Globalization of India’s Business: Why Go International?

Sanjay K. Katait

Vidya Bharati Mahavidyalaya

sanjay.katait @ rediffmail.com

1. Introduction

Globalization is considered as an important element in the reform package. But what constitute globalization?

The term globalization has four parameters:

1. Reduction of trade barriers so as to permit free flows of goods across national frontiers.

2. Creation of an environment in which free flow of capital can take place among the nation- states.

3. Creation of environment, permitting of free flow of technology.

4. Developing countries, creation of an environment in which free movement can take place in different

countries of the world.

The advocates of globalization, more especially from developed countries, limit the definition of globalization

only to three components like unhindered trade flow, capital flow and flow of technology. Globalization which

is a more romantic word indicating the desire to integrate nation-state within the overall framework of WTO, is

nothing but a modern version of comparative cost advantage which was propagate by the classical economist to

provide foundation of unrestricted flow of goods from one nation to another. Globalization of business has

become a subject matter of serious discussion in the national economic policies and corporate board- rooms. The

subject has assumed a great significance in the light of the recent changes in the global business environment

and the national economic policy changes. International trade is growing faster than world output and

international investment is growing much faster than the global trade. These are the clear indication of growing

internationalization.

Globalization means adopting a global outlook for the business and business strategies aimed at enhancing

global competitiveness. Companies, which have adopted a global outlook for the business and business

strategies, aimed at enhancing global competitiveness. Companies, which have adopted a global outlook “stop

thinking of themselves as a national marketers who venture abroad and start thinking themselves as a global

marketers.

The top management and staff are involved in the planning of worldwide manufacturing facilities, marketing

policies, financial flows and logistical system.

Why go International?

There are several answers to the question “why firms go international?” The factors, which provoke firms to

go international, are broadly divided into two groups.

1. Pull Factor:

2. Push Factor:

1. Pull Factor:

The pull factor, most of which are proactive reasons are those forces of attraction, which pulls the business to

the foreign markets. In other words, companies are motivated to internationalize because of the attractiveness of

the foreign market. Such attractiveness includes relatively profitability and growth prospects

.

2. Push Factor:

The push factor refers to the compulsion of the domestic market, which prompt companies to internationalize.

Most of the push factors are reactive in nature.

Other element, which provoke Globalization:

A. Profit Advantage.

B. Growth opportunities.

C. Domestic Market Constraints.

D. Competition.

E. Government Policies and Regulations.

F. Spin-off Benefits.

G. Strategic Vision.

A. Profit Advantage:

An important incentive for international business is the profit advantage. International business could be more

profitable than the domestic. There are several cases where more than 100% of the total profit of the company

is made in the foreign markets.

Even when international business is less profitable than the domestic, it could increase the total profit if the

international business enables the form to achieve optimum capacity utilization or economies of scale.

One of the important motivations for foreign investment is to reduce the cost of production by taking

advantage of the cheap labor. While in some cases, the whole manufacturing of a product may be carried out in

foreign locations, in some cases only certain stages of it are done abroad.

B. Growth Opportunities:

The enormous growth potential of many foreign markets is very strong attraction for companies. In number of

developing countries, both the population and income are growing very fast. Naisbitt and Aburden observed

Asians will be the consumers of 2000, which means greater opportunities for Asian countries for the

developmental purposes.

It may be noted that several developing countries, the newly industrializing countries and the peoples of

Republic of China in particular have been growing much faster than the developed countries.

Even if the market for several goods in these countries is not very substantial at present, many companies are

eager to establish foothold there, by considering their future potential.

C. Domestic Market Constraints:

Domestic demand constraints drive many companies to expanding the market beyond the national border.

The market for number of products has tended to saturate or decline in the advanced countries. This often

happens when the market potential has been almost tapped.

Another type of domestic market constraints arises from the scale of economies. The technological advance

have increased the size of the optimum scale of operation substantially in many industries making it necessary to

have foreign market, in addition to the domestic market, to take advantage of scale of economies. It is thrust

given to export that enable certain countries to setup economic size plants.

