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Working Papers | 1995

Badla Trading: A Primer and a Proposal

Gupta Ramesh

This paper explains the mechanics of badla trading and settlement. It reviews badla transactions, fixation of havala rates and margins, the market process of determining the badla rates, and payment procedures. The accounting mechanism for carry over business illustrated with hypothetical transactions in a 'valan'. An evaluation of risk-return in carry over business and badla financing is done. The author reviews the deficiencies in existing practices followed by the Stock Exchange authorities infixing havala rates and margins; and general enforcement of rules related to carry over business. Certain suggestions regarding simplification of margin fixation and collections are made. In the absence of institutional arrangements for margin trading and short selling, SEBI is urged to reintroduce badla system but only after making sure that the Stock Exchange Authorities would behave in a responsible manner and have proper wherewithal to ensure effective monitoring. Stock Exchange as a Self-regulatory Organizations (SROs) would have to devise effective systems which are not prone to unwarranted influences. Specific suggestions for Stock Exchange authorities are: a) Do not make compromises in fixing havala rates to solve temporary default problems; b) Collect margins at a fixed percentage (say 35 per cent) of the gross value of total carry over business; do not fix varying margins for bulls and bears for different scrips. c) Closely monitor and prohibit practices used by brokers such as 'vandhas' and 'chalu upla' to reduce margin liabilities. d) Limit carry over business to 12.5 times of the broker's net capital. Insist on segregation of clients' deposits from broker's capital. Enforce capital adequacy norms stringently. Hopefully, with the change in power equation between Executive Director and them ember brokers on the one hand and composition of the Governing Board on the other, it should be possible for SEA to ensure necessary control and monitoring system for successful operation of badla system.

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Working Papers | 1995

The Badla System Revisited

Gupta Ramesh

This paper is an attempt to examine the issues underlying the current debate about reintroducing the badla system. The differences between badla system on one hand and options and futures markets on the other are highlighted. Then it is argued that for an efficient security market, facility of buying stocks on margin and facility to sell short is a must. In the absence of an acceptable central depository system and due to cumbersome procedure of share transfers, badla system is the most appropriate settlement system under Indian conditions to meet the demands of a strong and efficient security market. Badla system in the past fell in disrepute mainly because of a faulty implementation and monitoring system. There were frequent payment crises and settlement delays. Stock Exchange were functioning as closed clubs of brokers ignoring general interests of investing public. With the change in power equation between Executive Director and the member brokers on the one hand and composition of the Governing Board of Stock Exchanges on the other, it can be hoped that necessary control and monitoring system for successful operation of badla system would be strictly adhered to. Two things would need to be ensured. a) No compromise in fixing havala rates. These rates must reflect the current market price at the end of the trading period. Correct havala rates would facilitate marking to the market of carry over business, and thus reduce the settlement risk in the ensuing period. b) Collection of full margins on the entire carry over business (on gross basis). The margin percentage should be sufficiently high (say, 35 percent of havala rate) so as to act as a deterrent to high speculation (so called bubble trading) and be adequate for guaranteeing the performance of the contract in the ensuing settlement. The author also argues that SEBI's insistence that carried over transactions not be squared off but must be settled by delivery and payment within 90 days is impractical and ill-advised. One must realize that our trading system is very different from the one prevalent in other countries, and it is impossible to identify transaction-wise carry over business in our trading system.

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Working Papers | 1995

Synergy in Government Policies and Global Competitiveness of Two Indian Industries: An Empirical Study

S. Manikutty

The paper analyzes the role of Government policies in influencing the competitiveness of two Indian industries: Automobile Components and Leather. These industries were chosen due to their good export performance, prima facie evidence that they are influenced by government policies and their potential for improvement in competitiveness. The paper charts the major government policies and identifies clusters of these policies of different years. The competitiveness is measured by the export performance. In the leather industry, India's export share as a percentage of world exports was also looked at. The study finds a striking relationship between sharp increase in competitiveness and a coherent set of government policies introduced within a short period. The major conclusions of the paper are that (i) government policies have a great influence on competitiveness of industries (ii) the policies should be in synergetic bundles, and (iii) industry specific measures may be useful in promoting the competitiveness of specific industries. The findings are related to Michael Porter's “diamond” model and implications of policy makers and industry associations are discussed.

