

28.95 123.662

2007-08

50.10

37.85

12.28

88.49

36.26 170.003

2008-09

61.21

55.46

16.10

122.54

42.24 226.804

2009-10

69.53

61.99

15.87

144.53

48.51 280.385

2010-11

74.62

70.16

11.96

145.48

47.87 312.21

Growth Rate (%)

16.14

20.65

4.22

23.13

13.85 26.52

B.

MFI Model: Profile of Microfinance Institutions

Sl. No.

No of years

Loan disbursed during the year:

Loan outstanding with MFIs as on 31st March:

No. of MFIs Amount

(in billions) No. of MFIs

Amount(in billions)

1

2006-07

334

11.52

550

15.842 2007-08 518 19.70 1109 27.493 2008-09 581 37.32 1915 50.09

4 2009-10 691 80.63 1513 101.48

5 2010-11 469 76.05 2176 106.89Growth Rate (%) 10.15 67.94 35.82 66.93

Source: Compiled from “Status of Microfinance in India”- NABARD Annual Report 2007-08 to 2010-11http://www.nabard.org/departments/pdf/Micro%20Finance%202010-11.pdfhttp://www.nabard.org/pdf/Status%20of%20Micro%20Finance%202009-10%20Eng.pdfhttp://www.nabard.org/pdf/Status%20of%20Microfinance%20in%20India%202008-09_131109.pdfhttp://www.nabard.org/fileupload/DataBank/Publications/Micro%20Finance%20in%20India%20-%202007-08.pdf



16.14 percent and 20.65 percent respectively. Similarly, during 2010-11, the Commercial banks

including Regional Rural banks and Cooperative banks financed a little less than 12 lakhs SHGs with

bank loans of ` 145.48 billion as against around 11 lakh SHGs with bank loans of ` 65.70 billion during

2006-07, registering a positive growth rate of 4.22 percent and 23.13 percent respectively. The positive

growth rate in both of these components indicates a sound proliferation of microfinance in terms of

helping the poor in accessing small finance of their need and enhancing their living standard in the Indian

economy. The loan outstanding figure portrays the fact that in the current year, 2010-11 around 48 lakh

SHGs had the outstanding bank loans of ` 312.21billion as against 29 lakh SHGs with bank loans of `

123.66 billion in 2006-07. A growth rate of around 14 percent were observed in terms of number of SHGs

having outstanding loans with the banks with 27 percent growth in loan outstanding amount over the

period of five years. The positive growth rate of loan outstanding both in number and amount indicates

that an increased number of SHGs have participated and availed the loan from SBLP. This also shows the

success of the same programme in terms of outreach. The programme has benefited the poor.

Along with the direct finance to SHGs, the banks in recent times are also found financing

Microfinance Institutions (other model of NABARD) for on-lending to SHGs and other small borrowers.

Over five years, from 2006-07 to 2010-11, the number of loan receiving MFIs were grown by 10 percent

with 68 percent growth in loan amount. Along with the growth of loan disbursement, a positive growth of

67 percent was also recorded in loan outstanding amount with MFIs. These entire phenomena, therefore,

vindicates the fact that more poor have been served by the tool of microfinance to increase their living

standard in particular and eradicate poverty in general. Micro financial services to the poor can be the

magical formula in lifting them up from poverty and also to mainstream them with country's economic

activity (Park, 2001; Shaw, 2004; Ahmed et al., 2006; Coleman, 2006; Haitt & Woodworth, 2006). It is

claimed that this new paradigm of unsecured small scale financial service provision helps the poor

people to take advantage of economic opportunities, expand their income, smoothen their consumption

requirement, reduce vulnerability and also empowers them (Littlefield, Morduch, & Hashemi, 2003;

ADB, 2004). Improved access of microfinance can enable the poor to smoothen their consumption,

manage their risk better, gradually build their asset base, develop their micro-enterprises, enhance their

income earning capacity, and enjoy an improved quality of life as well as stable family units (Robinson,

2001).

7.2. Proliferation of Microfinance in Bhutan: Impact on capability development and improvement

in living standard of the poor

Bhutan is at its nascent stage in the field of microfinance. The rural credit in Bhutan started only

in the year 1980. The Bank of Bhutan (BOB) and the Food Corporation of Bhutan (FCB) had been the



earlier intervention through which Government tried to streamline the poor with formal financial

institutions, But the programmes have turned out to be futile as a large segment of the poor could not

obtained loan from BOB on account of collateral requirement. Also, FCB could not sustain long due to

manpower and logistic problems apart from the failure of the government in subsidizing the gap in the

difference of interest rates. It was only in the year 1988, a full-fledged corporation in the name of BDFCL

(Bhutan Development Financial Corporation Limited), now (from, June, 2011) renamed as BDBL

(Bhutan Development Bank Limited) has been established in Bhutan mainly to cater the needs of more

than 60 percent of the rural poor of the country. The BDBL since its establishment has been helping poor

in accessing small finance through its Agricultural Lending Division (ALD). The three financial

products that have offered by this division are: (i) Small Individual Loan (SIL), (ii) Commercial

Agricultural Loan (CAL), and (iii) Group Guarantee Lending and Saving Scheme (GGLS). The GGLS is

a replica of the Grameen Bank of Bangladesh.

As BDBL is the sole institution in Bhutan that provide credit to small and medium-scale

industrial and agricultural activities in all the twenty districts – particularly in rural areas, the financial

performance of it depicts the actual state of microfinance in the country. Table 1.5 clearly indicates the

profile of Agriculture Lending Programmes of Agricultural Lending

Table – 1.5: Profile of Agriculture Lending Programme of BDBL (Amount in millions)

Outreach Years2007 2008 2009 2010 2011 Growth

rate (%)

Loan disbursement

Total

939

926

1000

2059

1934

25.16Rural

280

460

599

1387

1406

54.20% of rural to total

29.82

49.68

59.90

67.36

72.70

23.21

Loan outstanding

Total

1791

2499

2818

3640

4542

25.07

Rural

448

715

1012 1858

2479

54.91

% of rural to total

25.01

28.61

35.91 51.04

54.58

23.85

No. of Active credit Accounts

Total 17596 18627 19923 25292 28895 13.86Rural 15589 16515 17315 22714 26360 14.67% of rural to total 88.59 88.66 86.91 89.81 91.23 0.72

No. of new loan disbursed

Total

5880

7833

8588 13280

13206

23.94

Rural

5299

7288

7595

12370

12460

25.10

% of rural to total

90.12

93.04

88.44

93.15

94.35

0.93

DepositsTotal**

79.42

137.24

264.02

1459.23

2298.38

148.29Savings

56.86

95.99

175.05

334.38

576.21

80.03

No of depositors

Total 7614 10947 15879 32976 44529 58.96Rural 7429 10654 15222 31582 42598 58.08% of rural to total 97.57 97.32 95.86 95.77 95.66 -0.55

Source: Self calculation from BDBL Annual Report, 2007-2011** indicates Fixed + Recurring + Savings and Current deposits.



