1

A STUDY ON CONSUMER SATISFACTION TOWARDS SERVICES

PROVIDED BY HEALTH INSURANCE COMPANIES

Research Project Submitted in Partial Fulfilment of the Requirements

for the Degree of
B.COM Honours
by
SHREYA DHANORKAR
to the
DEPARTMENT OF COMMERCE
BHOPAL SCHOOL OF SOCIAL SCIENCES

April, 2020-2021

Submitted by Guided by
Shreya Dhanorkar Vinod Kumar
Adwani
Roll no. 18051144 Assistant Professor
2

CERTIFICATE

It is certified that the work contained in the project report titled A study on consumer
satisafaction towards services provided by health insurance companies by Shreya
Dhanorkar, has been carried out under my supervision and that this work has not been
submitted elsewhere for a degree.

Signature of Supervisor: …………….

Name : Vinod Kumar Adwani

3

DECLARATION

I hereby declare that this project report entitled A study on customer satisfaction towards
services provided by health insurance companies was carried out by me for the degree of
BCOM Honours under the guidance and supervision of guide Vinod Kumar Adwani of
Department of Commerce, BSSS College. The interpretations put forth are based on my
reading and understanding of the original texts and they are not published anywhere in any
form. The other books, articles and websites, which I have made use of are acknowledged at
the respective place in the text. This research report is not submitted for any other degree or
diploma in any other University.

Place: Bhopal

Name of the Student: SHREYA DHANORKAR

Class & Section:

B.COM HONOURS IIIrd year

Date: 15 April, 2021
Department : Commerce

Bhopal School of Social Sciences

April, 2021
4

ACKNOWLEDGEMENT

I would like to take this opportunity to express my profound gratitude and deep regards to
my guide Vinod Kumar Adwani for her exemplary guidance, monitoring, valuable feedback
and constant encouragement throughout the duration of this research project on the topic A
study on customer satisfaction towards services provided by health insurance companies.
His valuable suggestions were of immense help throughout my project work. His perceptive
criticism kept me working to make this project in a much better way. Working under him was
an extremely knowledgeable experience for me. The blessing, help and guidance given by him
from time to time, shall carry me a long way in the journey of life on which I am about to
embark. I would also like to thank our Principal Dr. Fr. John P.J. and Vice Principal Dr Sr
Sonia Kurien for their immense support and blessings.

I would also like to express my deep sense of gratitude to all those who have provided me
information, guidance and other help during my research period .
Lastly, I thank my parents and friends for their constant support and encouragement without
which this project would not be possible.

SHREYA DHANORKAR

B.COM HONOURS III year

5

PREFACE

This project on A Study on customer satisfaction towards services provided by health

insurance companies has been prepared in partial partial fulfillment of the requirement of the
programme B.COM HONOURS in the academic year 2020-2021. The whole project is
measured through the questionnaire, the data further analyzed and interpreted and the result
was obtained.

A blend of learning and knowledge acquired during my theoretical studies at the organization
is presented in this project report. This project is a stepping stone for my career.

My study contains the following chapters:

Chapter I : INTRODUCTION OF THE TOPIC

Chapter II : REVIEW OF LITERATURE

Chapter III : RESEARCH METHODOLOGY

Chapter IV: DATA REPRESENTATION & ANALYSIS

Chapter V : RESULTS & DISCUSSIONS

6

.INDEX

Contents Page No.

Chapter 1 : INTRODUCTION OF THE TOPIC 8-12

1.1 Rationale of the study 8

1.2 Introduction to the Industry 9-11
1.3 Justification of the Topic 11-12

Chapter 2 : REVIEW OF LITERATURE 14-15

2.1 National Reviews 14-15

Chapter 3 : RESEARCH METHODOLOGY 17-18

3.1 Objectives of the study 17
3.2 Research Hypothesis 17
3.3 Scope of the study 17
3.4 Research Design 17
3.5 Limitations of the study 18

Chapter 4 : DATA REPRESENTATION & ANALYSIS 20-32

4.1 Data representation & Interpretation 20-30

4.2 Hypothesis Testing 31-32

Chapter 5 : RESULTS & DISCUSSIONS 34-36

5.1 Major findings 34

5.2 Discussions & Suggestions 35
5.3 Conclusion 36

REFRENCES 37
ANNEXURE 38-40
 Copy of Questionnaire 38
7

CHAPTER - 1

INTRODUCTION TO THE TOPIC

1.1 Rationale of the Study
1.2 Introduction to the Industry
1.3 Justification of the Topic
8

1.1 Rationale of the study

Nature is uncertain and unpredictable. The same is true with the life of an individual which
is surrounded by risks and uncertainties in this volatile world. Any kind of misfortune may
lead from minor to serious injuries or even loss of life. Diseases too never knock our doors
to enter our body. Money was and will never ever be able to buy life or cure diseases till
the existence of this world but to cope up with hard times in our life and life of our near
and dear ones when we leave for heavenly abode ,insurance is the perfect solution.
Generally, insurance is of two types: life insurance and non life insurance or general
insurance. The present paper is an attempt to outline the current picture of health insurance
sector in India which is a part and parcel of general insurance. Health insurance sector in
India has gained huge escalations since liberalization due to introduction of private health
care financers, increase in health consciousness among all sections of the society, increase
in income of the households, price and service competition between health insurers and
absence of bureaucratic attitude in health insurance employees (Singh, April 2020).

Health insurance is a product of general insurance that covers expenses related to

medication and surgery of an insured which could be an individual, family or a group of people.
It is an arrangement where an individual, family or a group purchase health care coverage
in advance by payment of a fee called as premium. In other words, health insurance is an
arrangement that helps to delay, defer, reduce or avoid payment related to medical expenses of
an insured. The insurer will either ensure cashless treatment of medical ailments or
provide a reimbursement of medical expenses incurred under the policy in any of the
network hospitals across the country.

The healthcare market in India is estimated to be valued at US$ 372 billion by 2022, reflecting
the rate at which medical charges are expected to increase in the country.
9

1.2 Introduction to the industry

The insurance industry is governed by the Insurance Regulatory and Development Authority
of India (IRDAI).
There has been a major growth in the insurance industry in the last decade. It consists of 63
Insurance companies and 24 life insurance companies and 39 non-life insurers.
Demographic factors such as growing middle class, young insurable population, and growing
awareness of the need for protection and retirement planning will support the growth of
Indian insurance.
The rate of private health insurance is 5-10% in India.
Currently, there are seven health insurance and 23 general insurance companies providing
health insurance products in India.
Health insurance makes a contribution of 20% to non-life insurance business and makes it
the 2nd largest portfolio.
As of 2016, the life expectancy at birth stood at 68.7 years for males and 70.2 years females.
The global average stands at 70 and 75 years, respectively.
Non-communicable diseases claimed approximately 61% of the total deaths which occurred
in India in 2017.
Around 224 million people suffer from hypertension in India as of 2017.
Approximately 73 million Indians suffer from type 2 diabetes, which can lead to various
medical complications. This number is expected to witness a staggering growth to 134
million by 2025 (Godigit).

The possible medical complications individuals might develop during their lifetime and
corresponding expenses for treatment of the same.
The healthcare market in India is estimated to be valued at US$ 372 billion by 2022,
reflecting the rate at which medical charges are expected to increase in the country.
These staggering figures, coupled with rising medical expenses, demonstrate the importance
of health insurance policies in India. These policies offer comprehensive coverage of
healthcare expenses against periodic premium payments made by the policyholders
(Godigit).
10

 TYPES OF HEALTH INSURANCE

1. Individual Health Insurance

This type of health insurance covers an individual and is the most common health
insurance plan in India. It covers the hospital expenses if an individual is admitted
due to any medical emergency. The premium depends on factors like age, medical
history, etc.

2. Family Floater Insurance Plans

These insurance plans cover medical expenses of all the family members. The
sum insured in this case is usually higher than individual insurance. The most
important advantage of these plans are that these are cost effective as management
of different policies is not required.

3. Senior Citizen Insurance Plan

Senior citizen insurance plans are for senior citizens above the age of 60. Usually
the premium paid in these plans are higher.
Some of the benefits of this plan are cashless hospitalization, day care expenses,
pre-existing and disease cover.

4. Critical Illness Health Insurance Plan

A critical illness health insurance plan provides protection against fatal diseases
like kidney ailments, heart diseases, cancer, paralysis etc.In such cases, the
policyholder gets a lumpsum amount on the diagnosis of covered illnesses. Unlike
individual insurance, no hospitalization is required to claim the money.

5. Personal Accident Health Insurance Plan

This policy provides protection against an accidental injury or death. A lumpsum

amount is paid to the insured or its family members in case of injury, loss of
income due to permanent partial or total disability.

6. Unit Linked Health Insurance Plan

Unit Linked Plans or ULIPs are insurance plans that also act as investments.
When the amount is paid, half of it is utilised for health cover and the remaining
amount is invested in a mix of equity and debt. So, with ULIPs health as well as
future wealth is secured.
11

7. Maternity Health Insurance Plan

Maternity Health Insurance is health insurance with maternity coverage. It is

generally an add-on to the basic health insurance plan. It covers post and pr
delivery expenses like diagnostic tests, medicines and hospitalization.

HISTORY OF HEALTH INSURANCE

Over the last 50 years, India has achieved a lot in terms of health insurance.
Before independence, the health structure was in dismal condition i.e. high
morbidity and high mortality and prevalence of infectious diseases.
It was in 1986 that the first insurance product “Mediclaim” entered the country,
hoping to stir things up. Since then, the number of private sector insurance
companies have increased manifold, and the policies offered by them are diverse
and designed specifically for your needs. While Mediclaim used to offer a
minimum coverage of Rs.15,000 at one point, today the minimum sum is Rs.
50,000 for the government sector and 1 lac for private corporations. This has a lot
to do with the exponentially rising healthcare costs in India. With advancements
in cures and treatments, new procedures get factored into your healthcare plan,
thus raising the premium floor (iKnowledgeteam, 2018).
Since independence, emphasis has been put on primary health care and we made
considerable progress in improving the health status of the country. But still, India
is way behind many fast developing countries such as China, Vietnam and Sri
Lanka in health indicators. Health insurance, which remains highly
underdeveloped and less significant segment of the product portfolios, is now
emerging as a tool to manage financial needs of people to seek health services.
The new economic policy and liberalization process followed by Government of
India since 1991 paved the way for privatization of insurance sector in the
country. The Insurance Regulatory and Development Authority (IRDA) bill,
passed in Indian parliament, is the important beginning of changes having
significant implications for the health sector (Anita).

JUSTIFICATION OF THE TOPIC

Medical emergencies come unannounced. To get the best medical facilities having
a health insurance plan is important. Buying a health cover is not an option but a
compulsion. Health Insurance is well established in most countries but in India it
remains an untapped market. Only 1.1 Billion of the Indian population that is less
than 15% is covered through health insurance.
12

Health insurance increases accessibility to quality healthcare private healthcare in

particular where the cost remains a barrier to many. It ensures appropriate
treatment in a timely manner (Bazaar).

Fixed benefit health insurance plans pay the entire amount on diagnosis of the
disease. Yes, there is no need to show actual proof of hospitalization and
treatment, like hospital bills or treatment bills. In this way, such health insurance
policies offer full coverage for both, before and after hospitalization expenses.
There are no pre-specified durations/limits. If the policyholder is diagnosed with
an ailment that is covered under the policy, the insurer will pay the money to the
policyholder without asking any further questions. With proper health insurance,
you can get treated anywhere in India and the world. If you have the right amount
of health cover, you do not need to compromise with treatment. In a fixed benefit
health insurance plan you get a lump sum payout upon diagnosis, which removes
the hassle of getting admitted to a network hospital for cashless treatment. With
the health insurance claim money, you can opt for treatment anywhere in the
world as per your own wish and convenience. Health insurance is not just a cost-
effective way to manage medical treatment. It also gives you bigger coverage with
every year you do not claim (Prudential).

The main purpose of this study is to find out the problems common man faces
while going for health insurance plans. This study also aims at raising awareness
on health insurance and highlighting its importance in the long run.
13

CHAPTER - 2

REVIEW OF LITERATURE

2.1 National Reviews

14

2.1 National Reviews

1. Vijay Srinivas, (July-2000) 15 in his article on I-low Returns Linked

Insurance Products can be Popularised states the reason for emergence of
investment linked products, according to that he states that under normal
general insurance policies, only one premium i.e. risk premium is collected.
But keeping in view the Indian psyche, he suggests that return based insurance
would be immensely popular (Srinivas, July 2000).

2. Anil Gumber and Veena Kulkarni (September 2000) 16 in their pilot

study on 'Health insurance for Informal Sector', point out that a survey on
1200 households in Ahmedabad district in Gujarat shows that poor prefer
public sector management of health care facilities and 30 percent are
uninsured. Over 92 per cent of the noninsured households in both rural and
urban areas have no awareness about the existing health insurance schemes,
but when they were informed about the various plans, almost all of them
showed interest in joining it (Health insurance for informal sector, 2000).

3. Mahesh Bhatt and Dileep Mavalankar (November 2000) 17 in their paper

on 'Health Insurance in India - Opportunities, Challenges and Concerns'
have analyzed the opportunities for health insurance in India and found that,
India has limited 27 experience of health insurance given that government has
liberalized the insurance industry, health insurance is going to develop rapidly
in future. They point out that the experience from other places suggests that if
health insurance is left to the private market it will only cover those, which
have substantial ability to pay leaving out the poor and making them more
vulnerable (Bhatt, 2001).

