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International Journal of Business Management

Research

(A Bi-Annual Journal)

ISSN: 2249-2143

Volume 6, No. 2, July-Dec, 2016

An official publication of University School

of Business Management Desh Bhagat

University Amloh Road, Mandi Gobindgarh

Fategarh Sahib-147301 Punjab, INDIA

Year of Publication:2016

Disclaimer:

The views & opinions expressed and interpretaions made in the Journal are solely of respective authors and should

not be attributed to Desh Bhagat University. The editor disclaim all for any responsibility injury to persons or

property resulting from any ideas or product or practices referred in papers published in the Journal . All effects

have been made to ensure accuracy, but the editors or DBU not be held responsible for any remaining inaccuracies

or omissions.

International Journal of Business Management & Research

EDITORIAL BOARD

Patron Editor-in-Chief

Dr. Zora Singh Dr. Payal Bassi

Chancellor, Desh Bhagat University Associate Director

University School of Management

Desh Bhagat University

ASSOCIATE EDITORS

Dr. Rajni Saluja Mr. Rajinder Kumar

Associate Professor, Assistant Professor

University School of Management, University School of Management

Desh Bhagat University Desh Bhagat University

ADIVSORY BOARD

Prof. (Dr.) R.K Uppal Prof. (Dr.)Deepak Tandon

Professor, Professor of Finance,

Department of Economics, Lal Bahadhur Institute of Management & Technology,

DAV College, Malout, Punjab New Delhi

Prof. (Dr.) BishnuPriya Mishra Prof. (Dr.) Pardeep Singh Walia Professor of Finance, Professor, Department of Commerce,

Uttkal University, Bhubaneswar, Post Graduate Government College for Girls,

Odisha Chandigarh

Prof. (Dr.) Navkiranjit Kaur Dhaliwal

Professor, Department of Commerce,

Punjabi University, Patiala

INTERNATIONAL JOURNAL OF BUSINESS MANAGEMENT & RESEARCH

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Contents Page No.

1. Demonetisation – Its Socio-Economic Impact on India

Payal Bassi& Rajni Saluja …….. 1

2. Demonetisation in India- A Critical Analysis

Nidhi Jain & Vanisha Chhabra …….. 7

3. Role of Foreign Direct Investment in Service Sector in India

Parminder Kaur …….. 16

4. Relative Financial Performance of New Private Sector Banks in India

Rajni Saluja …….. 22

5. Factors Influencing Awareness of E-Commerce: An Empirical Study

of Ludhiana District

SakshiVerma ……. 31

6. Women Empowerment Through Web Based Business : A Case

Study of Mom’s Touch, Indian Brand

Shagun ……. 41

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Demonetisation &Its Socio- Economic Impact on India

*Payal Bassi**Rajni Saluja

*Associate Director, University School of Management, Desh Bhagat University, Mandi Gobindgarh

**Associate Professor, University School of Management, Desh Bhagat University, MandiGobindgarh

Abstract

The objective of the paper is to highlight the socio-economic impact of demonetisation adopted

by Government of India. It focuses on benefits and challenges faced due to implementation of

demonetisation. Impact of demonetisation on common man is also observed. The study

concluded that demonetisation has not only sown the seeds for cashless India but also raised

hopes in the minds of young India that black money will be weeded out soon.

Keywords: Demonetisation, Black Money, India

Demonetisation

Government of India recently took a historic decision of demonetising 500 and 1000 rupee

currency notes which were 86% of total currency to fight against the socio-economic evils.

Demonetisation is the process of eliminating the currency from the circulation. In Indian context

it means withdrawing of the currency by Reserve Bank of India as official mode of payment. It

implies that the said currency ceases to be a legal tender.

Prior Instances of Demonetisation in India

Demonetisation is not a new concept for India. It was done twice before in 1946 and 1978.

1. On January 1946, the pre-independent government of India passed the High Denomination

Bank Notes (Demonetisation) Ordinance. According to which the currency notes of Rs.500, Rs.

1000 and Rs.10,000 were demonetized. The aim was to curb black marketing.

2. On January 1978, the high currency notes of Rs.1000, Rs.5000 and Rs.10,000 were

demonetized again with a view to curb black money transactions. But it did not have any

significant effect on cash.

3. The government has implemented a major change in the economic environment by

demonetizing the high value currency notes – of Rs.500 and Rs.1000 denomination. These

ceased to be legal tender from the midnight of 8th of November 2016. The first and second

demonetization affected really high value notes which formed a small part of notes in circulation.

IJBMR, Vol. 6, No. 2, July-Dec, 2016 Page 1

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But this time the demonetized notes were forming 86% of cash and were highly in circulation.

The announcement appears to be the most important change made by the Government to date. It

is one of the historical steps in India. Demonetisation is an urgent implementation in Indian

economy because Rs.500 and Rs.1000 are calculated to be 13.5 lakhs of crores of currencies in

circulation.

Issues in Demonetisation

The Government took this step mainly to dissolve certain issues in the economy which are acting

cancerous to the health of the economy.

• Bring out Black money

• Abolition of Fake money

• Control the Inflation

• Reduce the Rate of Interest

• Make it Digital India through E-transactions

• Transparent money transaction

• Increase the Tax Revenue

Objectives of the Study

• To study the impact of demonetisation on common man in India.

• To study the impact of demonetisation on economy of India

Research Methodology & Database of the Study

The focus is on a qualitative approach to research. The study makes use of qualitative content

analysis. Being a topic that is of current importance, the research focuses primarily of written

content in various newspapers by leading economists and politicians and reports by government

and private organizations. Relevant information has been collected from internet sources,

newspapers, national and international magazines etc.

Impact of Demonetisation on Common Man

It has been observed that innumerable difficulties are faced by common man and are highlighted

as follows:

• The change did invite a lot of trouble to the public in the beginning. Initially, there was a

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huge hue and cry about the idea people had to wait in really long queues just to withdraw the

necessary money they needed.

• There was a limit to the per-capita withdrawal and that was a huge issue for many people

mainly because of their personal requirements which included marriage, health, property

• In the process of curbing black money the innocent common people and poor seemed

most suffered like those people who do not have access to post offices and banks had

seemed panicking for exchanging notes.

• Farmers have faced lot of problems because they could no longer afford to sell their

harvest from kharif crop or sow rabi crops.

• Many daily wagers were unable to find work.

• Demonetisation has a direct impact on sectors dealing with cash vendors, auto

rickshaws, owners, taxi drivers, daily wage earners and small traders.

• The Indian system mainly functions on cash and so less cash means disruption in the

• Government’s step to curb black money and fake currency has hit hard to poor people

the most.

• Sudden announcement and failure to prepare in advance has created temporary chaos

and discomfort among the general public.

• In both urban and rural India, the country’s large informal economy has been disrupted

Impact of Demonetisation on Indian Economy

Indian Economy is also remarkably affected by Demonetisation.

• Demonetisation has increased the deposit of demonetized currency notes.

• GDP in short run got adversely affected by demonetisation. Since the injection of

liquidity is slow, there was cash crunch and it lead to fall in the consumption which in

turn slowed down the investment plans of firms and ultimately fall in GDP.

• The Asian Development Bank forecasted that India’s GDP growth would reduce to 7%

from 7.4% for the current fiscal 2016-17.

• After demonetisation, the income taxes rose because of increased disclosure.

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• The payments to local bodies also increased because demonetized notes remained to be

the legal tender for tax payments and clearances of arrears.

• Indirect taxes declined as there was reduction in the consumption.

• Payment for utility bills through online mode increased and cashless transactions also

increased.

• People started using e-wallets. Credit cards, debit cards/ Rupay card/USSD/UDI, Internet

banking, mobile wallets like Oxigen, Paytm, Moniwik, aadhar enabled payment system,

POS and so on are few popular modes of electronic transactions which are commonly

used by the citizen.

Benefits of Demonetisation

No doubt, due to demonetisation common man has to face lot of problems but it also benefitted

the people and society at large.

• Rise Of The Cashless Economy

• Growth Of The Formal Economy Will Be Another Associated Long Term Gain

• Social Shake Up

• Demonetization Will Reduce The Circumference Available Of Parallel Economy

• Large Number Of New Tax Payers May Appear With Demonetization

• Cleaning Of The Real Estate Sector Will Be Associated Long Term Gain Of

Demonetization

• Rise In Financial Savings

Challenges of Demonetisation

The announcement for implementation of demonetisation was made overnight. Implementation

of this historic step may face various challenges and issues.

• No clear concept of Indian money from Foreign Bank

• Highly affected by the savings economy

• No clear idea about money withdrawals

• To curb small business sectors

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• Low transaction by poor, middle and neo middle class people.

• There is no daily wages work in all sectors of Indian economy.

• No permanent and alternative solution of demonetisation.

• More roles for commission agents to exchange old and new currencies.

• Lack of New Five hundred rupees currencies

Conclusions

Demonetisation will have major impact on the parallel economy. No doubt, this step has caused

great distress to the general public and their day to day activities. However deflationary effect of

demonetisation will also be witnessed in Indian economy in the long run. With demonetisation

illicit activities and money laundering too will be checked. Demonetisation has not only sown

the seeds for cashless India but also raised hopes in the minds of young India that black money

will be weeded out soon.

References

Balamurugau, S &Hemalatha, B.K. (2017). Impacts on Demonetization: Organized and

Unorganized Sector. IOSR Journal of Humanities and Social Sciences (IOSR-JHSS), pp.

1-11. Available on. www.iosrjournals.com

Bhatnagar, Harshita (2017) Demonetization to Digitalization: A Step Toward Progress,

Management and Economics Research Journal, Vol. 3, pp. 11-15

Dash, A. (2017). A Study of Socio Economic Effect of Demontization in India.

International Journal of Management and Applied Sciences, 3(3), pp. 13-15.

Jayasudha, S.M.&Thangvel, M. (2017). Am Empirical Study on the Major Problems

Faced due to Demonetization by the Small Retailers in Erode City. IOSR Journal of

Humanities and Social Sciences (IOSR-JHSS), pp. 18-20. Available

on.www.iosrjournals.com

Mariappan, K. (2017). Issues and Challenges of Demonitisation in India in the year 2016.

IOSR Journal of Humanities and Social Science (IOSR-JHSS), pp. 12-13. Available

Mishra, Deepika (2017). Demontisation: It’s Socio-Economic Impact. International

Journal for Innovative Research in Multidisciplinary field, 3(5). ISSN. 2455-0620.

Muthulakshmi, Kamatchi E. (2017). Impacts of Demontisation on Indian Economy-

Issues & Challenges. IOSR Journal of Humanities and Social Sciences (IOSR-JHSS), pp.

34-38. Available on.www.iosrjournals.com

Nandhini, P. &Kalaimani, G. (2017). Demontization: Impact on the Economy.