Division (ALD) of BDBL. Over the span of five years that is from 2007-2011, a positive growth

has been depicted in almost all the financial indicators. Loan availed by the rural population those come

from the poor financial background has been increased by 54 percent in which the number of active credit

accounts registered a growth rate of 15 percent. This clearly shows the interest of the poor in availing

credit from the bank. The increase participation in the credit has also been observed through number of

new loan disbursed which has registered a growth of 25 percent in five years. Despite credit, deposits

from the rural part, also act as one of the important financial performance indicators of growth. A growth

of 80 percent has been recorded in savings deposits with 58 percent increase in the number of rural

depositors in five years. All these indicators delineate the fact that rural population is increasingly being

served by small finance in Bhutan by BDBL. Also, this draws the inferences of acceleration of

microfinance in Bhutan.

Besides BDBL, many informal organizations and NGOs have been formed and defunct in

Bhutan in the recent decades. However, two NGOs, such as 'Tarayana Foundation' and 'The National

Women Association of Bhutan (NWAB)' are still actively involved in providing microfinance in Bhutan.

These organizations mostly play the role of promoter, skill trainer, and capacity builder in upbringing the

self Help Groups (SHGs).

7.3. Microfinance and GNH:

The analyses of the secondary data from the various sources suffice the fact that poverty is very

much pervasive in two of the south Asian countries that are in India and Bhutan. High rate of financial

exclusion, low literacy rate, and low income per person indicates lower standards of living of the citizens

of these countries. Despite all these, countries' effort in improving living standards of the poor through

effective tool of microfinance has proved to be salubrious in the long run. The poor in both the countries

are found enhancing capability development and increased their living standards through the provision of

microfinance, especially microcredit. Definition of happiness, in itself is not very concrete and varies

from individual to individual. It is a subjective term and always poses a problem with regard to its

quantification. For the poor who live in acute poverty, the most important drive for happiness could be

their upliftment of the living standard. For a wage-based labourer, who is already in the state of poverty,

the actual meaning of happiness could be an ability of earning bread and butter to feed himself and his

family, ability to send children in the school at least for primary education, ability to free from the

avaricious moneylenders, and streamlining with the formal financial institutions for most needed small

finance. As provision of small scale finance to the poor, especially microcredit has proved to be an

effective tool for meeting ground level requirements in particular and increasing living standard of the



poor in general, the microfinance as a whole can be taken as one of the important factors that aid in

increasing the GNH index.

8. Conclusion /Recommendations:

The happiness, though differ from person to person, cannot be achieved without capability

development of the poorest class. The country where most of the population resides in rural areas and

poverty is spread throughout, the capability development of this class plays a crucial role in bringing

happiness to people and holistic development in the country. As it has already been observed, poor

perceived happiness in terms of fulfilling their basic needs, (though advanced needs always tend to arise

once the lower needs of human beings are satisfied) the provision of small finance to the poor could be

one of the best alternative for the government which not only fulfill in meeting their basic needs but also

helps in enhancing their living standards. It has been perceived that there exist a positive correlation

between living standards of the poor and happiness. Happiness tends to increase with the increase in the

living standards. Microfinance plays a significant role in increasing living standards of the poor which

ultimately will bring happiness among the poor. This component is certainly a prerequisite condition for

Gross national happiness albeit it may not be the sufficient condition for other pillars of GNH. The study,

however, upon analyzing the data and drawing inferences from the study, recommends the following

suggestions.

ØThe capability development of the vast poor, especially representing rural part, is very much

essential as it plays crucial role in bringing happiness among these classes. The different

stakeholders such as NGOs, BDOs, Government, and banks should involve rigorously in

capacity building of the poor through appropriate trainings.

ØThe policy planners and the government should start emphasizing more on the capability

development of the poor. A special room should be created in the Five Year Plans that

encompasses all the components of capability development of the poor.

ØThe high rate of financial exclusion should be reduced and the poor from the rural areas

should be streamlined with formal financial institutions. This not only helps them in

accessing small financial products of their choice from the formal financial institutions but

also relinquish them from the exorbitant interest rate as charged by the avaricious

moneylenders.

ØHappiness Index is expected to accelerate faster if genuine poor of the society are

streamlined with formal financial system, especially with microfinance programmes. To do

this, proper identification of the needy and genuine borrowers for the programme should be



the primary objective of all the authorities who implement and run such programmes.

ØThe NGOs should play a decisive role in promoting and nurturing poor and help them

accessing finance from the formal financial institutions. NGOs can play a decisive role as

an effective delivery mechanism in rural development as they have innate advantage to

involve people and ensure their participation in the agencies (Stephen, J.K. 2005).

ØAbsence of minimum educational background of the poor members is one of the prime

obstacles in accessing small finance from the financial institutions. The full fledged

education to the members is, however, not possible but an informal education module that

imparts basic knowledge with regard to importance of small finance in enhancing their

living standard should be provided to them.

ØAs happiness is directly related with microfinance, the government or the respective

authority should work actively on simplifying the process of provisioning small scale

finance to the poor.

9. References

lADB (Asian Development Bank). (2004). Special Theme: The Changing face of the

microfinance industry. Building Financial Systems for the Poor. ADB: Manila. Retrieved

from www2.adb.org/Documents/Reports/Annual_Report/2004/special-theme. pdf, Date

of visit - 12th November, 2011.

lAhmed, S. M., Petzold, M., Kabir, Z.N. & Tomson, G. (2006). Targeted intervention for the

ultra poor in rural Bangladesh: Does it make any difference in their health seeking

behaviour? Social Science & Medicine, 63(11), 2899 - 2911.

lColeman, B.E. (2006). Microfinance in Northeast Thailand: who benefits and how much?

World Development, 34(9), 1612 - 1638.

lHiatt, S. R. & Woodworth, W.P. (2006). Alleviating poverty through microfinance: Village

banking outcomes in Central America. The Social Science Journal, 43 (2006), 471 - 477.

lKhandelwal, A.K. (2007) Microfinance Development Strategy for India, Economic and

Political Weekly, 42 (13), 1121-1126.

lKhander, S.R. (1998). Fighting Poverty with Micro credit: Experience in Bangladesh.