D. Competition:

Competition may become a driving force behind internationalization. A product market does not normally

motivate companies to seek business outside the home market. Until the liberalization, which started in July

1991, the Indian economy was highly protected market. Not only that the domestic producers were protected

from foreign competition but also domestic competition was restricted by several policy induced entry barriers,

operated by such measures as industrial licensing and MRTP regulations

Being in the sellers market, the Indian companies, in general, did not take the foreign market seriously. The

economic liberalization ushered in India since 1991, which have increased competition from foreign firms as

well as from those within the countries, however, significant changes observed and the result of which many

Indian companies are now systematically planning to go international in a big way.

The strategy of counter-competition is to penetrate the home market of the potential foreign competitor so as

to diminish its competitive strength and to protect the domestic market share from foreign penetration. Direct

market penetration can drain vital cash flow from the foreign companies domestic operations. This drain can

result in lost opportunities, reduced income, and limited production, impairing the competitor’s ability to make

overseas thrust.

E. Government Policies and Regulations:

Government policies and regulations may also motivate internationalization. There are both positive and

negative factors, which could cause internationalization.

Many government gives a number of incentives and other positive support to domestic companies to export

and to invest in foreign countries. Similarly several countries give a lot of importance to import development

and foreign investment.

In India companies maybe obliged to earn foreign exchange to finance their imports and to meet certain other

foreign exchange requirement like payment of royalty, dividend etc. Further, In India, permission to enter

certain industries by the large companies and foreign companies was subject to specific export obligation.

Some companies also moves to foreign countries because of certain regulations, like environmental laws in

advanced countries.

F. Spin-off Benefit:

International business has certain spin-off benefit too. International business may help the company to

improve its domestic business; international business helps improve the image of the company. Foreign

exchange earnings may enable a company to imports capital goods, technology etc. Which may not otherwise

be possible for countries like India.

Another attraction of exports is the economic incentives offered by the government.

G. Strategic Vision:

The systematic and growing internationalization of many companies is essentially a part of their business

policy or strategic management. The stimulus for internationalization comes from the urge to grow, the need to

become competitive, the need to diversify and to gain the strategic advantages of internationalization. There are

number of corporate which are truly global, planning of manufacturing facilities, logistical systems, financial

flows and marketing policies in such corporations are done considering the entire world as its, and a single

market – a borderless world

2. Conclusion

The new economic policy of India is expected to encourage the Globalization of India business. The increasing

domestic competition is compelling many companies to pursue Globalization. The liberalization policy towards

foreign technology and collaborations is enabling Indian companies to upgrade their production facilities or to

establish new facilities, which will help them to enter in the foreign market.

3. References

1. Indian Economy – Mishra & Puri, Himalaya Publication,New Delhi. 2005.

2. Indian Economy - K.P. Sundaram, S.Chand & Sons, New Delhi. 2005.

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INDIAN RURAL BANKING – EMERGING TRENDS AND CHALLENGES – ROLE OF REGIONAL RURAL BANKS (RRB) IN THIS CONTEXT.

DR. SANJAY K. KATAIT _{(Asst. Prof.)}

M.COM., MBA., MIRPM., Ph.D.

VIDYA BHARATI MAHAVIDYALAYA,

CAMP, AMRAVATI. (M.S.) 444602.

PHONE NO. (O) 0721- 2662740, (R) 0721- 2562525

ABSTRACT

After independence, the major aim of rural credit policy in our country has been to expand of institutional financing with a view to curtail the role of indigenous financial agencies like moneylenders.  The All – India Rural Credit Survey Committee (AIRCSC) perceived that only multi-purpose co-operatives can be a viable solution to the problem of rural finance.

 

INTRODUCTION:

 

The Narasimham Committee on rural credit recommended the establishment of Regional Rural Banks (RRB) on the ground that they would be much better suited than the commercial banks or co-operative banks in meeting the needs of rural areas.  They would combine the local feel and familiarity with rural problems which cooperative possess and the degree of business organization, ability to mobilize deposit, access to central money markets and modernized outlook which the commercial banks have.

On Narasimham Committees recommendation, the Government passed the Regional Rural Banks Act, 1976.  The main objective of RRB is to provide credit and other facilities particularly to small and marginal farmers, agricultural laborers, artisian and small entrepreneurs and develop agriculture, trade, commerce, industry, and other productive activities in the rural areas. 

