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Working Papers | 2009

Innovations for Reviving Small-Scale Industries

Anil K. Gupta

Given the economic distress worldwide, the micro, small and medium scale enterprises (MSME) had been hit hard. Large numbers of workers have been laid off because of depressed demand, piled up inventory, pending retrievables and squeezed credit market. A sector which provides maximum employment cannot be left to fend for itself without a major transformation led by the entrepreneurs, policy makers and also other support organizations. There are several innovative options that one can try at four different levels such as (a) stimulating demand, (b) upgrading technology and skills, (c) promoting innovations for developing new products and services and (d) forging new partnerships among the entrepreneurs and also with the R&D institutions, grassroots innovation networks and the technology students.

Some of the urgent steps required are: (a) technology audit of MSMEs by formal R&D institutions, (b) Creation of National Innovation and R&D Fund for MSMEs, dedicated for replacing age old materials, technologies and production processes, (c) awards for innovations by and for MSMEs, particularly, engaging youth as attempted by Karnataka Council of Science and Technology and Indian Institute of Science, Bangalore and (d) dedicated R&D centres for various industrial clusters.

This is a painful time for the MSMEs and the workers being laid off. A bipartition approach is required among the major political parties to put forward a revitalization plan. Millions of workers and small entrepreneurs will anyway soon vote on the vision of the parties in taking country out of the current stressful situation.

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Working Papers | 2009

Linking Vertical and Horizontal Markets for Innovations at Grassroots:Sustainability Imperative Sustainability Imperative

Anil K. Gupta

The supply chain management is at the core of globalising world. Today the large corporations are able to source materials from all around the world and sell it in the most interior parts of the developing and developed world. With the increase in oil prices, this model of globalisation is coming under strain. But there are some other challenges also facing the dominant globalisation model. The call to large corporations to look for the fortune at the bottom of the economic pyramid implied dipping into the limited purchasing power of the economically poor people. Assumption was that given the cultural bias in favour of poor emulating the lifestyle of the richer people (.Sanskritisation.), the possibility of selling products and services at affordable prices to the poor were immense. It did not matter if the market for locally produced goods and services got suppressed, creating a constraint for the growth of above model. Apart from the logistical issues in meeting scattered, small and uncertain demand in rural areas, the ethical and efficiency issues also did not get addressed.

In this paper, I am challenging the viability of current model of globalisation. To me, unless sufficient space is created in global markets for grassroots products and services, the present model is just not sustainable.

I would like to first discuss the emerging innovations at grassroots level which can help us think about new models for moulding markets at local, regional and global level. Later, one can better appreciate the logistical implications of integrating horizontal and vertical markets. Finally, I would like to speculate about the future shape of distributed, modular manufacturing for meeting local as well as global needs.

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Working Papers | 2009

If Technology is like Word, Institutions are like Grammar:Institutional Context of Technological Innovations and Knowledge Systems at Grassroots

Anil K. Gupta

Many developing countries have taken interest in learning from the Honey Bee Network experience for replicating the model. In a UNESCO conference, I was asked to identify the key steps that national governments can take to deal with the challenge of developing an inclusive innovation based development model. I have identified six steps which can help the leaders in various countries.

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Working Papers | 2009

Risk Management Lessons from the Global Financial Crisis for Derivative Exchanges

Jayanth R. Varma

During the global financial turmoil of 2007 and 2008, no major derivative clearing house in the world encountered distress while many banks were pushed to the brink and beyond. An important reason for this is that derivative exchanges have avoided using value at risk, normal distributions and linear correlations. This is an important lesson. The global financial crisis has also taught us that in risk management, robustness is more important than sophistication and that it is dangerous to use models that are over calibrated to short time series of market prices. The paper applies these lessons to the important exchange traded derivatives in India and recommends major changes to the current margining systems to improve their robustness. It also discusses directions in which global best practices in exchange risk management could be improved to take advantage of recent advances in computing power and finance theory. The paper argues that risk management should evolve towards explicit models based on coherent risk measures (like expected shortfall), fat tailed distributions and non linear dependence structures (copulas).