Oxford University Press: NewYork.

lLittlefield, E., Morduch, J. & Hashemi, S. (2003). Is Microfinance An Effective Strategy To

Reach The Millenium Development Goals? CGAP Focus Note No.24. Retrieved from

www.cgap.org/gm/document-1.9.2568/FN24.pdf, Date of Visit – 16th July, 2010.



Maslow, Abraham (1943). Theory of human Motivation. Psychological Review, 50,

370-396

lMcDonald, Ross (2005). Rethinking Development, Local Pathways to Global Wellbeing.

St. Francis Xavier University, Antigonish, Nova Scotia, Canada. Pp.3

lNABARD (National Bank for Agriculture and Rural Development). (2000). NABARD

and Microfinance. Mumbai.

lPark, A. & Ren, C. (2001). Microfinance with Chinese characteristics. World

Development, 29(1), 39 - 62.

lRobinson, M. (2001). The Microfinance Revolution: Sustainable Finance For the Poor.

Washington DC: World Bank.

lSen Amartya, (1999), Development as Freedom, Oxford University Press Oxford

lShaw, J. (2004). Microenterprise occupation and poverty reduction in microfinance

programmes: Evidence from Srilanka. World Development, 32 (7), 1247 - 1264.

lStephen, J.K. & Selian, A. (2005). Role of NGOs in microfinancing through Self Help

Groups. Indian Journal of Marketing, 35(8), August.

lUnited Nations. (2009). The millennium development goals report. New York, NY: United

Nations. Retrieved from: , Date of Visit - 15th January, 2010.

l


Abstract:

The persistent high rise in the price of building materials have leaded to more demand of inputs

of construction. One of the major inputs in many hilly areas is “Stone”. So, stone quarry has gained its

importance in recent time. This research was carried out to assess the socio-economic and

environmental impacts of quarrying in an area. In order to assess impacts of the operations on the

community, interactions have been done with community people. Several interview and observations has

shown alarming impact. The results say that economically good amount of growth has been seen as

compared to social factors. Income structure has improved leading to improvement in living standard.

But not such impact has been seen in Social aspect, since the environment is viewed as the worst sufferer.

Degradation has been observed in quality of air, soil and other natural factors. So it is important to see

the sustainability of such activity through different directions.

KEY WORDS: stone quarry, socio-economic, environmental

Introduction

Stones are one of the free gifts of nature. There are different types and qualities of stones on

earth. Some are igneous or non igneous, some are hard to break or soft in nature. They also differ in

colour. Stones are used for many works such as building houses, bridge making, hedging boundaries,

constructing drinking well sides, road making etc. Most of the rocks and stones contain very valuable

materials and minerals as iron, bauxite, dolomite etc.

Quarry is the breaking of stony hillocks into a particular size of stone pieces. In the first step of

quarry there is the need of blasting stony hillock because after that only the quality of stone can be known.

On the basis of quality, stones can be divided into two groups: -

(a) Living stone or good quality of stone and

(b) Dead stone

Living stones are good quality of stones and only this kind of stones are useful. Dead stones are

of no use because the components of stones are porous and so these break easily. To get stone it is

important to break hard and big rocks in small pieces for which it is exploded. Gelatin and Urea are used

for blasting which are provided by the lease owners. To fire the gelatin is also very risky because one has


“EFFECT OF STONE QUARRYING ON SOCIO-ECONOMIC ANDENVIRONMENTAL CONDITION- HOW FAR SUSTAINABLE??

A CASE STUDY FROM JHARKHAND STATE”1

Raj Shree Verma

1.Dr.Raj Shree Verma, Assistant Professor, Dept. of Rural Management, Xavier Institute of Social Service, RANCHI


to run away from that place quickly otherwise there is a chance of injury. While the blast occurs the small

pieces of stones spread in the nearby areas with very high speed which can injure a person. These hillocks

come under Dept.of Forest. So in taking lease for stone quarrying one has to take license from Dept. of

Forest and Mining Dept.

Stone quarrying consists mainly two types of works:-

(a) Quarrying

(b) Crushing the stoneQuarrying means the breaking of stones and stony hillocks to get wanted

size of stones. On the basis of size, stones can be categorized into -

i. Size boulder quarrying

ii. 4 inch stone quarrying

Size boulders are the pieces of stones which are generally used in different kind of works. These

may be square or rectangular. The size varies according to demand, requirements and type of works. This

type of stone quarry needs more skills and only the skilled people can quarry this type of stones. The

instruments used in this kind of quarry are punch, chisel, hammer etc. In the first step they break the

stones or hillocks by blasting which involve again high degree of risk. Then size boulder quarry is done

on lease or license. These licenses are also given by Dept. of Forest and Environment, Dept. of Mines,

otherwise it will be illegal.4 inch stones are being used in crusher to crush these stones further into small

chips. Skill is not needed here as in quarrying size boulders. These stones have no specific shape. These

chips are used in many things. Crusher machine crushes the 4 inch stones into chips. In the process of

crushing people who are working there, especially women, are engaged in carrying the pieces of stones

and bringing it to crusher machine.

Stone Quarry gives its reflections on the economy in diverse behavior. It starts with economic

which changes income status leading to social changes. Variations can be seen in the socio-economic

condition of the economy.

It also effect environment. A study was carried out to find the effect of particulate concentration

on forced vital capacity of lungs of stone quarry workers. The results indicates that as the exposure

duration increases the forced vital capacity of lungs decreases and the same times if exposure duration is

same but concentration of particulate matter increases then again the forced vital capacity of lungs

decreases. Therefore the decrease in the forced vital capacity of lungs depends upon the exposure 1

duration and particulate concentration

Also William H. Langer in his article on “Potential Environmental Impacts of Quarrying Stone

in Karst—A Literature Review” stated that “ if proper precautions are not taken many human activities in

karst, including extraction of carbonate rocks, can result in damage to the environment and associated

Raj Shree Verma


2increases in costs for environ-mental compliance or liability .”

Minerals exploitation has supported the social and economic development of many developed

countries. In developing countries, it will continue to provide the technological development and 3employment .

Afeni Thomas Busuyi in his work on “Assessment of the Socio-Economic Impacts of

Quarrying and Processing of Limestone at Obajana, Nigeria” says “There is no doubt that mineral

exploitation if properly coordinated can have a positive socio-economic impact on the people of the

producing area through the development of some socio-economic infrastructure such as roads, schools,

hospitals, and housing. These may trigger the rise of a wide range of small businesses. Despite these

benefits, mineral exploitations can also have a number of adverse Socio-economic impacts on the host 4

community ”

The main objective of this study is to assess the socio-economic and environmental impacts of

stone quarry at Jharkhand. This research work will serve as a basement data for assessing the full socio-

economic and environment impacts of the operations.

