ISSN 2321 – 9378

IMI
Volume 9, Issue 1, 2020 An IMI Kolkata Publication

Highlights
Gig Economy Financial Stability Efficiency in Auto Sector
Opinion on Budget
About IMI Konnect
IMI Konnect, published quarterly from International Management Institute Kolkata, is an open
access Scholarly Publication in Management. It started its journey in December 2012,
and publishes original research articles (non-technical) by scholars in the field of
management and firsthand perspectives from business thinkers and practitioners on
contemporary issues. IMI Konnect provides an intellectual platform for the national and
international scholars and the industry experts to discuss and debate their opinions and thus
contribute to the knowledge of management. It also publishes interviews with eminent
personalities in the field of business.
The articles will go through a review process before publication. The issues are themed on
Marketing, Finance, Organisational Behaviour & Human Resources (OB & HR),
Information Technology & Operations (IT & Operations), Strategy, Economics and
Management. The publication caters to academicians and practitioners in corporate and
government organizations and departments.

Editorial Advisory Board

Arindam Banik, Director, IMI Kolkata, India
Anoshua Chaudhuri, Professor and Chair, Department of Economics, San Francisco
State University, USA
Arpita Mukherjee, Professor, Indian Council for Research on International Economic Relations
(ICRIER), New Delhi, India
Damodar Suar, Professor, Department of Humanities and Social Sciences, Vinod Gupta School
of Management, IIT Kharagpur, India
Madhu Vij, Professor, Faculty of Management Studies, Delhi, India
Subhrangshu Sekhar Sarkar, Professor, Department of Business Administration,
Tezpur University, Assam, India
Syagnik Banerjee, Associate Professor, University of Michigan-Flint, USA

Editorial Team
Editor: Paramita Mukherjee, Ph.D
Associate Editors: Rituparna Basu, Ph.D
Sahana Roy Chowdhury, Ph.D
Editorial Manager: Rajashri Chatterjee, Ph.D
Editorial Assistant: Amrita Datta
 Contents

Article
Macroeconomic Policies and 1
Financial Stability in India
Soumya Kanti Ghosh, Disha Kheterpal and Shambhavi Sharma

Future of Gig Economy: Opportunities 14

and Challenges
Gobinda Roy and Avinash K. Shrivastava

A Study to Measure the Efficiency of the 26

Automobile Companies in Indian Scenario
Utilizing Data Envelopment Analysis
Arindam Banerjee and J. N. Mukhopadhyaya

Opinion
Perspectives on Budget 2020 33
Priti Agarwal
Swagat Bose
Manuscript Submission Guidelines
The article should be non-technical and should be of around 2500 - 4000 words. The research
articles may be upto 7000 words. But no mathematical expressions or technicalities of methods
should be contained in the main text. It should be typed in MS Word in Times New Roman 12
with paragraph spacing 1.5. Figures and simple, small tables can be incorporated. There should
not be any notations or equations, at least in the main text. If required, it may be put in Appendix.
The article should also contain a short abstract of 150 – 200 words. Full forms of each
abbreviation should be mentioned at first instance. All figures and diagrams should be in black
and white. Send your manuscript along with your name, institutional affiliation, email ID and
contact number to the editorial office at imikonnect@imi-k.edu.in mentioning the area viz.
Marketing, Finance, OB & HR, Economics, Strategy, IT & Operations, Management
Education, Others or Themed Issue.
For copies/queries and submission, please contact IMI Konnect editorial team at
imikonnect@imi-k.edu.in or call +91 33 6652 9664
Article IMI Konnect Volume 9 (1) 2020

Macroeconomic Policies and

Financial Stability in India
Soumya Kanti Ghosh*, Disha Kheterpal** and Shambhavi Sharma***

Abstract
India has not witnessed any episode of extreme financial instability since the 1991 Balance of Payments
(BoP) crisis, largely because of its insulated banking system with 90 per cent of bank liabilities being
funded from retail depositors, sound macro-economic policies and cautious liberalisation, although spells
of volatility have been observed in Indian financial markets following 2008 global financial crisis and
2013 taper tantrum. Periods of volatility have transformed the way fiscal and monetary policies work.
Over the years, fiscal deficit reduction has freed up resources for the banking sector as the regulatory
requirements have been progressively brought down. Fiscal policy has turned accommodative during
periods of financial volatility and more recently the banking sector has been provided with capital as its
provisioning requirements have increased after declaration of NPAs. In case of monetary policy, India
formally adopted inflation targeting with price stability as the primary objective in 2016, after
witnessing periods of high inflation. However, following the significant global volatility in recent
times and the collapse of an NBFC behemoth in September 2019, the Indian central bank is now
increasingly focused on maintaining financial stability. One such evidence was implicit when the
Reserve Bank of India (RBI) refrained from raising interest rates in October 2018 policy to defend the
Rupee against an overwhelming market consensus. In fact, RBI explicitly emphasized that the central
bank was largely tolerant with the domestic exchange rate finding its market determined level and was
concerned only to the extent that exchange rate depreciation feeds into headline inflation. The recent
decline in growth numbers has further reinforced this consideration. In this article, we have focused on
the banking sector and more recently NBFC sector, while outlining the recent policy changes which have
been introduced to support the objective of financial stability.

Financial Stability: An Introduction economic and financial systems witnessing

Financial stability has become extremely extreme volatility over the years and outlier
important in the present scenario with events have become the new normal. Financial

*Ph.D; Group Chief Economic Adviser, State Bank of India, Mumbai

**Manager Economist, State Bank of India, Mumbai
***Manager Economist, State Bank of India, Mumbai

1
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

stability is characterized by absence of any instability can be domestic or external. The

major financial crisis. It is a situation when a external causes could be sudden change in oil
country, its institutions and markets continue price, speculative attack on currency, increased
to function smoothly (Rangarajan, 2006). cross border capital flows owing to rapid
Financial stability is achieved when there are changes in market perceptions, global
no bank runs, institutional panics or collapses monetary easing and subsequent tightening
and the economy runs with acceptable levels etc. On the domestic front, low domestic
of macroeconomic indicators including interest rate, excessively loose credit policy
inflation, fiscal deficit and current account which can enhance leverage ratios, moral
deficit among others. hazard problems and over spending by the
There can be numerous causes of financial Government could be potential causes of
instability. There are particularly two schools financial instability.
of thoughts for explaining the source of The 1990s was the time when the importance
financial instability. One is the cyclical school of financial stability came to the forefront
of thought (Kindleberger, 1978) according to with several economies including Finland,
which cyclicality of events causes episodes of Sweden, Japan and some emerging economies
financial crisis and instability. Here the asset witnessing economic and financial crisis.
price continues to build up until some one-off Global crisis of 2008 has led to increased focus
event changes the market perception, in turn on financial stability by both advanced and
causing the downward spiral in prices and an emerging market economies. While some
ultimate market crash. The other is the (Bordo and Landon-Lane, 2010) have blamed
monetarist school of thought (Friedman and the loose monetary policy for build-up of 2008
Schwartz, 1963) which believes only financial crisis, others believed asymmetric
disruption in money supply can cause private information in the Market Backed
financial instability. Any disturbance which is Securities (MBS) market led to deepening of
not accompanied by a significant decline in crisis. Geanakoplos (2010) concluded high
quantity of money is termed as ‘pseudo- leverage in stable periods makes the economy
financial’ crisis by Schwartz (1986), Jadhav more vulnerable to the drop in leverage
(2006). However, these theoretical premises associated with periods of instability
on their own do not completely explain the (Bauducco, Christiano & Raddatz, 2014).
realities of the financial instability episodes Though the debate on the causes of 2008 crisis
witnessed in past decades. It is driven by a still continues, it was felt that a robust policy
combination of the macro policies pursued framework is an essential prerequisite for
and the market sentiments. maintaining financial stability. Countries have
An event which can lead to financial started re-looking at their macro-policies

2
Article IMI Konnect Volume 9 (1) 2020

while keeping in mind the overall financial banking financial companies (NBFCs), as also
stability objective. the money, forex and government securities
In this article, we aim to analyse how the fiscal markets that are dominated by banks. There
and monetary policies pursued in India have are separate regulators for capital markets,
shaped and supported the country’s financial insurance sector and pension funds. The
stability. Although India has not witnessed various players constituting financial system
any episode of extreme financial instability are inter-dependent. The total outstanding
since the 1991 BoP crisis, there have been bilateral exposures among the entities in the
episodes of volatility and we trace how fiscal financial system increased from `31.4 trillion
and monetary policies have aimed to provide in March 2018 to `36.3 trillion in March
1
stability to the system. We have focused on the 2019.
Indian Banking sector, as banks, especially In India around 55 per cent of the total
public sector banks are the major resource flow to commercial sector happened
intermediaries in the Indian financial system. through the banking industry in FY19,
The rest of the article is organized as follows. making banks the major intermediaries
Section II describes the institutional details of between savers and borrowers. The
the Indian financial system. Section III traces commercial banking landscape is dominated
India's fiscal policy path and how banking by public sector banks. However, private sector
sector has been impacted due to it. Section IV is also catching up rapidly. The share of Public
analyzes the characteristics of India's sector banks in advances was 61.1 per cent vis-
monetary policy and how RBI's steps have à-vis 31.2 per cent of Private sector banks, as
influenced the banking sector. Section V on March 31, 2019. The rest are occupied by
analyzes the most recent period of volatility Foreign Banks (4.1 per cent), Regional Rural
experienced by the Indian financial system on Banks (2.8 per cent) and Small Finance Banks
account of the NBFC sector stress. Section VI (0.6 per cent). As per RBI’s Financial Stability
concludes. Report, the network structure of the financial
system indicates that SCBs were the
Financial System Architecture in India dominant players accounting for 46.2 per cent
The Indian financial sector comprises of of the total bilateral exposures as on March
commercial banks, insurance companies, non- 2019.
banking financial companies, housing finance Scheduled Commercial Bank Credit to GDP
companies, co-operatives, pension funds, in India increased from 22 per cent in FY2000
mutual funds and other smaller financial to 53 per cent in FY14 and declined since then
entities. RBI regulates banking sector, non- to reach 51.4 per cent in FY19. Thus credit to
1
RBI’s Financial Stability Report, June 2019