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IOSR Journal of Humanities and Social Sciences (IOSR-JHSS), pp. 31-33. Available

Sangeetha, S. (2017). Benefits of Demontization : Rich and Poor. IOSR Journal of

Humanities and Social Sciences (IOSR-JHSS), pp. 29-30. Available

Shah, YousufAyash (2017).Impact of Demontisation on Rural india. International Journal

of Scientific and Research Publications, 7(3).

Shanbhogue, Girish (2016). A Study on Demontization of 500 and 1000 Rupee Notes &

Its Impact on the Various Sectors and Economy. International Journal of Research

Economics and Social Sciences (IRJESS), 6(12), pp. 274-284. Available on

http://euroasiapub.org.

Sriram, K.V. &Lewlyn L.R. Rodrigues (2017). Effect of Demontization in India-

Economic, Political and Social Perspective, Proceedings of Annual Eurasian Business

Research Conference, 30-31 March, 2017, Phillipines.

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Demonetisation in India: A Critical Analysis

Nidhi Jain Vanisha Chabbra

Assistant Professor, LRDAV, Jagraon

Abstract

In an important move, the Government of India declared on 8th of November 2016, that the five

hundred and one thousand rupee notes will no longer be legal tender from midnight, 8th

November 2016. The RBI will issue Two thousand rupee notes and new notes of Five hundred

rupees which will be placed in circulation from 10th November 2016. Notes of one hundred, fifty,

twenty, ten, five, two and one rupee will remain legal tender and will remain unaffected by this

decision. This measure has been taken by the Prime Minister in an attempt to address the resolve

against corruption, black money and counterfeit notes. This move is expected to cleanse the

formal economic system and discard black money from the same. The argument posited in favour

of demonetisation is that the cash that would be extinguished would be “black money” and

hence, should be rightfully extinguished to set right the perverse incentive structure in the

economy. Therefore, it is imperative to evaluate the short run and medium-term impacts that

such a shock is expected to have on the economy.. This paper elucidates the impact of

demonetisation on Indian economy.

Key Words: Demonetisation, Black money, Corruption

Introduction

Demonetization is the act of Banning /taking back of a currency unit of its status as legal tender.

Demonetization is necessary whenever there is a change of national currency. The old unit of

currency must be retired and replaced with a new currency unit. The government has

implemented a major change in the economic environment by demonetizing the high value

currency notes – of Rs.500 and Rs.1000 denomination. These ceased to be legal tender from the

midnight of 8th of November 2016. People have been given up to December 30, 2016 to

exchange the notes held by them. The proposal by the government involves the elimination of

these existing notes from circulation and a gradual replacement with a new set of notes. In the

short term, it is intended that the cash in circulation would be substantially squeezed since there

are limits placed on the amount that individuals can withdraw. In the months to come, this

squeeze may be relaxed somewhat. The reasons offered for demonetisation are two-fold: one, to

control counterfeit notes that could be contributing to terrorism, in other words a national

security concern and second, to undermine or eliminate the “black economy”. There are

potentially two ways in which the pre-demonetisation money supply will stand altered in the new

regime: one, there would be agents in the economy who are holding cash which they cannot

explain and hence they cannot deposit in

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the banking system. This part of the currency will be extinguished since it would not be replaced

in any manner. Second, the government might choose to replace only a part of the currency

which was in circulation as cash. In the other words, the rest would be available only as

electronic money. This could be a mechanism used to force a transition to cashless medium of

exchange.This change, if it is executed, would dramatically change the economic environment in

the country by forcing agents to move from using cash as a medium of exchange to using cash

substitutes. This appears to be a real possibility given that the Finance Minister as well as the

Governor of the Reserve Bank of India have repeatedly emphasized that agents should be

moving to the use of cashless medium where there are no problems in comparison to the cash

based medium. For instance, The Hindu reported that “Reserve Bank of India (RBI) has urged

citizens to switch to alternative modes of payments such as pre-paid cards, credit and debit cards,

mobile banking, and Internet banking.” In a press conference on November 12, the Union

Finance Minister too said that “Those in businesses should start using digital payment gateways,

cards and banking system. Life will become simpler in the new financial system that is the only

viable.These two would have different effects on the economy in the short term and in the

medium term, as will be explored below.

1. Very short-term impact

The demonetisation, by removing 86 per cent of the currency in circulation, has resulted in a

very severe contraction in money supply in the economy. This contraction, by wiping out cash

balances in the economy, will eliminate a number of transactions for a while, since there is no or

not enough of a medium of exchange available. Since income and consumption are intrinsically

related to transactions in the economy, the above would mean a severe contraction in income and

consumption in the economy. This effect would be more severe on individuals who earn incomes

in cash and spend it in cash. To a lesser extent it would also affect individuals who earn incomes

in non-cash forms but need to withdraw in cash for consumption purposes, since a number of

sectors in the economy still work predominantly with cash. In terms of the sectors in the

economy, the sectors to be adversely affected are all those sectors where demand is usually

backed by cash, especially those not within the organized retailing. For instance, transport

services, kirana, fruits and vegetables and all other perishables, would face compression in

demand which is backed by purchasing power. This in turn can have two effects: while it is

expected that supply exceeds demand, there would be a fall in prices, however, if supply too gets

curtailed for want of a medium of exchange, prices might, in fact, rise. Thus, while generally

people seem to expect prices to fall, it is quite possible that prices would instead rise.

2. Short-term effect with complete replacement

The short-term effect on the economy would depend on the speed with which and the extent to

which the cash is replaced by the authorities. If the entire cash is replaced within a short duration

of time, the effects beyond the very short term of 1-2 months might be little. But a few sectors

are likely to be seriously affected. To give an example from two sectors which are supposed to

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have large employment effect on the economy, we can talk about agriculture, automobiles and

construction. This is the sowing season for the Rabi crop in some parts of the country and the

harvesting season for the Kharif crop. Most of the purchases and sales in this segment of the

economy are carried out through cash. With the elimination of cash from the economy, sale of

kharif crop would be difficult unless the crop is sold on the promise of payment in future. Given

the limited bargaining power of the farmer, the price they can realize for the crop can be

adversely affected. On the other hand, in the sowing activity, people would not get access to the

inputs required since most of the inputs are now purchased from the market unless they seek

access to credit from the supplier. In other words, with demonetisation, there would be a

significant strengthening of the informal sector credit market in the rural economy.

3. Short-term effect with incomplete replacement

If, on the other hand, the authorities choose to replace only a fraction of the total cash that was

surrendered by the people to the banking sector, then one would witness some other

changes/effects in the economy. For transactions to be restored to the pre-change level, a number

of agents who are using cash as a medium of exchange have to move to using digital versions of

money as the medium of exchange. While this change is gradually happening in the economy, if

it is forced by making cash inaccessible, the compression in demand as well as in income

generation in the economy would continue for a longer period until people get familiar with the

functioning and use of these media.

4. Medium-term effects

In the medium term, the effects would be related to the extent to which the currency is not

replaced within the economy. If the entire currency is replaced, there would not be any major

effects on the economy. However, it is to be expected that the entire currency would not be

replaced – to the extent currency is extinguished and to the extent some of the currency remains

as bank deposits, there would be some impact on the economy. The first effect would be a

compression of the economy to the extent the extinguished currency was working as a medium

of exchange. The currency that is placed inthe banks but not withdrawn, it is argued, would

generate an expansion in deposits in the economy. In the discussions on demonetisation, there is

a consistent reference to the resultant increase in credit creation in the economy. Like Finance

Minister Arun Jaitley says, “Bank deposits will increase and they will have more capacity to

support the economy.” The total cumulative credit that can potentially be generated is defined in

terms of the reserve ratio. Total credit potential = incremental deposit generated*(1/reserve

ratio).

1. To study the impact of demonetisation on black money & financial inclusion.

2. To study the short term & medium term impact of demonetization.

3. To study the major hurdles in the transformation of economy into cash-less economy.

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Research Methodology

Data used in the study are secondary in nature and mostly collected from the newspapers, &

from the report of research tax team of 14th of November 2016. The study covers a period from

Nov 2016 to Dec 2016. Four parameters namely financial inclusion, black money, & benefits of

this move by the government, major hurdles in the transformation of economy have been used to

study the impact of demonetisation.

History of Demonetisation in India

1. First - 12 Jan 1946 (Source: RBI History 1935-51, pg. 706)

Following the action in several foreign countries, including France, Belgium and the U.K., the

Government of India decided on demonetisation of high denomination notes, in January 1946. It

is interesting that as early as April7, 1945, suggested similar action in India as 'one more

concrete example for the Indian Government to follow in its fight against black market money

and tax evasions which have now assumed enormous proportions .

2. Second - 16 Jan 1978 (Source: RBI History 1967-81, RBI Balance Sheet, RBI Currency

and Finance Report)

On 16 Jan 1978, the ordinance was announced via All India Radio at 9 a.m. The Ordinance

provided that all banks and government treasuries would be closed on 17 January 1978 for

transaction of 'all business except the preparation and presentation or the receipt of returns' that

were needed to be completed in the context of demonetization. This time public was given even

lesser time of 3 days to exchange Rs.1000, Rs.5000 and Rs.10000 notes.

3. Latest Demonetisation in India

The demonetisation of 500 and 1,000 banknotes was a policy enacted by the Government of

India on 8th November 2016. All 500 and 1,000 banknotes of the Mahatma Gandhi series

ceased to be legal tender in India from 9th November2016. In the announcement, Modi declared

that use of all 500 and 1,000 banknotes of the Mahatma Gandhi Series would be invalid from

midnight of the same day and announced the issuance of new 500 and 2,000 banknotes of the

Mahatma Gandhi New series in exchange for the old banknotes. However, the bank note

denominations of 100,50,20,10 and 5 of the Mahatma Gandhi Series remained legal tender and

were unaffected by the policy. The move by the government to demonetize Rs.500 and Rs.1000

notes by replacing them with new Rs.500 and Rs.2000 notes aims to tackle the menace of black

money, corruption, terror funding and fake currency. The total value of oldRs.500 and Rs.1000

notes in the circulation is to the tune of Rs.14.2 trillion, which is about 85% of the total value of

currency in circulation. The World Bank in July, 2010estimated the size of the shadow economy

for India at 20.7% of the Gross Domestic Product (GDP)in 1999 and rising to 23.2% in2007.

Assuming that this figure has not risen since then (quite unlikely though)and that the

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cash component of the shadow economy is also proportional (it could be higher), the estimated

unaccounted value of the currency could be to the tune of Rs.3.3 trillion. Now, post the

announcement of demonetization by the government this money would have to either accounted

for by paying the relevant tax and penalties or would get extinguished.

Positive Macro Benefits of this move by the Government

This move by the government is likely to have long term benefits for the economy. The

extinguishing of the major proportion of unaccounted currency would reduce from the liabilities

of the government and would add to its finances. This would mean that while interest rates can

be low, the government spending on large infrastructure projects would kick start capex cycle

and push economic growth higher in the medium term. The move is also likely to have a habit

changing impact in the Indian populous and there could be increased belief of keeping cash in

the banks rather than stashed at home and use formal banking channels for their spending needs.