The first five RRB were set up on October 2 1975, at Moradabad and Gorakhpur in Uttar Pradesh, Bhiwani in Haryana, Jaipur and Rajasthan and Malda in West Bengal.  These banks were sponsored by the Syndicate Bank, State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of India.

 

ROLE OF REGIONAL RURAL BANKS (RRB) IN THE PRESENT SCENERIO:

 

• To accept deposit
• To grant advances
• To provide ancillary banking services
• To supply inputs and equipments to farmers
• To provide assistance in the marketing of their products
• To maintain godowns

 

STRUCTURE AND ORGANISATION OF RRB :

 

The authorized capital of RRB is fixed at Rs. 1crore, and its issued capital at Rs. 2 lakhs.  Of the issued capital, 50% is to be subscribed by the Central Government, 15% by the concerned State Government and the rest 35% by the sponsoring bank.

The working and the affairs of the RRB are directed and managed by a Board of Directors.  The Board of Directors consists of chairman, three directors to be nominated by the Central Government concerned, and not more than 3 directors to be nominated by the Central Government and his term of office does not exceed five years.

 

PROGRESS OF REGIONAL RURAL BANKS – CURRENT SCENERIO (RRB):

 

The progress of RRB in the initial stages was quite rapid.  At present 196 RRB in 23 states with 14500 branches operating in the country.  The total deposit with RRB in 2004-05 amounted to Rs. 58350 crores and their advances came to Rs.31770 crores.  Over 95 % of the advances of the RRB are direct advances to small marginal farmers, landless laborers and rural artisian or, in other words to weaker section of the society.

 

More especially about 48% of RRB loan assistance is to agricultural and 52% for non-agriculture (rural artisian, retail trade, etc).

 

State wise, the largest number of offices in a single State is to be found in Uttar Pradesh (3100) followed by Bihar (1950) and Madhya Pradesh (1620).

RRB has an important role to play in our rural economy, as they have to act as alternative agencies to provide institutional credit in rural areas.  In course of time it is necessary to remember that they have not been set up to replace cooperative credit societies but act as a supplement to them.  RRB has always been active participant in programmes designed to provide credit assistance to weaker sections.

 

PROBLEMS FACED BY RRB:

 

1.      Haste and lack of coordination in branch expansion.

2. Difficulties in deposit mobilization.
3. Constraints in deposit mobilization.
4. Slow progress in lending activity.
5. Urban orientation of staff.
6. Procedural rigidities.

 

SUGGESTION FOR REORGANISATION AND 

IMPROVEMENT IN THE WORKING OF RRB:

 

1.      The unique role of RRB in providing credit facilities to weaker sections in the villages must be preserved.  The RRB should exist as rural banks of the rural poor.

2. The RRB may be permitted to lend up to 25% of their total advances to the richer section of the village society.
3. The State Government should also take keen interest in the growth of RRB.
4. Participation of local people in the equity share capital of the RRB should be allowed encouraged.
5. Local staff may be appointed as far as possible.
6. Cooperative societies may be allowed to sponsor or co-sponsor with commercial banks in the establishment of the RRB.
7. A uniform pattern of interest rate structure should be devised for the rural financial agencies.
8. The RRB must strengthen effective credit administration by way of credit appraisal, monitoring the progress of loans and their efficient recovery.
9. The credit policy of the RRB should be based on the group approach of financing rural activities.
10. The RRB may initiate certain new insurable policies like deposit-linked cattle and other animals insurance policy, crop insurance policy or the life insurance policy for the rural depositors.
11. The RRB may relax their procedure for lending and make them more easy for village borrowers.
12. Co-ordination between district level development planning and district level credit planning is also required in order to chart out the specific role of the RRB as a development agency of the rural areas.

 

RECOMMENDATIONS OF THE DIFFERENT COMMITTEES ON RRB:

 

1. Dantwala Committee 1977.
2. Narasimham Committee 1991.
3. Khusro Committee.

 

1. Dantwala Committee 1977.

 

In June 1977, the Reserve Bank of India appointed a committee to review the working of RRB.  Professor M.L.Dantwala headed it and the committee submitted report to the Reserve Bank of India with some important recommendations.