2. Background

Jharkhand is surrounded by West Bengal on the eastern side, Uttar Pradesh and Chhattisgarh on

the western side and by Orissa on the southern side in India. On the north is the state of Bihar. The new

state of Jharkhand largely comprises of the forest tracks of Chhotanagpur plateau and SanthalPargana

and has distinct cultural traditions. This area in and around the districts of Chhotanagpur and

SanthalParganas was formerly Southern Bihar and is thickly wooded and consists of a succession of

hills. It is one of the richest areas in the whole country, rich in minerals deposit and forests. The region

has huge reserve of coal, iron ore, mica, bauxite and lime stones and considerable reserves of copper,

chromites, asbestos, cyanide, china clay, manganese, dolomite, uranium etc. Here mining activity

ranges from the small, completely manual stone quarries to mechanical mines. With increasing

mechanization, mining equipment has grown larger and become more powerful. Entire landscapes are

altered in a relatively short period of time. The Jharkhand government has granted 524 leases for mining

various major minerals-206 of which have been granted for coal alone. In addition, 2,717 leases

covering an area of 8,426 hac.have been granted for extracting minor minerals in the state.

The capital of this state is Ranchi. Geographically, Ranchi is located in the Chota Nagpur

1. International Journal of Environmental Research and Public Health Dr. Suresh Kumar Singh1, Dr. G. R. Chowdhary, V. D. Chhangani and Dr. GopalPurohit

2. U.S. Geological Survey Open-File Report OF-01-0484, U.S. Department of the Interior, U.S. Geological Survey3. Assessment of the Socio-Economic Impacts of Quarrying and Processing of Limestone at Obajana, Nigeria” Afeni Thomas

Busuyi, Cawood Frederick, and IsiakaAfolabiFatai4. European Journal of Social Sciences – Volume 6, Number 4 (2008)

“EFFECT OF STONE QUARRYING ON SOCIO-ECONOMIC AND ENVIRONMENTAL CONDITION-HOW FAR SUSTAINABLE?? A CASE STUDY FROM JHARKHAND STATE”


plateau. The area surrounding Ranchi has been endowed with natural attractions and it is referred to as

the “City of Waterfalls” Ranchi has a hilly topography and its combination with dense tropical forests

ensures that it enjoys a comparatively moderate climate compared to the rest of the state. There are 14

blocks in Ranchi one of it is Namkum. It has an area of 415.57 square km. it is roughly located between

Kanke, Angara, Khuti and Karra block. It has 94 revenue villages according to 2001 Census. A large part

of it is Cantonment Area. (Refer Annexure 2)

The prosperity of any village depends on the economic status of the whole village. If in a village

cultivable land area is scares because of presence of rocks and stones, there people acquires stone

quarrying as their occupation and make it their means of livelihood. The same has been seen in the

surveyed area that because of existing stones in the surrounding people are more inclined towards stone

quarry for their livelihood.

3. Methodology

The study was done in Ranchi District of Jharkhand State. DungriPanchayat was taken which

comes under Namkum Block of Ranchi District. There are seven villages in this Panchayat from where

the researcher has taken sample of nearly 150 households. The study was conducted into two villages of

DungriPanchayat which are Kiski and Sorha. Both the villages have two tolas. Kiski consists of Kiski

(khas) and Chukru while Sorha consists of Sorha (khas) and Garandibeda.

For Socio-Economic effect Primary Data collection has been done with Interview Schedule of

open end and close end questions. Whereas Focused Group Discussion and Observation was conducted

to analyse environmental effect. Secondary Data were collected from various documents of Block office

and Panchayatcommitte too.

The quarries under our study are usually small in their size of operation. Their production is

from 20 to 200 tons a day and the number of labourers required for these quarries vary from 20 to 28.

Seasonality of operations is one salient feature of these quarries

These places were covered by dense jungle even some decades earlier. People living in these

areas are mostly tribal like Munda, Oraon and other. Basically these people were dependent on the

surrounding forests. Deforestation caused total socio – economic changed to these communities. They

are now the contract labours for agriculture to some distant places or they are the labours of such quarries

and stone crushers. In these districts one geographical feature is common, i.e. the land is arid, agriculture

is scanty and these areas once were covered by dense jungle. Due to unplanned deforestation top soil has

been destroyed. Underground water level is down below 120 to 350 ft. digging a well is too much costly

and deep tube well is almost out of question as people live here are very much poor. Rainfall is minimum

in these areas. All these reasons causes diverse livelihood. The move from one occupation to another

Raj Shree Verma


keeping Stone quarry as the basic one.

4. Findings

The term environment implies all the external factors – living and non-living, material and non-

material, which surround human beings. The basic three component of the environment are:

lPhysical environment consisting of water, soil, air, housing etc.

lBiological environment includes plant and animal life.

lSocial environment includes customs, culture, habits, income, occupation etc.

Thus a balance between these three will make the environment a healthy one. So in this research

it has been tried to find the effect of Stone Quarry on Social, Economic and Environmental conditions.

4.1. Social effects

Social impact is defined as the process of assessing the social consequences that are likely to

arise after the project development with its policy and legislation. It also includes the cultural

consequences to human populations of any private or public actions that alter the ways in which people

live, work, play, relate to one another so as to organize to meet their needs and generally cope as members

of society

a) Size of the family

In this Panchayat generally there are nuclear family system. In average about 4-5 children are in

every family. Elder members and new generation people live together if it is a joint family. In

average 6-7 members in these families comprises of children, parents and their grandparents.

Only 30% of the total household has joint family. In case of nuclear families case is not of

separate dwelling but families had divided the house into different portion and in each portion a

nuclear family is living as separate identity. This is one of the reasons of over dependence on

stone quarry or crushing. As family burden has not been shared by many so nearly every

member is earning to sustain their life.

5. “The Stone Quarrying Industry around Delhi – Impact on Workers and theEnvironment” S.A. Azad and Dr. Ashish Mittal, Parasar, in 2008

6. Burdge, R. and Vanclay, F., 'Social impact assessment: a contribution to the state of the art series'. Impact Assessment, 1996; 14(1), pp59-86.

70%

30%

Size of the family (in percent)

Nuclear family

Joint family

Fig. 1- Size of the family:


30%70%


b) Religion

People from Hindu, Sarna and Christian religion reside here. The percent of Hindu people is

more as compared to other. It is about 45%. Sarna is 30% and Christian is about 25% of the

population.

c) Caste and Class distribution

In DungriPanchayat people of many castes reside together in the form of different tolas which

are called by their caste such as Oraontola, Mahtotola, Lohrakocha, Mundabasti etc. Mahto,

Munda, Rajput, Oraon, Lohra are the different caste which are seen here. Among these Rajput

are of high class then comes Mahto while Lohra are of low class. The people having high

population have power over social activities. Apart from this educated people lead the other

activities of the village. Oraon and Munda people are Schedule Tribe (ST) while Mahtos are

Schedule Caste (SC) and Lohra people are Other Backward Class (OBC). Thus the ST

population is highest in the Panchayat which is about 50%. The SC population is about 8%,

OBC is about 30% and General population is 12%. Stone quarry is generally the work of the

people of a specific caste called Lohra. These people were look upon by other people. Today

many people of DungriPanchayat are engaged in quarry works and this has changed people's

view.

