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| Special Centennial Issue |
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No. 416 |
July 2024 |
Vol. CV (Part-I) |
ISSN: 0019-5170 |
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Contents
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Assessing Finance Commission’s Revenue Deficit Grants:
Normative Assessment of Interest Payments
D. K. Srivastava 1
Muralikrishna Bharadwaj 2
Tarrung Kapur 3
Ragini Trehan 4
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The Sixteenth Finance Commission like its predecessors
would undertake assessment of state expenditure needs
including interest payments. Recent FCs applied a norm on
the growth of interest payment in the forecast period without
applying any norm on the base year magnitude. We suggest a
normative approach applied both to base year and the
forecast period linked to the sustainability norms of the state
FRLs. Application of this approach to the FC14 and FC15
(2) periods show substantive over assessments. Such an
approach also ensures that any non-merit subsidies/freebies
financed by excessive borrowing is not underwritten by the
FC.
Keywords: Finance Commission, Revenue Deficit Grants,
Normative Approach, Sustainable debt levels.
- Chief Policy Advisor, EY India, Formerly Director, Madras School of Economics
(MSE), Chennai. E-mail: dkscloud@gmail.com; dk.srivastava@in.ey.com
- Senior Manager, Tax and Economic Policy Unit, EY India,
E-mail: muralikrishna.b@in.ey.com
- Senior Manager, Tax and Economic Policy Unit, EY India.
E-mail: tarrung.kapur@in.ey.com
- Senior Manager, Tax and Economic Policy Unit, EY India and part-time PhD. scholar
at MSE, Chennai. E-mail: ragini.trehan@in.ey.com
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Impact of Macro-Economic Factors on Underpricing
of IPOs Using Econometric Models
CMA Dr. Jeelan Bash V 1
Sharanappa Kilarahatti 2
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Underpricing of IPOs has been contemplated as a prevalent
phenomenon across the world. The principle aim of this
paper is to examine the impact of macro-economic factors on
the level of underpricing, number of IPO issues and MAARO
of initial public offerings (IPOs) independent as each
dependent variable. We considered the companies went for
IPOs on National Stock Exchange during the period from
2011 to 2022 consisting of 348 IPOs. In each method,
different models have been developed to find out the best
model based on the highest predictive strength. Descriptive
and inferential statistics are used to describe the variables
and draw inferences. Further, multivariate data analysis is
extensively used. Overall, the study concludes that number
of IPO issues, dependent variable determined by inflation,
HCI, interest rate, balance of payment exchange rate, FDI
and employment is the best model. This model is considered
the best because of good fit, selection criterion mode and
satisfaction of diagnostic tests. Hence, it is suggested to be
the model for the further prediction of IPO issues.
Keywords: Underpricing, MAARO, Initial Public Offerings
and Macro-Economic Factors.
- Professor , Dept. of Studies in Commerce, Vijayanagara Sri Krishnadevaraya University,
Ballari, Karnataka, India. Email: drjeelanbasha@yahoo.co.in
- Research Scholar, Dept. of Studies in Commerce, Vijayanagara Sri Krishnadevaraya
University, Ballari, Karnataka, India. Email: sharankilarahatti@gmail.com
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The Effect of Corporate Governance on the Financial Performance
(Sustainability) of Microfinance Institutions in Ethiopia
Ayenew Shibabaw Asmare1
Naveen Kumar 2 |
This study investigated the relationship between the financial
performance and corporate governance of microfinance
institutions using a sample of 25 MFIs from 2012 to 2021
with a balanced set of panel data. The study used secondary
data and employed a descriptive research design and a
quantitative research approach. The empirical results
showed that Female CEOs, Women directors, and internal
auditors reporting directly to the board of directors and
Profit Orientation have a positive relationship and
statistically significant effect on financial performance (ROA
and OSS). The study recommended as microfinance
institutions should consider the gender diversity of CEO and
on the Board of directors and the board of directors also
give attention to internal auditors to report directly to them.
Moreover, the study suggested for future researchers may be
interested in validating the stability of the result and
providing additional results for this study by including other
variables (Internal and external).
Keywords : Microfinance, financial performance,
Governance, internal and external factors.
- Lecturer, Department of Accounting and Finance, Debre Markos University, Ethiopia,
and Ph.D. Candidate at University Business School, Panjab University, Chandigarh,
India.