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Working Papers | 2009

Effect of Mobiles on Socio-economic Life of Urban Poor

Ankur Sarin and Rekha Jain

Using a survey of 1774 users and non-users in 84 slums in three metropolitan cities (Delhi, Ahmedabad and Kolkata), we try to understand the impact of mobiles on their social and economic lives. Urban slum dwellers spend significant amounts on communications, both for a first time acquisition of handset and SIM (nearly 40% of the average household earnings per month), as well as on going expenditure. However, a majority of respondents believe that the use of mobiles has led to an improvement in their economic situation and that these benefits are greater than ownership and usage costs. Mobile also appears to change how slum residents interact with each other. Despite reducing face-to-face interactions, mobile usage is associated with stronger social relationships. In comparing users and non-users, we find differences between users and non-users in terms of income, education and other social characteristics. We also find evidence of hierarchies within households, with women far more likely than men to be only infrequent mobile users or not to have access at all. While cost of a handset is the primary barrier to owning a mobile, non-owners report difficulty in using a mobile, clarity of charges for call-plans and information dissemination as other barriers to ownership.

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Working Papers | 2009

Lessons from Leveraging Land: A Case of Bangalore Mysore Infrastructure Corridor

G. Raghuram and Satyam Shivam Sundaram

Bangalore Mysore Infrastructure Corridor pioneered the idea of leveraging land for revenue generation to make a project viable. The project was conceived as early as 1988. It had the twin objectives of (i) connecting Bangalore and Mysore (two rapidly growing cities in Karnataka) with an expressway and (ii) developing the infrastructure around the periphery of Bangalore city and the expressway. The project generated many controversies centred around land acquisition including the quantum of land, number of places for land acquisition, number of families affected, and the compensation package. These issues were further escalated due to frequent changes in political leadership in the state. This paper discusses the events which have spanned over two decades and brings out the key learnings in leveraging land as a revenue generation instrument.

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Working Papers | 2009

Quantifying the Impact of Chikungunya and Dengue on Tourism Revenues

Dileep Mavalankar, Tapasvi Puwar, Tiina M Murtola, and S S Vasan

Background
Health economists have traditionally quantified the burden of vector-borne diseases (such as chikungunya and dengue) as the sum of the cost of illness and the cost of intervention programmes. The objective of this paper is to predict the order of magnitude of possible reduction in tourism revenues if a major epidemic of chikungunya or dengue were to discourage visits by international tourists, and to prove that even a conservative estimate can be comparable to or even greater than the cost of illness and intervention programmes combined, and therefore should not be ignored in the estimation of the overall burden.

Methods
We have chosen three Asian economies where the immediate costs of these diseases have been recently calculated: Gujarat (an economically important state of India), Malaysia, and Thailand. Only international tourists from non-endemic countries have been considered to be discouraged, and a 4% annual decline in their numbers has been assumed. Revenues from these tourists have been calculated assuming that tourists from non-endemic countries would spend, on average, the same amount as all international tourists. These assumptions are conservative and consistent with the recent experience of Mauritius and Réunion islands. Non-Resident Indians (NRIs) have been considered half as likely to avoid travel to Gujarat compared to non-Indians. This paper reports inflation-adjusted expenditure figures as 2008 US$, assuming recent market exchange rates of 42.0 INR/US$, 3.22 MYR/US$, 0.68 EUR/US$, and 33.6 THB/US$.

Findings
A 4% decline in tourists from non-endemic countries would result in a substantial loss of tourism revenues . at least US$ 8 million for Gujarat, US$ 65 million for Malaysia, and US$ 363 million for Thailand. The estimated immediate annual cost of chikungunya and dengue to these economies is US$ 90 million, US$ 133 million, and approximately US$ 127 million respectively, indicating that impact on tourism revenues should not be ignored when calculating the burden of infectious diseases. The impact on Gujarat is relatively less because its share of world tourism receipts is just 0.04%, whereas Malaysia and Thailand have healthy shares of 1.64% and 1.82% respectively. A 4% decline in tourists to Gujarat from other Indian states would amount to US$ 9.6 million loss in domestic tourism revenues to Gujarat.