Also with more money being kept in the banking channel, some of these low cost deposits may

be sticky and improve the medium to long term Current Account and Savings Account

(CASA)ratio of the banks. Another element of the demonetization would be reduction in cash

transactions in real estate. This is likely to reduce to real estate prices and make it affordable to

some extent. This may be visible more in the rural belt, where many non-farming entities

purchase fertile farmland, not for farming but for money parking purpose. The demonetisation

and consequent reduction in shadow economy would bring the demand for such farm lands

down. This move is likely to lead to better tax compliance, raise the Tax to GDP ratio and

improved tax collection. Also with lower cash transactions in the near term, inflation may see

downtrend in the near term. Also with higher tax to GDP ratio, the government may also get

enough headroom to reduce the income tax rates, which can lead to higher disposable income

with people and can improve consumption demand in the medium to long term.

Impacts of Demonetisation

Here is an expecting effect of the demonetization on the GDP growth for the current financial

year and the resulting cash crunch on various sectors, which are included for GVA estimation.

The impact period considered is 7 weeks (from the of demonetization announcement on 8th

November'16 till end of December'16).Certain projections have been made for the losses or gains

in each sector week wise, which have been accounted for in final expected GVA for FY17 which

will get reflected in the GDP growth number. A point to note is that some of the losses in GDP

incurred in these 7 weeks will be recovered in the next quarter, particularly for consumer goods

where there would be only deferment of purchase. However the same doesn't stand for losses in

services sector. Nonetheless, the expected recoveries in have been netted off while considering

the overall impact in these 7 weeks .For individual sectors the proportion of output likely to be

affected has been used as the basis for extrapolating the potential loss of output on a weekly

basis till December end when it is assumed conditions normalizes. The impact hence varies

across these 7 weeks with the intensity being highest in the first two weeks which keeps tapering

downwards

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towards the end of the terminal period. As the judgments made on these effects is critical to

assess potential loss of GVA, the methodology works on the basis of two alternative approaches

which will help to formulate a range for the same.

1. Conservative Approach: Here the premise is that the expected impact is moderate as the

assumption is that there would be minimal level of distortions on growth in output.

2. Aggressive Approach: In this model the assumption is that there would be extreme

distortions to begin with which will subsequently taper down proportionately over time. This

becomes significant especially in the services sector. The services sector is expected to be

affected the most under both the approaches, mainly on account of losses in trade, hotel,

transport etc. due to the volume of cash transactions involved in these economic activities.

Importantly, these losses, due to their inherent nature, can't be recovered in the next quarter.

SMEs in industry will have a major problem in adjusting production schedules as both payments

and receipts flow in cash given their structures. Hence, Industry is also expected to be impacted

which will be more significant in the first 2-3 weeks post the announcement. The gains would be

positive for the banking sector due to the increase in deposits which would be countered by

slowing down of other sectors in the group like real estate. Agriculture is expected to least

impacted with major shock being absorbed in the first 2-3 weeks.

Impact on financial inclusion

RBI has also issued licenses to open new-age small finance banks and payments banks which are

expected to give a push to financial inclusion and bring innovative banking solutions. Things are

also falling in place in terms of technology for India. The recently launched Unified Payments

Interface by National Payments Corporation of India makes digital transactions as simple as

sending a text message. It is possible that a section of people which has used electronic mode of

payment for the first time due to the cash crunch will continue to transact through this medium,

but there are still a number of hurdles in making India a cashless economy. First, a large part of

the population is still outside the banking net and not in a position to reduce its dependence on

cash. According to a 2015 report by Pricewaterhouse Coopers, India's unbanked population was

at 233 million. Even for people with access to banking, the ability to use their debit or credit card

is limited because there are only about 1.46 million points of sale which accept payments

through cards. Major hurdles in the transformation of economy into cash-less economy are

following:-

Physical infrastructure

Not enough physical infrastructures are available. So there is need to improve the availability of

physical infrastructure in India. Number of citizens on mobile: Not all Indians use mobiles and

not everyone is connected. The latest figures from the Indian telecom regulator TRAI show that,

as of July 31, 2016, India had a tele-density of83%, Note that these are the number of

connections, not users, so you will have to discount this significantly, because many users have

multiple SIM cards. The proof: Delhi has a tele-density of234.77%. Urban wireless tele-density

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is 148%, and rural is50.72%. And of the 1,034.23 million connections, 88.88% areactive.

Payment and mobile network capacity

What we've seen with demonetisation and the increase in usage of cards and online payments is

that somewhere in the value chain, banks and/or payment gateways were not in a position to

handle the load. Transactions failed and we were told that Visa wasn't able to handle the load.

At present, there isn't sufficient capacity to accommodate escalated usage if everyone starts

transacting digitally. More importantly, do we have the network capacity to deal with this? What

happens in an emergency situation?

Security issues

The weakest security link in any transaction is not the technology system but the user and a lack

of understanding of security issues. For instance, to withdraw money from ATMs, some people

were giving others their card and PIN numbers. But there are other risks, too. In 2011, it was

believed that payment gateway CC Avenue was hacked. HDFC Bank, too. And just last month,

HDFC and Axis Bank were hacked. The difference between depending on cash and digital

payments is that using cash limits the damage from losing a note or a number of notes. When it

comes to digital transactions, the risks are higher. Language compatibility: Paytm has recently

updated its application with some features enabled in Indian languages. Mobikwikhas done

English and Hindi. Phone works in English, Hindi and Tamil. However, most mobile handsets

don't have an Indian language interface and that's the case for most mobile apps and services,

too. Ola is available in Indian languages only for drivers, not passengers. Apart from Snapdeal,

no e-commerce company has tried going the Indian language way. There's a part of the

population in India which still isn't able to read and write, let alone read and write English. The

digital divide here is massive and that's why physical notes worked.

Merchant costs

Merchants need a working internet connection to accept digital payments. They also need to pay

a monthly cost torrent a machine or own a smartphone with an application to accept payments.

On credit cards, merchants are charged a merchant discount rate (MDR), an inter-bank exchange

fee, of 1.7%-2.5%per transaction. On debit cards, they need to pay 0.75% per transaction below

Rs. 2,000 and 1% for transactions aboveRs.2,000. For UPI, merchants are charged 0.75% per

transaction plus other costs (on par with debit cards).

Customer costs

You need a smartphone and an internet connection, plus you'll need to pay USSD charges (Rs.

0.5 per session) and data charges when applicable. Cash might be more expensive for the

government, because of tax evasion, corruption, the need to keep re-circulating old, spoiled

currency, and the cost of enabling transfers, but digital is very expensive for citizens. What is

happening here is a transfer of the cost of money from the government to citizens, as well as a

massive collection of data. Using cash isn't the same as using digital payments because:

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Not enough people have mobile connections or internet connections, and the internet isn't

prepared to accommodate a massive surge in use at times of emergency. What's more,

many don't use the internet regularly and smartphones and mobile apps that support all

Indian languages aren't available.

Internet connectivity isn't reliable, available or as cheap for users as cash.

The process of making digital payments in India is not easy and it's time consuming.

Making digital payments costs more for both the merchant and the customer.

Digital payments can lead to major security risks and currently there aren't adequate

processes in place to address issues among either merchants or customers. Above all, not

enough is being done to educate the consumer, the weakest link in the chain.

Digital payments aren't a single standard like cash: money in one type of account is not

the same as in another type of account, and it is not interoperable, unlike cash. The

important thing is to give people choice, and switch people to living cash-free gradually.

Parity between cash and digital money is probably impossible to achieve, but there are

means of getting closer to it by creating an incentive structure for that switch. That

involves making cash more expensive than going cash-free, and ensuring better

enforcement.

Conclusion

There is a general preference for cash transactions in India. Merchants prefer not to keep records

in order to avoid paying taxes and buyers find cash payments more convenient. Although

cashless transactions have gone up in recent times, a meaningful transition will depend on a

number of things such as awareness, technological developments and government intervention.

For instance, mobile wallets have seen notable traction, and it is possible that a large number of

Indians will move straight from cash to mobile wallets. A study by Boston Consulting Group and

Google in July noted that wallet users have already surpassed the number of mobile banking

users and are three times the number of credit card users. Presently, people face difficulties in

making electronic payments even in metro cities because of poor network. The biggest

beneficiaries of this transition, banks and related service providers will have to constantly invest

in technology in order to improve security and ease of transaction. People will only shift when

it's easier, certain and safe to make cashless transactions. The government will also need to play

its part. It will have to find ways to incentivize cashless transactions and discourage cash

payments. Implementation of the goods and services tax, for example, should encourage

businesses to go cashless. There is an imperative need to modify the credit and financial services

delivery system to achieve greater inclusion. The latest solution is demonetisation. Even though

there will be pain and confusion in the short term for common people and economy, a disruptive

measure was perhaps the only way to shake up the system to a new compliance normal. It is

expecting that demonetisation provides a boost to Government's financial inclusion drive.

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References

Special correspondent. (2016, Nov 12). As ATMs run out of cash, RBI ‘encourages’ public to

go digital. The Hindu. Retrieved from http://www.thehindu.com/business/Economy/rbi-

urges-public-to-adopt-digital-as-atms-run-dry/article9339020.ece

RBI. (2016, Nov 8). Demonetisation of Rs.500 and Rs.1000 notes. The Hindu. Retrieved

from http://www.thehindu.com/news/national/Demonetisation-of-Rs.-500-and-Rs.-1000-

notes-RBI-explains/article16440296.ece

World Bank. (2016, Oct 2). Financial inclusion. Retrieved

fromhttp://www.worldbank.org /en/topic/financial inclusion/overview#1

Tax research team, (2016, Nov 14). Demonetization: Impact on the Economy

Care rating. (2016, Nov 18).impact of demonetization on GDP growth.Retrieved

from:http://www.careratings.com/upload/NewsFiles/SplAnalysis/Impact%20of%20demo

netization%20on%20GDP.pdf

Jaitley Arun. (2016, Nov 9).Demonetisation will benefit economy in long run. The Hindu

Business Line. Retrieved from

http://www.thehindubusinessline.com/economy/demonetisation-to-increaseecosize.

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Role of Foreign Direct Investments (FDI) in Service Sector in India

Parminder Kaur, HOD, Department of Commerce, S.U.S Govt. College, Sunam

Abstract

Service Sector is the lifeline for the economic growth of a country. Service sector has emerged as the most

dynamic sector of Indian economy particularly since last one and a half decade and this sector is

contributing significantly to GDP, employment and structural transformations. Foreign direct investment

has been instrumental behind the growth of service sector in India. The present paper focuses on the

financial year-wise analysis of FDI equity inflows and to know the sectors attracting highest FDI equity

inflows in India over the period of 2004-05 to 2014-15. The secondary data has used for study. The

analysis has revealed that service sector attracts the highest amount of FDI inflows into India. DDTA

(Double taxation avoidance agreement) between India and Mauritius helps in obtaining maximum FDI

via Mauritius.