 

1. The RRB with some modification in their organization and function become a very useful component in the totality of the rural credit structure.  The RRB can make a substantial contribution to improving quality and quantity of credit flows to the rural areas by becoming an integral part of the rural credit structure.
2. Providing rural credit in a more efficient manner.
3. The RRB should function at the intermediate level.  It should progressively fill the credit gap in the rural sector.
4. The jurisdiction of a RRB should be confined to one district.
5. The RRB should be allowed to provide full banking facilities in the areas of their operation.
6. Forms and procedure of the RRB should be simplified.
7. Sponsoring banks should provide training to the staff of the RRB.
8. The RRB should adequately recruit technical staff.
9. The RRB should ensure uniformity in the interest rate policy on par with all rural financial agencies in the organized sector of the money market.

 

2. Narasimham Committee 1991.

 

RRB were establish mainly to provide a low cost alternative to the operation of commercial bank branches but the functioning of the RRB gives much cause for concern.  According to Narasimham committee, there are basic three problems faced by the RRB.

 

1. Because of the many restriction placed on the businesses they can undertake, RRB have low earning capacity.
2. The wage and salary scales of RRB have been rising and, in fact with the recent award of Tribunal, their salary scales, an important rationale for the setting up of RRB has ceased to exist.
3. The sponsoring bank are also running their own rural branches in the every area of operation of the RRB.  This has given rise to certain anamolies and to avoidable expenditure on controls and administration.

           

                        Recommendation of Narasimham Committee:

                

1. Commercial bank should segregate the operation of their rural branches through the formation of one or more subsidiaries.
2. Each rural subsidiary should have compact area of operation so as to facilitate recruitment and development of manpower apart from providing the needed trust in business operations and effective improvement in the control and the supervision and information system.
3. The rural subsidiaries should be treated at par with RRB in regard to cash reserves and statutory liquidity requirements (SLR) and refinance facilities from NABARD.
4. All concession in lending to agriculture and to small industry should be phased out, and there would be saving in cost of administration brought through the process of rationalization.
5. NABARD should help RRB to earn higher level of interest income for their surplus cash balances and for their funds presently invested in Government securities or in Government guaranteed securities for SLR compliance.

  

3. Khusro Committee:

 

           The Agriculture Credit Review Committee under the chairmanship of Dr. A.M. Khusro observed that weakness of RRB were endemic and non – viability was built in to their structure. RRB has accumulated huge losses over the year and, in some cases, the losses have eroded even a part of their deposits.  There was, thus, a strong case of winding up of such insolvent institutions.  Besides, RRB would not be able to serve the interest of the largest groups in the manner expected of them.  According to the Khusro Committee, there was no place for RRB in the country rural system in near future and they should be merged with sponsored banks.

 

CONCLUSION:

 

RRB is mainly established to solve the problem of the weaker section of the society and also to settle various problems which cooperative and business organization faces. With the help of this research paper an attempt is made to throw light on the working, problems and role of RRB in this context with some suggestion.

 

REFERENCES:

 

1.      Banking And Financial System – Sundaram and Varshney – Sultan  Chand and Sons – 2005 .

 

2.  Banking and Financial System -  Mithani and Gordon –Himalaya Publishing House – 2005.

 

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Commerce Education a Continuing Process In Social Interaction

Prof. E. K. Thombre

Dr. A. T. Pande

Dr. S. K. Katait

Department of Management, Vidya Bharati Mahavidyalaya,

Camp, Amravati

Objectives:

1.                  To review the locus standi of commerce education in the present scenario.

2.                  To try to gauge what is expected of it today?

3.                  To think of its anatomical fabrics.

4.                  To get at its functional role.

5.                  Manifestation of the desired liaison.

Introduction:

            Gone are the days when higher education could dwell its ivory castle. Higher education can hardly afford to remain in its isolated citadel. Once upon a time higher education could pride it’s remaining away from the world and claim to guide it.

            Now and of now higher education is expected to be life oriented and result oriented and more so with commerce education because conceptually it comes to be a technical education. [This concept was very much upheld in commerce conference held at G.S. College of Commerce Wardha 1971].