Fig. 2- Religion of people of Dungri Panchayat:

45%

30%

25%

Religion (in percent)

Hindu

Sarna

Christian

Fig. 3- Caste distribution in DungriPanchayat:

28%

29%26%

10%17%

Caste distribution (in percent)

Munda

Oraon

Lohra

Raj Shree Verma


d) Education

Stone quarry has badly affected education status of this area. One bad effect of stone quarrying

is that after class 5 children drop out from schools and work at quarry. They quarry four inch

stones, which does not need any particular skill. Parents working in field do not pay attention on

the education of their children. Children are seen as the helping hands of the family. Girls are

allowed to work in crusher and boys in quarry of four inch stones.

50% of children of age group 5-7 go to school. Generally children start going schools at the age

of 6 or 7. The percentage of school going children of age group 7-10 is very high i.e. 95%. One

important factor which is responsible for school going is government policy which provides

books and mid day meal free of cost. It attracts children of low income group. Percentage

declines in the age group from 10-15 years i.e. from 95% to 35%. This is a very big fall.

The reason responsible for this decline is the accessibility of schools. Up to class 5, children do

not face problems regarding approachability of schools. But after that children of all villages

who come under DungriPanchayat, have to go 4-5km. for further studies.

After class 5 children leave school and do the work of stone breaking. 5% children of age group

10-15 and 15% above 15 years of DungriPanchayat work in stone quarrying mines and crusher.

Mostly boys of age group 11-25years work in crusher work (Refer Picture 1 of Annexure 1)

while girl children above age of 12 works. Gradually these children learn the size boulder stone

quarrying and start getting more wages leading to be a permanent worker in this field.

Fig. 4- Percent of children working in stone quarrying and other related works

0

50

100

5-7 year 7-10 year 10-15 year Above 15 year

Percentage of school going children

Percentage of school …



e) Health

Stone quarry is a risky work in which people often get injured by breaking instruments or by

small pieces of stones which spread while blasting big stones in the process of stone quarry.

Sometimes these injuries are very deep and if tetanus injections are not taken on time it has lead

to serious problems. Women working in crusher generally suffer from cough and cold because

they work in dust continuously.

As people are earning more so their awareness level has increased and they are relying more on

doctors than superstitious beliefs about their health. Children of poor families get their meal at

school which is a provision of government for all the school going children thus malnutrition

cases are very rarely found. The income of people is enough to feed themselves so the health

status of people is better than before. In case of illness many people afford private clinics also.

Today in case of illness about 90% people go to doctors either to Sanitarium or PHC or private

clinics. Village doctors ( Baidhs) are also visited by 5% of the people. But still 3% people

believe in superstitions.

f) Housing

In Panchayat about 91% people use to live in the Kuccha houses and only 3% people live in

semi pucca and only 2 % people live in pucca houses. The semi pucca houses which people use

for living are either Indira Awas houses or own built. The Schedule Tribes, Schedule Caste and

Other Backward Class and BPL families have got the Indira Awas facility and every family have

Indira Awas semi pucca houses but the condition of these houses is very appalling. The

contribution provided by Government is not enough alone to complete the houses and the

people have to contribute money to complete the house. People use only the money provided

by Government and thus house remains incomplete which they use to keep their cattles and

themselves live in kuccha houses. The kuccha houses need repairing yearly.

Fig. 5-Types of houses in percent

91%

7% 2%

Type of houses (in percent)

Kuccha

Semi pucca

Pucca

Raj Shree Verma


4.2. Economic effects

In Kiskikhas total no. of households is 95 out of which 25 people are quarry size boulder, 35 are

4” stone breakers and 20 women are engaged in crusher work. While in Chukru of 47 households there is

only 1 person is size boulder and 6 women are engaged in crusher work. In Sorhakhas total no. of

household is 63. In size boulder quarry 15 people are engaged while 10 are 4” stone breakers and 12

women are engaged in crusher.

a) Sources of income

In the villages of DungriPanchayat the sources of income are basically agriculture, stone

quarrying, stone crusher, rice beer selling where as some are labourers etc. Out of seven villages

of DungriPanchayat, the people of four villages are engaged in the works related to stones.

i. Agriculture: - Agriculture is a source of income. Cultivable land is must for agriculture and

agricultural production. In DungriPanchayat about 73% people are engaged in agricultural

works but most of the lands are uplands and thus not of good quality. The uplands are not

cultivable because water does not stand in this type of lands. Only few crops that need less

water such as ragi, oil seeds, surguja and teesi can only be grown on these lands and so these

lands are used for grazing. About 80% of the households own land but they are small and

insufficient.

ii. Stone quarry: -The stone quarrying is the main occupation of the people beside agriculture.

The people having agricultural land are also engaged in this work because agricultural

work is only for 6 months and in rest six months either they go for stone quarrying work or

work as labours. The people of Lohra caste do not access land and they are totally

Table No.1Number of people engaged in different stone quarry related works

NAME OF THE

VILLAGE

TOTAL NO. OF

HOUSEHOLDS

SIZE

BOULDER

QUARRYERS

4” STONE

BREAKERS

CRUSHER

WORKERS

KISKI (KHAS)

95

25

35

20

CHUKRU 47 1 - 6

SORHA

(KHAS)

63

15

10

12

GARANDIBEDA

14

2

-

10



dependent on the stone quarrying. About 50% people of DungriPanchayat are engaged in

stone quarrying works.

iii. Crusher: - Generally women are engaged in crusher. It is a source of income. In

DungriPanchayat about 25% people are engaged in crushing work.

b) Sanitarium

Sanitarium is also a source of income for the people of DungriPanchayat. Ramakrishna

Mission TB Sanitarium is the place where many people get work. Thus sanitarium is source of

income for many people. This institution gives Different type of works for the people. In an

average for 10% people of DungriPanchayat depends on it for source of income.

c) Wages

The income of the people working in stone related works is higher than agricultural works. Size

boulder breakers earn Rs.2500-3000/- weekly while four inch stone breakers earn Rs. 2000-

2500/- . This depends on their work because they get wages according to work done. And

people working in crusher earn Rs. 1200-1500/- monthly. The annual income from agriculture

is very less. In average it is Rs.1500-1800/annum because most of the lands are uplands and

land holding is also very less.

d) Saving

As income of the people increased the saving also increased. Earlier the income of people was

Fig. 6- Sources of income:

50%25%

10%15%

Sources of income( in Percent)

Stone Quarry

Crusher

Sanitorium

Other

Table No.2Wages of people working in different stone quarry works

Type of work

Wages

Monthly income (in Rs.)