Email: shibabaw.ayenew21@gmail.com
- Asst. Professor, University Institute of Applied Management Sciences (UIAMS), Panjab
University, Chandigarh, India.
Email: naveen.mehta13@gmail.com
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Gender Gap in Unpaid Care Work: A Case Study of the
Unpaid Work of Women in Kollam District, Kerala
Ruth Elizabeth Jacob1
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The numerous indicators used to evaluate the economic
output of countries are more or less handicapped in
recognising the role of women labour force in the informal
sector as it is often difficult to evaluate and standardise.
Unpaid domestic works are often taken for granted and are
further endorsed as the moral responsibilities on the weaker
sex by many cultures if not all. To put things in context, this
paper modestly attempts to highlight the unpaid work
undertaken by women viz-a-viz their male counterparts.
Using Time Use Survey (TUS) and seemingly related
regression technique, this paper enquires into and shows the
trade-off between unpaid, paid and non-work activities
between gender. Replacement Cost method is used to
calculate the monetary value of unpaid work and
consequently estimate the value for these services. The
findings of the study reveal that unemployed married women,
who have children less than 6 years, spent an average of
10.2 hours daily on unpaid work compared to their male
counterpart who spend an average of 6.1 hours daily for the
same unpaid work. This micro level study is done to throw
light into the enormous work undertaken by housewives in
the domestic sphere. Their services are yet to be
acknowledged as productive work and has to be included in
to the national accounting system.
JEL Codes: D13, E01, J16
Keywords : Gender disparity, Kollam, Kerala, time use,
unpaid care work.
- Assistant Professor, Madras Christian College (Department of Economics) Tambaram
(East), Chennai – 600059 Tamil Nadu. E-mail: ruth@mcc.edu.in
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Stock Volatility Pattern, Risk & Portfolio Allocation:
Evidence from Indian Stock Market
Afsah Shahid 1
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This paper investigates the relationship between market
capitalization and volatility clustering in the Indian stock
market over the period from 2010 to 2021 using the GARCH
Model. The result shows that the sum of the coefficients of
ARCH and GARCH terms is very close to 1, which suggests
that the volatility shocks are quite persistent. The study
indicates that investments in Small Cap firms are relatively
riskier compared to Mid Cap and Large Cap firms. The
findings hold significant policy implications for optimal asset
allocation and portfolio diversification, balancing risk-return
appetites in the face of market uncertainty and investors’
exposure to risks in the market.
Keywords- Market Capitalization, Volatility Clustering,
GARCH.
JEL classification: G10, G12, G15
- Centre for Economic Studies and Planning (CESP), Jawaharlal Nehru University,
New Delhi. Email: afsahshahid02@gmail.com
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Emergence and Expansion: An In-depth Study of Born
Global Firms in Indian Textile Industry
M Srividhya 1
C.T. Vidya 2 |
This research study delves into the remarkable ascent of
Born Global (BG) textile firms in India, which have emerged
as a significant force in the global textile industry. The study
explores the key drivers behind their rapid
internationalization and examines the transformative impact
on firm performance. The sample consisted of 72 Indian
textile BG firms. Employing a random effect model, the study
uncovers the intricate relationship between
internationalization and firm performance in Indian textile
BG firms from 2005 to 2021. The findings reveal a
captivating trajectory, showcasing a short-term, dynamic
journey characterized by a two-stage, inverted U-shaped
relationship between internationalization and firm
performance. Initially, as these firms venture into global
markets, their performance experiences a temporary decline,
only to rebound and achieve unprecedented heights beyond a
certain threshold. The journey becomes even more intriguing
in the long run, revealing an extended four-stage M-curve
hypothesis with two pivotal turning points. Furthermore, the
study uncovers the pivotal variables that ignite firm
performance in BG textile firms during their
internationalization voyage, with the impact evolving. In the
short run, firm size and resource emerge as significant
determinants, while in the long run, lies in research and
development intensity. These compelling findings bear
significant policy implications. By extending financial
support and fostering research and development initiatives
for emerging BG firms, policymakers can strategically
propel their transformative journey towards maximum prowess on the international stage. Such interventions will
fortify the growth and competitiveness of BG textile firms in
India, cementing their position as unrivalled leaders in the
global market.
Keywords: Born Global firms, textile industry,
internationalization, firm performance, random effect
model.
JEL Classification: F00, D22, L25, F14, F23.