3
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

GDP has also not reached any alarming rate Also the international financial crisis
indicating absence of any bubble like prompted the Government to deviate from
situation. the fiscal consolidation process embodied in
the FRBM Act and provide fiscal stimulus to
Evolution of Fiscal Policy and Its Impact on
support growth.
Banking Sector
Since then the move towards lowering the
India used to run a high fiscal deficit in the 90s
Centre’s fiscal deficit has been gradual. In
(Average: 5.78 per cent of GDP). Higher
2017, the FRBM Committee submitted its
fiscal deficit impacts the economy through
report and the Government accepted the key
higher inflation and increased market
recommendations in 2018 to bring down
borrowings which can crowd out private
Central Government’s Debt to GDP ratio to
investment. However, after the passing of the
40 per cent. Government also accepted the
Fi s c a l R e s p o n s i b i l i t y a n d B u d g e t
recommendation to use fiscal deficit target as
Management Act, (FRBM Act, 2003), a
the key operational parameter. The objective is
conscious effort was made to rein in the fiscal
to go towards fiscal deficit of 3 per cent of
deficit of the Centre and the States. FRBM
GDP. However, some leeway has been given
Act aimed to institutionalize financial
to deviate from the fiscal deficit in case of
discipline, reduce India’s fiscal deficit, improve
economic uncertainties with a slippage of upto
macroeconomic management and the overall
0.5 per cent being allowed over pre-defined
management of the public funds by moving
targets.
towards a balanced budget and fiscal
prudence. Various tax reforms were Fiscal deficit and debt levels have always been
undertaken to increase the tax base through raised as pain points by the rating agencies and
moderation in direct tax and corporate tax. India’s sovereign rating has been assigned the
According to FRBM Act fiscal deficit was to lowest grade, despite India not once defaulting
be reduced to 3 per cent by 2007-08. India was on its debt. However, despite a higher
moving towards a lower fiscal deficit after the consolidated fiscal deficit, India is relatively
passing of the Act and during the high growth insulated from the vagaries of international
phase of 2003-04 to 2007-08 there was fiscal financial markets as India’s fiscal deficit is
consolidation driven by revenue buoyancy. largely funded through domestic borrowings
However, the election related populist and India’s sovereign foreign currency debt to
spending by the Central Government in GDP ratio is at 3.8 per cent as of June 28,
2008-09, with substantial increase in wages 2019.
and subsidies along with the fiscal stimulus in In India, banks are required to maintain
the form of reduction in taxes and duties, had a Statutor y Liquidity Ratio (SLR) in
negative impact on India’s fiscal condition. proportion to their Net Demand and Time

4
Article IMI Konnect Volume 9 (1) 2020

Liabilities (NDTL). In the '90s when the requirements, it may be noted that Indian
fiscal deficit used to be high, the SLR also was banks have pre-emptive regulations that are
at very high levels (maximum: 38.5 per cent in higher than most other countries in the world
1992) and banks were touted as the captive (see Table 1). These also affect the banks’
investor base for government securities. It was business. Any change in the government’s
only in 1997 that the SLR was brought down borrowing programme due to increased fiscal
to 25 per cent. Although government deficit can impact bond yields. This can
securities are highly secure and imparted a impact the trading book of banks which hold
level of safety to banks, the resources of banks government securities in the form of SLR
stayed tied. The reduction in SLR freed up requirements, for which they have to make
banks’ resources, which helped banks in provisioning. This, in turn, impacts their
increasing their advances. Besides the SLR capital and stability. In 2016, after
demonetisation, the
Table 1: Pre-emptive Regulation in India and Abroad banks were holding
Country CRR (in %) SLR (in %) Priority Sector Lending (%) ample liquidity as
BRICS banking credit was
growing slowly so
they invested it in
g o v e r n m e n t
securities. In 2018,
the government
yields shot up, thereby
increasing the
provisioning stress on
b a n k s ’ p o r t f o l i o.
Thus, with a view to
ASEAN addressing the
systemic impact of
sharp increase in the
yields on government
securities in India,
RBI granted banks
the option to spread
provisioning for
Mark To Market
Source: SBI Research (MTM) losses on

5
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

investments held in Available For Sale (AFS) massive credit flow to infrastructure sector.
and Held For Trading (HFT) for the quarters Banking credit to infrastructure sector grew
ended December 31, 2017 and March 31, from `72.43 billion in 2000 to `8363.56
2018. This provided some stability to the billion as on March 30, 2014, displaying
banks. Given the situation, RBI also directed CAGR of 40.4 per cent. If we look at the total
the banks to build an Investment Fluctuation non-food credit during this period it grew at
Reserve. CAGR of 21.2 per cent, less than the
Notwithstanding the events that have infrastructure sector. Thus, it is clearly visible
impacted the banks adversely, India has not that there was a push specifically given to
witnessed any collapse of the banking system i n f r a s t r u c t u r e s e c t o r. W i t h i n t h e
in the past decades. While large public sector infrastructure sector, the power sector
ownership has been seen as positive in advances grew from `32.89 billion in 2000 to
preventing bank runs in the past, it has also `4869.02 billion as on March 30, 2014,
raised questions about moral hazard and crony displaying CAGR of 42.9 per cent. The
capitalism. Publicly held institutions can also telecommunication advances grew from
be directed to fulfil the developmental needs. `19.92 billion in 2000 to `882.04 billion as on
There have been instances of farm loan waiver March 30, 2014 (CAGR of 31.1 per cent).
announcements, which have a detrimental Roads and Ports sector advances grew from
impact on the credit culture. This can also `19.62 billion in 2000 to `1578.6 billion as on
generate instability in banks’ finances. In the March 30, 2014, (CAGR of 36.8 per cent).
Indian context banks lent heavily to the Push to higher credit disbursement during
inf rastructure sector, supporting the this period is one of the reasons for the current
economy ’s needs for inf rastr ucture banking sector woes of deteriorating asset
investment. With deterioration in asset quality. As the asset quality of infrastructure
quality of infrastructure projects post 2013 the projects deteriorated, the credit growth has
banks’ balance sheets suffered. cooled down significantly (Refer toTable 2).
In 2015-19 periods the CAGR for
In particular, during 2000-14 there was
infrastructure sector credit slowed to a mere 3
per cent. The NPA ratio of infrastructure
Table 2: Credit Growth (CAGR, per cent)
sector has forced banks to make
2000-04 2005-09 2010-14 2015-19 provisioning requirements, thus
Infrastructure 63 39 22 3 impacting their profitability.
Power 79 30 27 1
In the Indian context, as a majority of
Telecommunications 43 40 10 6 banks are public sector organizations,
Roads and Ports 47 29 21 3 Government has taken steps to shore up
Source: RBI their capital in the wake of higher NPAs.

6
Article IMI Konnect Volume 9 (1) 2020

The amount infused in PSBs by the support economic growth. As per the official
Government is `3.1 lakh crore from FY15 till RBI website, with liberalisation, the Bank’s
November 2019. This has provided stability to focus has shifted back to core central banking
the banks. Furthermore, the introduction of functions like monetary policy, bank
Insolvency and Bankruptcy Code, 2016 is a supervision and regulation, and overseeing the
major step in helping the banks to deal with payments system and onto developing the
their stressed assets. financial markets. Since 2004, RBI has added
financial stability as an additional objective in
Evolution of Monetary Policy and Its Impact
view of the fast growing size and importance
on Banking Sector 2
of the Indian financial sector.
Reserve Bank of India has been formulating
During 2008, increase in administrative
the monetary policy and regulating the credit
petroleum products’ prices and firming up of
and currency system of India since its
global crude oil and metal prices led to double
inception. However, as India had significant
digit domestic inflation. Thus to curtail
development needs at that time, monetary
inflation and keep inflationary expectations
policy was heavily influenced by the
under check the central bank resorted to
G o v e r n m e n t p o l i c y. D e v e l o p m e n t
restricted monetary policy. In late 2008,
considerations are still present as is evident by
however, RBI had to reverse its policy so as to
setting up of the priority sector norms by RBI
prevent the country from the impact of global
and regulation of special institutes catering to
crisis. In 2009-10, there was a shift in policy
the development of agriculture and small
towards recovery of growth momentum and
industries (NABARD, SIDBI among others).
consequently, measures were undertaken to
However, the practice of automatic
improve transmission and enhance
monetisation of fiscal deficit through creation
transparency in loan pricing. The subsequent
of ad hoc treasury bills was abolished in 1997,
three years were mired in higher inflation and
thereby completely separating monetary
low growth. However, owing to loose
policy from the fiscal policy (Mohan & Ray,
monetary policy globally during these years,
2019). Since then, Reserve Bank of India has
India continued to remain one of the favourite
been using various instruments (CRR, Repo,
destinations for foreign capital. RBI had to
Liquidity Adjustment Facility operations and
sterilise the liquidity flowing in, leading to
Open Market Operations) to achieve the
accretion of forex reserves.
objectives of price stability and to provide
adequate credit to productive sectors so as to In 2013-14 again, there was turmoil in the

2
Macroprudential policies – Indian experience, Address by Anand Sinha, Deputy Governor of the Reserve
Bank of India, at the Eleventh Annual International Seminar on Policy Challenges for the Financial Sector on
“Seeing both the Forest and the Trees – Supervising Systemic Risk”, ( June 2011)