Size boulder quarry

1.10-1.20 paisa/ stone

2500-3000

Four inch stone quarry Rs. 130/tractor &Rs.

250/truck

2000-2500

Crusher Rs. 60/day

1200-1500

Raj Shree Verma


insufficient and it was very hard to go for saving because hardly they could manage food for

themselves. People go for saving today although the percent of these people is very less. In the

Panchayat only 10% people go for savings in Banks. The reason is that most of the people invest

their money in drinking Rice beer and other intoxications. The banks of the area are Bank Of

India and Jharkhand Grameen Bank which are 4-5 km form the villages of the

DungriPanchayat. The Banks are in Hulhundu and Dusmile.

e) Expenditure

Stone quarry resulted in the increase of income and thus the expenditure of people also

changed.The expenditure is done on fooding, clothing, drinking vodka, clothing, festivals,

medicine and education. The monthly and annual income of people is good but they do not go

for saving in big amount.

f) Working condition

Stone quarry changed theoccupation and seasons of working. Earlier when agriculture was the

main occupation of people, works were available only for six months and in rest six months

either people used to go to the towns in search of the works or remain workless. But now few

menberes of the family work in stone quarry while other engage themselves in crusher which

works throughout the year. Thus the income of the family increases and they never remain

workless.

4.3. Environmental effects

Quarrying is necessary to provide much of the materials used in traditional hard flooring, such

as granite, limestone, marble, sandstone, slate and even just clay to make ceramic tiles. However, like

many other man-made activities, quarrying causes a significant impact on the environment. In particular,

it is often necessary to blast rocks with explosives in order to extract material for processing but this

method of extraction gives rise to including noise pollution, air pollution, damage to biodiversity and

habitat destruction.

Fig. 7- Expenditure Pattern:

50%27%

8%

5% 4% 3% 3%

Expenditure (in percent)

Food

Rice beer

Festivals

Clothing



a) On Air

Dust from quarry sites is a major source of air pollution, although the severity will depend on

factors like the local microclimate conditions, the concentration of dust particles in the ambient

air, the size of the dust particles and their chemistry, for example limestone quarries produce

highly alkaline (and reactive) dusts, whereas coal mines produce acidic dust. The crusher

machine crushes the stones into small chips. In this process very minute particles of stones also

come out and as a result air near the crusher is dust loaded. The workers work in dust making

them prone to many diseases like asthma, lung cancer etc.The air pollution is not only a

nuisance (in terms of deposition on surfaces) and possible effects on health, in particular for

those with respiratory problems but dust can also have physical effects on the surrounding

plants, such as blocking and damaging their internal structures and abrasion of leaves and

cuticles, as well as chemical effects which may affect long-term survival. (Refer Picture 2 of

Annexure 1)

b) On nearby area

The fields near those areas where stone quarrying is going on or had happened is of no use

because when they blast big stones, small pieces scatter on the nearby areas shattering the

productivity of land. And those lands are of no use for agricultural purpose. It becomes barren.

(Refer Picture 3 of Annexure 1)

c) On Sound

Unfortunately, quarrying involves several activities that generate significant amount of noise. It

starts with the preparatory activities, such as establishing road or rail access, compound and

even mineral processing facilities. Next is the process of exposing the mineral to be extracted

and this is usually done by removing the top soil and other soft layers using a scraper, or

hydraulic excavators and dump trucks. The excavation of the mineral itself will involve

considerable noise, particularly is blasting methods are used. Following this, the use of powered

machinery to transport the materials as well as possibly processing plants to crush and grade the

minerals, all contribute even more noise to the environment.

d) On temperature

The regular blasting has increased the temperature of the surrounding. The dust present in the

air is also responsible for increasing the temperature.

e) On Rainfall

Here the rainfall is regular but since last five years the pattern of raining has changed little. Earlier the

Raj Shree Verma


time of coming of monsoon was mid of June which has changed. Now it reaches before June.

f) On Biodiversity

One of the biggest negative impacts of quarrying on the environment is the damage to

biodiversity. Biodiversity essentially refers to the range of living species, including fish, insects,

invertebrates, reptiles, birds, mammals, plants, fungi and even micro-organisms. Biodiversity

conservation is important as all species are interlinked, even if this is not immediately visible or

even known, and our survival depends on this fine balance that exists within nature. Quarrying

carries the potential of destroying habitats and the species they support. Even if the habitats are

not directly removed by excavation, they can be indirectly affected and damaged by

environmental impacts – such as changes to ground water or surface water that causes some

habitats to dry out or others to become flooded. Even noise pollution can have a significant

impact on some species and affect their successful reproduction. Nevertheless, with careful

planning and management, it is possible to minimise the effect on biodiversity and in fact,

quarries can also provide a good opportunity to create new habitats or to restore existing ones.

g) On Quarry Waste

Again, like many other man-made activities, quarrying involves the production of significant

amounts of waste. Some types of quarries do not produce large amounts of permanent waste,

such as sand and gravel quarries, whereas others will produce significant amounts of waste

material such as clay and silt. The good news is that they are generally inert and non-hazardous,

unlike the waste from many other processes. However, there is still potential for damage to the

environment, particularly with water contamination. For example, suspended particles – even

though they are chemically inert – may imbalance freshwater ecosystems. Large amounts of

solids can also exacerbate flooding, if it is dumped on the flood plains. Lastly, the accumulation

of waste by-products will still need to be stored and managed somewhere that will not affect the

environment in an adverse manner. Furthermore, the treatment and disposal of the waste may

produce more negative impacts on the environment. While quarries can cause significant impact

to the environment, with the right planning and management, many of the negative effects can

be minimised or controlled and in many cases, there is great opportunity to protect and enhance

the environment, such as with the translocation of existing habitats or the creation of new ones.

5. Suggestions

ØPeople do not save from their wages so initiative to be taken in that area so that villagers will

deposit their extra money. There is a need to facilitate and motivate people to improve the

saving habit which will help them in future.



People should be made aware about the process and condition of loan taking. This will

benefit them in so many ways.

ØIn the villages Self Help Groups (SHG) of women are running which are called Mahila

Mandal in local language. These SHG women save from their income on their own but lack

of proper support and bank linkage is required. They need support from any outsider

organization that can supervise the SHG and inspire and motivate them by rewarding and

providing loans on very cheap interest.