Keywords: Foreign Direct Investment, Service Sector, India

Introduction

India is a vast country and many sectors contribute to the country’s GDP. Indian Economy is

classified into three sectors: Primary, Secondary and Service Sector. The primary sector is an

economic description concerned with the extraction of raw material. It includes farming,

fisheries, forestry and animal husbandry etc. Secondary sector includes manufacturing industries.

In service sector all types of services are included. They include trade, hotel & restaurants,

transport, storage, communication, health care, education etc. The reason for growth of service

sector is due to increase in urbanization, privatization and more demand for intermediate and

final consumer services. The contribution of service sector has increased with pace because of

foreign investors has shown interest in investing the country. This is due to the reason that India

has a large pool of highly skilled, low cost and educated workers in the country. This shows a

positive change in share of service sector in India’s GDP. Foreign Direct Investment (FDI)

means investment by non-resident entity/person resident outside India in the capital of the Indian

company under Schedule 1 of FEMA Regulations 2000. FDI inflows into core sectors are

assumed to play a vital role as a source of capital, management, and technology in countries of

transition economies. It is a high level indicator of economic health of a country. The new

policies have succeeded in enhancing foreign capital inflows in the Indian economy. With the

volume of FDI inflows into India increasing significantly from Only US $ 97 million in 1990-91

to more than 60.1 billion in 2016-17. India has emerged as one of the leading FDI destinations

among developing countries. Despite significant procedural relaxations and liberal policies, FDI

inflows in India, though much higher than the past, has not been able to reach the levels of the

ASEAN economies or China. FDI growth in important sector like services over all foreign

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inflows into the country increased 22% to $ 35.81 billion during year 2014-15. There has been a

significant growth in FDI inflows in 2013-14 and 2014-15 (April-October) in general and in

Services Sector in particular. In 2014-15 FDI inflows to service sector grew by a shopping 70.4

percent to 16.4 billion US $. The rising trend is continuing in the first seven months of 2014-

2015 with the FDI equity inflows in the services sector growing by 74.7% to dollar 14.8 billion.

It helps to establish new companies. All of these contribute to economic growth of the country.

Review of Literature

Ahmad (2015) analyzes not only the impact of foreign direct investment on gross domestic

product but also to analyze trend of foreign direct investment in India since liberalization.

Further he concluded that it is need of hour to adopt imperative and innovative policies and good

corporate government practices at par with international standards, to attract more foreign direct

investments. Sood (2015) analyzed the contribution of FDI for GDP growth. The study

concluded that the association and dependence of GDP on FDI in India is found to be statistically

significant whereas the relationship and dependence of investment by FII on total FDI in India is

insignificant. Singh (2015) analyze contribution of service sector in GDP, employment, FDI and

Export services. The paper found that the service sector faces number of problems such as

infrastructure facilities to poor; cost of service delivers is high and some more. Arya and

Ashwani (2014) examine the impact of government expenditure in social sector on economic

growth at state level for 15 major states. Impact of expenditure on social sector has no significant

impact on growth. But it has an impact on human resource development and indirectly

participates in economic development. Akhtar (2013)found and stated in his study on Inflows of

FDI in India: Pre and Post Reform Period that during pre-liberalization period FDI has increased

at Compounded Annual Growth Rate of 19.05 % and during post liberalization period it has

grown to 24.28 %.Kumari (2013) examines the present and future status of FDI in India. She

has done her study in the period of 2000-2012 and tried to examine the equity inflow of FDI and

FDI trend in India during these years with the help of regression analysis and correlation tests.

The FDI trend analysis result shows the upward trend of FDI inflow in India, which clearly

shows that FDI is going to flourish in the near future, thereby increasing the economic growth.

Mukherjee (2012) analyze that services is fastest growing sector in India, contributing

significantly to GDP, GDP growth, employment, trade and investment. Aggarwal, Singla and

Aggarwal (2012) exhibited the sector-wise & year-wise analysis of FDI’s in India, and ranked

the sectors based upon highest FDI inflows. It has been found that Mauritius invested highest in

India followed by Singapore, Japan, and USA and so on. It was also shown that there has been a

tremendous increase in FDI inflow in India during the year 2000 to 2011.Bohra (2011) analyzes

FDI to developing countries in the 1990s was the leading source of external financing and has

become a key component of national development strategies for almost all the countries in the

world.

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To achieve the objective of the paper secondary data on India economy for the period 2004-05 to

2014-15 has been used. The data is obtained from governmental and non-governmental

published and unpublished sources, various websites related to foreign direct investment, annual

reports, various bulletins of Reserve Bank of India, World Investment reports and Economic

Survey, Government of India.

Objectives

The main objectives of the study are:

To know the trend of FDI inflow in India.

To study the sectors attracting highest FDI equity inflows in India.

Analysis and Interpretations

FDI is an investment made by an entity in one country in an Industrial / business activity in

another country. FDI becomes more vibrant in India after the introduction of new economic

policy 1991. After liberal policies regarding Foreign Direct Investments in 1991, the amount of

FDI received by India increased sharply. India attracts many Multi-national enterprises due to

lower labour costs and high economic growth. To achieve the objectives of this study an analysis

on the basis of collected data is done. The result on the basis of secondary data is as follows:

Table 1: Financial Year-Wise FDI Equity Inflows in India

Year Amount In

Crores

Amount In USD

Million

% Growth

2004-05 10,064 3,219 47%

2005-06 14,653 3,219 72%

2006-07 56,390 12,492 125%

2007-08 98,642 24,575 97%

2008-09 1,42,829 31,396 28%

2009-10 1,23,120 25,834 (-)18%

2010-11 97,320 21,383 (-)17%

2011-12 1,65,146 35,121 64%

2012-13 1,21,907 22,424 (-)36%

2013-14 1,47,518 24299 8%

2014-15 1,89,107 30931 27%

Source: As per DIPP’s FDI data base

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From table I it is analyzed that total FDI equity inflow in India from different sectors during the

year 2000-01 was US$ 2378.68 million. It increases to 2704.34 million but decreased to US$

2187.71 million in 2003-04. FDI inflows increased rapidly in year 2006-07 i.e. US$ 1249.77

million. The reason behind this fast growth is change in policies regarding to retailing in India as

Government gives approval for 100% for cash and wholesale trading and 51% for single branch

retailing. In year 2009-10 and 2010-11 it started to dip by 18% and 19%. Again FDI inflows

started to gain its momentum and foreign direct investment have been on rise in India. There was

a growth of total FDI equity inflow of 27.29% during 2014-15 over 2013-14 in India.

Table 2: Foreign Direct Investment flow to India: Country wise

Source

Country

Total FDI

2010-11

14,939

2011-12

23,473

2012-13

18,286

2013-14

16,054

2014-15

24,748

Mauritius 5,616 8,142 8,059 3,695 5,878

Singapore 1,540 3,306 1,605 4,415 5,137

U.S.A. 1,071 994 478 617 1,981

Cyprus 571 1,568 415 546 737

Japan 1,256 2,089 1,340 1,795 2,019

Netherlands 1,417 1,289 1,700 1,157 2,154

UK 538 2,760 1,022 111 1,891

Germany 163 368 467 650 942

UAE 188 346 173 239 327

France 486 589 547 229 347

Switzerland 133 211 268 356 292

Hong Kong 209 262 66 85 325

Spain 183 251 348 181 401

China 2 73 148 121 505

Malaysia 40 18 238 113 209

South Korea 136 226 224 189 138

Luxembourg 248 89 34 539 204

Others 1,142 892 1,154 1,015 1,250

Source: www.rbi.org.in

It shows that Mauritius and Singapore on the top among the chart of 10 top investing countries into India

followed by USA, Cyprus and Japan.

(ISSN 2249-2143) Table 3: Sectors Attracting Highest FDI Equity Inflows in India

Ranks Sector 2010-11

(April-

March)

2011-12

(April-

March)

2012-13

(April-

Cumulative

inflows

%age of

total inflows

(in terms of

1. Service Sector 15,504

(3,296)

24,656

(5,216)

25,367

(4,660)

1,71,345

(37,063)

2. Construction Development :

Townships, Housing, Built-Up

Infrastructure

(1,663)

15,236

(3,141)

(1,206)

1,00,363

(21,954)

3. Telecommunications

(radio paging, cellular mobile,

basic telephone services)

(1,665)

(1,997)

57,585

(12,645)

4. Computer Software &

Hardware

52,500

(11,640)

5. Drugs & Pharmaceuticals 961

14,605

(3,232)

(1,008)

48,257

(10,202)

6. Chemicals (Other Than

Fertilizers)

10,612

(2,354)

18,422

(4,041)

40,366

(8,857)

7. Power 5,796

(1,272)

(1,652)

36,085

(7,825)

8. Automobile Industry 5,864

(1,299)

35,702

(7,653)

9. Metallurgical Industries 5,023

(1,098)

(1,786)

(1,385)

34,375

(7,426)

10. Hotel & Tourism 1,405

17,401

(3,190)

32,884

(6,526)

Source: As per DIPP’s FDI data base

According to Table III, Service sector attracts the highest FDI inflows with 20% of the total

inflows followed by construction development 12%, Telecommunication 7% and computer

software and hardware 6% respectively.

Conclusion

FDI plays an important role in economic development of India. It became possible due to the

liberal policies and regulations regarding foreign direct investments through Government route

and automatic route. India is in double taxation avoidance agreement (DDTA) with Mauritius,

this helps in attracting maximum FDI from Mauritius. India received maximum foreign

investments from Mauritius, Singapore and Japan which shows a positive impact on growth of

GDP of India. It is also analyzed that the service sector receives the highest amount of FDI

inflows followed by telecommunications sector and construction sector during 2011 to 2014.

Investors are taking keen interest in investing and showing their growing confidence in India

Economy.

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In order to attract more and more FDI inflows in country policy makers need to ensure

transparency and consistency in making the policies.

References

Ahmad Izhar Mohammad Yameen (2015). Impact of FDI on GDP in India since

Liberalization. Pezzottaile Journals. 4 (3) : 1827-1834.

Sood Naveen (2015). Trend of FDI in India: An Analytical Study of 2001-14.

International Journal of Commerce and Management. 9(6):56-62.

Singh Kuldeep (2015). The significance of Service Sector in Indian Economy.

International Research Journal of Management and Commerce. 2 (4) : 13-25.

Latha M.C. and Dr. Shanmugan V. (2014). Growth of Service Sector in India.IOSR

Journal of Humanities and Social Science. 19 (1): 8-12.

Ashwani S and Arya Gaurav. Does Government Spending on Social Sector Impact

Growth? An Analysis across Indian States for Last Two Decades. International Research

Journal of Commerce, Art and Science. 5 (6) : 211-225.

Akhtar Gulshan (2013). Impact of FDI: Pre & Post Reform. International Journal of

Humanities and Social Science Inventions. 2(2) : 1-11.