4. Indrani Gupta and Purnima Das Gupta, (February 2001) 20 made a

pioneering attempt of an exploratory study to understand the health
seeking behavior in urban Delhi, they concluded that Delhi seems to be
segregated along economic status, with the health seeking behavior of low-
income households being quite different from that of middle and high-income
households. A greater percentage of high and middle income households use
government facilities, and a greater percentage of lower income households
use private facilities (Jayaprakash, 2006).

5. Soumya Vishwanaliian states in her article on 'Banking Industry finds

new Market for Medical Professionals' (March 2001) 21, that management
consultants have found that providing loans to medical professionals are
considered as safe advances in current days (Jayaprakash, 2006).
15

6. Nair KS (April to June 2001) 23 in his paper Cost of health care, a study
of unorganized labor in Delhi has found that the demand for health care on
introduction of health insurance or risk sharing scheme mainly depends on
quality of care provided under the scheme. The question of willingness and
ability to pay for the health care services also depends on effectiveness of the
curatives services provided under the health insurance schemes (KS, 2001).

7. Ajay Mahal (February 2002) 29 in his attempt to assess the 'Private

Health Insurance in India and Potential Impact oil Issues' has stated that
the entry of private health insurance companies in India is likely to have an
impact oil costs of healthcare, equity in the financing of care and the quality
and cost-effectiveness of CD such care. The author points out some practical
difficulties of IRDA in implementing health related standards as many of the
laws and their implementation are in the hands of individual stales as a
constitutional requirement (Jayaprakash, 2006).

8. Ramgopal Agarwala and Zafar Dad Khan (March 2002) 30 in their

attempt of classification of labor market in India and insurance slate the
presence of three segments of the labor market. At the lop are the elite white-
collar workers consisting of the senior public sector officials and the
managerial class in the private sector, for about 1 percent roughly 3 million
workers. At the other end are the unorganized sector including the self-
employed, informal sector workers, and casual laborers accounting for 92
percent of the labour forces about 300 million workers. in the middle are the
regular wage employees in the public sector and in the organized private
sector, who account for about 7 percent of the labor forces about 22 million
people (DadKhan, 2002).

9. Soumya Viswanathan (May 2002) 34 in her analysis on the Insurer-

Hospital model of health insurance states that many corporate hospitals like
Apollo, KMCH are trying out new plans but it is feared in this article that
hospitals coming up with insurance plans may leave enough room for, the
hospital to manipulate coverage and increase claims.

10. Devendra B Gupta and Anil Gumber (November 2002) in their paper on
external assistance to health sector and its contributions, problems and
paradigms, have stated that in the past thirty years India has received
considerable external assistance for the health sector, including for family
welfare. But various pitfalls have been observed like time lags in the sanction,
start-up, and disbursement of donor funds, the implementation is reported to
be tardy. This has resulted in both time and cost Overruns (Gumber, 2002)
16

CHAPTER – 3

RESEARCH METHODOLOGY

3.1 Objectives of the study

3.2 Research Hypothesis

3.3 Scope of the study

3.4 Research Design

3.5 Limitations of the study

17

3.1 OBJECTIVES OF THE STUDY:

Primary Objectives

1. To understand the scenario of health insurance in India.

2. To evaluate the problems faced by people while investing in health insurance.
3. To find the factors considered by people while investing in a health insurance plan.

Secondary Objectives

1. To create awareness about the importance of having a health insurance.

3.2 RESEARCH HYPOTHESIS:

H0: The two attributes gender and investment in health insurance are independent.

H1: The two attributes, gender and investment in health insurance are interdependent.

3.3 SCOPE OF THE STUDY:

This study has been conducted in the city of Bhopal among 50 people.

3.4. RESEARCH DESIGN:

 GEOGRAPHICAL AREA: The data has been collected from the people of Bhopal

 DURATION OF STUDY: Duration of the study is 2 months

 SAMPLING TECHNIQUE: Simple Random Sampling Technique has been used.

 SAMPLE SELECTION:
Inclusion criteria- people of age between 20 to 60.
18

 DATA COLLECTION PROCEDURE: The data has been collected through questionnaire
from approximately 50 respondents.

 DATA COLLECTION INSTRUMENT: Questionnaire were circulated among respondents

through google forms.

3.4.1. RESEARCH METHODOLOGY:

A mix of primary and secondary research methods has been used.

 Primary data- for questionnaire.
 Secondary data- for literature review of research papers, websites, articles and reports.

1.5 LIMITATIONS OF THE STUDY:

1. The sample size for the questionnaire was 50 which may not represent the entire
picture of customer satisfaction towards health insurance companies.

2. The study was confined to the city of Bhopal.

3. The selection of respondents was done on the basis of convenient random sampling
due to which some respondents who did not have any health insurance policy were
not able to give feedback which led to the number of actual respondents from 50
to 36.
19

CHAPTER - 4

DATA REPRESENTATION AND ANALYSIS

4.1 Data representation & Interpretation

4.2 Hypothesis Testing

20

4.1 Data representation & Interpretation

Q1. Age of respondents

Age No. of respondents Percentage

18-25 2 4.1%
25-35 40 81.6%
35-45 2 4.1%
45-55 0 _
55 and above 5 10.2%
Table 4.1

Age
10% 4%
0%
4%

82%

18-25 25-35 35-45 45-55 55 and above

Fig. 4.1

Interpretation:

The above figure shows that out of the 49 respondents 4% belonged to the age group of 18-25,
10% belonged to 55 and above age group, 4% belonged to 35-45 age group and no respondents
were from the age group of 45-55.

Q2. Gender of respondents

21

Gender No. of respondents Percentage

Male 24 49%

Female 25 51%

Table 4.2

Gender

Male

51% 49% Female

Fig. 4.2

Interpretation:

The above figure represents that the total respondents included 51% Females and 49% Male.

Gender plays a vital role in deciding the type of health insurance plan taken.

Q3. If working income level:

Income Level No. of respondents Percentage

1-2 Lakhs 4 20%

2-4 Lakhs 4 20%

Above 5 Lakhs 12 60%

Table 4.3
22

Income Level

20%
1-2 Lakhs
2-4 Lakhs
60% 20% Above 5 Lakhs

Fig. 4.3

Interpretation:

In the above Fig. 4.3, out of the total respondents 20 were in the working category. Out of these
20% had an income level of 1-2 Lakhs, 20% had an income level of 2-4 Lakhs and around 60%
had an income level above 5 Lakhs.

Q4. Do you have an health insurance policy?

Options No. of respondents Percentage

Yes 37 75.5%

No 12 24.5%

Table 4.4
23

Respondents having health

insurance

24% Yes
No

76%

Fig. 4.4

Interpretation:
The above Fig. 4.4 shows that out of the total 49 respondents 24.5% (12) did not have a health
insurance policy and the remaining 75.5% (37) had a health insurance policy.

Q5. Name of the health insurance policy

HealthInsurance No. of respondents Percentage%

Comapany

LIC 8 21.05%
Oriental Health Insurance 3 7.9%
ICICI Lombard 3 7.9%
Care Health Insurance 3 7.9%
Star Health Insurance 15 39.47
HDFC 1 2.63%
United India 1 2.63%
Max Bupa Health Insurance 1 2.63%
SBI 1 2.63%
CGHS 1 2.63%
Health cover by employer 1 2.63%

Table 4.5
24

Name of health insurance company

LIC
Oriental

3% 3%
3% ICICI
3%
3% 21%
Care
Star
8%
HDFC
40% 8% United India
8% Max Bupa
SBI
CGHS

Fig 4.5

Interpretation:

The above Fig. 4.5 represents that out of the 38 respondents having a health insurance
policy, 40% have Star Health Insurance, 21% have LIC, 8% have Oriental, 8% have
Care Health Insurance, 8% have ICICI Lombard. It was also observed that the
remaining 15% have invested in CGHS, HDFC, United India, Max Bupa and SBI
respectively.

Q.6 What do you prefer?

Options No. of respondents Percentage

Government Health 25 51%

Insurance Companies
Private Health Insurance 24 49%
Companies
Table 4.6
25

Sales

Government health insurance companies Private health insurance companies

Fig. 4.6

Interpretation:

The above chart shows that out of the total respondents 51% (25) preferred
investing in Government health insurance companies and the remaining 49%
(24) preferred investing in Private health insurance companies.

Q.7 How long have you been with your current health insurance provider?

Options No. of respondents Percentage

Less than a year 15 32.6%

2-5 years 16 34.8%

5-8 years 6 13%

More than 8 years 9 19.6%

Table 4.7
26

How long have you been with your

current health insurance provider

19% Less than a year

33%
2-5 years
13%
5-8 years
More than 8 years
35%

Fig. 4.7

Interpretation:

The above fig. 4.7 represents that out of the total respondents, 33% were with
their current health insurance provider for less thana year, 35% for 2-5 years,
13% were for 5-8 years and 19% were for more than 8 years.

Q.8. What factors do you consider before investing in a health insurance

policy?

Options No. of respondents Percentage

Company Image 27 55.1%

Services 31 63.3%

Accessibility 23 46.9%

Policy Coverage 40 81.6%

Table 4.8
27

Factors consisdered while investing in a health insurance

policy
45

40

35

30

25

20

15

10

0
Company Image Services Accessibility Policy Coverage

Fig. 4.8

Interpretation:

The above Fig 4.8 shows the factors considered by respondents while24
investing in a health insurance policy. It shows that 27 respondents
considered company image, 31 respondents considered services, 23
respondents considered accessibility and 40 considered policy coverage.

Q.9 Where do you like getting information on health insurance?

Options No. of Respondents Percentage

Health Insurance 24 32%

Branch Offices
Over Phone 16 21.34%

Internet 35 46.6%

Table 4.9
28

WHERE DO YOU LIKE GETTING

INFORMATION ON HEALTH
INSURANCE?

Over phone

32%
47% Health insurance branch
offices

21% Internet

Fig. 4.9

Interpretation:

The above Fig 4.9 represents the medium preferred by the respondents for
receiving information regarding health insurance. It shows that 47% prefer
receiving information over phone, 32% through health insurance branch
offices and the remaining 21% through Internet.

Q.10 Do you think your current health insurance rates are reasonable?

Options No. of respondents Percentage

Yes 18 39.1%

No 6 13%

Maybe 22 47.8%

Table 4.10
29

Opinion of respondents regarding

their current health insurance
rates

Yes
39% No
48%
Maybe

13%

Fig. 4.10

Interpretation:

The above fig. 4.10 shows the opinion of the respondents regarding their
current health insurance rates. Out of the total 38 respondents having a health
insurance, 39% think their current health insurance rates are reasonable, 48%
think their current health insurance rates were not reasonable and the
remaining 13% are not sure in this regard.

Q11. Rate your satisfaction level on your current health insurance

Satisfaction Level No. of respondents Percentage

1 5 11.1%

2 8 17.8%

3 12 26.7%

4 17 37.8%

5 3 6.7%

Table 4.11
30

Satisfaction level of the respondents with

their current health insurance provider
5
3

4
Satisfaction Level

17

3
12

2
8

1
5
0 2 4 6 8 10 12 14 16 18
No. of respondents

Fig. 4.11

Interpretation:

The above Fig 4.11 shows the satisfaction level of the respondents with their
current health insurance plan. It shows that out of the total respondents, 5 have
a satisfaction level of 1, 8 have a satisfaction level of 2, 12 have a satisfaction
level of 3, 17 have a satisfaction level of 4 and the rest 3 have a satisfaction
level of 5 with their current health insurance plan.
31

4.2 RESEARCH HYPOTHESIS:

Having Not having
Health % Health % Total
Insurance Insurance
Male 20 54.05% 4 36.36%

Female 17 45.94% 7 63.63%

Total 37 100 11 100

Table 4.12

Source: Primary Data

Ho: The two attributes, gender and having a health insurance policy are
independent.

H1: The two attributes, gender and having a health insurance policy are
interdependent.

χ2 = ∑(Oi – Ei)2/Ei

Chi Square Test:

Consolidated table

Having Health Not having Health Total

Insurance Insurance
Male 20 4 24
Female 17 7 24
Total 37 11 48

Table 4.13
32

Chi Square Table:

Male Observed Expected (E) (O-E)2 (O-E)2/E

(O)
Having Health 20 24*24/48 = 12 64 5.33
Insurance
Not having Health 4 11*24/48=5.5 2.25 0.409
Insurance
Female

Having Health 17 37*24/48=18.5 2.25 0.12

Insurance
Not having Health 7 11*24/48=5.5 2.25 0.409
Insurance
Total 6.268

Table 4.14
Decision:
P= 0.01

d.f = (r-1) (c-1)

= (2-1) (2-1)

=1

Factor Level of Degree of Table Value Chi Square

significance Freedom
(d.f.)
Gender 1% 1 6.635 6.628

Table 4.15

χ2 0.05, 1 = 3.481 > χ2 = 3.758

The above table 4.15 shows that the table value of χ2 at 1% level of

significance is 6.635 > 6.628. Hence the null hypothesis : gender and having

health insurance are independent is accepted. Thus, it can be concluded that

gender bias does not have an impact on having a health insurance policy.
33

Chapter – 5

Findings, Suggestions & Conclusion

5.1 Major Findings

5.2 Suggestions
34

5.1 Major Findings

 In this study , people of the age group 18-60 were included. Among these 51% were
female and 49% were male. It was also found that most of the respondents belonged
to the age group 25-35 and 55 and above.
 Among the respondents who belonged to the working class, 20% have an income
level of 1-2 Lakhs, 20% have an income level pf 2-4 Lakhs and the 60% belonged to
the above 5 Lakhs income level group.
 According to this study, maximum respondents (75.5%) have a health insurance
policy whereas 24.5% do not have a health insurance policy.
 It was found that majority (39.47%) of the respondents have a health insurance policy
under Star Health Insurance, and LIC (21.05%).
 It is observed in this study that both Government as well as private health insurance
companies are preferred by the respondents as the preference percentage between the
two differed by 2% only.
 Maximum (34.8%) insured have been with their current health insurance provider for
2-4 years.
 Policy Coverage is the most important factor considered before investing in a health
insurance policy
 It was found that Internet is the most preferred medium for getting various important
information regarding health insurance companies.
 This study suggests that majority of the health insurance policy holders are not sure if
their health insurance rates are reasonable or not whereas some respondents are of the
opinion that their current health insurance rates are reasonable.
 The maximum rate of satisfaction level for health insurance is 4 (37.8%). Also 11.1%
policyholders are not so satisfied with their current health insurance plan.
35

5.2 Suggestions

 Consumers should know the company profile .the services provided and the details
related to the health insurance policy well.