ØAwareness campaign against Vodka drinking is to be done to make them aware about the ill

effect of it.

ØThe women of the villages should be motivated and made to understand effects of vodka

selling and drinking. Trainings like sewing, candle making should be given to these ladies

so that they would not be jobless after leaving vodka selling.

ØMarket for selling their hand-made products like candles should be provided otherwise it

will be unproductive if their products will not get a perfect market.

ØTo check the dropout rate from school it is important to have ban on the engagement of

children in quarry mines and crusher. It is important to make parents understand about value

of education.

ØTheir farming activities can be better encouraged by the provision of fertilizers to further

help improves the soil quantity such as the supply of organic manure

ØThey should form a partner in enlightenment for increased environmental awareness in

surrounding communities.

ØThe company must provide reasonable compensation for lost crops / economic trees.

ØThe company must develop with communities an influence management plans.

ØImprove basic facilities / utilities such as water supply, schools, roads and health

infrastructure.

ØRegular assessment of environmental impacts and mitigation through technical initiatives

with collaborative efforts of research institutes should be encouraged.

6. Conclusion

Stone quarrying is the occupation of many people. In these villages where research has been

done, about 70% people are engaged in this work which is the only source of income for many people.

There are different kinds of work related to stone quarrying such as quarrying, crushing, and carrying

through tractors and trucks, which generate works for many people. Economically it has a good impact.

Ø

Raj Shree Verma


The standard of living of people of the area has increased and migration of people towards town has

decreased because they are getting work on their own place.

But like the other side of the coin it has negative effects also especially on the environmental

condition. Viewing the economic impact of the stone quarry it is very profitable and also provides

employment to the people. But as we see the effects of the stone quarry on the environment and the health

of the people it is very harmful. In the long run it will not lead to sustainable development. The stone

quarry is an economic activity at the cost of environment and life of the local population. Stones are

natural resources which need special protection because the extreme use of these resources must harm

the whole human and non human being.

References

lBarkley P.W.andSeckler D.W. “Economic Growth And Environmental Decay;

lDas Gupta P.K. “The Impact OF Industrialization On Tribes In South Bihar”

Anthropological Survey Of India 1978

lJoshi M. V.,”Women Rural Labourers- Problems And Prospects”, A. P.H. Publishing

Corporation 1999.

lKabra G.D. “Tribal Workers In Industrial Setting” Vohra Publishers And Distributers

Allahabad 1987

lKannan K.P. “Of Rural Proletarian Struggles, Mobilization And Organization Of Rural

Workers In South West Asia” Oxford University Press Delhi, 1988

lMalya I., Dave P, Sharma D. “Social Change in villages: Rural Elders Reap Benefits From

Out Migration” (July-Sept.2005), Social Action

lRawat A.S. “History Of Forestry In India” Indus Publishing Company, New Delhi 1991

lRay K.,”WomenLabour In Mines”,Mittal Publication2006

lSharma D.K. “Tribal Employment And Linkages: A Case Study In A Mining Area, New

Delhi” Council of Social Science Research (Typed Research Project) Madhya Pradesh

1980

lSharma K. “Place of Women in Rural Development” Mainstream, Vol. lg, No. 10

lSharma U. “Female Labour In India” Mittal Publication New Delhi 2006

lThe The Solution Becomes The Problem” New York: Harcourt Brac, Jovanovich 1972

lVenkataraman K. S. “Coir Industry And Trade Union In The Malabar Coast” Journal of the

University of Bombay, ( July 1949) Vol. 10, No.



ANNEXURE -1Picture showing a boy of age 12 breaking the 4” stone pieces

Picture Showing the effect of crushing on the air in the form of dust

Picture Showing the effect of stone quarry on the nearby land.

PICTURE -2

PICTURE-1

PICTURE-3

Raj Shree Verma


India Jharkhand

RanchiNamkun

ANNEXURE -2Map of Surveyed Area


Overview

The Book Organisational Behaviour by Parikh, Margie and Gupta, Rajen presents a

refreshingly motivating attempt with understanding the whole dynamics of this intriguing subject of

study. This book make a sincere attempt to provide a thought provoking reading on organisational

behaviour by encompassing a wide variety of self administrable inventories, well illustrated examples

and exploring detailed case studies. This book contains value added knowledge for individuals, groups

and teams at all organisational levels through its different attempt at promoting the development of

competencies around four Modules: Module one deals with Introduction and the context of behaviour in

organisations, Module two based on Understanding individuals in organisations, Module three

contemplates toward Understanding groups in organisations and finally Module four is devoted to

Understanding how organisations shape behaviour overall works?

This book overall is unique in its character because of having distinct Models of Organisational

Behaviour that puts managing and leading for effectiveness as the central concern. This model shows the

direct link between human behaviour that how it works effectively in organisational point of view. The

content of this book is being arranged correspondingly in a slightly different sequence. Since attitudes

are found to be the more easily accessible among the links to behaviour, we start the module on

understanding individual behaviour with the same. In a nut shell, this book is more beneficial

particularly for the management graduate, entrepreneur, labours and person engaged in production

activity.

In the beginning of chapter, Lead story is there which is very peculiar in nature for the learners.

This book is comprehensive read that deals with all the essentials issues of the subject is useful as a

reference as well as text book. In Every chapter, this book carries chapter summery, key terms and

concepts, review questions, field assignment, class assignment, O.B in the news, O.B in the internet,

followed by recommendation-watch movies, read books and know yourself making it application

Integral Review- A Journal of Management, Vol. 6 No. 2, December 2013

BOOK REVIEW

Title : Organisational Behaviour

ISBN : 13: 978-0-07-015319-610: 0-07-015319-1

Price : Rs. 495

Author : Margie Parikh and Rajen Gupta

Publisher : McGraw Hill Companies

Reviewed By : Zahid Raza Khan


oriented. The subject Organisational Behaviour, after the sea change that it has undergone, talks about

virtual teams instead of committees and replaces command and control supervision with values and self

leadership. There is a strong global orientation in this book which illustrates how Organisational

Behaviour concepts and practices are relevant to companies in every part of the world. It is useful not

only for the managers but also for all those who want to understand Organisational Behaviour.

Apparently this book is divided into four main Modules. Each of these modules is further

divided into meaningful classified chapters of study. Almost chapters contains task that reflect core of

this book. More ever, each chapter ends with developing competencies exercises in the form of chapter

summary, key terms and concepts, and field assignment. In a nut shell, this book makes a revolutionary

departure from the conventional method of learning in the field of organisational behaviour by

synthesizing theoretical concepts with application oriented insight in order to help develop in whole

some competency Profile.