Kumari Nilanjana (2013). A Study of FDI in India. Journal of Economics and

Sustainable Development. 4(3): 25-40.

Mukhrejee Arpita (2013). The Service Sector in India. ADB Economic Working

Paper series No. 352.

Aggarwal Shalini, Singla Ankur and Aggarwal Ritu (2012). FDI in India.International

Journal of Code Engineering and Management. 15 (5): 93- 105.

Bohra Singh Narendra (2011). FDI in Indian Service Sector. International Journal of

Economic Research. 2(2): 10-18.

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Relative Financial Performance of New Private Sector Banks in India

*Rajni Saluja

*Assistant Professor, University School of Management, Desh Bhagat University, Mandi Gobindgarh

Abstract

The policy of liberalization, globalization and privatization in 1990s was accompanied by new

entrants in the Indian banking Industry. Government gave licenses to a small number of private

banks which came to be known as New Generation tech-savvy banks. There arose large

competitive pressures due to entry of new players in the Indian banking industry. The objective

of the present paper is to examine the financial performance of new private sector banks in

India. The study covers major private sector banks such as ICICI Bank, HDFC Bank, Axis Bank,

Yes Bank, Kotak Mahindra Bank. To measure the profitability of banks in India, financial ratios

are calculated such as Spread as percentage of working funds, Burden as percentage of working

funds, Operating profit as percentage of working funds, Net profit as percentage of total income,

Interest income as percentage of total income, Non-interest income as percentage of total

income. The paper evaluates financial performance of private banks through overall profitability

indices and on the basis of this study banks are classified into four categories- Excellent, Good,

Fair and Poor performers. Statistical tools like average, standard deviation and coefficient of

variation are used. The time period of the study is 5 years from 2007-08 to 2011-12. The study

concludes that on basis of overall profitability HDFC Bank, Axis Bank and Kotak Mahindra

Bank are the excellent performers and ICICI Bank and Yes Bank are the poor performers. The

paper also makes recommendations to improve the financial performance of banks in India.

Keywords: Financial Performance, Private Banks, Profitability

Introduction

Indian Banking sector is growing at rapid pace in co-ordination with global changes. Banks play

a productive role in the economic growth of the country by following the proper mobilization

and allocation of resources. Indian Banks has risen to such a height functionally and

geographically that is unparalleled in the world. Banking sector reforms have brought sea

changes in Indian banking industry. RBI’s efforts to adopt international banking standards have

forced the bank to shift the focus on profitability for survival. The policy of liberalization,

globalization and privatization in 1990s was accompanied by new entrants in the Indian banking

industry. Government gave licenses to a small number of private banks which came to be known

as New Generation tech-savvy banks. There arose large competitive pressures due to entry of

new players in the Indian banking industry.

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Profitability is very important criterion to evaluate the overall efficiency of a concern. The term

‘profitability’ is comprised of two words, ‘profit’ and ‘ability’. The analysis of profitability is

extremely important to management which is responsible of the ultimate success of the banks, to

the state holders who are interested in adequate reforms and growth of the banks and to the long

term creditors who are interested in the repayment of their debt and solvency of the bank. The

present paper focuses on financial performance of major new private banks in India.

Main Objectives of the study

To examine the financial performance of new private sector banks during the period

from 2007-08 to 2011-12.

To evaluate the financial performance of private sector banks in India and to appraise

the profitability of these banks through overall profitability indices.

To make recommendations to improve the financial performance of banks in India.

Methodology & Database

The study is secondary based and analytical in nature. The data is collected from

publications of major private banks particularly annual reports of banks and publication of

Reserve Bank of India such as Report on Trends and Progress of Banking in India.The study has

taken into consideration following major private banks such as ICICI Bank, HDFC Bank, Axis

Bank, Yes Bank, Kotak Mahindra Bank. To measure the profitability of banks in India, financial

ratios are calculated which are as follows:

Spread as percentage of working funds

Burden as percentage of working funds

Operating Profit as percentage of working funds

Net Profit as percentage of total income

Interest income as percentage of total income

Non-interest income as percentage of total income

The time period of the study is 5 years from 2007-08 to 2011-12. The statistical tools are

used in the study to analyze the data are average, standard deviation and coefficient of variation.

For analyzing the performance of private banks, six profitability indices are calculated by using

the following formula:

Profitability index= Average ratio for the concerned private bank/Average ratio for the

aggregate of all the private banks.

Once the indices are obtained, their Average (X) and Standard deviation (σ) are calculated.

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On the basis of performance indices, the study seeks to classify Private sector banks into four

categories:

a) Excellent Performance level includes the banks lying at the top 25 percent areas of

the normal distribution i.e. where index value is greater than (X+0.6745σ)

b) Good performance level includes the banks whose growth index score lies between

50 to 75 percent areas of the normal distribution i.e. where index value is between X

to (X+0.6745σ)

c) Fair Performance category includes those banks where index lies between 25 to 50

percent area under normal curve i.e. where index value is between (X-0.6745σ) to X

d) Poor category comprises the banks which show their index lying at the bottom 25

area of the normal distribution i.e. where index value lies below (X-0.6745σ)

Value of 0.6745σ refers to the standard normal distribution which divides the distribution

at 25 percent and 75 percent respectively. For expenditure index as in case of burden index, the

performance levels had been reversed. This is because these are expenses for the bank and lower

the volume, higher the performance measured in terms of profitability. MS Excel is used to

calculate the values.

Analysis & Interpretation

Following ratios are calculated to assess the financial performance of major private banks

in India.

Spread as percentage of working funds:Interest spread is the difference between interest earned

and interest paid by the banks. Working funds refers total resources of the bank. The ratio of

spread as percentage of working funds is a measure of operating profitability of banks. Higher

value of this ratio is better. Table 1 shows spread as percentage of working funds.

HDFC Bank had the maximum ratio during 2007-08 (3.93%), Kotak Mahindra Bank during

2008-09 (6.51%), 2009-10 (5.52%), 2010-11 (4.12%) and 2011-12 (3.83%). For ICICI Bank,

Axis Bank, Yes Bank, the ratio increased during 2011-12 as compared to 2007-08 whereas for

HDFC Bank and Kotak Mahindra Bank, the ratio has decreased over the period of time.

Bank-wise analysis shows maximum average ratio for Kotak Mahindra Bank (4.86%)

followed by HDFC Bank (3.83%), and minimum average ratio forICICI Bank (2.05%),Yes Bank

(2.13%) and Axis Bank (2.63%) respectively. Maximum variations in the ratio are witnessed by

Kotak Mahindra Bank (23.04%) and minimum variation is observed by Yes Bank (3.92%).

Year-wise, the average ratio of five new private sector banks was highest during 2008-09

(3.46%) and lowest during 2007-08 (2.88%). The average bank spread ratio increased from

2.88% (2007-08) to 3.23% (2009-10) and then declined to 2.95% in 2011-12.

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Maximum variability was observed during the year 2008-09 (54.3%) and minimum variation

during 2011-12 (25.8%). Table 4.1 reveals that HDFC Bank and Kotak Mahindra Bank achieved

higher ratio over the average bank ratio for all the years.

Table1: Spread as percentage of working funds

Year/Bank ICICI

Mahindra

Average S.D. C.V.

2007-08 1.82 3.93 2.36 1.98 4.32 2.88 1.16 40.2

2008-09 2.02 4.04 2.49 2.22 6.51 3.46 1.88 54.3

2009-10 1.93 3.76 2.77 2.16 5.52 3.23 1.46 45.2

2010-11 2.22 3.80 2.70 2.11 4.12 2.99 0.92 30.8

2011-12 2.27 3.64 2.81 2.19 3.83 2.95 0.76 25.8

Average 2.05 3.83 2.63 2.13 4.86 3.10

S.D. 0.19 0.15 0.19 0.09 1.12

C.V. (%) 9.27 3.92 7.22 4.23 23.04

Source: Calculated values

Burden as percentage of working funds: Burden refers to the difference between non-interest

expenditure and non-interest income of a bank. From the profitability angle of the banks, this

ratio is considered to be very important. To enhance the profitability, the banks should always try

to reduce this ratio. Table 2 shows burden as percentage of working fund. ICICI Bank has lowest

ratio during 2007-08 (0.78%); Yes Bank during 2007-08 (0.81%). ICICI Bank and Yes Bank

could achieve a lower burden ratio then the average ratio for all the years.

Bank-wise analysis shows the lowest average ratio for Yes Bank (0.86%) and ICICI Bank

(0.98%) respectively and maximum average burden ratio for Kotak Mahindra Bank (3.15%) and

HDFC Bank (2.49%) respectively. Thus Yes Bank was at better position and Kotak Mahindra

Bank at worst position with respect to burden ratio for the period under study. Maximum

variation and least consistency in the ratio was found in case of Kotak Mahindra Bank (26.98%),

ICICI Bank (20.41%) respectively. Minimum variation and maximum consistency was observed

for Yes Bank (3.49%), Axis Bank (3.76%) and HDFC Bank (11.24%) respectively.

Year-wise, the average burden ratio which was 1.79 percent in 2007-08 increased to 2.12

percent in 2008-09 and declined to 1.47 percent in 2011-12. This indicates that new private

banks in order to increase their profitability reduced burden ratio. The burden ratio was more

consistent during 2011-12 (42.86%) and 2010-11 (49.07%) whereas less consistency was

observed during 2008-09 (67.92%), 2007-08 (64.25%) and 2009-10 (61.88%) respectively.

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Table 2: Burden as percentage of working funds

Year/Bank ICICI

Mahindra

Average S.D. C.V.

2007-08 0.78 2.73 1.38 0.81 3.29 1.79 1.15 64.25

2008-09 1.32 2.82 1.27 0.88 4.33 2.12 1.44 67.92

2009-10 0.94 2.44 1.38 0.85 3.46 1.81 1.12 61.88

2010-11 0.95 2.39 1.31 0.88 2.52 1.61 0.79 49.07

2011-12 0.90 2.11 1.32 0.87 2.17 1.47 0.63 42.86

Average 0.98 2.49 1.33 0.86 3.15 1.76

S.D. 0.20 0.28 0.05 0.03 0.85

C.V. (%) 20.41 11.24 3.76 3.49 26.98

Operating Profit as percentage of working funds: Operating profit denotes the difference

between the interest spread and burden. Net profit is obtained by deducting provisions and

contingencies from operating profit. This ratio indicates operating profit per unit of working

funds. Higher value of this ratio indicates better profitability and lower ratio shows lower

profitability of the bank. Table 3 shows operating profit as percentage of working funds. Kotak

Mahindra had the maximum ratio during 2009-10 (3.97%) and Axis Bank during 2008-09

(2.95%), 2010-11 (3.17%), 2011-12 (2.19%), HDFC Bank during 2007-08 (2.83%).