 There needs to be special health cover support provided to the people below poverty
line.

 Continuous modification by undertaking research needs to be done for the better

performance of health insurance industry in India.

 It is important that the government gives priority to the health insurance sector in
India keeping in mind the current Covid situation.

 Internet is the most powerful medium of sharing information regarding health

insurance plans and the importance of the same.
36

5.3 Conclusion

The future of the health insurance industry looks promising with some major changes
in the framework and the way the industry conducts its business and deals with its
customers. There is lack of awareness among the customers regarding health
insurance which results in disproportionate time being utilized for educating
customers on the same. In India people have to sell their assets to meet their medical
expenses. The gap between the requirement of health cover and the delivery of health
products needs to be bridged. The importance of having a health cover needs to be
stressed upon as it covers not only the hospitalization expenses but also the pre and
post expenses. More than diseases like obesity, heart related issues, paralysis it is the
treatment that requires financial stability to which the answer is health insurance.
37

REFERENCES

WORKS CITED

Anita, J. (n.d.). Emerging Health Insurance in India- An Overview.

Bazaar, P. (n.d.). Importance of health insurance and its features. Retrieved from
https://www.policybazaar.com/health-insurance/general-info/articles/importance-of-health-
insurance-features/

Bhatt, D. M. (2001, Janauary). Health Insurance in India: Opportunities, challenges and concerns. New Delhi,
India: New Century. Retrieved from
https://www.researchgate.net/publication/238659220_Health_Insurance_in_India_Opportunities_Ch
allenges_and_Concerns

DadKhan, R. A. (2002, March). Labor Market and Social Insurance Policy in India: A Case of Losing on Both
Competitiveness and Caring. Retrieved from
https://www.researchgate.net/publication/255588227_Labor_Market_and_Social_Insurance_Policy_
in_India_A_Case_of_Losing_on_Both_Competitiveness_and_Caring

Godigit. (n.d.). What is health insurance.

Gumber, D. B. (2002, November). EXTERNAL ASSISTANCE TO THE HEALTH SECTOR AND ITS CONTRIBUTIONS:
PROBLEMS AND PROGNOSIS. Retrieved from
https://www.researchgate.net/publication/237208010_EXTERNAL_ASSISTANCE_TO_THE_HEALTH_SE
CTOR_AND_ITS_CONTRIBUTIONS_PROBLEMS_AND_PROGNOSIS

Health insurance for informal sector (January 2000). Retrieved from

https://www.researchgate.net/publication/262120746_Health_Insurance_for_Informal_Sector_Case
_Study_of_Gujarat

iKnowledgeteam. (2018). Tracing the evolution of health insurance in India.

Jayaprakash, S. (2006). An explorative study on health insurance industry in India. Retrieved from
http://hdl.handle.net/10603/64405

KS, N. (2001, April-June). Cost of health care, a study. Delhi.

Prudential, I. (n.d.). Importance of health insurance. Retrieved from https://www.iciciprulife.com/health-

insurance/importance-of-health-insurance.html

Singh, R. R. (April 2020). A study of health insurance in India. Lucknow: reseachgate.net.

Srinivas, V. (July 2000). I-low returns linked insurance products can be popularized.
38

ANNEXURE

I am Shreya Dhanorkar pursuing B.Com Honors from The Bhopal School Of Social
Sciences.
I am conducting a survey on consumer satisfaction towards services provided by
health insurance companies as a part of my curriculum.
Please fill out this form by selecting the best suited option. The information provided
will be used for academic purposes only.

Required*

Q1. Name

________________________

Q2. Age

18-25

25-35

35-45

45-55

55 and above

Q3. Gender

Male

Female

Q4. Occupation

_______________
39

Q5. If working, income level:

1-2 Lakhs

2-4 Lakhs

Above 5 Lakhs

Q6. Do you have health insurance policy?

Yes

No

Q7. Name of the health insurance company:

Oriental Health Insurance

Star Health Insurance

Care Health Insurance

ICICI Lombard

Other

Q8. What do you prefer?

Government health insurance companies

Private health insurance companies

Q9. How long have you been with your current health insurance provider?

Less than a year

2-5 years

5-8 years
40

More than 8 years

Q10. What factors do you consider before investing in a health insurance policy?

Company image

Services

Accessibility

Policy Coverage

Q11 Where do you like getting information on health insurance?

Over phone

Health insurance branch offices

Internet

Other
_______________

Q12. Do you think your current health insurance rates are reasonable?

Yes

No

Maybe

Q13 Rate your satisfaction level on your current health insurance

Highly dissatisfied 1 2 3 4 5 Highly satisfied

XLI

IMPACT OF GST ON CONSUMER DURABLE GOODS

Research Project Submitted in Partial Fulfillment of the Requirements

For the Degree of

BCOM Honours

By

Shubham Baliyan

To the

DEPARTMENT OF COMMERCE

BHOPAL SCHOOL OF SOCIAL SCIENCES

April, 2021

Submitted by Guided by

Shubham Baliyan Vinod Adwani

18051145 Associate Professor

Department of Commerce

CERTIFICATE

XLI
XLII

It is certified that the work contained in the project report titled “Impact of GST on Consumer
durable goods,” by “Shubham Baliyan ,” has been carried out under my/our supervision and that this
work has not been submitted elsewhere for a degree.

Signature of Supervisor:

Name: Vinod Adwani, Associate Professor

Department: Commerce

Bhopal School of Social Sciences

April, 2021

DECLARATION

XLII
XLIII

I hereby declare that this project report entitled “Impact of GST on Consumer durable goods “was
carried out by me for the degree of BCOM Honours under the guidance and supervision of Vinod
Adwani (Associate Professor) of Department of Commerce, BSSS College. The interpretations
put forth are based on my reading and understanding of the original texts and they are not published
anywhere in any form. The other books, articles and websites, which I have made use of are
acknowledged at the respective place in the text. This research report is not submitted for any other
degree or diploma in any other University.

Place: Bhopal

Name of the Student: Shubham Baliyan

Class & Section: BCOM Honours

Date: 15/04/2021

ACKNOWLEDGEMENT

I would like to thank our Principal Dr. Fr. John P.J. and Vice Principal Dr Sr Sonia Kurien for
their immense support and blessings. I thank our HOD Dr Amit Kumar Nag for his support. I
would like to express my special thanks of gratitude to my research guide Vinod Adwani,

XLIII
XLIV

Associate Professor of Department of Commerce for his valuable suggestions and guidance and
for giving me the golden opportunity to do this wonderful research project on the topic: - Impact
of GST on Consumer durable goods, Without his help it would have been difficult for me to have
reached this state of completion of my project report. Also, I would like to thank my parents and
friends who helped me a lot in the preparation of this project.

I wish to acknowledge the help of all those who have provided me information, guidance and other
help during my research period.

ABSTRACT

GST was introduced on India in 1 July 2017. GST is also known as one nation one tax because in
it many indirect tax are combined and some of these taxes are value added tax(VAT),Excise ,sales
etc. Implementation of GST leads to reform in taxation system. GST have various effect on
consumer durable goods. When the GST was first implemented, the GST tax where slightly higher

XLIV
XLV

on most of the consumer durable goods but these GST slab rates were reduced form 28% to 18%
on many consumer durables goods and these changes in GST rates have impact on consumer
durables goods.

The main purpose of the study is to evaluate the changes in consumer view points and perception
in term of satisfaction towards the Impact of GST on consumer durables goods on Bhopal city.

TABLE OF CONTENTS

CHAPTER CONTENT PAGE NO.

1 INTRODUCTION 1
1.1 Rationale of the Study 2
1.2 Introduction to taxation & GST
 Taxation system 2-4

XLV
XLVI

 GST 5-11
1.3 Introduction to consumer durables goods 12-20
1.4 Justification of the study 21
2 LITERATURE REVIEW 22
2.1 International Review 23-24
2.2 National Review 24-26
3 RESEARCH METHODOLOGY 27
3.1 Objectives of the Study 28
3.2 Research Hypothesis 28
3.3 Scope of the Study 28
3.4 Research Design 29-30
3.5 Limitations of the Study 30
4 DATA REPRESENTATION AND 31
ANSLYSIS
4.1 Data representation and analysis 30-50
4.2 Hypothesis Testing 50-54
5 RESULTS AND DISCUSSIONS 55
5.1 Findings 56
5.2 Suggestions 57
5.3 Conclusions 58
BIBLIOGRAPHY 59-60
ANNEXURE
QUESTIONNIARE 61-64

XLVI
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CHAPTER-I
INTRODUCTION

1.1Rationale of the study

The aim of the study is to obverse the impact of GST on consumer durable goods and to understand
the correlation between GST and price inflation on consumer durables goods. The study will
further add more information in the field of GST, particularly with the special reference to

1
2

consumer durable goods. Also this will help the future researchers to carry out the further study
more precisely.

1.2What is tax?

Taxes are the compulsory payment which is imposed by the government on the general public for
the welfare of the society. Taxes are the mean source of revenue for the government.

Taxes cover’s up to 90% of the total revenue of government. Taxes are the payment for civilized
society.

1.2.1Why are taxes levied?

Taxes are imposed on the people because they are main source of revenue for the government.
Revenue earned by government from taxation is used for meeting expenditure like, health care
facilities, for making of road and dams, for defense purpose, used for maintaining education
facilities.

1.1 What are the reasons for levying taxes?

1. Try to Improve standard of living of each and every citizens of the country
2. Try to reduce the gap between the rich and poor by applying more taxes on rich and giving
the subsides to the poor
3. For defending the nation against the unwanted factors like terrorist and other countries which
want to creates trouble for our country
4. Playing taxes is responsibilities which have to fulfill by each and every citizen of our country.
1.2 different type of taxes as follows :-

2
3

COPRATE TAX

INCOME TAX
DIRECT TAX
GIFT TAX

MINIMUM
ALTERNATE TAX
TAX
VALUE ADDED TAX
(VAT)

SALES TAX
INDIRECT TAX
GOOD AND
SERVICE TAX

EXCISE

1.2.2TYPES OF TAXES

There are mainly two typesof taxes direct tax and indirect tax.

Direct tax

Direct tax is a type of tax in each burden of the tax can’t be shifted from one tax payer to other tax
payer or someone as. Following of the direct taxes are as follows:-

1. corporate tax
2. double tax avoidance treaty
3. fringe benefit tax
4. personal income tax
5. tax incentives
6. capital gains tax
7. banking cash transaction tax

3
4

Indirect tax

Indirect tax is different from the direct tax. In indirect tax burden of the tax is shifted from one
taxpayer to another taxpayer. Some of the prime example of the indirect tax as follows:-

1. value added tax (VAT)

2. sales tax
3. services tax
4. custom duty
5. excise tax
6. Goods and services tax

Local taxes

These are those type of taxes which are levied by the government on the entity of goods, these
taxes are doctor tax and entry tax.

Income tax

Income tax is a tax in which taxes are charged or imposed on individual or an entire entity on the
bases of their income in the case of an individual and in the case of the firm, tax is calculated on
the bases of their profit which they earned within that financial year. Income tax may vary form
one individual to another individual on the bases of their income.

Consumption tax

Consumption tax is a tax which is based on the consumption of the individual and its different
form the income tax. Income tax is based on the income but consumption tax is based on the
consumption of goods and services, sales tax is an example of consumption tax. Consumption tax
is regressive in nature because each and every person will pay the same amount of tax on goods
and service. Let us explain this with an example virat kohli will pay the same amount of money
for a 5 rupee pen which is also same for a common people like me. In consumption tax wealth of
the consumer does not affect the price of the goods and services

1.2.3GOODS AND SERVICES TAX (GST)

4
5

The idea of GST is first given by the Kelkar task force in 2004, but because of some reason the
idea was dropped. GST idea again comes to light when the constitution (amendment) bill comes
to parliament on 14 December 2014. After taking all the suggestions GST finally becomes an Act
on September 8, 2016, and with help of the constitution (101 st amendment act) force this act to
follow by both the state and center government.

GST stands for one nation one tax. GST is an indirect tax which made after combining 15 indirect
tax. GST is a consumption tax. GST is a value added tax levied on sales, consumption of goods
and services. Goods and service tax is a destination based tax on supply of goods and services and
levied at all stages. Tax is bear by the consumer in the end.