            Thence much water has flown.  The world has taken strides in all walks of life.  And the modern age comes to be an age of technological advancement. There is no denying the fact that commerce education has also change but change a little only.

 Locus standi of commerce education today:

       Commerce educations compose and constituted as it stands to be suffered from multiple anatomical flows the basic one being it lags far behinds of playing its expected role. The role that society expects of it is that it should serve as a source of supplying functionaries at various levels commensurate with the societal needs. But university graduate in commerce do not appear to be standing to the occasions. Nor has commerce faculty provided any sound basis of any theoretic fabric in its functional domain. Hence its seemed to have utterly failed both in applied and fundamental areas. Commerce curricula in various Indian Universities shall cater far –

1                    The societal needs in the form of providing skill for commerce world.

2                    It should provide manpower capable of sustaining the rapid changes in the world of commerce.

3                    Commerce education shall better be in a position to give a direction to the society and visualize in advanced its needs.

4                    It should through its changing curricula stand to match the demand and supply of functionaries in the world of commerce.

What is expected of commerce education today? -

            Society expects of commerce education that it educates the youth in way that they should be able to sustain and see through their role efficaciously in their day to day function for which they should be both theoretically and factually meet the challenges of the times and prove their social utility.

Expected anatomical fabric of Commerce education

            As has been pointed out at the very out set curricula of static nature can hardly delivered the goods today. Any educations for that matter and particularly commerce education must be vide awake to the day-to-day problems of the society. All personnel requirement must be supplied through institutions imparting commerce education. Our curricula should try to turn out not only accountants functioning mechanically but they should be pundats in the science of accounting and should be able to visualize and see through the changing dimension of the science with the changing technology of the trade trade. At present only the basics of debit and credit are crammed without any attempts on the part of the student of its application to given situation. This lacuna must be made good for this institution imparting commerce education must work in liaison with the business world at both micro and macro level.

            The discipline of economics a core and centrifugal component of commerce educational must not confined themselves to cramming of certain postulate of science mechanically. But this facet of commerce education must conduct it self in a way so as to enable the student to apply the principles they learn in the classrooms to their surrounding areas. Commerce faculties would do  well  in probing in to problems of “Farmers Suicide In Maharashtra and Its Economic Under Currents”.

            To get at concrete perspective the faculties shall beneficially have raport with the institution for economic development working in their region.

            For the rudiment in Management areas the commerce colleges shall work in liaison with management Institutions that are rapidly emerging in considerable number these days. Inter Institutional meets and visit of Inter Institutional meets  and visits of inter institutional faculty also can strengthen this liaison.

            Legal environment of business is an area which is gigantic in its self. Researcher in commerce faculties should cater to the requirements of “Studies in legal domain by probing deeper into the business and industrial law “ and should see to it that laws it stands and their students study it has objectivity element in the scheme of things of legal studies. Research in commerce faces a special responsibility in studying is the nature and anatomy of the commercial legislation. These research findings shall proliferate below and feel the vacuum in the curricula for this liaison with law faculty and the local bars can go a long way.

Functional role of commerce education

Commerce education has no static role to play.  Its role changes as changes the commerce in society.  Commerce changes rapidly.  One remembers that in 1950 and 1960 the teaching of’ Type writing and stenography’ only fetched a great deal of admiration to G.S. college of commerce wardha.  Today training in computer education and Internet has assumed greater significance and these technological bits get the place of honor in the commerce curricula all over. But commerce education can   hardly rest contented with giving conversance to its students in the technological development alone. London University in 1980 had questioned the very propriety of commerce as a distinct faculty.  Possibly they must have implied that in the absence of basic theoretical fabric it is not entitled to claim a position of ‘ Faculty ‘as such and they must have been inclined to think of Commerce as adjunct of economics and lately of Management.

     Undoubtedly commerce education has to be impressionable to the contemporary commercial problems of the society nay its fundamental approach ought to be to identify these problems and address itself to those problems.  This is its applied functional side.  Universities have been and shall ever continue to be a citadel of higher learning.  It therefore, willy-nilly has to be awake to building a theoretic fabric in its own domain and come to assume a role of “Think Tank” viz a viz the commercial problems of the society.   For this purpose commerce education will have to have a continuous liaison with other social  institutions.