Bank-wise Analysis of the ratio reveals average ratio is highest in case of Axis Bank

(3.02%) followed by Kotak Mahindra Bank (2.93%) and HDFC Bank (2.79%), Yes Bank

(2.62%) and lowest in case of ICICI Bank (2.13%).Year-wise analysis shows maximum average

ratio during 2009-10 (3.17%) and minimum during 2007-08 (2.39%). In terms of variability,

2011-12 (11.11%) was most consistent and 2009-10 (19.87%) was least consistent.

Table 3: Operating Profit as percentage of working funds

Year/Ba

Mahindra bank

Average

2007-08 1.99 2.83 2.57 2.06 2.51 2.39 0.36 15.06

2008-09 1.96 2.83 2.95 2.75 2.54 2.61 0.39 14.94

2009-10 2.28 2.89 3.48 3.24 3.97 3.17 0.63 19.87

2010-11 2.23 2.79 3.17 2.58 2.86 2.73 0.35 12.82

2011-12 2.19 2.65 2.94 2.48 2.79 2.61 0.29 11.11

Average 2.13 2.79 3.02 2.62 2.93 2.69

S.D. 0.15 0.09 0.33 0.43 0.59

7.04 3.23 10.93 16.41 20.14

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Net Profit as percentage of total income: The ratio of net profit as percentage of total income

reflects the income generating capacity of the banks. This ratio indicates as to what percentage of

total income is being earned by a bank as net profit. Total income includes both interest and non-

interest income. Higher ratio indicates higher profitability and lower ratio indicates lower

profitability. Table 4 shows net profit as percentage of total income.

The ratio witnessed wide variations and gradual increase over the years for all banks. In

case of ICICI Bank ratio in 2007-08 (10.49%) which increased in 2011-12 (15.75%), ratio of

HDFC Bank also increased from 12.83% (2007-08) to 15.88% (2011-12), Axis Bank ratio

increased from 12.17% (2007-08) to 15.47% (2011-12), Yes Bank from 12.01% (2007-08) to

13.64% (2011-12) and Kotak Mahindra Bank from 9.80% (2007-08) to 15.16% (2011-12).

Over the period of study 2007-08 to 2011-12, Axis Bank has highest average ratio

(14.82%) followed by HDFC Bank (14.22%), Yes Bank (13.98%) and Kotak Mahindra Bank

(1283%). Lowest average ratio is observed in ICICI Bank (11.09%). In terms of variability, the

ratio is more consistent for Yes Bank (13.38%), Axis Bank (13.97%), HDFC Bank (14.22%) and

less consistent in case ICICI Bank (42.02%) and Kotak Mahindra Bank (27.90%).

Year-wise Analysis shows Axis Bank has highest ratio during 2010-11 (17.12%) and

2008-09 (13.21%) and 2009-10 (16.22%), HDFC Bank during 2007-08 (12.83%) and 2011-12

(15.88%). The average ratio gradually improved over the period with maximum 16.23% during

2010-11 and lowest during 2008-09 (10.13%). In terms of variability, highest variation and less

consistency is observed during 2008-09 (32.68%) and lowest variation and more consistency is

observed during 2010-11 (3.69%).

Table 4: Net Profit as percentage of total income

Year/Bank ICICI

Mahindra

Average S.D. C.V.

2007-08 10.49 12.83 12.17 12.01 9.80 11.46 1.26 10.99

2008-09 5.27 11.44 13.21 12.46 8.27 10.13 3.31 32.68

2009-10 8.13 14.76 16.14 16.22 14.45 13.94 3.34 23.96

2010-11 15.79 16.18 17.12 15.59 16.46 16.23 0.60 3.69

2011-12 15.75 15.88 15.47 13.64 15.16 15.18 0.90 5.93

Average 11.09 14.22 14.82 13.98 12.83 13.39

S.D. 4.66 2.03 2.07 1.87 3.58

C.V. (%) 42.02 14.28 13.97 13.38 27.90

Interest Income as percentage of total income: Interest income in banks refer to fund based

income. Interest earned includes interest or discount on deposits, income on investments, balance

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with RBI and other banks and other income. This ratio is indicator of profitability of banks.

Higher ratio is indicator of higher profitability of banks. Table 5 shows Interest Income as

percentage of total income.

Highest ratio was observed in case of Kotak Mahindra Bank in 2007-08 (84.55%), 2008-

09 (91.80%), 2009-10 (83.82%), Yes Bank has highest ratio during 2010-11 (86.46%) and in

2011-12 (88.04%)

Bank-wise Analysis show maximum average ratio for Kotak Mahindra Bank (86.16%),

followed by Yes Bank (83.19%), HDFC Bank (82.35%), Axis Bank (77.99%) and minimum in

case of ICICI Bank (69.24%). The ratio is more consistent for HDFC Bank (1.45%), Axis Bank

(2.96%), Kotak Mahindra Bank (3.82%), Yes Bank (4.77%) and least consistent for ICICI Bank

(21.74%).

Year-wise analysis shows highest ratio during 2011-12 (84.04%) and lowest in 2009-10

(74.09%). In terms of variability, maximum variability and less consistency is observed during

2009-10 (18.36%) and minimum variability and more consistency is observed in 2007-08.

Table 5: Interest Income as percentage of total income

Year/Bank ICICI

Mahindra

Average

2007-08 77.75 81.58 79.59 78.71 84.55 80.44 2.69 3.34

2008-09 56.51 83.23 78.90 82.08 91.80 78.50 13.2 16.82

2009-10 50.59 80.94 74.68 80.46 83.82 74.09 13.6 18.36

2010-11 79.62 82.13 76.59 86.46 84.29 81.82 3.87 4.73

2011-12 81.72 83.88 80.23 88.04 86.35 84.04 3.21 3.82

Average 69.24 82.35 77.99 83.19 86.16 79.79

S.D. 15.05 1.19 2.31 3.97 3.29

C.V. (%) 21.74 1.45 2.96 4.77 3.82

Non-Interest Income as percentage of total income: Non-interest income is also known as other

income is second as well as last component of the total income of a bank. Non-interest income of

bank represents income earned by way of commission, brokerage, service charges and other

miscellaneous receipts. From the viewpoint of profitability, non-interest income of bank is

considered as an important factor. This ratio indicates percentage of fee based income in total

income and hence greater profitability. Thus banks must give much emphasis to increase the

non-interest income as to have the higher profitability. Table 6 shows non-interest income as

percentage of total income. The ratio was highest for ICICI Bank during 2007-08 (22.25%),

2008-09 (43.49%), 2009-10 (49.41%), Axis Bank during 2010-11 (23.41%) and 2011-12

(19.77%).

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Bank-wise analysis of the ratio reveals maximum average ratio (30.76%) for ICICI Bank

followed by Axis Bank (21.99%), HDFC Bank (17.65%), Yes Bank (16.81%) and minimum

ratio for Kotak Mahindra Bank (13.83%). In terms of variability, more variation and less

consistency is observed in ICICI Bank (47.27%) and least variation in ratio for HDFC Bank

(6.74%).

Year-wise analysis shows average was highest in 2009-2010 (27.49%) and lowest in

2011-12 (15.96%). In terms of variability, greater variation and less consistency is observed in

2008-09 (61.38%) and less variation and more consistency was observed during 2007-08

(13.75%)

Table 6: Non-Interest Income as percentage of total income

Year/Bank ICICI

Mahindra

Average S.D. C.V.

2007-08 22.25 18.42 20.40 21.29 15.45 19.56 2.69 13.75

2008-09 43.49 16.77 21.09 17.92 8.19 21.49 13.19 61.38

2009-10 49.41 19.06 25.32 19.54 16.18 27.49 13.55 49.29

2010-11 20.38 17.87 23.41 13.36 15.70 18.14 3.93 21.66

2011-12 18.28 16.12 19.77 11.96 13.65 15.96 3.21 20.11

Average 30.76 17.65 21.99 16.81 13.83 20.21

S.D. 14.54 1.19 2.31 4.01 3.29

C.V. (%) 47.27 6.74 10.50 23.85 23.79

Table 7: Table showing Indices of Profitability Performance

Bank/Ratio Spread

as % of

working

Burden

as % of

working

Operating

Profit as

working

Profit

of total

income

Interest

Income

as % of

income

Non-Interest

Income as %

of total

income

ICICI Bank 0.66 P 0.55 P 0.79 P 0.83 P 0.87 P 1.52 E

HDFC Bank 1.24 E 1.41 E 1.04 G 1.06 G 1.03 G 0.87 F

Axis Bank 0.84 F 0.75 F 1.12 E 1.11 E 0.98 F 1.09 G

Yes Bank 0.68 P 0.49 P 0.97 P 1.04 G 1.04 G 0.83 F

Mahindra

1.56 E 1.79 E 1.09 E 0.96 F 1.08 E 0.68 P

Average 0.97 0.99 1.00 1.00 1.00 0.99

S.D. 0.39 0.57 0.13 0.11 0.08 0.33

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Conclusions

It can be concluded that HDFC Bank, Axis Bank and Kotak Mahindra Bank are the

excellent performers and Yes Bank and ICICI Bank are poor performers on basis of overall

profitability.

Suggestions

Following suggestions are made to improve the profitability of the banks:

Banks should enhance fee based income and reduce dependence on interest income in

order to increase profitability.

Banks should grow in size and should introduce diversified and sophisticated

products to meet the needs of modern society.

Profitability of banks is largely affected by high operating costs. High labour

productivity, updated technology and employment of low cost funds help in

controlling operating costs and ensure financial viability of banks.

References

Bodla & Verma, (2008-09) “Earning Quality of Scheduled Commercial Banks in

India”, Prajnan, Vol. XXXVII, No.4, pp. 144-158.

Debasish Swaroop Sathya& Mishra Bishnupriya, (2005) “Indian Banking System-

Development Performance and Services”, Mahamaya Publishing House, New Delhi,

pp. 53-99.

Prasad K.V.N & Chari A.A, (2011) “Indian Journal of Finance, November, pp. 11-22.

Sangmi Mohi-id-din &Nazir Tabassum,(2010) “Analyzing Financial Performance of

Commercial Banks in India: Application of CAMEL Model”, Pak. J. Commer.

Soc.Sci, Vol. 4(1), pp. 40-55.

Annual reports, ICICI Bank, various issues.

Annual reports, HDFC Bank, various issues.

Annual reports, Axis Bank, various issues.

Annual reports, Yes Bank, various issues.

Annual reports, Kotak Mahindra Bank, various issues.

RBI, Report on Trends & Progress of Banking in India, various issues.

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Factors Influencing Awareness of E-Commerce: An Empirical Study of

Ludhiana District

Sakshi Verma, M.Com, Department of Commerce, A.S.College, Khanna

Abstract

E-Commerce is a form of modern business, which addresses the requirements of business

organizations. It can be broadly defined as the process of buying or selling of goods or services

using an electronic medium such as the Internet. Various models of E-Commerce are used

nowadays like (B2B) business to business, (B2C) business to consumer etc. Now the products

and services are available 24 hours.The purpose of this study is to find the various factors and

the intensity to which they influence the awareness of E-Commerce among people in Ludhiana

District. Some of the determinants that can be said to having an impact over E-Commerce’s

awareness and usage are like literacy, region, occupation and age etc. Survey research was

adopted with questionnaire as data collection instrument. Quantitative and qualitative basis of

research has been used. Empirical study of Ludhiana District has been conducted.