GST is governed by the GST council. Under GST, goods and services are taxed at the following
rate, 0%, 5%, 12%, 18%, and 28% and there is some special case in which the tax rate is 0.25%
on precious stones and 3% on gold. For the luxuries goods, GST charged rate is more than the
other goods and the rate is 28%. Goods which fall under the 28% tax rate slab are small cars, AC
and refrigerator, premium cars, tobacco, and aerated drinks.

1.2.4 History of GST

1. Vijay kelkar task force 2004 was the first ones to recommend the GST concept in India.
2. On 2006-07 union government was come up with the budget which also included GST.
This budget stated that GST will be applicable form 1 st April 2010.
3. Committees of state finance minister after various meeting agreed on implementation of
GST in India.
4. Government issued first discussion paper in November 2009.
5. Finance minister said that the GST will be coming on April, 2011.
6. On 6th May, 2015constitution (122nd Amendment) has passed the lok sabha.
7. On June 14, 2016, finance minister released a draft in public domain for views and
suggestions.
8. On 3rd August, 2016 the constitution (122nd Amendment bill), 2014 was passed by rajya
sabha.
9. (122nd) amendment bill, 2014 become an act after the Hon’ble president of India gives his
final assent on September 8,2016.101st amendment bill also being pass which force the
state and central government to levy this tax.

5
6

10. GST become fulfilled tax after replacing complex multiple indirect tax on 1 July,2017

1.2.5 Different types of GST taxes

CGST stands for central goods and services tax this tax is levied by the central government. CGST
is applicable within the state only, tax revenue goes to the central government and no addition
cares if the limit does not exceed 40 lakhs.

SGST stands for state goods and services tax this tax is levied by the state government. SGST is
applicable within one state only tax revenue goes to the state government and care only if the limit
exceeds 40 lakh

IGST stands for integrated goods and services tax this tax is combined levied by both central and
state government. Applicable within intra- state supplies and import. Tax revenue is shared
between the state and central government.

UGST stands for union territory goods and services tax. This tax is levied by U.T.Govt.

Tax revenue is collected by the U.T.Govt.

6
7

•IGST stand for integrated gst

•applicable transaction between two state or one state and one UT
•tax is collected by central government and the revenue is shared between
IGST central and state government

•SGST stand for state gst

•applicable transaction is within the state
•revenue is collected by state government
SGST

•CGSTstand for central GST

•applicable transactionis within the state
•revenue is collected by the central government
CGST

•UGST stand for union territory

•applicable transaction within the one union territory
UGST •revenue is collected by the UT government

1.2.6 Taxes which are combined to form GST

7
8

Taxes which come under the SGST are as follows:-

1. VAT/sales tax
2. Luxury tax
3. Entertainment tax
4. Taxes on lottery, gambling and betting

Taxes which come under the CGST are as follows:-

1. Service tax
2. Central excise duty
3. Additional excise duty
4. The excise duty levied under the medical and toilet preparation act
5. Additional customs duty
6. Surcharges

Not subsumed tax/duties in GST are:-

Taxes under CGST which does subsumed comes under GST

1. Basic custom duty (BCD)

2. Excise on tobacco and petrol goods
3. Specific cesses
4. Central sales tax on liquor for drinking purposes

Taxes under SGST which does subsumed comes under GST

1. Alcoholic liquor does come under SGST

2. Taxes on entertainment do not come under SGST because they are collected by the
panchayat or municipality or by some local government bodies.
3. Stamp duty on transfer of immovable property
4. Tax on sale of electricity or tax on consumption

1.2.7SALIENT FEATURES OF GST

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(1) Destination based principle: - GST is a destination based tax because tax revenue is
collected by that state in which the goods and service is consumed by the consumer.
(2) Dual GST: - In India we follow dual GST with CGST which is levied by the central
government and SGST which is levied by the state government. Union territories without
legislature are levy union territory GST (UTGST).
(3) Inter-state supply: In this tax is collected by the central government for the purpose of not
breaking the credit chain.
(4) GST on import: - In this tax is collected on import goods and tax while be levied on this
bases of inter-state supplies and should be subjected to IGST with the
In the case of service, tax is levied on the base of inter-state supplies and subject to IGST.
(5) Items kept out of GST: - GST is not applicable on Alcohol for consumption and GST is
not applicable on petroleum product (crude, petrol, diesel, ATF, natural gas).
(6) Taxation on tobacco: - GST is applicable on tobacco product and Centre will also going
to charge central excise duty.
(7) Threshold exemption: - threshold exemption applies to both CGST and SGST.
(8) Exports are zero-rated: - In export GST is not charged and GST is levied on export at zero
rates.
(9) GST has multiple tax rates: - 0%, 3%, 5%, 12%, 18% and 28%.

1.2.8 ADVANTAGES OF GST

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GST is good for the economic. Its benefits government, consumer, stakeholders of industry. GST
help in reduce the price of goods and services. GST helps in making tax structure more simplified.
When the tax structure becomes simplified it attracts the MNC to our country.

1. One nation one tax: Aim of the GST is to simplify the taxation system and remove
economic barriers which will attract more MNC to the Indian market.

2. Exports from India are zero rated: government does not charge any GST on export thus it
will lead to making product more competitive in global market and which lead to boost in
the economy.

3. Tax payer’s friendly: the Aim main of the GST is to remove complexities and make it more
simplified for the tax payer’s to pay their GST.

4. GST is based on IT: GST is filled online which require less time compare to manual
taxpaying.

5. Boost to the economic growth: GST help in boosting the exports and manufacturing
activities generation for more employment which lead to increase in Indian economy.

6. Eradication of check post: e-bill leads to removal of check-post at the states boundaries.
Now, the flow of raw material and final product has become free, fast.

7. Boost to make in India product: GST have provided a boost to the made in India products
by making goods and services produce in India more competitive in the nation market as
well as in international market.

1.2.9 DISADVANTAGES OF GST

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These are the drawback of the good and services tax in India:

1. Transition proved complex: when the marketer shifted to the new tax rate it produce many
problem to the marketer which leads to relaxations by the GST council.
2. Change in software: marketer have to shift their accounting which is ESP software to GST
software. Purchasing of new software lead to increase in the cost.
3. Multiple tax rate: GST have 5 tax slab rate 0%, 5%, 12%, 18% and 28%.
4. Multiple state registrations: business now needs to register for GST in every state they are
doing or operating their business.
5. Professional needed: GST creates a need for a professional body in small business and new
formed business also need to Heir professional for GST works.
6. Increase in operational cost: by employing professional for GST complaint lead to increase
in the operation cost of the business.
7. Computerized GST: GST has to be filled online with the help of a computer but some
business does have computer on their small shops and many people do not know how
computer works which lead to many problem.

1.3CONSUMER DURABLES GOODS

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Are a type of consumer product that does not wear out easily and therefore does not require regular
replacement, they are classified as "durable goods" and they are expected to last at least three years
without breaking. Consumer durables goods are divided into three parts

White goods, brown goods and consumer electronic goods.

What is CAGR?

CAGR stand for Compound Annual Growth Rate

12
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CONSUMER DURABLES INDUSTRY -INDIA

WHITE BROWN CONSUMER

GOODS GOODS ELECTRONICS
• Washing • Sewing • Television (TVs)
nachines machines • Laptops
• Refrigerators • Electric fans • Electronic
• Air • Microwaves accessories
conditioner(AC) ovens • CDs & DVDs
• Mixers&ginders • Digital cameras
• Rice cookers • Camcorders
• Cleaning
equipments
• Other domestic
appliances

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14

Consumer durables goods has a market of Rs 76,400 crore in FY'19 and in the year 2019 ecologist
estimated that the consumer durable market will grow up to Rs. 1.48 lakh crore (US$ 21.18 billion)
by 2025.Rural area generate 1/3 of total revenue of consumer durables goods and urban area
generates 2/3 of total revenue of consumer durables goods.

Revenue

0%

33% URBAN AREA MARKET

RURAL AREA MARKET

67%

Rural area and sub rural area will start show increase in the demand for TV, AC and other consumer
durables goods in the near future, which will lead to increase in 25% revenue. It’s predicted the in
the near future demand for the AC and Laptops will increase in the urban area.

1.3.1WHITE GOODS

The white goods market was worth $ 635.4 billion in 2019 and is expected to cross $ 1,031.0
billion by 2027, expanding at a CAGR of 7.8% over that period.Products which come under the
white goods are washing machine, Refrigerators and Air conditioner (AC). Washing machine hold
40% of the white goods, refrigerators hold 28% of the white goods and AC hold 32% share of

14
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white goods.

WHITE GOODS SHARE

32% Washing manchine

40%
Refrigerators

AC

28%

1.3.2 WASHING MANCHINE

Some salient feature of the washing machine is as follow:-

 Washing machines are divided into two categories: semi-automatic and fully-automatic.
Semi-automatic machines account for 70% of the washing machine market. Top loading
machines are semi-automatic machines.
 GST tax rate on washing machine have been reduce form 28% to 18%.
 GST tax rate redaction lead to price drop for washing machine, which makes the washing
machine more affordable and this lead to create more demand for washing machine into
the market for a period of time.
 Fully automatic can be divided into two categories: front load and top load. Top-load
machines are favored because they are less expensive.
 Big washing machine manufacturers in India include LG, Samsung, IFB, Whirlpool,
Videocon, and Godrej.
 Washing machine targeted customer are ladies.

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 Most revenue earned in India comes for north India and in the east is the area which buys
the washing the least.

1.3.3 REFRIGERATOR

Some salient features of the Refrigerator are as follow:-

 The refrigerator industry is dominated by urban areas, which account for 75% of the
market.
 GST charged on the Refrigerator is 28% and this 28% lead to create price inflation for
refrigerator.
 Direct cool and frost free refrigerators are the two types of refrigerators on the market.
Single-door direct-cool refrigerators must be manually defrosting the fridge.
 Indian customers favor direct-cool refrigerators with a capacity of 170-190 liters.
 Frost-free refrigerators don't need to be defrosted and electric fans maintain even air
circulation. Frost-free refrigerators have two doors.
 There are three types of frost-free refrigerators: standard top-mounted, bottom-mounted,
and side-by-side.
 Top companies for refrigerators are as follows Samsung, LG, and Godrej.

1.3.4 AIR CONDITIONERS (ACs)

Some salient feature of the Air conditioners are as follow:-

 North India accounts for 38% of revenue, 30% in the south, 20% in the west, and 12%
in the east.
 Voltas leads the room air conditioner industry with a 22 percent share, followed by LG
(16%), Lloyd Electric (16%), Daikin (13%) and Hitachi (13%) each, Blue Star (12%),
Samsung (8%), and others (3%).
 28% GST is charged on the air conditioners because they are treated as a luxurious.
 There are two types of air conditioners: fixed speed and variable speed (invertors ACs)
 The majority of air conditioner makers use outsource and assembly model.

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1.3.5BROWN GOODS

Home and kitchen appliances make up the majority of the brown products category. Silent feature

 In terms of market share, the top five competitors dominate 45% percent of the market.
 These are the products which come under brown goods Sewing machines, Electric fans,
microwave oven, mixer grinder, rice cooker, etc.
 GST tax rate for sewing machine 12%, electric fan is 18%, microwaves oven is 18%,
mixer grinder is 18%, rice cooker is 18% etc.
 As we can observe that 90% of the brown goods are fell under 18% tax slab rate.
 GST tax rate on brown goods when GST is been implemented is 28% but after some time
later government reduce the reduce GST rate by 18%.
 Top companies in the brown goods market are Havells, TTK prestige, Bajaj electrics and
Hawkins.

1.3.6CONSUMER ELECTRONIC

 Number of television households in the financial year 2021 is apparox 204 million.
 Flat panel displays mainly consist of LED/LCD/Plasma television sets.
 In 2021 more the 90% of the television is made up of LCD screen.
 GST tax rate of television & monitors (32inch or below) have been reduce form 28% to
18% and this reduction in tax rate lead to increase in the demand of television.
 GST rate on digital camera is still 28%.
 Leading companies in LCD screen marking market are Samsung Display, LG Display, Influx Crop,
CSOT, Sharp and Panasonic.

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1
Source: - • India - number of TV households 2018-2023 | Statista

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1.3.7 New GST Rates 2020

There are some consumers durables goods which have seen reduction in GST slab rate from
28% to 18% .Some of them are as follows –

 Power banks of lithium-ion batteries

 Digital camera
 Video game console
 Video camera recorder
 Monitors
 32-inch television
 Vacuum cleaner
 Mixer
 Grinder
 Ice cream freezer
 Food processor
 Hairdryer
 Water heater
 Water cooler
 Electric ironing machines

1.3.8 Impact of GST on consumer durables goods

2
Source:- GST Rates on Electronics - Impact on Electronics & Consumer Electronics (groww.in)

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 When GST implemented in India on 1 July 2017. Most of the consumer durables goods
GST rates are very high (28%) which lead to increase in the tax burden on the common
public.
 GST tax rates player a major role on price fixation of the consumer durables goods.
 GST tax rates directly affect the price of the consumer durables goods.
 GST help in simplifying the taxation system which lead to attract more MNC into the
market which created competition for the consumer durables goods manufacturer thus this
lead to creates more buying chooses for the consumer.
 In 2018 GST tax rate of washing machine and TV & monitor (32inch) have been reduced
from 28% to 18% and this leads to create more demand for this goods in which GST rates
have been reduced.
 When government observe that the demand for some consumer durables goods of the same
market start losing its demand because of uncertain reason government reduce the GST
rates on those goods. Government wants to create equilibrium between demand & supply.
 GST indirectly creates innovation into the market when the rates of some consumer
durables goods are high then the manufacture are forced to do innovation of new products.
Manufactures have to search for different ways by which they can reduce their production
cost and increase their profit.
 Sometime tax burden also shifted to the manufacture of consumer durables goods. This
type of situation occurs when there are many competitors in the market; these competitors
forced the manufacture to sell the goods at a loss.