Interpretation
This paper shows that potential loss of tourism revenues due to a severe epidemic outbreak could be substantial. In some cases, ignoring this component could seriously underestimate cost-benefit results, forestalling promising interventions that could benefit the society as a whole or leading to inadequate investment of resources in prevention and public-funded control programmes. This would be to the detriment of especially poorer sections of the society, who may not be able to afford treatment costs. At present data are insufficient for us to make more than a preliminary estimate of the magnitude of the potential loss of revenues from tourism due to a major outbreak of chikungunya or dengue.

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Working Papers | 2009

Integrating Resource-Based and Rational Contingency Views:Understanding Design of Dynamic Capabilities of Organisations

Kaushik Roy and Pradyumana Khokle

Resource-based view of organisation emphasises that no organisation can be self sufficient and it will always be dependent on the environment for the fulfillment of resource needs. Further, this interaction with the environment can take various forms including manipulation, which is manifested through mergers, acquisitions and other inter-organisational relationships. The rational contingency view of organisations emphasises the goals that an organisation has, which are not clearly brought out in the resource dependence view. It is attempted here to integrate perspectives from the resource-based and rational contingency views of organisations to assess how the dominant coalition would view its role in an organisation with respect to building dynamic capabilities after analysing an array of goal-resource linkage possibilities.

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Working Papers | 2009

Determinants of Small-Scale Farmer inclusion in Emerging Modern Agrifood Markets: A Study of the Dairy Industry in India

Vijay Paul Sharma, Kalpesh Kumar, and Raj Vir Singh

In response to structural transformations taking place in the Indian dairy sector mainly in processing segment this paper examines determinants of market channel choices of milk producers based on a survey of 390 farm households in 2007. It also attempts to investigate what impacts these market channel choices may have on farmers income and technology adoption. A two-stage multinomial logit model is employed to investigate determinants and effects of market channel choices of milk producers. While modern marketing channels have emerged in the Indian dairy sector, the traditional sector is still dominant. Farmers sell nearly 85 per cent of milk to traditional channels. The share of the modern organized sector is growing but at a slow pace. The dominance of the traditional channel is an indication of a very competitive and cost-effective traditional market in linking producers and consumers. It is possible that high transaction costs also act as a barrier. However, issues of hygiene and quality of milk being sold through traditional channels require attention. Results indicate that small dairy farmers and the poor are mostly excluded from modern private sector channels. Households socio-economic variables (farm size, age and education) are important determinants of marketing channel choice in the case of the modern private sector. Large farmers have better opportunity to participate in modern private channels. Market infrastructure such as road, provision of veterinary services, distance from milk collection centre, markets, milk collection centres, price risks, etc. have significant effect on farmers marketing choices. The second stage results of the Heckman model show that education, membership of producers association/cooperatives, provision of veterinary services, and farm size have significant impact on cooperative marketing channel farmers income while in the case of modern private sector, education and price risk have significant impact on income.

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Working Papers | 2009

Player Pricing and Valuation of Cricketing Attributes: Exploring the IPL Twenty-Twenty Vision

Siddhartha K Rastogi and Satish Y. Deodhar

In April 2008, BCCI initiated Indian Premier League, a cricket tournament of Twenty-Twenty overs to be played among eight domestic teams. Team owners bid for the services of cricketers for a total of US$ 42 million. Not much is known about how the valuation of cricketers might have occurred. Given the data on final bid prices, cricketing attributes of players, and other relevant information, we try to understand which attributes seem to be important and what could be their relative valuations. We employ the bid and offer curve concept of hedonic price analysis and econometrically establish a relation between the IPL-2008 final bid prices and the player attributes. Number of half centuries, number of wickets taken, and number of stumpings in all four forms of the game, batting average in the twenty-twenty form of the game, batting strike rate in one-day international (ODI), age, nationality, iconic status, and non-cricketing fame seem to be the critical attributes in the valuation of players. With the auction of incumbent and new players for the IPL-2009 underway till February 2009, we hope that the analysis of this kind would facilitate better understanding of player price formation and underscore the predictive value of such data driven analysis.

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