Keywords: E-Commerce, Awareness, Determinants, Empirical

Introduction

E-Commerce is a form of modern business, which addresses the requirements of business

organizations. It can be broadly defined as the process of buying or selling of goods or services

using an electronic medium such as the Internet. Various models of E-Commerce are used

nowadays like (B2B) business to business, (B2C) business to consumer etc. Now the products

and services are available 24 hours.

India is becoming shopper’s paradise for those who sell their products and services online. India

is the country with large population; those are the heavy users of smart gadgets. Availability of

reducing broadband subscription charges and introduction of 3G and 4G services has made the

consumers, the driving force of E-Commerce in the country.

According to a new study by Forrester Research, approximately a fifth of total retail

sales will take place online by 2021 in Asia Pacific, with 78 percent of that coming from mobile,

up from 63 percent in 2016.

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To study the various factors affecting the awareness of E-Commerce in Ludhiana district.

Concept

Ludhiana is a city and a municipal corporation in Ludhiana district in the Indian state of Punjab,

and is the largest city north of Delhi. It is the largest city in the state, with an estimated

population of 1,693,653 as of the 2011 Census. The population increases substantially during the

harvesting season due to the migration of laborers from the eastern states of Uttar

Pradesh, Biharand Odisha. It has an area of about 3,767 square kilometers. The city stands on

the Sutlej River's old bank, 13 kilometers south of its present course. It is a major industrial

Centre of northern India.

This paper focuses on studying the various factors prevailing in the market that effect the

awareness of E-Commerce like, Age, Education, Sex, Occupation, Income etc. it is a study of

District: Ludhiana

E-Commerce implies trading through internet; it has been gaining a huge importance since mid

90s. However, E-Commerce is getting more and more attention from entrepreneur and

consumers. E-Commerce is used at a global level; various sites for trading like Amazon India,

Flipkart, Snapdeal, E-bay, Alibaba etc. are very popular. There are various models of E-

Commerce:

1. BUSINESS-TO-BUSINESS (B2B)

2. BUSINESS-TO-CONSUMER (B2C)

3. CONSUMER-TO-CONSUMER (C2C)

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4. CONSUMER-TO-BUSINESS (C2B)

5. BUSINESS-TO-GOVERNMENT (B2G)

6. MOBILE COMMERCE (M-COMMERCE)

1.) Business-To-Business

The buying and selling of goods and services between companies online or commerce

between businesses that is conducted electronically or collaboration among business

communities over the internet.

E.g.:- Ferguson, Quill, Grainger.

2.) Business-To-Consumer

B2C E-Commerce, in which online businesses seeks to reach individual consumers, it is

the most well-known and familiar type of E-Commerce.

E.g.:-Amazon, Flipkart, Snapdeal etc.

3.) Consumer-To-Consumer

C2C ventures provide a way for consumers to sell to each other with the help of an online

business. The first and best example of this type of business is e-bay.com. This introduces

online auctions.

E.g.:- half.com, craigslist.com.

4.) Consumer-To-Business

When an individual sells products and services to a business.

5.) Business-To-Government

It is commerce between public sector and government. It refers to the use of E-Commerce for

public procurement, licensing procedures and other government related procedures.

E.g.:- Business pay taxes, file reports, or sell goods and services to govt. agencies.

6.) Mobile Commerce

Any E-Commerce is done through wireless environment, especially via internet.

The study is mainly concerned with studying the various factors that affect the awareness and

usage of E-Commerce in a definite region i.e. Ludhiana. Hence various data and methodology is

considered in the report preparation. The main data sources are:

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Primary Data

The primary data refers to original information gathered for a specific purpose and provides up

to date, accurate and relevant information and it is gathered in an investigation according to the

needs of the problem.

Tools to collect the primary data

Survey method with the help of questionnaires, interviews, personal observation, and direct

consultation with respondents has been used as a way to collect primary data.

Sampling unit

It refers to the individual who are to be surveyed in the study and these are the people living in

Ludhiana or the regions under it.

Sample size

It refers to the number of people surveyed for this topic, in the study 50 respondents were

surveyed and their response has been drawn.

Secondary Data

The secondary data can be defined as data collected by someone else for purposes other than

solving problems being investigation and previously meant for another purpose.

A secondary data is collected from the books, internet and other publications.

Factors Affecting the Awareness of E-Commerce in Ludhiana District.

To increase the convenient understanding of the data, I would like to analyze the collected data

in a systematic manner and interpreted with the most suitable method possible.

Gender

Gender affects the buying behavior of the consumer. Gender classified on sex basis i.e. male and

female. The differentiation between the gender is necessary as people of different gender have

their specific technology perception. The following pie diagram shows the result:

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Diagram 1: Analysis of respondents on the basis of gender

The above diagram depicts the percentage of male and female. Approximately 65% of

respondents are female and 35% of respondents are male.

Geographical Location

The location of respondents affected their E-Commerce usage a lot. The areas under Ludhiana

district are divided into sub-urban and rural areas. For the convenience of respondents sub-urban

is shown as urban.

Diagram 2: Analysis of region as a factor influencing E-Commerce

The above diagram is showing that people from urban areas prefers the usage of E-Commerce

than the people belonging to rural areas. 29 respondents from urban areas are using E-Commerce

and 03 respondents are from rural area.

Urban Rural

REGION

Respondents

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Criterion or Features

Because E-Commerce offers a lot of features it becomes a task for the respondent to see what

feature he chooses over the other. Respondents use E-Commerce for separate reasons and they

give preference to different features or benefits of it like price, choice, quality, payment security,

fast delivery etc.

Diagram 3: Analysis of usage of E-Commerce o the basis of its criterion

The above diagram indicates that the most important factor that influences the usage of E-

Commerce among respondents is CHOICE i.e. respondent prefer E-Commerce because it avails

a variety of products and services. After this main priority is given to price. The feature with

lowest responses is fast delivery and others.

Purpose of Usage

E-Commerce is attracting sellers and buyers very much because it has multipurpose usage for the

users.

Diagram 4:Analysis of purpose of usage of E-Commerce

56%16%

Respondents

Shopping and entertainment Online payments

Online banking Online Business

Others

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The diagram- 4 is clearly showing that most of the respondents i.e. 56% use E-Commerce for

shopping. It depicts that the main advantage of E-Commerce is the variety, price and other things

that affects the usage among them. Around 16% use is for online payments and the least is for

online business and other purposes.

Educational Qualification

Our main objective in this is to find out that whether education is also a factor that affects the

awareness regarding E-Commerce in Ludhiana district. As we know that education nowadays

plays a great role in market as customer education can lead the market to different way

Diagram 5: Analysis of relation between education and usage of E-Commerce in respondents

The above diagram shows that the most highly qualified respondents are the higher users of E-

Commerce i.e. they do online transactions as 47% respondents who use E-Commerce are

postgraduates and respondents with lowest education level i.e. matriculation are the rare users of

internet i.e. 9% .Also, there are less number of users from the higher secondary qualification i.e.

13%. Therefore it represents that respondents with education qualification more than higher

secondary are more likely to use online trade.

Occupation

Occupation of a person greatly affects his habits and interests. It has been seen that person with

different occupations like household, business, service class etc. largely affects their behaviour

and pattern of spending. This is why this factor has been included in the study.

Matriculation9%

Higher secondary

Graduation31%

Postgraduation47%

RESPONDENTS

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Diagram 6: Analysis of occupation and E-Commerce usage relation

The graph itself shows that the main users of e-transactions are students with highest numbers.

Service class and businessman are at a same level in case of usage of E-Commerce. There can be

various reasons behind the non-usage of e-transactions by these classes.

Satisfaction Level

Higher the satisfaction of consumers, higher would be the sales of seller. The satisfaction of

respondents affects the usage of E-Commerce. If a user is dissatisfied then it becomes difficult to

convince them to use a technology as they start to resist it.

Diagram 7: Analysis of satisfaction level of respondents

The graph above shows that most of the respondents are satisfied with E-Commerce. There are

very less respondents who said highly dissatisfied with E-Commerce, it indicates that there are

chances to enhance and improve online commerce.

10121416

RESPONDENTS

Respondents

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Findings

With the present obstacles in the real world the researcher is able to find some of the following

points after conducting the study. These are the factors that influence the usage of E-Commerce

in Ludhiana District. District word here includes Ludhiana itself and all the areas under it. The

findings are as:

Females are the main users of online trade as we can see that most of the times the

purpose of using e-transactions is shopping so we can say that females under Ludhiana

District are the main prominent users of E-Commerce.

The geographic location of people affects the usage of technology very much either

because lack of facilities or any other reason, respondents are not aware about E-

Commerce.

The availability of lot of varieties over internet, it gives a great opportunity to buyers to

have a choice between wide range of products. Also the price availability due to frequent

sales etc has a great impact over its usage.

E-Commerce has been seen as a great platform for shopping at reasonable prices and

many more features. But due to the busy routine, users of online payments have also

started to pay bills etc. through internet.

Mostly the respondents with higher education i.e. above graduation perform more usage

of E-Commerce.

Most of the respondents feel either satisfied or neutral with the usage of E-Commerce.

This can be increased to a great level as a lot of opportunities are there.

Suggestions

At the end we can say that however there is a positive response towards E-Commerce from

various aspects but still there are many things which can be molded or introduced. The

researcher has come up with the following suggestions that may prove to be helpful for the

encouragement of E-Commerce so that its whole benefits can be enjoyed.

Awareness –it has been noticed that the non-users of E-Commerce are mainly resisting E-

Commerce usage because there are not even aware of what it actually is.. So the

awareness about the benefits of using E-Commerce must be spread more and more so that

the user base can increase.

Reduction in extra charges- the charges on e-transactions like taxation, delivery charges

must be reduced. This can also be done by reducing taxation on shipping etc.

Technological advancement- People who are not technology savvy are unable to use E-

Commerce because they find it difficult to operate it. So speaker mode must be

introduced just like Google provides the speaker facilities.

Education- India is a great platform to expand business because of availability of large

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customer base when it comes to the education of students, subjects like E- Commerce

must be of a mandatory nature in practical application because practical application and

theoretical concepts have some differences.

Adaptability- Because of the changing picture if India after demonetization, it has

become a topic of significance importance for the people to understand that for an

advanced and healthy nation, they have to support the government and its programmes.

Things are easier said than done but still there a lot of ways in which the scenario of India can be

improved. If everything goes its right way then surely our Nation can develop.