1.4JUSTIFICATION OF THE TOPIC

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A study about the impact of GST on consumer durable goods, this study will help us to know
more about GST, what are effects on consumer durables. Taxes are the deciding factor which
affects the price of the goods. This study help the consumer to deeply understand how they are
been benefited from the implication of goods and services and what are the advantages and
disadvantages of the goods and services tax. With the help of data analysis consumer will be able
to compare the difference between the current indirect taxation system with the past indirect
taxation system.

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CHAPTER-2
LITERATURE REVIEW

22
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CHAPTER-2

LITERATURE REVIEW

2.1 International review

2.1.1(Benedict, 2011) Author examines the aspects of the Australian GST law that deal with
financial services in order to determine if they have been properly construed in terms of the
legislation's original meaning and how the issues raised can be addressed.

2.1.2(Emmanuel, 2013)Author explored the correlation between VAT, increased VAT costs, and
Nigerian economic development and tax revenue. The author has proposed two null hypotheses
for this analysis, both of which have been confirmed after the review has been completed. Given
the close relationship between the two, the author concludes that the government and authorities
should properly inform the consumers about the importance of VAT so that they can more
comfortably consider increases in VAT prices.

2.1.3(Fathi, 2012)Using a variety of experimental approaches, the authors investigated the

relationship between the rate of value added tax and public value added tax evasion. They come
to the conclusion that there is no correlation between the two since in many countries with high
VAT rates, enforcement is also high, and in countries with low VAT rates, evasion is high.

2.1.4( Ahmad, 2010)in this article, the author discusses the Pakistani government's plans to
introduce a general sales tax. The author has addressed Pakistan's current indirect tax regime, its
past, and the changes suggested by the National Taxation Reforms Commission, before
highlighting the problems and advantages of the proposed reforms.

2.1.5(Genpact, 2011)In this article, Genpact summarizes how the results of a study they performed
for a manufacturing customer who was subject to European VAT saved money as a result of some
procedure improvements in the client's handling of VAT-related compliances.

2.1.6(Gelardi, 2013)The author of the paper examined the potential effect on consumers of the
new National Consumption Tax to be implemented in the United States, as it would result in higher
prices for consumers. This new tax would be nationwide, in addition to the various states' current
sales taxes.

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2.1.7 (Collins, 2014)in this article, the author examines and evaluates household payments to direct
tax and indirect tax revenues in Ireland. Furthermore, the importance of these donations is
examined in light of Ireland's latest indirect tax reforms.

2.1.8 (Zhou, 2013)in this article, the writers look at the Malaysian GST. The writers have outlined
the current problems in the Malaysian economy and compared them to the planned GST. The effect
of the goods and services tax on price levels, economic development, revenue production, and
other factors is also examined in the report. GST, according to the report, will lower costs and raise
GDP in general.

2.1.9 (Roshidi , 2016) Research aims to determine the extent of GST taxpayers' understanding and
interpretation in Malaysia. The participants in this sample were only 256 civil servants who worked
as secondary school teachers in the kaula kangsar district of Perak. Data is collected with the help
of questionnaire. The results reveal that the GST has a low to strong negative view among
respondents.

2.1.10(Feria, 2009)in this article, the authors compare indirect taxation in Australia and the EU,
focusing on financial services, to see if the Australian good and services tax system is better. Even,
if the Australian system is superior, are there any elements that should be introduced in the EU?

24
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2.2 National reviews

2.2.1(sharma , 2018)in this study author talk about the GST and its advantages and disadvantages.
History of GST in India is also been explained by the researcher, study also talks about the effect
of GST in India in consumer and will the GST will help the economic in the growth or not. GST
is a big leap in indirect taxation system. Study is based on proper fact and primary date is called
with the help of questionnaire. The question under the questionnaire is easy to understand and with
the help of thus questionnaire we can make an estimate whether the consumer are satisfy with the
GST tax slab or does it require some changes in it.

2.2.2(Garg, 2014)This study is based on the effects of GST and the historical context of Indian
taxes and tax system, as well as the obstacles, risks, and possibilities that GST presents to our
market economy. Based on the implications of GST with a brief history of Indian taxes and tax
structure, and addressed the potential obstacles, risks, and possibilities that GST presents to
improve our free market economy.

2.2.3(fintapp, 2017)this study is based on the consumer durable goods. This study talks about the
type of the consumer durable goods industries which are available in our country. There are three
types of consumer durable industries in India and these industries are as follows, white, brown,
consumer electronic. Revenue of consumer durables good industry and how much growth in their
revenue we can expect in the near future.

2.2.4(bhat, 2014)this article discusses about the e-governance of India's value added tax system
which is based in India and special preference is given to Goa and Kerala. Up until 2005, India
had a very complex sales tax scheme. In 2005, a number of states, including Goa and Kerala,
switched from sales tax to the Value Added Tax. The availability of ITC on imported products
was the key benefit of VAT.

2.2.5(Guptha , 2014)According to her research, implementing GST in the Indian context would
result in commercial advantages that are not available under the VAT scheme, which would
essentially contribute to economic growth.

2.2.6(Adhana, 2015)this study is based on GST and its type. What is the aim of this taxation
system and what are the opportunities that a free market economy would provide?This study helps

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us to understand the concept of GST and what is CGST, SGST, and IGST are. In this study GST
concepts is well explained with well-defined examples.

2.2.7(Rajamani, 2018)this study is aim to determine the impact of GST on the Indian economy. In
this study author would like to share his knowledge regarding the GST. Study is based on the
concepts of CGST, SGST and IGST. In this effect of GST on different sectors is also shown and
what are the positive of GST and its negative where explained in the full detailed.

2.2.8(BHATIA, 2020)This study is based on the impact of GST on export goods and author tell us
how we can to export at 0% GST and are the ways by which we can claims this 0% GST rate on
export. This study is based on the detail analysis of the data related to the export. In this study
author talks about LUT methods by which we can claim 0% GST rate on exports.

2.2.9(CONTROL, 2021)THIS ARTICLE IS BASED ON THE GST REVENUE COLLECTION OF

31 MARCH 2021 IN THIS YEAR GST REVENUE COLLECTION BREAKS ALL PAST RECORD
BY COLLECTING 1, 23,902CRORE OF WHICH CGST IS RS 22,973 CRORE, SGST IS RS
29,329 CRORE, IGST IS RS 62,842 CRORE (I NCLUDING RS 31,097 CRORE COLLECTED
ON IMPORT OF GOODS) AND CESS IS RS 8,757 CRORE (INCLUDING RS 935 CRORE
COLLECTED ON IMPORT OF GOODS)," ACCORDING TO AN OFFICIAL STA TEMENT.

2.2.10(TIMES, 2016)THIS ARTICLE IS BASED ON THE CONSUMER DURABLES GOODS

TAX SLAB RATE SHOULD BE COME DOWN FROM 28% TO 18%. CONSUMER HAVE TO
BEAR THE GST TAX BU RDEN ON CONSUMER DURABLES GOODS BECAUSE OF HIGH
TAX RATE ITS LEAD TO INCREASE IN THE PRI CE OF CONSUMER DURABLE GOODS.

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CHAPTER -III
RESEARCMETHODOLOG
Y

3.1 OBJECTIVE OF THE STUDY

 To understand the relation between GST and price inflation of consumer durable goods

27
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 To understand GST more deeply.

 To understand consumer durables goods more deeply.
 To find out the advantages and disadvantages of GST.

3.2 RESEARCH HYPOTHESIS

H0:- There is no significant difference between the education qualification level and their
satisfaction towards the current GST slab rates of consumer durables goods.

H1:- There is significant difference between the education qualification level and their satisfaction
towards the current GST slab rates of consumer durables goods.

3.3 SCOPE OF THE STUDY

This study is done for finding out the effect of GST on consumer durables goods and on consumer
views on GST. This study is based on the respondent/consumer selected form the Bhopal to find
out their consumption pattern. Respondent are selected form the mixed group which is wider
difference in understanding. Scope of the research is small because of its limited area.

3.4 RESERCH DESIGN

 Geographical area: this research is based on the respondent which is located in Bhopal.
 Duration of the study: 1 month
 Simple size: 100respondentsare selected for filling questionnaire.
 Sampling technique: judgment sampling is taken for the study (Those respondents are
select which have knowledge regarding GST)
 Data collection instrument: Information gathering is very important for any researcher.
Information is divided into two parts primary data and secondary data. Primary data is a
type of data in which data is collected by the researcher and it’s done by taking
questionnaire. Secondary data is a type of data which is already been collected by the
other but its utilized by the researcher.
In this study researcher have taking primary data for analysis purposes.
In primary data questionnaire is created with the help of Google form and this form is
based on the topic impact of GST on consumer durable goods. In this questionnaire
respondent are selected form Bhopal.
Secondary data

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Journal
Research paper
Internet
Books
 Data collection producer:
Primary data is collected with the help of a questionnaire which was in the form of
Google form. This Google form is distributed among the respondent of Bhopal with the
help of social media apps like Facebook, twitter, WhatsApp, Instagram, Discord etc. this
a type of a questionnaire which should be fill out by yourself and this questionnaire is
divided into two section and these section are section A and section B. In section- A
question are consist of personal information and these information are Age, Gender,
Qualification, Marital Status, and Occupation. In Section-B question are based on
question which are related to the research and fulfill the research objective and its 10
question.
 3.5. LIMITATION OF THE RESERCH:

1. This study is conducted in a limited area which is Bhopal so it’s not applicable to all
the cities
2. This research is conducted at a time when our country is going through a pandemic
because of which it create price hike in the market which gives us misleading data
regarding GST rate on consumer durables goods.
3. Data given by the primary data (questionnaire) may not be correct because its fill by
my friends, family and the data collected from this questionnaire may be misleading
to some reader.

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CHAPTER-IV
DATA REPRESENTATION
&ANALYSIS

Tables 4.1 In this respondent has been differentiated on the bases of Gender

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Number Age group No. of respondent Percentage

(%)
1. Male 48 47%

2. Female 40 39%

3. Prefer not to say 12 12%

total 100 100%

Age group

12%

Male
48% Female
Prefer not to say
40%

Interpretation

After seeing the above chart and table we can say that 47.5% respondent are male,39.6% are female
and 12.9% are not comfortable to tell their gender so they selected prefer not to say. Majority of
the respondent are male.

Table 4.2.In this respondent has been differentiated on the bases of marital status

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Number Marital status No. of respondent Percentage (%)

1. Married 64 64%

2. Unmarried 36 36%

Total 100 100%

Marital status

Married
36%
Unmarried

64%

Interpretation

After seeing the above chart and table we can say that 64% respondent are married and 36%
respondent are unmarried. Majority of the respondent are married.

Table 4.3. In this respondent has been differentiated on the bases of marital status

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Number Age group No. of respondent Percentage (%)

1. 18-25 34 34%

2. 25-35 29 29%

3. 35-45 23 23%

4. Above 45 14 14%
Total 100 100%

AGE GROUP

14%

34% 18-25
25-35
23%
35-45
Above 45

29%

Interpretation

After seeing the above chart and table we can say that34% respondent belong to 18-25 age group,
29% respondent belongs to 25-35 age group , 23% respondent belongs to 35-45 age group and
14% respondent belongs to above 45 age group. Majority of the respondent belongs to age group
of 18-28.

Table 4.4. In this respondent has been differentiated on the bases of Occupation

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Number Occupation No. of respondent Percentage (%)

1. Businessmen 29 29

2. Student 28 28

3. Professional 28 28

4. Any other 15 15

Total 100 100%

Occupation

15%
29% Businessmen
Student
Professional
28%
Any other

28%

Interpretation

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After seeing the above chart and table we can say that 29% respondent are Businessmen, 28%
respondent are student, 28% respondent are professional and 15% respondent have selected Any
other option which are consumer . Majority of the respondent are businessmen.

Table 4.5. In this respondent has been differentiated on the bases of Qualification

Number Qualification No. of respondent Percentage (%)

1. Graduate 45 45

2. Post graduate 33 33

3. Any other 22 22
qualification(Under-
graduate)

Total 100 100%

Qualification

22%
Graduate
45%
Post Graduate

33% Any other quilification (under-

graduate)

Interpretation

After seeing the above chart and table we can say that majority of the respondents are under-
graduate. Graduate respondents are 45%, post graduate respondents are 33% and any other

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qualification respondents (under-graduate) are 22%. Thus it can be concluded that majorities of
the respondents are under-graduate and post-graduate.

Table 4.6. Classification of the respondents on the basis of their perception regarding whether
GST is good for the economy

Number Responses No. of respondent Percentage (%)

1. Yes 64 64

2. no 25 25

3. maybe 11 11

Total 100 100%

Responses

11%

Yes
25% No
Maybe
64%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are in favour
of good and service tax is good for the economic 64% respondent are in favor, 25% are not the

36
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favour of the GST and 11% are confuse so they are going in favour of GST, These respondent are
not 100% sure about the GST but they think maybe GST is good for the economy.