- Ph.D. scholar, Centre for Economic and Social Studies (CESS), Hyderabad, India.
Email : srividhya@cess.ac.in
- Assistant Professor, Centre for Economic and Social Studies (CESS), Hyderabad, India.
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Efficacy of Monetary Policy Transmission Channels
in India
Nawab Hussain 1
Pradipta Chaudhury 2
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This paper examines the efficacy of various channels of
monetary policy transmission in India. Three channels
of monetary policy transmission, namely, the exchange
rate channel, credit channel, and asset channel are
empirically analyzed in this paper. The paper uses VAR
models on monthly data from 2016(M6) to 2020(M3).
We find that the exchange rate channel is significant in
determining fluctuations in prices and insignificant in
explaining fluctuations in output. The credit channel is
found to be significant in explaining fluctuations in
prices while accounting for little significance in
explaining fluctuations in output. While the asset
channel is found to be significant in influencing prices
and output. From impulse response, we find that prices
react negatively to a positive shock in the exchange
rate. A one standard deviation shock on credit tends to
be followed by an increase in prices and output.
However, the intensity of impact on output is less than
on prices. In the case of the asset channel, a positive
shock in stock prices brings a positive impact on both
output and prices. Furthermore, we find that the pass-
through from policy rates to credit and exchange rates
is slow and muted.
Our paper makes a significant contribution to the
literature on the monetary policy transmission
channels. First, while most of the studies on the topic use quarterly data and annual time series data, our
findings are based on monthly time series data and
hence capture a more intensive picture of these
variables. Second, our study uses the variance
decomposition method to aid the interpretation of
results obtained from VAR models. Third, our study
provides new insights by finding empirical evidence
about the efficacy of the asset channel. Previous studies
have ignored the asset channel in the context of the
Indian economy. We argue that while formulating
monetary policy decisions, the bullish and the bearish
tendencies of the stock market should be considered.
Keywords: Monetary Policy Transmission, Vector Auto
Regression (VAR), Inflation Targeting, Impulse Response
Function (IRF).
- Lecturer in Economics, School Education Department, UT of Ladakh, India.
E-mail: Nawab738@gmail.com
- Centre for Economics Studies and Planning, JNU.
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Social Security Benefits in India: Analysis from
Periodic Labour Force Survey (PLFS) Data
Vaibhavi Pingale1
Anurag Asawa2
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Purpose
Social security benefits in India are subject to the kind of
employment, especially in the formal sector. These benefits
include pensions, gratuity, maternity leaves and so on offered
to formal sector workers. The paper aims to study the
eligibility conditions and factors for regular salaried
employment defined by the National Commission of
Enterprises in the Unorganised Sector (2006) in India that
lead to social security benefits.
Design/Methodology/ Approach
Explicit unit-level data on social security is available in the
Periodic Labour Force Survey (PLFS) conducted by the
Government of India. The PLFS data provides information
only for those workers who have been classified under the
status code 31 (regular wage/salaried employees); 41
(worked as casual wage labour: in public works); 51 (in
other types of work), and are occupied in the non-
agricultural sector. This study is based on secondary data of
245576 respondents. Age, education, sex, marital status,
social groups, enterprise type, and job contracts are the
variables used in this study. Univariate and bivariate
tabulation is used to understand the spread of the data and
the relationship between variables. The chi-square test has
also been used to justify the variable to be used in the
regression model. Further, a logit model with a different
combination of independent variables was used to estimate
the probability for eligibility for social security.
Findings
The paper finds that the probability of being a male, working
in a government body with a graduate level of education, and
belonging to other social groups are favourable conditions
to become eligible for social security benefits in India.
Originality/ Value
Data scarcity for social security is a big issue in India. A few
studies have been done at the state or regional level with
hundreds of samples. These studies were restricted to the
awareness and usability of different government schemes. It
is the first study covering the entire country using unit-level
PLFS data to identify the determinant and estimate the
probability of formal social security.
Research limitations/implications
This research paper is based on the information available
only for those workers who are regular wage/salaried
employees, worked as casual wage labour: in public works;
and other types of work, and are occupied in the non-
agricultural sector. However, the implication of the outcome
is for the entire country as data has been collected from all
over the country.
Practical implications
The outcome of the analysis provides information that the
majority of the workers do not get social security benefits in
India. There have been umpteen attempts at the state and
central level to deliver social benefits, has not been reached
the mass. We have shown that almost fifty per cent of the
respondents are not receiving any social benefits.