7
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

global financial markets owing to the news of Empirical results suggest that financial
withdrawal of monetary stimulus by the US. instability might impact the outcomes of
Capital outflows happened from emerging mandated policy goals for inflation in future.
markets to safe havens. India was particularly In the US, frequent mentions of financial
impacted during this period as it faced instability terms at the FOMC, particularly
pressure of currency depreciation amidst during bust periods, resulted in a statistically
capital outflows, elevated oil prices leading to significant reduction in the funds rate relative
higher inflation and current account to that implied by a simple Taylor rule based
imbalance and increased fiscal deficit. on Federal Reserve staff forecasts of inflation
Accordingly, RBI adopted a multiple and unemployment rates.
indicators approach and took a number of Indian banks also face the dilemma of
measures to support the economy. Supported monetary transmission from the RBI
by various factors including collapse in global signalling rate / policy rate / repo rate to
commodity prices, proper supply setting lending rates. The large share of public
management and reduced domestic demand deposits in total liabilities for banks in India
some moderation in inflation was achieved. has important implications for macro stability
However, still sticky inflationary pressures led and policy transmission. First, with banks
RBI to adopt flexible inflation targeting (FIT) funding themselves through retail deposits,
regime in 2014. Under FIT, RBI adopted the source of vulnerability to external
headline consumer price index (CPI) inflation contagion is significantly reduced. Second,
as the nominal anchor with the medium-term only 1 per cent of the bank borrowings is
target set at 4 per cent within a tolerance band currently at the RBI policy rate. Third, the
of +/- 2 per cent, while supporting growth share of public deposits has a preponderance
(Mohanty, 2017). of low cost Current Account and Savings
In 2016-17, RBI constituted a six member Account (41 per cent approximately) that is
Monetary Policy Committee (MPC) and mostly interest rate agnostic in India with an
entrusted them the task of setting the average interest rate of around 3.5 per cent.
benchmark interest rate. Inflation was The rest are time deposits with a fixed interest
explicitly announced as the primary goal, while rate for the duration of the deposit tenure. It is
keeping in mind the objective of growth. difficult to cut deposit rates since India does
Overtime, with growing concerns about not have a well-developed social security
financial uncertainty RBI mandate has system and the senior citizens depend on
decisively shifted from inflation targeting to interest income from bank deposits as a source
growth in order to maintain financial stability. of income after retirement.
This is clearly visible from the monetary policy Compared to India, demand deposits in
statements since Oct’18 (Refer to Table 3). developed economies (the UK, the US,

8
Article IMI Konnect Volume 9 (1) 2020

Table 3: Analysis of MPC Statements

Oct'18 Dec'18 Feb'19 Apr'19 Jun'19 Aug'19
Positive sentiment
on inflation
Negative sentiment
on inflation
Positive sentiment
on growth
Negative sentiment
on growth
The Excluding The output ...the output There is scope Addressing
inflation food gap has gap remains for the MPC to growth
outlook items, opened up negative and accommodate concerns by
calls for a inflation modestly as the domestic growth concerns boosting
close vigil has actual output economy is by supporting aggregate
over the remained has inched facing efforts to boost demand,
next few sticky and lower than headwinds, aggregate especially
months, elevated, potential.... especially on demand, and in private
Key statement especially and the The need is the global particular, investment,
because output to strengthen front. The need reinvigorate assumes the
the output gap private is to strengthen private highest
gap has remains investment domestic investment priority at
virtually virtually activity and growth activity, while this juncture
closed and closed. buttress impulses by remaining while
several private spurring private consistent with remaining
upside consumption. investment its flexible consistent
risks which has inflation with the
persist. remained targeting inflation
sluggish. mandate. mandate.

Rate cut No No Yes (25 bps) Yes (25 bps) Yes (35 bps) Yes (25 bps)
Source: RBI

Singapore, Eurozone countries) do not pay Regarding improvement in monetary

any interest rate and the deposits can be transmission of policy rate to lending rate,
withdrawn at any point of time without any RBI has progressively moved from bank rate
penalty. This minimises the cost of deposits to Marginal Cost of Lending Rates (MCLR)
significantly. Second, even in the time deposit and finally to an external benchmark regime
category, the deposits are mostly floating and from October 1, 2019 to facilitate monetary
are linked to a bank’s external benchmark. transmission. However, for monetary

9
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

transmission banks need to link their Recent Crisis: NBFC Sector

liabilities as well to an external benchmark. There were 9,659 non-banking financial
But one of the problems in India is no bank companies (NBFCs) registered with the
can do this alone as that would lead to its Reserve Bank as on March 31, 2019, of which
customer switching away to another bank. 88 were deposit accepting (NBFCs-D) and
With external benchmarking of lending rates, 263 were systemically important non-deposit
bank margins might be subject to volatility accepting NBFCs (NBFCs-ND-SI).3
and while this could result in a regime of low
interest rates for lenders, it could also impact Though all NBFCs-D and NBFCs-ND-SI
the depositors and this have implications for are subject to prudential regulations such as
financial stability in future. In particular, an c apital adequac y requirements and
external linked benchmark could imply two- provisioning norms along with reporting
way interest rate movements that could be requirements, their norms were simpler
swift. Our estimate suggests that there are compared to banking sector until recently.
around 41 million senior citizens term deposit India’s macro-polic y is focused on
accounts in the country with total deposit of consumption to drive growth and NBFC
`14 lakh crores / 7 per cent of India’s GDP. sector in India was encouraged to grow to
The average deposit size per account is around support consumption. They were lending in
`3.3 lakh and interest income from such sectors where banks refused to go or did not
deposits forms 5.5 per cent of Private Final want to go. The advances of NBFC-ND-SI
Consumption Expenditure in FY19. witnessed double-digit growth in the past few
years. Demonetisation also helped them in
As price stability is not sufficient for financial accessing excess liquidity floating in the
stability, RBI has also been taking various market, which they used to further their
measures to maintain financial stability. lending. Problems in the NBFC sector started
Various macro-prudential norms are being surfacing in Q3 of FY19, when a few large
modified by RBI from time to time, keeping NBFCs defaulted on their payments. Since
in mind the needs of the economy while the NBFC sector borrows for short-time
preventing the formation of asset price period and lends for longer duration, this
bubbles. Adequate liquidity is another asset-liability mismatch has always been a
prerequisite for financial stability. Drying up concern. However, with market sentiments
of liquidity can destroy erstwhile well- turning sour the problem magnified. There
functioning financial institutions through the was liquidity squeeze and smaller NBFCs
confidence channel. RBI has been actively were more severely impacted. The better rated
managing liquidity through various measures. NBFCs have been able to stay afloat, though
3
Financial Stability Report, June 2019

10
Article IMI Konnect Volume 9 (1) 2020

their borrowing costs have also gone up. contributed to slowdown in construction,
The textbook explanation of the recent SME and automobile sectors. To ensure
NBFC crisis lies in the Financial Instability stability in the system, the Government has
Hypothesis by Minsky (1992). According to taken various steps including a special
this hypothesis, over time capitalist economies Liquidity Infusion Facility (LIFt) for housing
tend to move from a financial structure finance companies, change in regulatory
dominated by hedge finance units to a authority of Housing Finance Companies
structure in which there is large weight to from National Housing Bank to RBI among
units engaged in speculative and Ponzi others. On November 18, 2019, the
finance. Furthermore, if an economy with a Government has amended the country’s
sizeable body of speculative financial units is Insolvency and Bankruptcy Code (IBC) 2016
in an inflationary state, and the authorities which will help in speedier resolution of
attempt to exorcise inflation by monetary NBFCs, inc luding housing finance
constraint, then speculative units will become companies, with asset sizes greater than `500
Ponzi units and the net worth of previously crore via the IBC.
Ponzi units will quickly evaporate. In addition, the central bank has also
Consequently, units with cash flow shortfalls announced various measures to boost the
will be forced to try to make position by selling NBFC sector, including increasing the single-
out position. This is likely to lead to a collapse exposure limit to 20 per cent of Tier 1 capital
of asset values (Minsky, 1992). When it comes (from 15 per cent), priority lending status for
to interconnectedness between banks and loans to NBFCs that on-lend to finance
NBFCs, the share of NBFC credit in All agriculture, small businesses and homebuyers,
Scheduled Commercial Bank (ASCB) credit subject to certain regulations, harmonisation
has gone up from 3.6 per cent in 2008 to 6.5 of different categories of NBFCs into fewer
per cent in 2018. The share of bank ones based on the principle of regulation by
borrowings to total NBFC borrowings has activity rather than regulation by entity,
increased from 21.2 per cent in March 2017 to harmonising risk weights on NBFC exposure
23.6 per cent in March 2018 and further to (NBFCs will be risk weighted as per the
4
29.2 per cent in March 2019 . With increasing ratings assigned by the rating agencies
interdependence, NBFC crisis can take some registered with SEBI and accredited by the
toll on Indian banks’ balance sheet. However, Reserve Bank of India), partial credit
the exposure is not so much that it threatens guarantee from the Government on banks’
financial stability of the banking system. asset purchases from NBFCs, raising of
Liquidity problem of NBFC sector has External Commercial Borrowings (ECB) by

4
Financial Stability Report, June 2019

11
Ghosh, Kheterpal and Sharma IMI Konnect Volume 9 (1) 2020

NBFC, a certain part of the lending to NBFC experience shows we have been in an era of low
(upto 1 per cent of the Bank’s NDTL) can be interest rates for a decade but that has done
now used for meeting the requirement of little to boost aggregate demand. But this has
Liquidity Coverage Ratio (LCR) by banks. led to increasing household debt (in the US it
Majority of these measures are to provide increased from $12.5 trillion in Q1FY08 to
short-term stability to the NBFC sector and $13.9 trillion in Q2FY19). In the Indian
companies associated with them. However, context, total financial liabilities of households
measures like appointment of Chief Risk have jumped by a massive 58 per cent in FY18
Officer (CRO) for NBFCs with asset size of to `7.4 lakh crores (22 per cent jump in
more than `50 billion and bringing of FY17)5. Given such a large jump in household
regulatory norms of NBFCs at par with banks leverage, the question that arises is if monetary
will provide better supervision of NBFC policy will retain its effectiveness in India?
sector. This will enhance financial stability in Also, current low level of interest rates in India
India. could put question marks on financial stability
in terms of a judicious balance between
Conclusion
lenders and depositors. A discussion of all
In India, at times of stress in the financial such is however beyond the scope of the
sector, the monetary and fiscal policies have current article.
been accommodative and have provided
supportive measures so that the situation does References
not spiral out of control. This has helped in Bauducco, S., Christiano, L. J., & Raddatz, C. E. (2014).
Macroeconomic and Financial Stability: An Overview.
limiting the span of crisis. The
Series on Central Banking Analysis and Economic Policies
interconnectedness between the various no. 19.
financial intermediaries, although increasing,
BIS central bankers’ speeches by Sinha, Anand ( June
has not been very high. Thus the risk of 2011) on “Macroprudential policies – Indian experience”
contagion has been low. The recent NBFC at the Eleventh Annual International Seminar on Policy
crisis, however, shows that all the players of the Challenges for the Financial Sector on Seeing both the
Forest and the Trees – Supervising Systemic Risk
financial market have to be well-regulated to
support the aim of financial stability. Bordo, M. D., & Landon-Lane, J. S. (2010). The Global
Financial Crisis of 2007-08: Is It Unprecedented? (No.
A l s o, t h e c o n t e m p o r a r y i s s u e f o r w16589). National Bureau of Economic Research.
macroeconomists is assuring adequate Friedman, M., & Schwartz, A. J. (1963). A Monetary
aggregate demand in the current context of History of the United States, 1867-1960. Princeton
synchronized global slowdown. Monetary University Press.
policy could only act to some extent – Geanakoplos, J. (2010). Solving The Present Crisis and
Managing the Leverage Cycle.
5
Ministry of Statistics and Programme Implementation, Government of India