Table 4.7.In this we are trying to classify respondent thought regarding whether “GST increase
the various legal formalities? Responses is divided into 5 categories- strongly agree, agree, neutral,
disagree, strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 28 28%

2. Agree 40 40%

3. Neutral 12 12%

4. Disagree 10 10%

5. Strongly disagree 10 10%

Total 100 100%

Responses

10%
28% Strongly Agree
10%
Agree

12% Neutral
Disagree
Strongly disagree
40%

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Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that ‘GST increase the various legal formalities’. 40% respondent are agree
with the statement, 28% are strong agreeing the statement was correct,12% respondent are neutral
with their decision, 10% disagree with the statement and 10 % strongly disagree with the statement.
Majority of the respondents are with the statement hence which stats that GST increase the legal
formalities.

Table 4.8. In this we are trying to classify respondent thought regarding whether “Does GST
increase the tax burden on the common people? Responses is divided into 5 categories- strongly
agree, agree, neutral, disagree, strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 28 28%

2. Agree 41 41%

3. Neutral 11 11%

4. Disagree 9 9%

5. Strongly disagree 11 11%

Total 100 100%

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Responses

11%
28% Strongly Agree
9%
Agree

11% Neutral
Disagree
Strongly disagree
41%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that ‘GST increase tax burden on common people’. 41% respondent are agree
with the statement, 28% are strong agreeing the statement was correct, 11% respondent are neutral
with their decision, 9% disagree with the statement and 11 % strongly disagree with the statement.
Majority of the respondents are with the statement hence which stats that GST increase the tax
burden on common people.

Table 4.9. In this we are trying to classify respondent thought regarding whether “Does GST
increase the tax burden on the businessmen? Responses is divided into 5 categories- strongly agree,
agree, neutral, disagree, strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 21 21%

2. Agree 36 36%

3. Neutral 12 12%

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40

4. Disagree 19 19%

5. Strongly disagree 12 12%

Total 100 100%

Responses

12%
21%
Strongly Agree
Agree
19%
Neutral
Disagree

12% Strongly disagree

36%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that ‘GST increase tax burden on Businessmen’. 36% respondent are agree with
the statement, 21% are strong agreeing the statement was correct, 12% respondent are neutral with
their decision, 19% disagree with the statement and 12 % strongly disagree with the statement.
Majority of the respondents are with the statement hence which stats that GST increase the burden
in the businessmen.

Table 4.10. In this we are trying to classify respondent thought regarding whether “Does GST
hard to understand? Responses is divided into 5 categories- strongly agree, agree, neutral, disagree,
strongly disagree.

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Number Responses No. of respondent Percentage (%)

1. Strongly Agree 21 21%

2. Agree 30 30%

3. Neutral 21 21%

4. Disagree 19 19%

5. Strongly disagree 9 9%

Total 100 100%

Responses

9%
21%
Strongly Agree
19% Agree
Neutral
Disagree
30% Strongly disagree
21%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that ‘GST is hard to understand’. 30% respondent are agree with the statement,

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21% are strong agreeing the statement was correct, 21% respondent are neutral with their decision,
19% disagree with the statement and 9 % strongly disagree with the statement. Majority of the
respondents are with the statement hence which stats that GST is hard to understand.

Table 4.11.Classification of the respondents on the basis of their perception regarding whether
“Does GST is beneficial in long run. Responses is divided into 3 categories- Yes, No and Maybe

Number Responses No. of respondent Percentage (%)

1. Yes 61 61%

2. No 20 20%

3. Maybe 19 19%

Total 100 100%

Responses

19%

Yes
No
20% Maybe
61%

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Interpretation

After seeing the chart and table we can say that the most of the respondent are satisfied with the
statement that GST is beneficial for long run. 61% respondent are agree with the statement, 20%
respondent does not agree with the statement and 19% are bit confused but they are with the
statement. Thus majority of the respondents are with the statement hence which stats that GST is
beneficial in long run.

Table 4.12.In this we are trying to classify respondent thought regarding whether “GST is a good
method to replace the sales and service tax? Responses is divided into 5 categories- strongly agree,
agree, neutral, disagree, strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 10 10

2. Agree 22 22

3. Neutral 24 25

4. Disagree 26 25

5. Strongly disagree 18 18

Total 100 100%

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Responses

10%
18%
Strongly Agree
Agree
22%
Neutral

26% Disagree
Strongly disagree
24%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are not satisfied
with the statement that ‘GST is a good method to replace the sales and service tax’. 26% respondent
disagree with statement and 18% respondent strongly disagree with the statement, 24% respondent
are neutral about the statement, 22% respondent agree with statement, 10% respondent strongly
agree with the statement. Majority of the respondents are against the statement hence which stats
that GST is a not good method to replace the sales and service tax.

Table 4.13. In this we are trying to classify respondent thought regarding whether “Will GST lead
to increase in the friendly competition of the firm. Which leads to innovation for new consumer
durable product? Responses is divided into 5 categories- strongly agree, agree, neutral, disagree,
strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 11 11%

2. Agree 29 29%

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45

3. Neutral 21 21%

4. Disagree 18 18%

5. Strongly disagree 21 21%

Total 100 100%

Responses

11%
21% Strongly Agree
Agree

29% Neutral
18% Disagree
Strongly disagree
21%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that ‘Will GST lead to increase in the friendly competition of the firm. Which
leads to innovation for new consumer durable product. 29% respondent are agree with the
statement, 11% respondent are strong agreeing the statement was correct, 21% respondent are
neutral with their decision, 18% disagree with the statement and 12 % strongly disagree with the
statement. Majority of the respondents are with the statement hence which stats that GST ‘’Will
GST lead to increase in the friendly competition of the firm. Which leads to innovation for new
consumer durable product’’

Table 4.14.In this we are trying to classify respondent thought regarding whether.’’ GST is been
imposed on consumer durables good which lead to create price inflation for consumer durables

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goods’’. Responses is divided into 5 categories- strongly agree, agree, neutral, disagree, strongly
disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 21 21%

2. Agree 49 49%

3. Neutral 14 14%

4. Disagree 12 12%

5. Strongly disagree 4 4%

Total 100 100%

Responses

4%
12% 21%
Strongly Agree
Agree
14%
Neutral
Disagree
Strongly disagree
49%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that GST is been imposed on consumer durables good which lead to create price
inflation for consumer durables goods’’49% respondent are agree with the statement, 21%

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47

respondent are strong agreeing the statement was correct, 14% respondent are neutral with their
decision, 12% disagree with the statement and 4% strongly disagree with the statement. Majority
of the respondents are with the statement hence which stats that GST28% GST is been imposed
on consumer durables good which lead to create price inflation for consumer durables goods’’

Table 4.15.Classification of the respondents on the basis of their perception regarding whether
“Are you satisfied with current GST slab rates which is imposed on consumer durable goods?
Responses is divided into 3 categories- Yes, No and Maybe.

Number Responses No. of respondent Percentage (%)

1. Yes 66 66%

2. No 21 21%

3. Maybe 13 13%

Total 100 100%

Responses

13%
Yes
No
21% Maybe

66%

Interpretation

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After seeing the chart and table we can say that the most of the respondent are satisfied with the
statement that GST with the current GST tax slab rate on consumer durable goods. 66% respondent
are agree with the statement, 21% respondent does not agree with the statement and 13% are bit
confused but they are with the statement. Thus majority of the respondents are with the statement
hence people are satisfied with the current GST slab rate which is imposed on the consumer durable
good.

Table 4.16. In this we are trying to classify respondent thought regarding whether “Does GST
attract more MNC into the market which will help in price reduction of consumer durables goods
by creating competition into the market? Responses is divided into 5 categories- strongly agree,
agree, neutral, disagree, strongly disagree.

Number Responses No. of respondent Percentage (%)

1. Strongly Agree 27 27%

2. Agree 43 43%

3. Neutral 13 13%

4. Disagree 13 13%

5. Strongly disagree 4 4%

Total 100 100%

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Responses

4%
13%
27% Strongly Agree
Agree
13% Neutral
Disagree
Strongly disagree
43%

Interpretation

By analyzing the above chart and tables we can say that the most of the respondent are satisfied
with the statement that” Does GST attract more MNC into the market which will help in price
reduction of consumer durables goods by creating competition into the market? goods’’43%
respondent are agree with the statement, 27% respondent are strong agreeing the statement was
correct, 13% respondent are neutral with their decision, 13% disagree with the statement and 4%
strongly disagree with the statement. Majority of the respondents are with the statement hence
which stats that GST attract more MNC into the market which will help in price reduction of
consumer durables goods by creating competition into the market.

Hypothesis testing:-

Chi square test-

Chi square test is selected for testing the hypothesis for this study.

Formula of chi square =

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Where,

X2C= Valueof chi Square

Oi= Observed Variables

Ei= Expected Variables

i = No. of position of the variables

Observed variables

This are the variables which is measured by the researcher and they are data which is available on
data files (data that has been measured and recorded). Variables are divided into two type’s discrete
and continuous variables.

Observed variables

Two-square Table for Observed Value

Satisfied Educational Qualification

Under-Graduate Graduate Post-Graduate Total

YES 15 32 18 65

NO 2 11 9 22

MAYBE 5 3 5 13

Total 22 46 32 100

Expected variables:-

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Formula for expected variables= (Row Total* Column total)/ Grand Total

Thus,

Expected value of 15 will be:

Ei = (row total *column total)/Grand total

= (22*65)/100

= 14.3

After finding all the expected value, table will be as follows:-

Expected value

Two-square Table for Observed Value

Satisfied Educational Qualification

Under-Graduate Graduate Post-Graduate Total

YES 14.3 29.9 20.8 65

NO 4.84 10.12 7.04 12

MAYBE 2.86 5.98 4.16 13

Total 22 46 32 100

After finding out both observed value and expected value we can calculate the value of chi square

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Calculatingthe chi square X2,

X2= (Observed value –Expected value) 2/ Expected value

Value of X2 for the first value would be:

X2= (15-14.3)2/14.3

= (.7)2/14.3

= 0.0342

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= 0.0342

Observed Expected value O-E (O-E)2 (O-E)2/E

value
15 14.3 0.7 0.49 0.0342

2 4.84 -2.84 8.0656 1.6664

5 2.86 2.14 4.5796 1.6012

32 29.9 2.1 4.41 0.1474

11 10.12 0.88 0.7744 0.0765

3 5.98 -2.98 8.8804 1.485

18 20.8 -2.8 7.84 0.3769

9 7.04 1.96 3.8416 0.5456

5 4.16 0.84 0.7056 0.1695

6.1027

X2= 6.1027

Finding the value of degree of freedom form the chi square distribution table

Calculating the degree of freedom= (No. of columns-1)*(No. of rows-1)

Degree of freedom= (3-1)*(3-2)

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Degree of freedom = 4

CHI square distribution table:

According to the table value of expected Chi square at degree of freedom 4 and at 0.05 level

of significance is:

Expected X2=9.488

Interpretation

As the value of calculated chi square (6.1027) is less than the value of expected chi square (9.488),
the null hypothesis Ho is accepted.

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CHAPTER V
RESULT & DISCUSSION

55
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5.1Finding of the study

 Mainly most of the respondents are Male.

 Most of the respondents are married.
 38% respondents belong to the age group of 18-25.
 29% respondents are businessmen.
 45% respondents are graduated.
 Perception of the respondent towards the GST is positive and they think that GST is good
for the economy.
 Perception of the 69% respondent towards the GST is that the GST wills increases the
tax burden on the common people.
 68% respondent is responded that GST increased the various legal formalities.
 36% respondent agrees that GST will increase the tax burden on the business.
 Perception of the respondent towards the impact of GST in long run will be beneficial
for the economy.
 40% respondent agrees that the GST will lead to increase in the competition for
manufactures of consumer durables goods.
 70% respondent are responded that GST is been imposed on consumer durables good
which lead to create price inflation for consumer durables goods.
 Most of the respondents are responded that GST is hard to understand.
 Consumers are highly satisfied with the current GST slab rates which are imposed on the
consumer durables goods.
 Respondent agree that the GST tax will attract more MNC into the market and this will
leads to create more competition into the market for consumer durables goods and more
competition will leads to reduction in the prices of the consumer durables goods.

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5.2Suggestions

 The respondent/consumer suggested that there should be simple, transparent and easy to
understand provision in GST.

 Government should try to reduce the slab rate of consumer durables goods if possible,
because some people are very poor and for them to purchase a consumer durable goods
are like a dream which they can only fulfill once in a lifetime.

 For some middle class businessmen which are computer illiterate government must
provide training program in which their doubts related to GST can completely be cleared.

 The government must make sure that the GST revenue is properly managed.

 Government must provide incentive/subsides for small scale domestic manufacture of

consumer durable goods.

 Government must reduce the GST tax rate on energy-efficient products/eco-friendly like
4 star, 5 star, and inverter air conditioners and refrigerators and this will leads to create
more demand for these consumer durables goods.

5.3 Conclusion

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This is based on the overall highlight of good and service tax and its impact on consumer durable
goods in Bhopal. Government must make different information platform in which information
regarding GST can be collected easily and this information must been in a format in which it can
be easily understand by the consumer. Goods and services understanding among the consumer
must be good and this good understanding will help in creating a positive perception towards
GST. Bhopal custom department must spread awareness regarding impact of GST on consumer
durables goods. Bhopal custom department must aware people about the positive of GST and
this will leads to create goods perception of consumer towards GST.