Manifestation of the desired liason

            Right up to 1990 Commerce faculties in Indian Universities were in a mood to work in isolation from others.  They used to confine their domain to the deliberations of their academic bodies and work with their own subjectivities.  This has degenerated the faculties at national level in general and Maharashtra Universities in particular.  To overcome this trauma they have been activating themselves in the direction of diversification and rationalization of their curricula.  The basic attempt is to live up to the objective commercial problems of the society.  But this is not going to be but for a very proximate liaison with other social institutions.  A modest attempt is made here to pinpoint the modus operandi and present a model for establishing such a liaison.

1. In the domain of Accountancy  

Commerce Colleges of necessity are to live to the need for accounts of the business community.   Only teaching of double entry book keeping system based accounting will not be of much avail.  India has to tread still a long way in the corporatisation of its business.  In such a condition it is of no much of utility to perpetrate present practice of teaching learning the science.  Most of the Universities at present have been working on U.G.C. guideline i.e. 80:20 pattern i.e. 80 on a national level and 20 on a regional level.  If one takes thorough probe in to requirement of accountants for business in Vidarbha it requires no deep probe into the problem to know that it is the Mahajani or Indigenous method that is needed.  But even as 20% component commerce faculties are not heeding this problems in earnest.  Well there is a settled stock of literature on the phenomena.  But Universities will benefit a great deal, if their students are made to study this in liaison with the local skill in indigenous accounting. 

Commerce facility may beneficially do their teaching learning work of accountancy in liaison with the “ Chartered Accounts Institute of India” the most celebrated body in the domain of accountancy.

2. Business studies in general 

Commerce facility in the universities to objectively get at and to do realistic teaching of business problems must work in liason with the regional associations viz chamber of commerce. These associations face the brunt of these problems in there day to day functioning and hence students of commerce shall derive benefits from liaisons with such Institution.

 3. Domain of Agriculture Economics and Allied Areas

Agriculture economics comes to be the major pursuit of study of students in commerce. This is a science one would readily admit can hardly be a subject to learned through textbooks only, here its not implies to belittle the contribution of the learned authors in the field.  But liason with “Shetkari Sanghatana” and marketing federation of agriculture produce shall give a realistic shade to endeavor of the students in this area.

4. Liasion with local  Bar For the Regional Conversance with the Legal

Environment

As has already been averred to earlier at an advance level and at higher pedestal of studies student shall not accept only prescribed piece of legislation but try to peep into anatomical structure and suggest ways and means to improve it .  Local bar may be give a practical touch to the studies of students of mercantile and industrial law .

5. The Domain of Business Management

It has already been suggested that newly emerging class of business schools imparting education in management studies are the fertile institutions to build liason with. From such a liason basics of management with pragmatic approach could go a long way in giving practical orientation to the academic efforts of the commerce faculties in the universities.

6. Liason with financial institutions

Financial studies can hardly and fruitfully be pursued but for the liason with financial institution. Such as bank insurance companies and other financial institutions. 

How this liason should be establish and work out shall be up to the concerned authorities in the universities.  They may take national (and also global if any), regional and local perspective in the matter.  In view of that perspective they may carve out the shape of the liason to be established in between these institution and themselves. 

Summary and conclusions

Higher education can hardly remain in their ivory castle these days.

More so with commerce education for conceptually it is a technical education.

Commerce education hitherto fore can hardly afford to remain theoretical and book worm only in view of its interdependence with business and other social institutions.

They have to adopt a role of catalytic agent between the changes in commerce in the society and the students of commerce. 

To give practical touch to commerce education liason with commerce education and other institution is a desideratum.

Some suggestions-

Those concern with commerce education shall not look upon commerce curricula as a fund it be rather viewed as a flow.

Changes in commerce are fast and frequent therefore there could not be a static stock of curricula.  It must keep abreast of the changes in commerce.

            Commerce education will do better to be aware of its role of social engineering.

For this purpose they should continually take a SWOT analysis of themselves and contemporary commercial problems of the society.

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