Social implications
Already the beneficiaries are in less percentage of the total
population. The research papers show that workers from
marginalised groups, females, and those not having higher
education are less likely to receive social security benefits.
Keywords : Eligibility, Employees, PLFS, Social Security
JEL Code : J3, J32, J48
- PhD Scholar, Gokhale Institute of Politics and Economics, Pune - 411004.
E-mail: vaibhavi.pingale@gipe.ac.in
- Professor, Gokhale Institute of Politics and Economics, Pune - 411004.
E-mail: anurag.asawa@gipe.ac.in
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India’s Sub-National Fiscal Capacity: Key Insights
Bichitrananda Seth, Samir Ranjan Behera, Kovuri Akash Yadav
Debapriya Saha & Anoop K Suresh1
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This study investigates the relationship between fiscal
capacity of Indian States, proxied by their own tax revenue,
and the real gross state domestic product (GSDP) while
identifying its key determinants by utilizing a dataset
covering 16 Indian States over 19 years. The influence of
fiscal capacity on real GSDP growth is examined using fixed
(viz., pool ordinary least squares, fixed and random effect
method) and dynamic panel (generalized method of
moments) methods. On the other hand, a fixed effects model
is employed for deciphering the determinants of fiscal
capacity of the Indian States. The empirical analysis reveals
a positive association between fiscal capacity and GSDP. A
one per cent increase in fiscal capacity corresponds to a 0.26
per cent increase in GSDP. Factors such as real per capita
income, government consumption expenditure, and capital
outlay were found to have a significant impact on both
economic growth and revenue generation. A high ratio of
gross fiscal deficit to GSDP, on the other hand, limits fiscal
capacity. Investment in human capital yields positive
outcomes. To the best of authors’ knowledge, this study
represents a pioneering endeavour that comprehensively
addresses the issue of fiscal capacity at the sub-national
level of government in India.
JEL Classification: H71, H62, H52, O15.
Keywords: Fiscal Capacity, Per Capita Income, Human
Development Index, Fixed Effect Model, Generalized Method
of Moments.
- Dr. Samir Ranjan Behera is Director, Mr. Bichitrananda Seth and Mr. Anoop K Suresh
are Assistant Advisers, Mr. Kovuri Akash Yadav and Ms. Debapriya Saha are Managers
in the Department of Economic Policy and Research (DEPR), Reserve Bank of India,
Mumbai. The authors are located in the Reserve Bank of India at its Central Office in
Mumbai. Mr. Anoop K Suresh is the corresponding author for this manuscript, and he is
reachable at the
email id - anoopksuresh@rbi.org.in or anoop.k.suresh@gmail.com.
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Impact of Covid 19 on the Stock Movements and
Sectorial Reactions: Evidence from Indian Stock Market
N. Kubendran 1
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The present study focuses on the effect of covid
pandemic on the Indian Stock Market from the first
wave since December 2019 to May 2022. The main aim
of the study is to probe the movements of stock indices
with the volatility index during the three waves and also
to forecast future movements. For this purpose, the
study compares sectoral movements like Auto, Bank,
Consumer durables, Financial Services, and overall
nifty with the volatility index. So the findings of the
study are clustered into three dimensions according to
the three waves of covid 19 in India. At the end of the
first wave, it is observed that the majority of top
sectoral stocks return to their pre covid level with a
steadystate and volatility is not observed. During the
second and third waves, the indices movements are
moderate and volatility is also observed, particularly
high volatility is observed in the third wave. Finally, the
study concludes by stating that a higher level of the
negative effect of covid-19 is observed in the Indian
stock market during the first wave of covid-19, later the
negative effect has decreased on returns but a higher
level of volatility is persisting even today. Several
international factors like India-China Border issues, the
war between Ukraine-Russia, and the hike in prices of
petroleum products associated with inflationary
pressures are some of the reasons for volatility in the
Indian Stock market. It also observed weak forecasting
in the stock movements due to the expectations of the
fourth wave of covid 19 and international instability.
Keywords: Nifty, Sensex, Covid-19, Market Indices,
Volatility Index, Risk and Uncertainty.
JEL Classification: E32, E37, D53, D80.
- Assistant Professor, Pondicherry Central University, Puducherry-605014.
E-Mail: kubendran1979@gmail.com, kubendran.eco@pondiuni.ac.in
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