BIBLIOGRAPHY

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Ahmad, E. (2010). Why is it so Difficult to Implement a GST in Pakistan? The Lahore Journal of Economics, Vol. 15,,
139-169.

Adhana, D. K. (2015). Goods and Services Tax (GST): A Panacea for Indian Economy. International Journal of
Engineering and Management ResearchVolume-5, Issue-4, , 332-338 . Retrieved from reseracher gate.

Benedict, K. (2011). The Australian GST regime and financial services: How did we get here and where are we
going? Journal of Tax Research, Vol. 9, (Issue 2),, 174-193.

bhat, S. (2014). Impact of value added tax with reference to Goa and Kerala a comparative study. , Global Research
Analysis, Vol.3,issue 3 , 3-4.

BHATIA, S. R. (2020, April 24). GST on Export of Goods & Services. Retrieved from tax guru :
https://taxguru.in/goods-and-service-tax/gst-export-goods-services.html

Collins, M. L. (2014). Total Direct and Indirect Tax contributions of Households in Ireland: Estimates and Policy
Simulations. Nevin Eco. Research Institute WP Series, Vol 18,, 1-41.

control, m. (2021, April 01). GST revenue collection hits new record of Rs 1,23,902 crore in March 2021. Retrieved
from money control: https://www.moneycontrol.com/news/trends/current-affairs-trends/gst-revenue-
collection-hits-new-record-of-rs-123902-crore-in-march-2021-6719341.html

Emmanuel, U. C. (2013). The Effects of VAT on the Economic Growth of Nigeria,. Journal of Economics and
Sustainable Development, Vol. 4, (Issue 6), 190-201.

Fathi, b. (2012). Evaluation of Value Added Tax and Tax Evasion. Current Research Journal of Economic Theory, Vol.
4, (Issue 1), 1-5.

Feria, d. R. (2009). 2009, Options for Taxing Financial Supplies in Value Added Tax EU VAT and Australian GST
Models Compared . Cambridge Journals, Vol. 58, , 897-932.

fintapp. (2017). analysis on consumer durable good . Retrieved from Fintapp blog :
https://www.fintapp.com/blog/consumer-durables-industry-analysis-research-report/

Garg, G. (2014). Basic Concepts and Features of Good and Service Tax In India. International Journal of scientific
research and management, vol 2, 542-549.

Gelardi, M. A. (2013). , VAT and Consumer Spending: A Graphical Descriptive Analysis,, Issue 1. Asian Journal of
Finance and Accounting, Vol. 5, 1-20.

Genpact. (2011). Improving Value Added Tax Processes Produces $ .5MM. Impact for a Global Manufacturer,
Finance & Accounting Case Study,, 1-2.

GST on Electronics. (2020). Retrieved from Groww: https://groww.in/p/tax/gst-on-electronics/

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Guptha , N. (2014). GOODS AND SERVICE TAX and its impact on indian economy. Goods and Service Tax : Its
implementations on Indian economy volume 5 Issue 3, 126-133.

Mehrotra, D. H. (JULY,2019). GOODS AND SERVICES TAX AND CUSTOM DUTY. In GOODS AND SERVICES TAX AND
CUSTOM DUTY FOR B.COM.THIRD YEAR (pp. 1-40). BHOPAL : SAHITYA BHAWAN PUBLICATIONS.

Rajamani, A. (2018). A Study on Impact of Goods and Service Tax on Indian Economy. Retrieved from reseracher
gate :
https://www.researchgate.net/publication/328934343_A_Study_on_Impact_of_Goods_and_Service_Tax
_on_Indian_Economy

Roshidi , M. A. (2016). International Journal of Academic Research in Business and Social Sciences 2016, Vol. 6, No.
11 ISSN: 2222-6990 75 wAwareness and Perception of Taxpayers towards Goods and Services Tax (GST)
Implementation. Retrieved from reserch gate:
https://www.researchgate.net/publication/315934654_Awareness_and_Perception_of_Taxpayers_towar
ds_Goods_and_Services_Tax_GST_Implementation

sharma , p. (2018). project report on impact of gst by pankaj sharma . Retrieved from slide share:
https://www.slideshare.net/PankajSharma1221/project-report-on-gst-2018

times, e. (2016, november 16). GST rate on consumer durables should be 18%: CEAMA. Retrieved from
economictimes.indiatimes.com: https:///industry/cons-products/durables/gst-rate-on-consumer-
durables-should-be-18-ceama/articleshow/55292150.cms?from=mdr

Zhou, Z. Z. (2013). The Introduction of Goods and Services Tax in Malaysia, Centre for Public Policy Studies, Pg. 1-
29. Centre for Public Policy Studie, 1-29.

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ANNEXURE

QUESTIONNAIRE SURVEY

Question:

Q1) Gender

A) Female B) Male c) prefer not say

Q2) Martial status

A) Married B) Unmarried

Q3) Age Group

A) 18-25
B) 25-35
C) 35-45
D) Above 45

Q4) Occupation

A) Businessmen
B) Student
C) Professional
D) Any other

Q5) Qualification

A) Graduate
B) Post graduate
C) Any other qualification(under-graduate)

Q6) Is GST good for the economy?

A) Yes
B) NO
C) Maybe

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Q7) Does GST increase the various legal formalities?

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q8) Does GST increase the tax burden on the common people

A) Strongly agree

B) Agree

C) Neutral

D) Disagree

E) Strongly disagree

Q9) Does GST increase the tax burden on the businessmen

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q10) Is GST hard to understand?

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q11) Does GST is beneficial in long run

A) Strongly agree

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B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q12) GST is a good method to replace the sales and service tax

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q13) Will GST lead to increase in the friendly competition of the firm. Which leads to innovation
for new consumer durable product?

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q14) GST is been imposed on consumer durables good which lead to create price inflation
for consumer durables goods.

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly disagree

Q15) Are you satisfied with current GST slab rates which is imposed on consumer
durable goods?

A) Strongly agree
B) Agree

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C) Neutral
D) Disagree
E) Strongly disagree

Q16) Does GST attract more MNC into the market which will help in price reduction of
consumer durables goods by creating competition into the market?

A) Strongly agree
B) Agree
C) Neutral
D) Disagree
E) Strongly dis agree

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Balance of payments (BOP) is a statement of all transactions made between entities in one country and the rest
of the world over a defined period of time, such as a quarter or a year.

KEY TAKEAWAYS

The balance of payments include both the current account and capital account.

The current account includes a nation’s net trade in goods and services, its net earnings on cross-border
investments, and its net transfer payments.

The capital account consists of a nation’s transactions in financial instruments and central bank reserves.

The sum of all transactions recorded in the balance of payments should be zero; however, exchange rate
fluctuations and differences in accounting practices may hinder this in practice.

Understanding the Balance of Payments (BOP)

The balance of payments (BOP), also known as balance of international payments, summarizes all transactions that
a country’s individuals, companies, and government bodies complete with individuals, companies, and government
bodies outside the country. These transactions consist of imports and exports of goods, services, and capital, as
well as transfer payments, such as foreign aid and remittances.

A country’s balance of payments and its net international investment position together constitute its international
accounts.

The balance of payments divides transactions in two accounts: the current account and the capital account.
Sometimes the capital account is called the financial account, with a separate, usually very small, capital account
listed separately. The current account includes transactions in goods, services, investment income, and current
transfers. The capital account, broadly defined, includes transactions in financial instruments and central bank
reserves. Narrowly defined, it includes only transactions in financial instruments. The current account is included in
calculations of national output, while the capital account is not.

The sum of all transactions recorded in the balance of payments must be zero, as long as the capital account is
defined broadly. The reason is that every credit appearing in the current account has a corresponding debit in the
capital account, and vice-versa. If a country exports an item (a current account transaction), it effectively imports
foreign capital when that item is paid for (a capital account transaction).

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If a country cannot fund its imports through exports of capital, it must do so by running down its reserves. This
situation is often referred to as a balance of payments deficit, using the narrow definition of the capital account
that excludes central bank reserves. In reality, however, the broadly defined balance of payments must add up to
zero by definition. In practice, statistical discrepancies arise due to the difficulty of accurately counting every
transaction between an economy and the rest of the world, including discrepancies caused by foreign currency
translations.

Economic Policy and the Balance of Payments

Balance of payments and international investment position data are critical in formulating national and
international economic policy. Certain aspects of the balance of payments data, such as payment imbalances and
foreign direct investment, are key issues that a nation’s policymakers seek to address.

Economic policies are often targeted at specific objectives that, in turn, impact the balance of payments. For
example, one country might adopt policies specifically designed to attract foreign investment in a particular sector,
while another might attempt to keep its currency at an artificially low level in order to stimulate exports and build
up its currency reserves. The impact of these policies is ultimately captured in the balance of payments data.

Imbalances Between Countries

While a nation’s balance of payments necessarily zeroes out the current and capital accounts, imbalances can and
do appear between different countries’ current accounts. According to the World Bank, the U.S. had the world’s
largest current account deficit in 2019, at $498 billion. Germany had the world’s largest surplus, at $275 billion.1

Such imbalances can generate tensions between countries. Donald Trump campaigned in 2016 on a platform of
reversing the U.S.’s trade deficits, particularly with Mexico and China. The Economist argued in 2017 that
Germany’s surplus “puts unreasonable strain on the global trading system,” since “to offset such surpluses and
sustain enough aggregate demand to keep people in work, the rest of the world must borrow and spend with
equal abandon.”

History of the Balance of Payments (BOP)

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Prior to the 19th century, international transactions were denominated in gold, providing little flexibility for
countries experiencing trade deficits. Growth was low, so stimulating a trade surplus was the primary method of
strengthening a nation’s financial position. National economies were not well integrated with each other,
however, so steep trade imbalances rarely provoked crises. The industrial revolution increased international
economic integration, and balance of payment crises began to occur more frequently.

The Great Depression led countries to abandon the gold standard and engage in competitive devaluation of their
currencies, but the Bretton Woods system that prevailed from the end of World War II until the 1970s introduced
a gold-convertible dollar with fixed exchange rates to other currencies.2 As the U.S. money supply increased and
its trade deficit deepened, however, the government became unable to fully redeem foreign central banks’ dollar
reserves for gold, and the system was abandoned.3

Since the Nixon shock—as the end of the dollar’s convertibility to gold is known—currencies have floated freely,
meaning that country experiencing a trade deficit can artificially depress its currency—by hoarding foreign
reserves, for example—making its products more attractive and increasing its exports.4 Due to the increased
mobility of capital across borders, balance of payments crises sometimes occur, causing sharp currency
devaluations such as the ones that struck in Southeast Asian countries in 1998.5

During the Great Recession several countries embarked on competitive devaluation of their currencies to try to
boost their exports. All of the world’s major central banks responded to the financial crisis at the time by executing
dramatically expansionary monetary policy. This led to other nations’ currencies, especially in emerging markets,
appreciating against the U.S. dollar and other major currencies. Many of those nations responded by further
loosening the reins on their own monetary policy in order to support their exports, especially those whose exports
were under pressure from stagnant global demand during the Great Recession.6

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ARTICLE SOURCES

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Related Terms

What Is the Net Exports Formula?

A nation’s net exports are the value of its total exports minus the value of its total imports. The figure also is called
the balance of trade.

Capital Account Definition

In economics, the capital account is the part of the balance of payments that records net changes in a country’s
financial assets and liabilities. More

Basic Balance Definition

Basic balance is an economic measure for the balance of payments that combines the current account and capital
account balances. More

What Is Currency Depreciation?

Currency depreciation is when a currency falls in value compared to other currencies. Easy monetary policy and
inflation can cause currency depreciation. More

Trade Deficit

A trade deficit occurs when a country’s imports exceed its exports. A trade deficit is not necessarily detrimental,
because it often corrects itself over time. More

Current Account Definition

The current account records a nation’s transactions with the rest of the world – specifically its net trade in goods
and services, net earnings on cross-border investments, and net transfer payments. More

Governments view on bop of the year 2019-20:

NEW DELHI: India expects its balance of payments to be “very, very strong” in the current year, on the back of
stronger than expected exports and a fall in imports, Commerce Minister Piyush Goyal said on Monday.

“Exports have shown a good turnaround. We are in July at about 91% export level of the previous year, July 2019,
figures,” Goyal said at an industry event.

“So broadly, our balance of payments this year is going to be very, very strong.”

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India posted a trade surplus of $790 million in June, its first in over 18 years, with imports plunging as the
coronavirus pandemic depressed domestic demand for crude oil, gold and other industrial products, reflecting a
slowing economy.

OECD Policy Responses to Coronavirus (COVID-19)

The impact of the coronavirus (COVID-19) crisis on development finance

24 June 2020

OPEN PDF

Share

Abstract

This note discusses the consequences of the COVID-19 crisis on financing for sustainable development in low- and
middle-income countries eligible for official development assistance (ODA). Levels and trends in domestic and
external financing already fell short of the SDG spending needs prior to the COVID-19 crisis. The current global
context, however, risks a significant reduction in the financing available to developing economies. In sum, external
private finance inflows to developing economies could drop by USD 700 billion in 2020 compared to 2019 levels,
exceeding the immediate impact of the 2008 Global Financial Crisis by 60%. This exacerbates the risk of major
development setbacks that would, in turn, increase our vulnerability to future pandemics, climate change and
other global public bads. While official development finance is an important countercyclical force in the short-term
and tax revenues remain the only long-term viable source of financing for many public services, no single source of
development finance can take up this challenge alone. Actors in development finance and beyond need to
collaborate closely to “build back better” for a more equitable, sustainable and thus resilient world.