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Working Papers | 1995

Indian Plague Epidemic: Unanswered Questions & Key Lessons

Dileep Mavalankar

This paper briefly recapitulates the events during the recent plague epidemic in India with specific focus on suspected pneumonic plague cases in Surat City. The paper discusses three key questions which are as yet unanswered. These questions are: (a) The exact nature of the disease, specifically whether it was plague or some other diseases; (b) Origin of the suspected plague cases: and (c) The mode of transmission of the disease in the community. The paper discusses available evidence from secondary sources and some primary investigations done by the expert committee appointed by the State Government of Gujarat. This paper discusses the key lessons learnt from this suspected plague epidemic. The lessons learnt are in the areas of investigating epidemic of unusual disease, managing public fear during epidemic and management of cases of highly infectious diseases. The paper briefly comments upon the deteriorating public health situation in India and includes that developing countries must pay greater attention to public health in order to become globally competitive.

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Working Papers | 1995

Synergy in Government Policies and Global Competitiveness of Two Canadian Industries: An empirical Study

S. Manikutty and Kumar Vinod

The Paper analyzes the role of government policies in influencing the competitiveness of two Canadian industries: Telecommunications and Software. Telecommunications industry in Canada is subject to a relatively high degree of government intervention in the form of regulation as well as other forms. The “Competitiveness” of the carrier segment was measured in terms of its own performance over the years, and the equipment segment in terms of exports. The software industry though largely in a free market, is still influenced by broad government policies. Its competitiveness was measure by its foreign revenues. The study finds that even in a free market economy like Canada government policies have a vital role to play in promoting the competitiveness of industries. The areas of synergies and dissynergies in government policies and their impact on the industries studied are explored. The findings are also related to Michael Porter's “diamond” model for global competitiveness of industries.

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Working Papers | 1995

Why Collective Action: A Case of Joint Forest Management in Gujarat, India

Tewari Devi D

This paper empirically tests the factors which affect the collective action. The study is based upon the primary data collected from 33 villages in South Gujarat.

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Working Papers | 1995

Ordinal Comparisons in Choice Problems: A Diagrammatic Exposition

Lahiri Somdeb

The basic problem in choice theory is to choose a point from a set of available points. A large literature has grown where the central issue is the choice of a vector from a compact, convex and comprehensive (terms to be defined later) subset of a finite dimensional Euclidean space. A significant solution for such choice problems is the egalitarian solution which selects the highest possible vector with equal co-ordinates that is available under the given circumstances. There are several axiomatic characterizations of the egalitarian solution available in the literature. Of particular interest is an axiomatic characterization due to Nielsen (1983). There the egalitarian solution is axiomatically characterized using an assumption called 'independence of Common Monotone Transformations' (ICMT). Our objective in this paper is to provide a simple diagrammatic (yet completely rigorous) proof of the same result, when the feasible sets of attribute vectors are assumed (in addition to those essentially available in Nielsen (1983) to be strictly convex.

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Working Papers | 1995

A Simple Proof Providing an Axiomatic Characterization of the Kalai-Smorodinsky Solution

Lahiri Somdeb

In this paper we provide a simple proof for the axiomatic characterization of the Kalai-Smorodinsky Solution.

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Working Papers | 1995

Macroeconomic Analysis of Union Budget 1995-96

Dholakia Bakul H

Union Budget for 1995-96 was the fifth consecutive budget presented by Dr. Manmohan Singh, the main architect of India's recent economy policy reforms. Formulation of this budget was, however, a more difficult task than the earlier ones for various reasons. An attempt has been made in this paper to present a broad macroeconomic analysis of the main proposals and provisions of the Union Budget 1995-96 in the context of the stated objectives of the budget and examine the likely impact of the budget proposals on the economy especially in the short run.

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Working Papers | 1995

Managing Personal and Professional Roles A Training Module

Parikh Indira J

This paper Managing Personal and Professional Roles explores the social cultural context of women and the issues which confront women as they manage both home and work and deal with the dilemmas of multiple roles and membership in multiple systems. The training modules are designed from the experiences of women in life both at home and work. the paper is divided into sections: Section I introduces the theme, Section II introduces the 1) training module, 2) objectives of the training modules consist of a) social system and social roles, b) work systems and professional roles, c) integration of social and professional roles, d) self role and identity and e) new directions and action choices for women both at home and work. section III then actually goes into conducting the workshop. Conducting the workshop is divided into five modules. Each module has its own objectives, design, role of participants, role of the resource person, steps of the design, duration of each module and concepts arrived at from issues of each modules. The entire training module is anchored in the perspective of women's entry into management, their life space, dilemmas of life space, strengths and resilience of women, the stereotypes of social and work roles held by women themselves and men and society and the directions and action choices to redefine and redesign their roles. There is a bibliography at the end of each section and a comprehensive bibliography at the end of the paper.

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