References

https://yourstory.com/2017/02/E-Commerce-forrester-research/

https://www2.deloitte.com/in/en/pages/technology-media-and-

telecommunications/articles/E-Commerce-in-india.html

file:///C:/Users/expert/Downloads/in-tmt-E-Commerce-in-india-noexp.pdf

http://webdesign.vinsign.com/what-is-ecommerce-importance.html

http://ludhiana.nic.in/

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Women Empowerment through Web Based Business

Case Study: MOM’S TOUCH, Indian Brand

Shagun, M.COM- 4(semester), Department of Commerce, A.S College, Khanna

Abstract

This paper attempts to analyze the empowerment of women through web based business. Women

empowerment has regarded as a sine-qua-non of progress for a country. If women are to be

empowered, it is necessary to provide an expanding networking of support services so that they

are freed from some of their gender related shackles. E-commerce has given them a golden

opportunity to make an identity of themselves and bring their talent into limelight. Mom’s Touch

is a brand of handmade woolen products sold by various e-commerce sites like Amazon,

Flipkart, Voonik and Snapdeal. The owner of this brand is Mrs. RajniVig, who is a resident of

Khanna. The case study has been conducted on the basis of quantitative and qualitative data.

Various methods like observation and depth interview were used for data collection. This case

study depicts how web and internet has played a significant role in empowering a lady to support

her family and the families of her women employees as well.

Keywords: Women Empowerment, Sine-quo-non, E-commerce

Introduction

Women play an important role in the development both in the context of the family and the

society at large including the economy and social system. For the all-round development of a

community, women must be identified as a potential resource. Women empowerment has

regarded as a sine-qua-non of progress for a country. Empowerment of women implies to

enhance and improve the social, economic, political and legal strength of the women to ensure

equal right to women and to make them confident enough to claim their rights such as

independently live their life with a sense of self-worth, respect and dignity.

“To call woman the weaker sex is a libel; it is man’s injustice to woman. If by strength is meant

brute strength, then, indeed, woman is less brute than man. If by strength is meant moral power,

then woman is immeasurably man’s superior: Has she not greater intuition, is she not more self-

sacrificing, has she not greater powers of endurance, has she not greater courage? Without her

man could not be. If non-violence is the law of our being, the future is with woman. Who can

make a more effective appeal to the heart than woman?”

Mahatma Gandhi

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If women are to be empowered, it is necessary to provide an expanding networking of support

services so that they are freed from some of their gender related shackles. E-commerce has given

them a golden opportunity to make an identity of themselves and bring their talent into limelight.

Mrs. RajniVig,(age-51 years) resident of Khanna, district Ludhiana, is emerging as an example

of women empowerment through web based business. She is the owner of Brand “MOM’S

TOUCH” and produce and sale handmade woolen products like pullovers, cardigans, shrug etc.

She, acting as a women entrepreneur, who provides permanent employment to 15 women

residing in the areas nearby and also temporary employment to many other women. She is a

multi-talented woman who is a teacher, employer and the creator of all the product designs.

Need and Importance

There are following points which depicts if women got empowered how it will make a positive

impact on the economy:-

For the overall development of the society, women should be empowered.

They are equally competent as compared to male dominating society.

If they are independent, it will aid to reduce the domestic violence against them.

Women empowerment helps to come out from the cobweb of poverty.

It will leads to development of the nation.

It provides security as well as recognition.

Some of the empowerment instruments might be identified as follows:-

o They will get complete knowledge of their rights.

o Financial support to its families.

o Great role of literacy and higher education.

o Better take care of herself and her family.

o Marriages will be at higher age.

Objective of the Study

The aim of this paper is to show how the development of Women is being done through web

based business by conducting a Case Study on MOM’S TOUCH, Indian brand.

Review of Literature

Literature review is the basis of research. Quality research cannot be possible without reviewing

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literature comprehensively because it helps us to find out research gap in existing body of

knowledge

Seth(2001)explained that there is an evidence to show that even in Vedic age women got

most respectful and dignified position in the society. Right to education was provided to

them and they were free to spend their whole life without getting married. They were

independent to pursue their knowledge and self-1 realization. Kumar, A.K(2003) Studied

that, due to lack of awareness about the serious problem of violence against women an the

acceptance by women that men are superior has a led to the ignorance of various incidents of

murder, rape, abduction and torched against women. Veer, U (2004) that cases had been

noticed where the parents kill their daughters because, their inability to meet the dowry

demands. Forbes, (2005)From liberal homes and conservative families, urban centers and

rural districts, women – single and married, young and old- came forward and joined the

struggle against colonial rule. Kosambi, (2007) In various women’s autobiographies and

writings from all over India, particularly Maharashtra and Bengal, the slogan that ‘personal is

political’ was being raised. The fact of women entering the male dominated arena of social

reform was tantamount to making a break with the past. Shylendra, H.S,(2008)stated that

the Self Help Group- Bank Linkage Programme in India is the largest microfinance in the

world. SHG are helping more than 17 million women form villages improve their incomes,

educate their children and buy assets. Malhotra, R(2015) studied that IT has played a greater

role in women's empowerment as by enhancing their skills, knowledge and income. Flexi

timings and work at home with internet has enabled the more women to join the labor force.

Present Study

Today is the era of IT, it has provided a great platform to women to empower them. This study is

a case study of the famous brand of woolen products i.e. MOM’S TOUCH run and owned by a

woman and to study that how the web or internet has helped them to reach their goals and vision

so that they could be able to live a life with a dignified , famous and respectful status.

The primary method of data collection i.e. observation and depth interview has been adopted.

The study has been conducted on qualitative basis. The owner, her children and her employees

were also interviewed to get a true realistic picture.

Uncovered Story

The idea behind the brand name “Mom’s Touch” was to express the tenderness of moms touch.

(ISSN 2249-2143)

And the brand name was decided by their children, who actually feel that experience. The

dedication and determination of the whole family makes the dream come true, which were seen

by owner’s son. Who act as the backbone of her mother (owner).

. Logo of Mom’s Touch

The logo depicts the mother holding her infant baby with care and love

The Tagline“A feel of Mother’s love”makes it clear that how much emotional aspect of product

is shown. The thing behind the mothers love was the idea of owner’s children, because their

mother used to make such type of woolens product for her children.

Details

Owner’s name: Mrs. RajniVig

Residential status: Khanna (District-Ludhiana)

Age: 51years

Educational qualification: M.A (Economics) , B.Ed

Employees: 15 Women

Establishment: 14 Nov,2015

Intermediaries: Amazon, Flipkart, Snapdeal and Voonik

Products: Woolen items

Contact:- momstouch17@gmail.com

www.facebook.com/momstouch17

Working of their Web Based Business

Web or internet has played a powerful role to empower this brand and thus empowering related

women. There are various sites through which the products are sold i.e., Amazon, Flipkart,

Snapdeal and Voonik. Their product line is mufflers, poncho, purse, kit, shrugs, pullover,

(ISSN 2249-2143)

cardigans and sweaters offering around 70 varieties. They produce medium size products.

The initial investment was around five lakh rupees and the mode of searching employees was

advertisement through print media like- pamphlets and newspapers.

Employees: Women working are on monthly basis, according to units they produce. There are

many benefits for them like; they can work while sitting at their homes. It has given good

financial support to them so that, they can also act as a pillar of strength of their families.

Process of Production

After receiving orders from their intermediaries, they start packaging the goods as they are

already produced before placing on web. Except Flipkart, the agents of other websites take the

orders from their house.

The price of products varies between Rs.299/- to Rs.2999/-

As the quantity of articles depend upon the demand of the goods. When, the order is placed by

the customers at particular website like on Amazon and Flipkart, than the email is forward by

their intermediaries to them. So, with this they receive the orders and according to that they

producing the product and finally packaging & selling to its intermediaries.

Benefits

There are following benefits in different perspective on the basis of Business point of view and

on the basis of Women Empowerment.

On the basis of Web based Business:

Wide Coverage - Area covered by the website is mainly out of Punjab which is of great

benefit to them as it increases their popularity and sales.

Quick Response - The orders are received quickly as the sites are in direct touch with the

brand. When an order is placed they get a mail from the intermediaries so that they

prepare their lot.

Advertisement - Advertisement can cover a large area at a single point of time which

increases its reach.

Convince and Easiness – Conducting online business is quite easy and convenient as

compares to another one.

Keep eyes on Consumers Buying Habits – Like web based business keep reviewing on

the wish list of their customers buying habits

Allow happy customers to sell your products – This implies words of mouth which

help to sell your more products.

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The diagram below shows the Process of Production and Selling:

Allow happy customers to sell your products – This implies words of mouth which

help to sell your more products.

Boost brand image – This helps the boost up the image of the brand.

Scalability – Enhancing scalability of the business as the wider coverage of the

customers.

On the basis of Women Empowerment

Financial support – As theybecome the earner of their family and it provides the

financial support as well as enhancing the standard of living.

Increases confidence – Empowerment itself dignifies the symbol of confidence and

independent women become more confident and take her decision itself.

Use of skill – If they have particular skill and it will beneficial for them.

RAW MATERIAL

DESIGNING OF PRODUCTS AND VARIETY

HANMADE PRODUCTION BY EMPLOYEES

STITCHING AND FINISHING

ADVERTISEMENT OF PRODUCT AND RECEIVING ORDERS

PACKAGING AND SELLING

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Support to family – They also act as the backbone of the family, who financially

provides support.

Equality in society – Women got equal rights as compared to men, and they also have

the knowledge about their rights and properly follow them.

Challenges

As another side of coin depicts various challenges suffered by the women empowerment through

web based business as follows:

Less knowledge of technology leads to dependence on others.

Fake sales returns by customers where they change the actual product with a fake one

which is of low quality.

Huge investment and formalities are needed.

Also the legal constraints are to be followed.

Due to the poverty they cannot boost up their skills.

Suggestions

The following suggestions may be valuable for the further study:

First and foremost priority is provided education of women, which is the grassroots

problem.

Legal formalities must be reduced so that more women can indulge in these kind of

businesses.

The product line must be enhanced to meet the need of competition.

Special training and orientation programmes must be formed are awareness regarding

them must be spread so that more women can become able to enhance their skills and

EMPOWER THEMSELVES.

Women should be allowed to work and provided them enough safety and support to

References

Seth, Mira (2001): “Women and Development- The Indian Experience”, Sage

Publication, New Delhi.

Shylendra H.S., “Role of Self Help Groups”, Yojana,2008

A.K.Kumar(2003), Women And Crime, Anmol Publication, New Delhi

Uday Veer-Crime against women, Anmol Publication, New Delhi ,2004

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http://www.importantindia.com/19050/essay-on-women-empowerment/

https://medium.com/@briannawillsss/18-major-benefits-of-e-commerce-business-for-

retailers-customers-in-2015-63c5fc87f679#.r6jcdgww2

http://iosrjournals.org/iosr-jbm/papers/Vol17-issue4/Version-1/B017411319.pdf

international journal of business managementdeshbhagatuniversity.in/journalupload/ijbmr, vol....

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