12
Article IMI Konnect Volume 9 (1) 2020

Jadhav, N. (2006). Monetary Policy, Financial Stability,

and Central Banking in India. Macmillan.
Kindleberger, C. P. (1978). Manias, Panics, and Crashes: A
History of Financial Crises, NewYork: Basic Books,
revised and enlarged, 1989, 3rd ed. 1996.
Minsky, H. P. (1992). The Financial Instability
Hypothesis. The Jerome Levy Economics Institute
Working Paper, (74).
Mohan, R., & Ray, P. (2019). Indian Monetary Policy in
the Time of Inflation Targeting and Demonetization.
Asian Economic Policy Review, 14(1), 67-92.
Mohanty, D. (2017). Eight Decades of Monetary Policy in
India.
Rangarajan, C. (2006). Financial Stability: Some
Analytical Issues. India’s Economy: A Journey in Time and
Space, 100, 331.
RBI Annual Reports (2015, 2016, 2017, 2018, 2019).
RBI Financial Stability Reports (2018, 2019).
Schwartz, A. J. (1986). “Real and Pseudo-Financial
Crises”. Financial Crises and the World Banking System,
London, MacMillan, 11-31.

13
Article IMI Konnect Volume 9 (1) 2020

Future of Gig Economy: Opportunities

and Challenges
Gobinda Roy* and Avinash K Shrivastava**

Abstract
The term “gig economy” is defined by a market which is based on a fixed-term contract or that is paid per
project by a company, third party, or online marketplace. The impact of the gig economy at work is very
pervasive and felt across industries. It has completely changed the way of engaging people at work and
has brought a fundamental shift in how our economy operates. Due to its unmatched merits, the number
of gig workers will keep growing, as many of the best and brightest workers turn to gig for their primary
employment. Though gig economy provides enormous benefits to the workers in terms of flexibility,
employment, freedom, etc., at the same time it has an adverse impact on the industry working
environment. In this article we have discussed the current trends of gig economy along with its merits
and demerits in global as well as the Indian context.

Introduction number of the workforce every year, digital

The mass adoption of the internet and disruption, and recent economic downturn
increasing penetration of smartphones, make many potential job-seekers unable to
connect online users across the countries over secure the permanent jobs (Manyika et al.,
the digital platforms. This helps organizations 2016). The paucity of permanent jobs
share their talent needs and contact the encourages them to join in contractual jobs as
remote online workers on digital platforms an independent worker, popularly called as
(Healy et al., 2017). These trends make the gig “independent workers” or “gig workers” or
economy more relevant and prominent in “freelancers”. In a few advanced countries, the
today’s digital era. Gig economy is a free young workforce opted for these contractual
market system where organizations contract jobs as a lifestyle choice in order to avoid
with independent workers for a short-term binding rules and regulations of permanent
project or service engagement (Techtarget, jobs. However, in many countries, gig
2020). A full-time job has been a tradition for platforms provide “bridge employment”
decades; however, the addition of a larger before joining permanent jobs. The gig

*Assistant Professor, International Management Institute, Kolkata

**Assistant Professor, International Management Institute, Kolkata

14
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

economy has got popularity among the digital focused on how regulatory framework and
start-ups as it helps them to pay the lower policies ensure better working environment
wages to contractual workers and avoid and wages and compliance with existing
potential law-suits by employees during labour laws for gig workers in local and global
economic downturns (Friedman, 2014). The contexts (Graham et al., 2017; Kässi &
main participants in the demand side of the Lehdonvirta, 2018; Aloisi, 2015). In the
gig economy are online start-ups, small and advanced nations, the emergence of the
medium enterprises, solo entrepreneurs, even entrepreneurial generation increases the
some big corporations who regularly recruit interest in jobs with flexible terms without any
gig workers on short and long-term formal employment contract. This leads to
assignments. The supply side is dominated by formation of the shadow corporation in the
individual workers or small agencies, mainstream economy (Friedman, 2014). The
f reelancers, f reelance agencies and introduction of leading digital outsourcing
independent consultants. A recent study platforms in gig economy has encouraged
suggests that gig economy is booming across many skilled professionals from an emerging
the countries. In the USA, the number of economy to join in gig workforce. Now
freelancers has gone up from 3.7 million in corporations have access to talents from
2014 to 62.2 million in 2019 (Statista, 2020; different countries on these platforms at a
Pofeldt, 2019). Lately, the emergence of many fraction of the cost of their home countries.
gig online platforms like Upwork, Guru, These pose challenges to gig professionals to
Fiverr enable organizations to recruit gig attract a good number of jobs from clients at
workers (also called freelancers) across the competitive fees. In order to be successful in
countries. Similarly, many freelancers or this economy, gig professionals have to be
independent workers join online platforms to proficient in staying organized, sustaining
sell their services to off-shore clients. Hence, client relationships and meeting deadlines for
digital platforms make it easy for freelancers overseas clients, finally coping emotionally to
to find jobs/projects online. As Stephane work with clients from different cultures and
Kasriel, CEO of the world’s largest freelance geography (Ashford et al., 2018). Hence,
platform Upwork puts it, one of the key factors personal branding is an important factor for
of increased freelancing activity is hiring from gig professionals for long term growth.
big companies. According to him, among the Similarly, judicious use of marketing channels
Fortune 500 companies, 30 per cent are now for lead generation is an important factor for
using top freelancing platforms and major long term sustenance in gig profession.
recruiters are technology companies on the The gig economy is also getting bigger in
platforms (Pofeldt, 2019). India as many young educated professionals in
Previous studies on gig economy mainly India are joining on large global freelancing

15
Article IMI Konnect Volume 9 (1) 2020

platforms. The number of gig workers in India economy have been discussed in Section 5.
was 15 million in 2015, only second to the US Section 6 covers the challenges followed by
with 53 million freelancers (Verma, 2018). the conclusion, implications and future
The popularity of gig work among the hiring research directions of the work in the
professionals in India mainly attributed to concluding section.
“drive efficiency, innovation, and competitive
Literature Review
advantage” while maintaining the human
resource cost at its minimum. Indian As per Cambridge Dictionary (2020), the
freelancers are mainly joining the gig nature of work in the gig economy indicates “a
economy due to work hour flexibility, way of working that is based on people having
opportunity of being their own boss, option to temporary jobs or doing separate pieces of
choose the job based on their interest and work, each paid separately, rather than
workload. Interestingly, 41 per cent of Indian working for an employer”. Research study
gig workers are engaged in Information termed it as a new avatar of Taylorism in the
Technology (IT) and/or related jobs while form of micro fragmentation of the labor
recruited by their local and global clients market based on hyper-temporary tasks called
(Verma, 2018). gig work or micro-task (Aloisi, 2015).
A d d i t i o n a l l y, g l o b a l i z a t i o n a n d
In this work, we present an exploratory study
computerizations lead to the formation of
about the future of the gig economy. We have
leading gig work sourcing platforms (Upwork,
also included the marketing and branding
Amazon Mechanical Turk, Uber, TaskRabbit,
challenges of gig professionals/agency in
etc.) and making the gig economy present
dynamic gig economy which is by its own
across the countries (Aloisi, 2015). Digital
nature not bounded by geographical and
sourcing platforms are playing a crucial role in
cultural boundaries. This study also presents
giving “people in poor countries access to
major trends in gig work and skill set
buyers in rich countries”. Contribution of this
demanded by global clients. The rest of the
gig economy may not be significant as
article is organized as follows. Section 2
compared to the traditional economy; still, the
presents the literature survey of the gig
turnover of this industry is estimated at about
economy and discusses the major work done
1.3 trillion and this economy is employing 53
by the researchers in this field of study. In
million workers (Staffing Industry, 2019).
Section 3 the trends of the gig economy and
Previous research examined the livelihood of
the scenario in the Indian economy are
digital workers in sub-Saharan Africa and
presented. Section 4 provides brief details
south-east Asian regions and highlighted the
about the marketing and branding strategies
issues they are facing like bargaining powers,
used in the gig economy. Opportunities for the
economic policy for inclusion, lack of
gig economy with an emphasis on Indian

