ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Financial Management of Public Sector Enterprises in India

Financial management of resources in terms of profitability constitutes, by far, the most important aspect of operational efficiency of an enterprise. A public sector enterprise can discharge its social obligations better if it operates in a profitable manner. This paper presents an analysis of the profitability of central PSEs. The analysis seeks to answer the questions as to whether the profits earned by the PSEs are adequate and whether the rates of return earned by them are satisfactory. For the purpose of the study, the data have been taken from primary as well as secondary sources. While the secondary data relate to 137 PSEs for a period

An Enquiry into the Production Efficiency and Profitability of MSRTC

The Maharashtra State Road Transport Corporation has been instrumental in providing access and connectivity across the entire state. Over the last few years, due to a variety of factors, particularly falling load factors and competition from the private sector, MSRTC's financial performance has shown a marked deterioration. After the financial turnaround of Karnataka State Road Transport Corporation when it was split into four smaller organisations, it has shown a marked improvement in physical and financial performance. The same solution is suggested by many for large corporations like MSRTC. In this paper, we examine whether splitting of MSRTC into smaller regions would actually help in its financial recovery. Also, we examine the possibility of an improvement in financial profitability by means of enhanced input productivity.

Patent (Amendment) Act 2002 and Technological Innovation

The changes incorporated in the Patents Act, 1970 in 2002 undoubtedly crossed the t?s and dotted the i?s of the TRIPS agreement. A wonderful opportunity, however, was lost to garner the practical knowledge base of the vast technical human resource base of a billion plus country. In this respect the?utility model? type of industrial property protection requires to be given a serious thought to accelerate manufacturing sector growth.

Capital Structure of Regulated Firms

A series of papers emphasise that the capital structure of regulated firms plays an important role in rate regulation due to the interaction between investment and financial decisions of regulated firms and the pricing choices of regulators. The aim of this paper is, in the context of India, to examine the empirical robustness of certain propositions related to the ideas which have been addressed in the literature. The investigation indicates that empirical evidence in India is consistent with some important propositions in the literature: (i) regulation tends to create an incentive for regulated firms to increase their debt level, (ii) debt has a positive effect on the return on equity (ROE), and (iii) if a regulated firm?s investment is relatively large, it is inclined to be highly leveraged.

Environmental Regulation

Many studies that have analysed the cost of compliance with environmental regulation have invariably confined themselves to the direct costs involved. However, a few studies have attempted to examine the effect of regulation on the production process of the firm and considered it as the additional unaccounted cost of compliance. This study, following the method developed by Morgenstern and others in 1998, estimates the hidden costs involved due to environmental regulation. Using firm-level primary survey data, this study of the Karur textile industrial cluster finds that there are hidden costs involved in complying with environmental regulation; the policy-maker has to take these additional costs into consideration.

Effect of Capital Structure on Firms' Product Market Performance

This paper empirically examines the effect of a firm?s capital structure on its product market outcome. The strategic consideration in the product market may induce Indian corporates to take on higher debt in order to gain strategic advantage. Using a balanced panel of 538 Indian manufacturing firms over the period 1989 to 2000, the paper studies the relationship between short- and long-term debt and sales performance (export as well as total sales). In the case of long-term debt, firms take time to build their infrastructure. Hence, considering a longer time horizon of two years and seven years of taking the loan, the paper finds that long-term debt boosts sales growth of firms belonging to the top 50 and large business houses. However, long-term debt is inconsequential for total growth of sales for smaller group and unaffiliated firms. The study finds empirical evidence on the interplay between the financial structure and product market performance in the Indian corporate sector.

Machine Tool Absorption and Capital Formation in India

This paper attempts to trace the evolution of the machine tool industry in India. It tests whether the relationship between gross fixed capital formation and machine tool supply has remained the same before and after 1991. It also seeks to demonstrate that any short-run deviations of machine tool supply from the demand warranted by GFCF are self correcting. Yet another objective of the exercise is to test and quantify an error correction model between machine tool supply and gross fixed capital formation.

Technology Acquisition and Growth of Firms

This paper attempts to analyse the determinants of growth of Indian automobile firms during three different policy regimes, namely, licensing (1980-81 to 1984-85, deregulation 1985-86 to 1990-91 and liberalisation 1991-92 to 1995-96). The analysis broadly follows the evolutionary theoretical framework. It is argued that differences among firms in terms of technology acquisition explain much of the firm level variation in growth. To incorporate firm specific and inter-temporal changes, the study has used two-way fixed effects estimation of the growth function. The results of this exercise support the view that inter-firm differences in growth in this industry in India are determined by variables capturing technology paradigm and trajectory shifts. The changing role of technology acquisition variables in determining growth is also borne out by the results of this exercise. Further, if one accounts for the role of technology, vertical integration, capital intensity and the age of the firm, size of the firm does provide a firm with positive advantages to grow.

Manufacturing Productivity under Varying Trade Regimes, 1980-2000

This paper examines the productivity performance of Indian manufacturing under varying trade regimes. The analysis focuses on the overall period of 1980-2000 and four sub-periods to reflect the shifts in trade policy regime. There is no evidence of much change in total factor productivity growth following liberalisation of the regime initiated in the early 1990s. As in the 1980s, factor accumulation rather than productivity growth accounts for most of the output growth during this period.

Ownership and Efficiency in Engineering Firms: 1990-91 to 1999-2000

The paper analyses the effect of ownership on efficiency of engineering firms in India in the 1990s, a decade of major economic reforms. Technical efficiency of firms, estimated with help of a stochastic frontier production function, is considered for the analysis. A comparison of technical efficiency is made among three groups of firms in Indian engineering: (i) firms with foreign ownership, (ii) domestically owned private sector firms, and (iii) public sector firms. The results clearly indicate that foreign firms in Indian engineering industry have higher technical efficiency than domestically owned firms. No significant difference in technical efficiency is found between private sector and public sector firms among the domestically owned firms. There are indications of a process of efficiency convergence - the domestically owned firms tending to catch up with foreign owned firms in terms of technical efficiency.

Impact of Japanese and US FDI on Productivity Growth

This paper examines the impact of Japanese and US foreign direct investments (FDI) on total factor productivity growth of firms in the Indian automobile, electrical and chemical industries in the post-reforms period. The results show that Japanese affiliation has a significant positive impact on productivity growth in a firm while the impact of US affiliation is not found to be significant. The results also show that domestic firms have witnessed both efficiency growth as well as technological progress in the electrical and chemical industries in the post-reforms period.

Globalisation: Productivity, Efficiency and Growth

and Growth An Overview N S SIDDHARTHAN IIIIIIntroduction IntroductionIntroductionIntroductionIntroductionIntroduction India began liberalising its economy and, in particular, its manufacturing sector over a decade ago. One of the objectives of liberalisation has been to make Indian industries more efficient and globally competitive. Towards this end, the government of India has been pursuing three sets of reforms: one, disbanding the complex network of industrial controls, industrial licensing and permits system; two, liberalising foreign trade and currency transactions and three, instituting several measures to facilitate foreign direct investment (FDI) inflows. These measures were launched in the year 1991 and the liberalisation process is still continuing. It was argued that the removal of entry and licensing barriers would expose Indian firms to international competition and compel them to improve their efficiency and productivity and introduce new processes and products. Trade reforms aimed at exposing Indian firms to global markets will compel them to produce better quality goods. Removal of import restrictions and currency transactions will enable them to import better quality materials, components and technology. FDI inflows will have technology and productivity spillover effects and would improve the productivity of Indian firms.


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