Over all, this book is indeedly a different one in term of not only content rather having worth

readable devoted with complexity theory to the contemporary world Which has been explained by the

author that, “the need for this text arose out of the feedback from MBA students who reported that the

texts written on organisational behaviour in another country did not give them an in sight into

organisational behaviour at work in India”. I wish all the best to the author.


This journal of Faculty of Management and Research, Integral University, Lucknow is biannual in

nature which covers wide range of issues in the field of Business Management Sciences including

International Marketing, International Business, Business Ethics, Finance, Human Resource, Market

Logistics & Supply Chain Management, Information Technology and other allied disciplines associated

with management.

Guidelines for Contributors / Authors

All the authors/contributors are requested to kindly follow guidelines strictly regarding

submission of papers/articles/case study/book review, failing which their contribution may not be

entertained.

1. The manuscript should be electronically typed in MS Word.

2. The text should be one and half spaced, and page margins should be 1 inch on all sides.

3. The first page of the manuscript should contain the information like, Title of the paper, the names

of the author's organizational associations and affiliations, telephone and e-mail address of the

contributors or authors.

4. The paper should start with an introduction and review of literature and all sections should

be numbered sequentially using 1, 2, 3, etc. Subheadings are numbered 1.1, 1.2, etc. If a

subsection may be further divided, the numbers 1.1.1, 1.1.2, etc. should be used. The paper

should end with concluding remarks.

5. An abstract of not more than 150 words and a maximum of 10 key words are required.

6. Hypothesis and objectives should be in the Research Methodology and objectives should precede

the hypothesis.

7. Font: Main body-12, Style: Times New Roman. The font size for heading will be 14 points bold

face and subsections with 12 points and bold. Do not underline any of the headings, or add

dashes, colons, etc.

8. All tables and figures should appear in the document on the right place wherever they are needed.

Figure captions appear centered above the figure, and are in upper and lower case letters. When

referring to a figure in the body of the text, the abbreviation "Fig." is used. Figures should be

numbered in the order they appear in the text. Table captions appear centered above the table in

upper and lower case letters. When referring to a table in the text, no abbreviation is used and

e-ISSN: 2278-6120p-ISSN: 0974-8032

Note & Guidelines for Authors


"Table" is capitalized.

9. Length of paper is limited to 10 pages (3000-5000 words), 10% more or less is acceptable in either

case.

10. List of references must be present in APA format and in alphabetical ascending order. Papers

without references will not be reviewed.

11. It is assumed that the paper submitted by the author is an original work and it should not be

submitted anywhere for publication in any form in any journal, magazine, periodical etc. (NB:

Conference papers may only be submitted if the paper was not originally copyrighted and if it has

been completely re-written). The opinion, ideas, and evaluations expressed by the author(s) is

assumed to be his own views (must not contain any libelous or unlawful statements or in any way

infringe the rights of others) and do not represent the views or policies of the Faculty of

Management and Research, Integral University, Lucknow.

12. After internal evaluation, the paper will be sent for blind review to the selected team of experts

for obtaining their opinion on the topic. Selection of the referees will be the discretion of the

Editor-in- Chief.

13. The Editors / editorial board reserves the right to modify and improve the manuscripts to meet the

standards of journal and also have full right to accept or reject an article for publication, and the

same will be communicated to the contributors within a month, after last date of submission of

papers.

14. There will be no publication charges and the main author will get complimentary copy

without any charge. Soft copy may also download from our university URL

(http://www.integraluniversity. ac.in/net/journals AndPublications.aspx)

Hope this will serve your purposes..........for additional information, you may contact:

The Editor - in - Chief

Integral Review

Department of Business Management

Faculty of Management and Research

Integral University,

Dasauli, Kursi Road, Lucknow - 226026 (U.P.) INDIA

Tel: (0522)-2890730, 2890812, 3296117

E-mail: [email protected]

e-ISSN: 2278-6120p-ISSN: 0974-8032

To,

The Editor-in-Chief

Integral Review – A Journal of Management

·

I/We_________________________________________________________________________________

hereby solemnly declare that the Research Paper/Review/Article/Chapter entitled, _____________________________________________________________________________________________

________________________________________________________________________

is my/our genuine and indisputable publication submitted to Integral Review – A Journal of

Management.

· I/We have mentioned all the references/citations from where I have adopted/referred the content and

I/We shall be responsible for any claim/violation of copyright/intellectual property rights.

· I/We agree to indemnify the Editors/Publisher of the journal against all claims or action arising from any

breach of warranty on my/our behalf in this agreement.

· I/We permit editors to publish the article in the journal or in any other means with editorial amendment, if any

to make it suitable for publication. Further, I/We hereby assign copyright to the publisher for its publication in

any form/language including all media, and exclusive right to use the matter for the life of the work.

· The author shall read and correct proofs of the work when submitted to him/her, and shall return same to the

Editor-in-Chief on the date specified by the Editor. If the Author fails to return proof within the time specified,

production and publication may proceed without Author's approval.

· Integral Review – A Journal of Management is the owner of all such copyrighted materials including

electronic and all machine-readable formats. No material may be reproduced in any format without

permission of the Publisher.

First author Name/Affiliation/Contact/Mail Id

Co-author(s) Name/Affiliation/Contact/Mail Id

1

2

Signature(s): ..................................... ........................................ ................................ First author Co-author Co-author

Place: Date:

Faculty of Management and Research, Integral University, Kursi Road, Dasauli, Post Basha, Lucknow - 226026 (U.P.)Tel: 0522-2890730, 2890812, 3296117 Fax: 0522-2890809 E-mail: [email protected] URL: www.integraluniversity.ac.in


Copyright Form

Subscription Form

I Would like to suscribe for Integral Review for 1/2/3/4/5 years. I am enclosing herewith a

draft (DD No. .....................................................Bank.............................................................................

Dated .....................................) in a favour of Treasurer, Integral University, Lucknow payable at

Lucknow for the Amount Rs. .............................................

Subscription Rate Bi-annual)

Category National International

Institutional/Library Rs. 500/- $ 100

Academicians Rs. 450/- $ 50

Students/Research Scholers Rs. 300/- $ 50

Please furnish the following details along with the draft/cheque in block letters.

Name : ___________________________________________________________________________

Address : _________________________________________________________________________

Country : _________________________________________________________________________

Telephone/Mobile : _________________________________________________________________

E-mail : __________________________________________________________________________

Fax : _____________________________________________________________________________

N.B. Universities or Institute publishing Journals may sign agreement with us for Reciprocal

Subscription without any charge. For more details please contact Editor - in - Chief through mail :

[email protected]