16
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

opportunity for upgrading their skill for countries like India, Philippines etc. (Graham
greater participation in global supply chain of et al., 2017). Freelancers in the USA get 75 per
workforce in gig economy (Graham et al., cent of their gig work from local clients,
2017). A recent study suggested that gig whereas in developing nations (India,
working environment is characterized by Pakistan, Philippines), freelancers get about
three actors such as gig workers (also known as 90 per cent gig works from overseas clients.
freelancers or independent contractors), the Since, USA gig workers work for their local
requester (clients), and intermediary platform clients, their hourly wages are historically
firms (Meijerink & Keegan, 2019). higher than their counterparts in other
Intermediary digital platform plays a crucial nations. Recent trend shows freelancers in low
human resource role in connecting gig income countries can charge higher per hour
workers and clients without any formal wages (USD 4/hr. to USD 20/hr.) after
employment contract, however ensuring upskilling in IT/programming domains.
project delivery and payment process However, employers from the developed
(Meijerink & Keegan, 2019). In order to exist nations can have access to freelancers in low-
in this competitive market, previous findings income countries on the digital platforms
suggested that gig professionals should (Beerepoot & Lambregts, 2015). Hence, they
upgrade their skill through certifications and play the “labour arbitrage” and hire the
simultaneously, the industry should be workers at the cheapest rate. So, in the global
strengthened by good regulatory strategies content, gig economy is pre-dominantly pro-
and democratic control over the digital employers and there is downward pressure on
platforms (Graham et al., 2017). Moreover, labour wages (Graham et al., 2017). There is
digital disruption brings many major also a positive trend in gig economy as many
changes/trends in the ways gig professionals big corporations started hiring freelancers for
adopt the new work environment to manage short and long term projects.
their professional and personal lives. Initially, only bootstrapping entrepreneurs,
Trends in Gig Economy cash-strapped ventures and small businesses
used to hire freelancers as support workers.
Along with the popularity of gig work
Now, many fortune 500 companies started to
outsourcing platforms like Upwork, Guru,
outsource many non-core jobs like marketing,
freelancers.com, etc., it has been found that
back-office jobs, HR functions to gig
demand-supply of gig work became more
professionals (Caminiti, 2018). In the gig
globally dispersed. Demand comes mostly
economy, number of job seekers is always
from advanced nations like the USA, UK,
more than the number of jobs created on the
Canada, Australia, etc (See Figure 1).
digital platforms and gig workers always face
However, supply comes from the low-income
stiff competition from fellow workers from

17
Article IMI Konnect Volume 9 (1) 2020

Fig 1: Distribution of Buyers and Sellers in Gig Economy

Number of buyers
per country
1-5
6-50
51-350
351-3,500
3,501-30,800
No buyers

Number of sellers
per country
1-5
6-50
51-250
251-2,500
2,501-11,800
No sellers

Source: Graham, Hjorth & Lehdonvirta, 2017

other countries. Figure 2 shows the various job m a r k e t p l a c e s a r e Fr e e l a n c e r. c o m ,

sources as used by the freelancers and online Upwork.com and Fiverr.com with 31 million,
market space is the topmost (73 per cent) job 17 million, and 7 million registered users
source for gig workers. respectively (Warner, 2020). Getting a stream
The three important market players in online of gig jobs on these online market space

18
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

Figure 2: Sources of Freelancing Jobs

Percentage of job sourced in gig economy
Others 7%
Recruitment firms 7%
Professional Facebook page 9%
Networking sites (LinkedIn) 14%
Social Media platforms 15%
Word of mouth/referral 33%
Online Marketplaces 73%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Source: Warner, 2020

becomes very challenging as many freelancers years) as compared to older generation (2 per
from developing nations bid for the jobs at cent freelancers are above 60 years) due to
lower wages rate (fees/hour). Many inherent heavy reliance on technology related platform
skills of freelancers like marketing skills, for job sourcing (Warner, 2020). However,
networking skills, computer skills help them older gig workers earn more money than the
to get jobs on the online platforms (see Figure younger freelancers. Interestingly, 50 per cent
3). Figure 3 indicates gig workers believe that of the gig workers are intermittent workers as
computer skills (33 per cent) would empower only 28 per cent freelancers are engaged in gig
them for better career advancement in the work on a daily or weekly basis. Based on the
industry (Warner, 2020). Another important latest 2018 Payoneer Freelancer Income
trend in the gig economy is that more and Survey, average hourly rate of a global gig
more young people find this profession more worker is $19. However, their rates vary from
lucrative (52 per cent gig workers are below 28 $11 to $28 depending on industry and skill set

Figure 3: Importance of Skills for Career Advancement in Gig Economy Platform

Importance of Skill

40%
30%
20% 33% 29% 27% 26% 24%
10%
0%
Computer skills Networking Business skills Marketing skills Ability to find
skills (finance, tax, work
insurance)
Source: Warner, 2020

19
Article IMI Konnect Volume 9 (1) 2020

(Thibodeaux, 2020). Because of flexibility of to position himself/herself as more creative

worktime, work freedom, gig economy and cost effective with respect to stable
observes increasing participation of women in employees in the same domain (Petriglieri et
the freelance workforce. Hence, gig economy al., 2019).
augurs a changing dynamics in workforce It has been found that gender plays an
management, cultural diversity, and access to important role in influencing client’s attitude
global resources. towards freelancer’s brand. Women need to
Marketing and Branding Strategy in Gig work harder to build reputation online though
Economy they get two-third of wages of their male
counterparts (Barzilay & Ben-David, 2016).
Technology adoption brings in a major
However, irrespective of genders, freelancers
disruption in gig economy, as this opens up
on gig platform can build brand by optimizing
doors to clients for accessing talents from both
their fees, feedback score, and showcasing
developed and developing nations. Similarly,
experience and certifications (Barzilay &
digital platforms help millions of freelancers
Ben-David, 2016). For building a brand as a
from developing nations to apply for the jobs
reliable gig professional, the key skills a gig
posted on these websites. However,
worker needs to have are remaining viable in
marketspace becomes cluttered due to
offering, staying organized, maintaining
mushrooming of fake profiles on gig
verified identity on digital media other than
platforms. This leads to hundreds of
the gig sourcing platform, sustaining
applicants for a simple admin job posted on a
relationships with previous clients, and coping
f reelance website. This becomes very
emotionally while delivering projects in cross-
challenging for client to select the best talent
cultural set-ups (Ashford et al., 2018). Self-
for the job. Freelance platforms such as
branding is critical at this stage for gig workers
Upwork and Freelancer.com have taken
for long term success.
various measures to weed out those non-
serious freelancers by putting various checks Previous studies suggested that in the context
on the personal verification, background of online gig working platforms, self-branding
verification, previous earning credentials, of freelancers can be created by a strong social
delisting of inactive profiles etc. Still, gig relationship (Grugulis & Stoyanova, 2011)
workers find it challenging to get new which acts as the main source of “procurement
contracts on a regular basis. Creating a of employment opportunities” on the gig
personal brand in the gig economy platform is platforms (Gandini, 2016). Besides creating a
an uphill task as he or she needs to position strong self-branding, it is often a challenge to
himself/herself as competent and reliable in gig worker to reach new clients by using
the crowded marketspace. He/she also needs various offline and online media channels.

20
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

Lately, freelancers use gig digital platforms to employers for contract or freelance work.
source the jobs on a regular basis (73 per cent) Apart from an increased availability of talent,
(see Figure 2). Additionally, they use social gig economy provides an opportunity in
media (15 per cent) and word of mouth providing “bridge employment” during
marketing (33 per cent) to reach the new recession when traditional full time jobs are
client segment and showcase their projects beyond their reach (Donovan et al., 2016).
and experience (Warner, 2020). Lately, gig There is an increasing opportunity for gig
workers are increasingly using search engine work in corporate world. In the corporate
marketing (paid marketing) such as pay-per- world ‘war for talent’ is nothing new and with
click (PPC) and Facebook paid campaign to intense competition, most organizations tend
reach their target segments without involving to focus on bottom lines to increase profits.
digital gig platforms. This helps them to get This is the sweet spot for all those freelance
rid of stringent terms and conditions, and high professionals, who sacrifice the comfort and
commission charged by the leading digital security (or may be not) of the corporate
platforms for every project they delivered on world, to do the work they love, and be their
the platforms (Key, 2017). Because of low cost, own master. Companies are latching onto this
trust, utility, and ease of implementation, the tribe as it helps them get an immediate
number of gig workers are increasing, who use workforce, reduce cost and innovate faster.
email marketing in apprising their customers Learning and development, customer support,
and prospects about various products/services corporate website development and support,
offered on a regular basis (Key, 2017). as a set of business activities, have always
Opportunities in Gig Economy employed f reelancers and now most
companies prefer to have only a couple of
The term Gig Economy was coined during
regular employees in those functions and get
the recession, where most of the workers relied
the rest of the work done through external
on short-term employment after losing their
th experts. This model allows companies to tap
jobs. According to MetLife’s 17 Annual U.S.
the most recent and relevant knowledge and
Employee Benefit Trends Study 2019, 85 per
expertise, at a fraction of the cost.
cent of gig workers in U.S are interested in
continuing contract work in the next five Gig economy creates a great opportunity in
years, as opposed to a traditional work role. Indian employment sector. Presently, the
These gig workers are not just typical Indian economy is facing jobless growth
freelancers who are interested in this type of leading to lack of inclusive growth. The gig
work. Full-time employees are earning extra economy would be able to provide gainful
cash through gig, and are thinking of “going employment to the youths. It can also create
gig” full time by leaving their current new opportunities for women as it enables

21
Article IMI Konnect Volume 9 (1) 2020

women to have flexibility in terms of work Another problem for gig staff is that there is
place and working hours leading to a surge in no guarantee of a steady income and therefore
their enrolment in such jobs. Larger it is hard to ascertain the person’s
participation of gig workers in corporate creditworthiness. In the Indian scenario, this
functions can help firms to rationalize the issue is important, as there is no social safety
workforce and reduce the cost of operation. net for the unemployed. Intellectual property
and confidentiality problems may trigger legal
Challenges in Gig Economy
tangles and conflicts (Vaidyanathan and Bose,
Though count of gig workers are increasing 2017). These add to the complexity of the
day by day, these gig professionals have been already nebulous relationship. An important
facing many challenges to get quality challenge to employers is maintaining
work/projects on a regular basis. First, there confidentiality of data and obtaining
are lack of laws in addressing gender intellectual property of the product/services
discrepancies while getting gig work on online rendered by the freelancers. The freelancers
gig platforms (Barzilay & Ben-David 2016). could be working for several competitors at
Second, there is lack of framework and the same time putting the company’s interests
governmental support for creating conducive at risk, as there is no “non-compete” clause in
environment for quality work/projects, casual work arrangements. Hence, employing
worker’s protection, and access to benefits as people on a short-term basis and entrusting
provided by traditional job (Donovan et al., them with vital information could be a cause
2016). The advent of gig economy and online for concern.
talent portals has given a new definition to
However, the biggest challenge to most of the
‘jobs’, employees and employers who do not fit
freelancers (experienced or novice) is to find
within the framework of current labour laws,
consistent work on digital platform.
presenting a major challenge and the need for
Additionally, they face issues of payment
new labour models (Horney, 2016). Such jobs
protection after the successful delivery of
are known as self-employed or micro-
work. The gig economy presents some unique
entrepreneurs and are not entitled to the
challenges for human capital management.
benefits that regular employees enjoy, as is
Keeping up with the changing laws
apparent in U.K. Uber’s situation (Lusher,
surrounding independent contractors, and
2017). This new business model severely
compliance with the Affordable Care Acts
compromised the long-term needs of the staff.
requirements, are just a few issues that
The short allocation model ensures a flow of
businesses must face. Moreover, the
funds but is viewed as less stable and highly
organization has to dedicate precious time and
exploitable given the versatility it provides
resources to manage these administrative
(CIPD Report, 2017).
tasks. There are potential opportunity costs,

22
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

which companies may face. Companies copyright and data security. Hence, future
should have proper due diligence for selecting research may look into the role of data privacy
the jobs which can be performed by gig and security issues in gig economy. Similarly,
workers. At the same time, it should ensure there is dearth of literature in analysis of wages
privacy, cost and optimization of other and payment protection concern of
resources. freelancers on digital platforms. This warrants
for further study on protecting rights of
Conclusion
freelancers in gig economy. Further, very few
This article examines the important roles of research focus on how gig professionals can
stakeholders in gig economy and highlights build their online brand and use various
how various factors affect the growth and marketing channels for long term growth and
importance of gig economy in Indian and career opportunity in this economy. So in
global context. Description of contemporary future research direction should include study
literature and market survey confirm the fact about the important factors that influence
that scope of gig economy not only covers marketing of freelance products and building
service industry, but also manufacturing strong brand in gig economy.
industry at higher pace (Gleim et al., 2019).
The role of digital platforms are crucial for References
bringing gig culture in developing countries, Aloisi, A., 2015. Commoditized workers: Case study
research on labor law issues arising from a set of on-
and in the remote corners of the world. Gig
demand/gig economy platforms. Comparative Labor
economy offers many opportunities to gig Law and Policy Journal, 37(3), 620-653.
workers such as flexible work environment,
Ashford, S.J., Caza, B.B. and Reid, E.M., 2018. From
working in interest areas, access to global job surviving to thriving in the gig economy: A research
postings. However, it poses many challenges agenda for individuals in the new world of work. Research
to freelancers in the form of less payment, lack in Organizational Behavior, 38, pp.23-41.
of social benefit and job security. The Barzilay, A.R. and Ben-David, A., 2016. Platform
opportunities for corporates are related to inequality: Gender in the gig-economy. Seton Hall L.
Rev., 47, pp.393-431
hiring freelancers namely reduced costs, less
Beerepoot, N. and Lambregts, B., 2015. Competition in
obligation, and talent on demand. However,
online job marketplaces: Towards a global labour market
organizations may face many challenges for for outsourcing services?. Global Networks, 15(2),
ensuring privacy of data, information, IPR pp.236-255.
while managing the business functions with Cambridge Dictionary 2020. Gig Economy. Retrieved
the help of freelancers. from https://dictionary.cambridge.org/dictionary/
english/ gig-economy (accessed 20 February 2020)
Based on the in-depth literature review, we
Caminiti, S. 2018. 4 gig economy trends that are
have found little mention about the ways that radically transforming the US job market. Retrieved
organization can use freelancing for ensuring f rom https://www.cnbc.com/2018/10/29/4-gig-

23
Article IMI Konnect Volume 9 (1) 2020

economy-trends-that-are-radically-transforming-the- er-ban-gig-economy-appeal-landmark-tribunal-
us-job-market.html (accessed 20 February 2020) ruling-workers-rightszero-hours-minimum-wage-
Donovan, S.A., Bradley, D.H. and Shimabukuru, J.O., holiday-a7966877.html (accessed on 24 February 2020)
2016. What does the gig economy mean for workers?. pp. Manyika, J., Lund, S., Bughin, J., Robinson, K., Mischke,
1-20 J. and Mahajan, D., 2016. Independent work: Choice,
Friedman, G., 2014. Workers without employers: necessity, and the gig economy. McKinsey Global
Shadow corporations and the rise of the gig economy. Institute, 2016, pp.1-16.
Review of Keynesian Economics, 2(2), pp.171-188. Meijerink, J. and Keegan, A., 2019. Conceptualizing
Gandini, A., 2016. Digital work: Self-branding and human resource management in the gig economy.
social capital in the freelance knowledge economy. Journal of managerial psychology. 34(4), pp 214-232
Marketing theory, 16(1), pp.123-141. Petriglieri, G., Ashford, S.J. and Wrzesniewski, A., 2019.
Gleim, M.R., Johnson, C.M. and Lawson, S.J., 2019. Agony and ecstasy in the gig economy: Cultivating
Sharers and sellers: A multi-group examination of gig holding environments for precarious and personalized
economy workers’ perceptions. Journal of Business work identities. Administrative Science Quarterly, 64(1),
Research, 98, pp.142-152. pp.124-170.

Graham, M., Hjorth, I. and Lehdonvirta, V., 2017. Pofeldt 2019, Freelance Economy Continues to Roar:
Digital labour and development: impacts of global a v a i l a b l e a t h t t p s : / / w w w. f o r b e s . c o m / s i t e s /
digital labour platforms and the gig economy on worker elainepofeldt/2018/10/31/f reelancing-economy-
livelihoods. Transfer: European Review of Labour and continues-to-roar/#63790c97df45 (accessed on 15
Research, 23(2), pp.135-162. February 2020)

Grugulis, I. and Stoyanova, D., 2011. The missing Statista 2020. Number of freelancers in the United
middle: communities of practice in a freelance labour States from 2017 to 2028(in millions) available at:
market. Work, employment and society, 25(2), pp.342-351. https://www.statista.com/statistics/921593/gig-
economy-number-of-freelancers-us/ (accessed on 15
Healy, J., Nicholson, D. and Pekarek, A., 2017. Should February 2020)
we take the gig economy seriously?. Labour & Industry: a
journal of the social and economic relations of work, 27(3), Staffing industry 2019. SIA sizes gig economy at 53
pp.232-248. million workers, totals $1.3 trillion in revenue. Retrieved
f rom https://www2.staffingindustr y.com/site/
Horney, N., 2016. The gig economy: A disruptor Editorial/Daily-News/SIA-sizes-gig-economy-at-53-
requiring HR agility. People and Strategy, 39(3), pp.20- million-workers-totals-1.3-trillion-in-revenue-50570
27. (accessed on 15 February 2020)
Kässi, O. and Lehdonvirta, V., 2018. Online labour Te c h t a r ge t , 2 0 2 0 . g i g e c on om y. R e t r i e ve d
index: Measuring the online gig economy for policy and from“https://whatis.techtarget.com/definition/gig-
research. Technological forecasting and social change, 137, economy” (accessed on 15 February 2020)
pp.241-248.
Thibodeaux, W. 2020. This Survey of 21,000 Freelancers
Key, T.M., 2017. Domains of digital marketing channels From 170 Countries Shows What Having No Boss Is
in the sharing economy. Journal of Marketing Channels, Like. Retrieved from https://www.inc.com/wanda-
24(1-2), pp.27-38. thibodeaux/this-survey-of-21000-freelancers-from-
Lusher,A. 2017. Uber to deny it is part of the 'gig 170-countries-shows-what-having-no-boss-is-
economy' while challenging landmark order to like.html (accessed on 24 February 2020)
give drivers employment rights” available at : Vaidyanathan, R. and Bose, P. 2017. The Conundrums of
http://www.independent.co.uk/news/business/news/ub

24
Roy and Shrivastava IMI Konnect Volume 9 (1) 2020

the Gig Economy. Retrieved f rom http://

w w w. l i v e m i n t . c o m / O p i n i o n /
AtBCpBokW7aLYLy4G0Kq3H/ The-conundrums-
of-a-gig-economy.html (accessed on 24 February 2020)
Verma S. 2018. The freelance army: Why many Indians
are choosing part-time over full-time. Retrieved from
https://www.financialexpress.com/industry/the-
freelance-army-why-many-indians-are-choosing-part-
time-over-full-time/1407756/ (accessed on 15 February
2020)
Warner, A. 2020. 30+ Freelance Stats – Why the Gig
Economy is Growing in 2020. Retrieved from
https://www.websiteplanet.com/blog/freelance-stats/
(accessed on 15 February 2020)

25
Article IMI Konnect Volume 9 (1) 2020

A Study to Measure the Efficiency of the

Automobile Companies in Indian Scenario
Utilizing Data Envelopment Analysis
Arindam Banerjee* and J. N. Mukhopadhyaya**

Abstract
The present study has utilized Data Envelopment Analysis to measure the efficiency and super
efficiency scores of the automobile companies, in the Indian scenario during the period 2011 -12 to
2016-17. Data related to 10 automobile companies, considered as decision making units, are extracted
from the CMIE Prowess database. Input oriented variable return to scale has been utilized in this
study. Three inputs related to cost and two outputs related to profitability are taken into consideration.
It was observed that 40 per cent of the automobile companies were performing below efficiency and 60
per cent at super efficiency level. Further, an endeavour has been made in this article to understand the
changes in the efficiency and the super efficiency scores by taking into consideration return on net worth
and return on capital employed as outputs and the costs as input. Spearman rank correlation has been
applied to investigate if there was any significant difference between the ranks obtained. It is also
observed from the study that return on net worth is an important criterion for evaluating the efficiency
of the companies.

Introduction input. But the problem arises if there are more

Efficiency is defined as the ratio between the than one output or input.
output and input. Optimum efficiency can be Data Envelopment Analysis (DEA) provides
achieved by either maximizing the output solution to this problem. It is an operations
(keeping the input constant) or minimizing research technique developed by Charnes et al.
the inputs (keeping the output constant). The (1978) to measure the efficiency of the
former is known as Output Oriented Decision-Making Units (DMUs) if there are
Approach while the latter is known as Input multiple inputs or outputs. In this article, two
Oriented Approach. Efficiency can easily be outputs and three inputs are taken into
calculated if there are one output and one consideration. Inputs are also known as

*Assistant Professor, J. D. Birla Institute (Department of Management), Kolkata

**Director, Heritage Business School, Kolkata

26
Banerjee and Mukhopadhyaya IMI Konnect Volume 9 (1) 2020

independent variables and output is known as Indian scenario utilizing the DEA from
dependent variable. The automobile 2011-12 to 2016-17. The contribution of this
companies are taken as DMUs for this article. study lies in investigating which companies in
In case of multiple inputs and outputs, the automobile industry are working
Charnes et al. (1978) have defined efficiency efficiently by measuring the efficiency scores.
as ratio between the weighted sum of outputs Three inputs related to cost structure of the
and weighted sum of inputs. Weights are companies and two outputs related to
being assigned on the basis of suitable profitability and sales have been taken into
programming. Linear program has been consideration for this study. Linear program
formed by taking the coefficients to be the has been formulated to calculate the efficiency
inputs and output values. They basically scores of the companies belonging to the
assumed constant returns to scale. Later on, automobile industry. The next section focuses
Banker et al. (1984) in their paper established on literature review followed by sections on
the variable returns to scale which methods, results and finally are the concluding
encompassed both the increasing as well as remarks.
decreasing returns to scale. Literature Review
Indian automobile sector has been taken into DEA has been applied in the context of
consideration for the study as it plays a crucial several sectors some of which are discussed
role in the growth of the economy. The here.
automobile sector contributes approximately
Malhotra and Malhotra (2008) applied DEA
7.5 per cent of the India’s GDP and
on financial data of 16 pharmaceutical firms
approximately 49 per cent of manufacturing
with three input variables and nine output
GDP with a large economic multiplier
variables. Tehrani et al. (2012) in their study
impact1. The sector includes two wheelers,
have utilized DEA to explore the relevant
trucks, cars, buses and three wheelers. India
model needed to evaluate the financial
has emerged as Asia’s fourth largest exporter
performance of 36 private entities in the
of automobiles behind Japan, South Korea
2 Iranian scenario. The study revealed that 75
and Thailand. The country is expected to top
per cent of the entities were inefficient while
the world in car volumes with approximately
the remaining were efficient. The paper also
611 million vehicles on nation’s road by 2050.
analyzed the weakness of different firms.
The present study has been conducted to Memon and Tahir (2012) have tried to
measure the efficiency scores of the companies investigate the efficiency level of the
belonging to the automobile industry in the companies related to the manufacturing sector
1
Source: www.moneycontrol.com
2
Accelerated growth-Frontline-The Hindu: https://frontline.thehindu.com

27
Article IMI Konnect Volume 9 (1) 2020

in Pakistan. Four inputs related to cost and banks. Based on the analysis of the sample
two outputs related to profitability were taken taken for the study, it was revealed that the
into consideration for the study. It is observed public sector banks were more efficient than
that majority of the companies the private sector banks. Nandkumar and
underperformed under both constant returns Singh (2014) in their paper have computed
to scale and variable returns to scales scenarios. the efficiency scores of 5 public sector banks
Feroz et al. (2003) in their research article have and 5 private sector banks through DEA. The
demonstrated the advantages of using DEA study revealed that the efficiency of the banks
over financial ratio analysis to compute the has increased in general due to the financial
overall efficiency of an entity. The article reforms in the banking sector. The paper
provides insights into the disadvantages of highlights that the private sector banks are the
using financial ratio as a mean to compute the better performers than the public sector banks.
managerial efficiency of a company and The main reason for lower efficiency of the
emphasizes how DEA can offset the banks may be attributed to an increase in non-
disadvantage by pro viding reliable performing assets in the banking sector.
information which can be extremely beneficial Bhattacharyya et al. (1997) have investigated
for the analyst. the efficiency of the Indian banks through
Tandon and Malhotra (2014) in their article DEA. It was revealed from the study that the
have investigated the efficiency of the public sector banks were the best performers
commercial banks in the Indian scenario for in terms of efficiency scores followed by
the period 2010-12. The commercial banks foreign banks and private sector banks
considered included public and private sector respectively.
banks along with foreign owned banks. The Nandy (2011) in his paper has evaluated the
analysis revealed that only 16 per cent of the efficiency of the automobile companies in the
total 48 banks were efficiently performing. Indian scenario using DEA. The paper also
The study also revealed that there was not suggests measures to convert an inefficient
much significant difference between the company into an efficient company.
technical efficiency of public and private Mazumdar and Adhikary (2010) on the other
sector banks but there was an ample scope of hand, in their paper, have measured technical
improvement for foreign banks. Karimzadeh efficiency in the Indian automobile industry
(2012) have tried to measure the efficiency of during 2004-06 using a stochastic production
the Indian commercial banks utilizing DEA. frontier.
A total of 8 banks were taken into
consideration for the study comprising of Works of Banker et al. (1984), Andersen and
public as well as private sector banks. Petersen (1993), Golany and Roll (1989) and
Efficiency scores were computed for these Bowlin (1998) have also been referred to while

28
Banerjee and Mukhopadhyaya IMI Konnect Volume 9 (1) 2020

formulating the linear programming to removed from the scope of the study. The
compute the efficiency and super efficiency efficiency score has been computed following
scores of the manufacturing companies as well Charnes et al. (1978). The descriptive
as choosing the appropriate number of statistics of the 5 variables taken for the study
decision making units for the present study. are put forth in Table 1.

Data and Methodology Table 1: Descriptive Statistics of Variables: ( ? million)

Variables N Minimum Maximum Mean
The present study has been
conducted taking into Sales 10 6998.00 57144.00 23983.11

consideration two outputs and PBDITA 10 1640.00 17116.00 5635.22

three inputs. The two outputs Raw Material 10 2199.00 18584.00 7577.11
relate to sales and profit and the Power 10 1422.00 9328.00 4241.44
three inputs relate to the cost
Compensation 10 588.00 4368.00 1988.55
structure of the automobile
Valid N (listwise) 10
companies. PBDITA (Profit
before Depreciation Interest Tax Source: Author's computation
and Amortization) has been The methodology followed is as follows: (i)
taken as the proxy of the profitability of the Computing the efficiency and super efficiency
organization. The sales basically reflect the scores of the Indian automobile companies
turnover of the companies. The inputs taken using DEA; (ii) Ranking the different
for the study include a) raw materials, stores automobile companies as per their efficiency
and spares; b) power, fuel and water charges and super efficiency scores during the time
and c) compensation to the employees. These period taken for the study; (iii) Investigating
constitute more than 50 per cent of the total the number of companies working below the
cost. The data related to the above five efficiency score of 1 and those working at
variables of the ten automobile companies are super efficiency level.
extracted from the CMIE Prowess database
for the time period of 2011-12 to 2016-17 (i.e. Results and Discussion
for 6 years). The automobile companies are Ranking the automobile companies based on the
selected on the basis of turnover. We have also efficiency and super efficiency scores
taken into consideration return on net worth
The study has been conducted taking into
and return on capital employed as outputs and
consideration three inputs related to cost, i.e.,
different costs/sales as inputs. All the
a) raw material, stores and spares; b) power,
automobile companies for which any data for
fuel and water charges; c) compensation to the
the five variables related to the time period
employees, and two outputs related to sales
taken for our study was unavailable were
and profit (PBDITA), for the period from

29
Article IMI Konnect Volume 9 (1) 2020

2011-12 to 2016-17. Each and every company outputs and different components of cost
in the automobile industry has been divided by sales as the inputs. Return on net
considered as a decision-making unit for the worth (RONW) is taken as the ratio of profit
s t u d y. A t o t a l o f t e n a u t o m o b i l e after tax and net worth while return on capital
companies/DMUs have been taken into employed is taken as the ratio of profit before
consideration. Input oriented variable returns interest and tax and capital employed. Capital
to scale approach has been utilized in this employed is taken as: fixed assets + current
article. Thus, the objective was to minimize assets – current liabilities. The ranks were
the inputs keeping the output constant. Those computed on the basis of the efficiency and
companies whose efficiency scores were 1, are super efficiency scores. The ranks obtained as
considered to be efficient. For them super well as the efficiency and super efficiency
efficiency scores were computed further. scores are reflected in Table 3.
The ranks computed as per the efficiency and Spearman rank correlation was conducted
super efficiency scores of the different between the ranks obtained by the automobile
automobile companies are shown in Table 2. companies as per Table 2 and Table 3. It was
An endeavor has been made further to found out that the Spearman rank correlation
investigate the efficiency and super efficiency was 0.842 which is significant at 0.01 level (2-
scores taking into consideration return on net tailed). Hence it can be concluded that there is
worth and return on capital employed as not much significant difference between the
ranks obtained by
Table 2: Efficiency and Super Efficiency Scores and the Ranks based on the automobile
Set 1 of Inputs and Outputs companies taking
sales and PBDITA
Name of the Company Efficiency Score Super Efficiency Score Rank
as the outputs and
Ashok Leyland Ltd. 0.8597 9
return on net
Bajaj Auto Ltd. 1 1.9023 2 worth and return
Eicher Motors Ltd 1 2.352 1 on c apital
Hero Motocorp Ltd. 1 1.1647 6 employed as the
Mahindra & Mahindra Ltd. 1 1.7733 3
outputs.
Maruti Suzuki India Ltd. 1 1.3157 4 Conclusion
V E Commercial Vehicles Ltd 1 1.1798 5 It is observed from
T V S Motor Co. Ltd. 0.8106 10 the study that
Tata Motors Ltd. 0.933 7 Eicher Motors Ltd
Volkswagen India Pvt. Ltd. 0.8992 8
is the most efficient
company followed

30
Banerjee and Mukhopadhyaya IMI Konnect Volume 9 (1) 2020

Table 3: Efficiency and Super Efficiency Scores and the Ranks based on by Eicher Motors
Set 2 of Inputs and Outputs Ltd and Bajaj
Name of the Company Efficiency Score Super Efficiency Score Rank Auto Ltd. It has
Ashok Leyland Ltd. 0.8411 8 also been observed
that 60 per cent of
Bajaj Auto Ltd. 1 1.2122 3
the companies of
Eicher Motors Ltd 1 1.2211 2
the automobile
Hero Motocorp Ltd. 1 1.1505 4 industry are
Mahindra & Mahindra Ltd. 1 1.1344 5 working at super-
Maruti Suzuki India Ltd. 1 1.3212 1 efficiency level
V E Commercial Vehicles Ltd 1 1.0421 6 and 40 per cent of
the companies are
T V S Motor Co. Ltd. 0.779 10
inefficient (score
Tata Motors Ltd. 0.8325 9
below 1). In both
Volkswagen India Pvt. Ltd. 0.8589 7 the cases above,
majority of the
by Bajaj Auto Ltd and Mahindra and companies in the automobile sector are
Mahindra Ltd when we are taking into efficient.
consideration the first set of inputs and It can be observed from the study that in terms
outputs. It is further observed that out of the of efficiency Maruti Suzuki India Ltd is
ten automobile companies, six companies ranked as number 4 based on the first set of
namely Bajaj Auto Ltd, Eicher Motors Ltd, inputs and outputs and number 1 when the
Hero Motocorp Ltd, Mahindra & Mahindra second set of inputs and outputs are
Ltd, Maruti Suzuki India Ltd and V E considered. If we refer to the share price
Commercial Vehicles Ltd are working above fluctuation of Maruti Suzuki for the last 5
the efficiency score of 1. It is also observed that years it reflects an increasing trend. The price
4 companies namely T V S Motor Co. Ltd, being `3725.00 as on April 1, 2015 and
Tata Motors Ltd, Volkswagen India Pvt Ltd touching `8814.00 as on April 1, 2018 as per
and Ashok Leyland Ltd are working below NSE. If we refer to Tata Motors Ltd it was
the efficiency score of 1. Thus 60 per cent of ranked number 7 as per the first set of inputs
the companies are super efficient (score of and outputs while in case of the second set of
above 1) and 40 per cent of the companies are inputs and outputs it was ranked number 9. If
inefficient (score below 1). Further, based on we refer to the share price fluctuation of Tata
the second set of inputs and outputs, it is Motors Ltd for the last 5 years we can observe
observed that Maruti Suzuki India Ltd is a decreasing trend. The price being `511.00 as
ranked as the most efficient company followed on April 1, 2015 and touching `214.00 as on

31
Article IMI Konnect Volume 9 (1) 2020

April 1, 2019 as per NSE. It seems that the Malhotra, D. K., & Malhotra, R. (2008). Analyzing
financial statements using data envelopment analysis.
second set of outputs, like the RONW is a
Com. Lending Rev., 23, 25.
better criterion for judging the efficiency of
Mazumder, R., & Adhikary, M. (2010). Measuring
the companies, at least in the automobile
technical efficiency in the Indian automobile industry.
sector. South Asia Economic Journal, 11(1), 53-67.
Thus, the management and decision makers Memon, M., & Tahir, I. (2012). Company operation
should try to give due importance to return on performance using DEA and performance matrix:
Evidence from Pakistan. International Journal of Business
net worth along with other parameters as an
and Behavioral Sciences, 2(2), 41-55.
evaluating criterion to measure the efficiency
Nandkumar, & Singh, A. (2014). A Study of Technical
of the companies. Efficiency of Banks in India using DEA, IOSR Journal of
Business and Management, 16 (9), 37-43.
References
Nandy, D. (2011). Efficiency study of Indian automobile
Andersen, P., & Petersen, N. C. (1993). A procedure for companies using DEA technique: a case study of select
ranking efficient units in data envelopment analysis. companies. IUP Journal of Operations Management,
Management science, 39(10), 1261-1264. 10(4), 39.
Banker R., Charnes, A., & Cooper, W. (1984). Some Tandon K., & Malhotra,N. (2014).A Comparative
models for estimating technical and scale inefficiencies Evaluation of Efficiency in the Indian Banking Industry
in data envelopment analysis, Management Science, 30, using Data Envelopment Analysis. The IUP Journal of
1078–1092. Bank Management, 13 (2), 33-46.
Bhattacharyya, A., Lovell, C., & Sahay, P. (1997). The Tehrani, R., Mehragan, M. R., & Golkani, M. R. (2012).
impact of liberalization on the productive efficiency of A Model for Evaluating Financial Performance of
Indian Commercial banks, European Journal of Operation Companies by Data Envelopment Analysis: A Case
Research, 98(2), 332-345. Study of 36 Corporations Affiliated with a Private
Bowlin, W. F. (1998). Measuring performance: An Organization. International Business Research, 5(8), 8.
introduction to data envelopment analysis (DEA). The
Journal of Cost Analysis, 15(2), 3-27.
Charnes, A., Cooper, W. W., & Rhodes, E. (1978).
Measuring the Efficiency of Decision Making Units.
European Journal of Operational Research, 2(6), 429-444.
Feroz, E., Kim, S., & Raab, R. (2003). Financial
Statement Analysis. A Data Envelop Analysis
Approach, Journal of Operation Research Society, 54(1),
48-58.
Golany, B., & Roll, Y. (1989). An application procedure
for DEA. Omega, 17(3), 237-250.
Karimzadeh (2012). Efficiency Analysis by Using Data
Envelop Analysis Model: Evidence from Indian Banks,
International Journal of Latest Trends in Finance and
Economic Sciences, 2(3), 228-237.

32
Opinion IMI Konnect Volume 9 (1) 2020

Perspectives on Budget 2020

On Corporate Bonds and More

Priti Agarwal*

The budget this year is quite beneficial from Indian promoters and investors to look at
the point of view of infrastructure. Many Infrastructure Investment Trust (InvITs).
measures including tax incentives have been The major reason for incentives to SWF
announced to deepen the corporate bond probably has been due to India requiring
market and incentives to Sovereign Wealth enormous investments in infrastructure sector
Fund (SWF) is one such measure in that which is estimated to be over $1 trillion over
direction. next 4 years. While NIIF (National
In order to incentivize the investment by Investment and Infrastructure fund) was set
SWF of foreign Government in the priority up by GoI in February 2015 which manages
sector, this budget has granted 100 per cent tax over $4 billion of capital commitments across
exemption to their interest, dividend and 3 funds to fund infra sector, it alone would not
capital gains income in respect of investment be able to meet the humungous requirement
made in infrastructure and other notified and hence funding by global SWFs is a
sectors before March 31, 2024 and with a necessity.
minimum lock-in period of 3 years. It is to be For renewable energy segment the budget
noted that such concessions/exemptions shall proposals are positive. The incentives to SWF
be available to SWF which is wholly owned itself are positive for renewable energy
and controlled, directly or indirectly by the segment as most of the global investors look at
Government of a foreign country and is set up investing in clean energy segment.
and regulated under the law of such foreign
country. Besides, the Budget also proposes extension of
Kisan Urja S ur aksha e vam U haan
Besides, the budget also announced abolition Mahaabhiyan (KUSUM) scheme for setting
of Dividend Distribution Tax (DDT). The up solar pumps for 20 lakh farmers and for
global yield seeking infrastructure investors providing assistance to set up solar plants in
would be benefitted with the abolition of barren land of farmers. Also large solar power
DDT. However, it may reduce incentive for capacity installation along railway tracks has

*General Manager & Regional Head (East), CARE Ratings

33
Opinion IMI Konnect Volume 9 (1) 2020

been announced. All these measures will push of time. This is something which has been
solar energy capacity additions. It would help witnessed in Budget 2020.
government move towards achieving its If we would like to read the fine print, we
renewable energy installation targets, actually look at macroeconomic indicators like
generating extra resources for railways and unemployment, growth, inflation etc. The
also aims at creating an additional revenue budget has focused on rationalising the
stream for the farmers. income tax structure. Also, several measures
The budget has allocated `22,000 crores for and initiatives towards structural reforms in
power and renewable energy sector. Further, the agricultural sector have been undertaken.
the announcement of 100 per cent tax Most importantly, the Government, in order
concession to SWFs on investment in to reinforce its focus on vocational training,
i n f r a s t r u c t u re p ro j e c t s a l o n g w i t h has allocated some money for skill
concessional tax rate for power generating development. The introduction of bridge
companies are significantly positive for new courses and the thrust on the infrastructure-
investment in the sector. focused skill development opportunities by
National Skill Development Agency are steps
Perfect Budget Does Not Exist in the direction of more generation of
employment. Though these may not be
Swagat Bose* adequate compared to the increase in the
When we often refer to the Budget or any working population in India, it is no doubt a
other major policy framework of the welcome step to achieve the objectives of Skill
Government, we rarely keep an eye on the India in the coming days.
finer details and rather rely heavily on
processed information, which by virtue of
populist demand, only tracks what is in trend.
Herein, inherent bias and political
partisanship often render a coloured vision as
such.
There is no such thing as a perfect budget. It is
rather always welcome if Government Policy
strays away from citizen appeasement and
focuses more on structural reforms over a span

**Director of AELIS Pvt. Ltd. (Skills & Education), Glocal Farms Pvt. Ltd. (AgriTech) and Kazma Technology Pvt.
Ltd. (Software)

34
 International Management Institute
Kolkata

International Management Institute Kolkata

2/4C, Judges Court Road
Alipore, Kolkata 700027
Telephone: +91 33 6652 9664
website: www.imi-k.edu.in