Prior to the COVID-19 crisis, levels and trends in domestic revenues and external flows to developing economies
were already considered insufficient to support the Sustainable Development Goals (SDG). With high levels of
public debt and additional pressures induced by the pandemic on all major sources of development finance, low-
and middle-income countries may struggle to finance their public health, social and economic responses to COVID-
19. Early observations point to massive debt and equity outflows from developing economies that accompany a
drop in remittances, and ripple effects on domestic finance already solicited by the unfolding public health and

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economic crises. In this challenging context, how can we avoid a development finance collapse that would send
millions back into poverty, and compromise our capacity to reach the SDGs, our common blueprint for a stronger,
fairer, and more sustainable world?

This note draws upon research carried out in the context of the OECD Global Outlook on Financing for Sustainable
Development (OECD, forthcoming[1]) and outlines the current and projected impact of the COVID-19 pandemic on
major sources of financing required to deliver support to developing economiesthe pandemic leaves a trail of
destruction – at the time of release of this Report, it had claimed 7.90 lakh lives, 73.59 lakh active infections and
counting out of 2.25 crore confirmed cases worldwide (as on August 20, 2020), driven human societies into
unfamiliar isolation, halted economic activity globally and extinguished jobs and incomes. At the first tentative
signs of relief – ‘green shoots’ being the operative term – people fatigued by asphyxiating social
distancing/masks/sanitisers and the ‘lockdown syndrome’ have unlocked in varying degrees, desperate to regain
control over their lives and livelihood. In several countries, a renewed surge of infections and deaths has triggered
re-clamping down of containment procedures. It is difficult to distinguish whether the first wave of virus has
intensified or if a second wave has hit.

I.2 COVID-19 has also hit India hard. Until recently, six cities – Mumbai; Delhi; Ahmedabad; Chennai; Pune; and
Kolkata – accounted for half of all reported cases. Over recent weeks, however, the curve has arched upwards in
lower tier cities/towns and the virus is penetrating even further into the interior regions. Unlike peers, India had
responded quickly and forcefully, with two months of nation-wide lockdown starting March 25. From the first case
reported on January 30 and the first death on March 12, the movement was relatively moderate to a little less
than 1000 confirmed cases and 19 deaths three days after the lockdown. By mid-May, the pandemic had taken
hold; confirmed cases crossed 85,000 surpassing China. At the end of July when Unlock 3.0 was about to begin,
confirmed cases were nudging 16.50 lakh, with 35,747 deaths, which have subsequently increased to 28.36 lakh
and 53,866 deaths, respectively (as on August 20, 2020).

I.3 India’s experience has also yielded hope and an innate belief in the unconquerable character of humanity and
the institutions that serve it. Notwithstanding large gaps in health infrastructure, the death rate in India is one of
the lowest in the world (1.9 per cent as against the world average of 3.5 per cent as on August 20, 2020). Testing,
clinical management and hospital support are being ramped up. The recovery rate has crossed 70 per cent and is
climbing. The challenges that face the country are to flatten the curve, restore employment, especially to displaced
migrants, rebuild supply chains, repair and revive the stricken economy and return life to normalcy. There is a
widespread recognition that only in close coordination among all stakeholders will the people of India be able to

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determine the shape of the recovery. While the path ahead is still shrouded with high uncertainty, sifting through
the experience of the year gone by could fortify this resolve and marshal the grit and resources to deal with the
challenges that confront us in 2020-21 and beyond over the medium-term.

Assessment of the 2019-20 Experience

I.4 Looking back, global developments in 2019 offer several pensive reflections that have implications for the
prospects for India, as for all other economies. It is now clear that the global economy recoupled in its downturn in
2019, dispelling the fissiparous movements that seemed to suggest differentiation in growth profiles of
constituents in the year before. Notably, the slowdown was more pronounced across emerging market economies
(EMEs) relative to advanced economies (AEs). Over the course of the year, the weakening of the growth
momentum became increasingly broad-based geographically from which individual countries, including India, had
no escape. The global slowdown was marked by a close co-movement in the slumps in industrial production, trade
and investment at national levels, given that investment is concentrated in intermediate and capital goods that are
heavily traded. In addition, trade tensions dented business sentiment in the manufacturing sector. The weakening
of global imports was significantly influenced by the downturn in EMEs. In turn, these forces reduced export
growth, which is intensive in imports, and relies heavily on the state of global supply chains. For a while, as
manufacturing lost steam, services held firm and helped to support consumer confidence, but eventually the
inexorability of the global downturn took over.

I.5 Despite these headwinds, some indications emerged toward the closing months of the year that the slowdown
may be bottoming out. With the easing of monetary policy continuing into the second half of 2019, bolstered by
fiscal stimulus in some countries, expectations that global activity could recover in early 2020 rose. In fact, high
frequency indicators for the fourth quarter (October-December 2019) suggested that momentum was stabilising at
a sluggish pace. One-off factors that had impacted global manufacturing – new emission standards for the auto
sector; inventory accumulation – appeared to fade. Business sentiment and manufacturing purchasing managers’
indices (PMIs) ceased deteriorating, world trade growth seemed to be bottoming out, and service sector PMIs
remained in expansionary territory.

I.6 The finance channel was also at work and, intertwined with the confidence channel, amplified global spillovers.
Positive impulses, transmitted through real sector channels described in the foregoing, initially boosted financial
markets, and diminished fears of trade war and a hard Brexit supported investors’ risk appetite. Equity prices
appeared to regain poise, sovereign bond yields declined, and portfolio flows returned to EMEs. Currency

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movements between September 2019 and early January 2020 reflected the general strengthening of risk
sentiment. Financial conditions had thus turned broadly accommodative across AEs and EMEs and conducive to a
modest recovery before the pandemic broke out.

I.7 The finance and confidence channels abruptly reversed transmission at the end of 2019 with the onset of
COVID-19. Financial markets froze, financial institutions started bracing up for a brutal onslaught of balance sheet
impairment, extreme risk aversion set in and as incomes stopped flowing, especially to the defenceless,
households and businesses alike made a dash for cash. COVID-19 was bringing to bear the dark side of global
integration. In the event, global growth at 2.9 per cent in 2019 was the lowest since 2009. The year 2019-20 (April-
March) also marked India’s lowest gross domestic product (GDP) growth since the global financial crisis (GFC).
Amidst the influential global developments referred to earlier, the Indian economy was hit by specific domestic
factors from the second quarter of 2019 onwards, including downturn in its automobile and real estate sectors and
pangs of distress among micro, small and medium enterprises (MSMEs).

I.8 Turning to domestic developments, the previous year’s Annual Report posed an existential question: are we
dealing with a soft patch, or a cyclical downswing, or a structural slowdown? Even as data were being awaited to
disentangle the nature of the slowdown, a soft patch was ruled out as the loss of pace became entrenched
sequentially with each ensuing quarter. Going back in time, the Indian economy had experienced a V-shaped
recovery from the GFC, but this stimulus-driven upturn failed to sustain: average GDP growth slumped from 8.2
per cent in 2009-11 to 5.3 per cent in 2011-13. From 2013-14, a cyclical upswing took hold and it turned to be one
of the longest in the post-independence period, reaching 8.3 per cent in 2016-17. Ahead of the cyclical global
downturn which commenced in 2018, however, India’s real GDP growth showed signs of slowdown during 2017.
Favourable statistical base effects delayed the onset of the cyclical downturn during the second half of 2017-18 in
spite of slowing momentum. Eventually, however, India joined the global slowdown from Q1:2018-19 and lost
speed continuously over the next 8 quarters, reaching 3.1 per cent in Q4:2019-20, the lowest in the national
accounts series based to 2011-12.

I.9 Thus, until the onset of COVID-19, the moderation in India’s growth trajectory reflected cyclical forces, both
global and domestic. The global drivers included softer external demand, new automobile emission standards in
several parts of the world, weaker macroeconomic conditions because of idiosyncratic factors in a group of
systemic EMEs, trade tensions and broader global trade policy uncertainty, the possibility of a no-deal Brexit and
the slowdown in China. The domestic factors took the form of inventory overhang in the real estate sector,
followed by unfavourable terms of trade sapping rural demand, a slump in gross fixed capital formation from

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Q4:2018-19 and contraction in merchandise exports from Q1:2019-20 and imports from Q2:2019-20. The
deceleration phase (Q4:2018-19 to Q4:2019-20) was accentuated by idiosyncratic events such as auto emission
norms/axle norms for commercial vehicles and credit events in the NBFC space.

I.10 Pre-emptively reading the underlying cyclical nature of the growth slowdown, monetary policy committee
undertook a series of policy rate reductions, starting as early as February 2019 and cumulating to 135 basis points
by February 2020; switched the stance of policy from calibrated tightening to neutral to accommodative; and
infused the system with abundant liquidity from Q2:2019-20. Monetary transmission, typically lagged and
incomplete in India, improved significantly in the second half of the year under comfortable liquidity conditions
and the mandated linking of the interest rates on new floating rate loans to select sectors to external benchmarks
in October. Illustratively, the weighted average lending rate (WALR) on fresh bank loans declined by 71 basis points
(bps) during February 2019-February 2020, of which 31 bps occurred during October 2019-February 2020. The
counter-cyclical shift in the monetary policy stance to support growth was enabled by inflation turning benign in
the first half of the year; in spite of a spike in food prices that caused headline inflation to rise beyond 6 per cent
during December 2019-February 2020, it averaged 4.8 per cent for the year as a whole, a little above the target of
4 per cent.

I.11 Fiscal policy had also turned counter-cyclical from Q4: 2016-17, with government final consumption
expenditure in the form of the 7th pay commission award and one rank one pension providing steady support to
GDP. From Q2:2019-20, the fiscal policy stance became expansionary, with a momentous corporate tax regime
change that made India comparable with Asian peers. This fiscal impulse, together with the cyclically induced
shortfall in revenues, eventually produced a sizeable deviation in the central government’s gross fiscal deficit (GFD)
from the target for the year – 4.6 per cent of GDP as against 3.3 per cent budgeted – warranting the usage of the
escape clause under the revised Fiscal Responsibility and Budget Management (FRBM) Act. Subnational fiscal
policy remained within the Fiscal Responsibility Legislation (FRL) thresholds, primarily via expenditure cuts in the
face of large scale revenue shortfalls, a feature observed in previous years as well. Automatic stabilisers,
particularly on the tax front, however, would have played a counter-cyclical role. On the whole, both the centre
and states had much less fiscal space to deal with COVID-19 than during the GFC.

I.12 Circling back to the formation of domestic demand during 2019-20, consumption turned out to be relatively
resilient. Government consumption put a floor underneath the downturn as discussed earlier – without it, real
GDP growth would have fallen from the headline of 4.2 per cent to barely 3.3 per cent in 2019-20. Private
consumption, which is the bedrock of domestic demand with a share of 57 per cent of GDP, withstood the overall

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loss of pace and started decelerating only from Q4:2019-20. The main drivers of the slowdown in 2019-20 were
investment and exports.

I.13 A slowdown in fixed investment set in from 2011-12 and became entrenched from Q4:2018-19, slumping into
contraction from Q2:2019-20. A combination of stress in balance sheets of corporates and banks, defaults in the
NBFC sector, slowing income growth of households leading to a large inventory overhang of unsold homes, and the
global slowdown weighed heavily on animal spirits.

I.14 Underlying the contraction of 5.1 per cent in exports in US dollar terms during the year was a drop in export
prices by 4.7 per cent. Sectoral analysis throws up valuable insights. For instance, a group of exports – electronic
goods; drugs and pharmaceuticals; iron ore – held firm in the face of a combination of weakening external demand
and country-specific impediments. Each of these sectors has considerable export potential, especially in the fast-
changing dynamics of the international environment.

I.15 As regards the evolution of aggregate supply conditions in 2019-20, agriculture and allied activities provided a
silver lining, with record foodgrains and horticulture production and favourable terms of trade for the farm
economy. The challenge of managing supply gluts in cereals exposed the shortcomings of policy interventions in
the form of price support and buffer stocking. Paradoxically, disruptions in agricultural supply chains and
restrictions affecting transportation of agri-produce from farms to markets produced demand-supply mismatches
that fuelled price flares in the second half of the year. The recent spate of reforms to agricultural marketing and
infrastructure could open up new opportunities for agriculture if they could be complemented by trade policies
that are predictable, expose the farm sector to international terms of trade and shift emphasis to processing and
value addition.

I.16 A perceptible slowdown in the industrial sector has set in after 2015-16, with its epicentre in manufacturing.
Structural rigidities in labour, land, and product markets have made Indian manufacturing uncompetitive in global
markets and unable to reap the demographic dividend embodied in a young but under-skilled labour force. Large
gaps in the physical infrastructure have also impacted productivity and overall efficiency. More recently, high
leverage and solvency concerns have produced stressed balance sheets, which appear to have overwhelmed
bankruptcy processes. In addition, some of the past issues remain formidable drags such as delay in land
acquisition, environmental concerns and various impediments in MSMEs sector.

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I.17 The services sector has remained the prime mover of the Indian economy over the last three decades. Until
2019-20, it had exhibited resilience and productivity; however, idiosyncratic developments, both domestic and
global – grounding of an airline; financial sector stress; stalled construction projects; revenue-related issues in
telecom; port activity impeded by muted foreign trade; coal production losses impacting railway freight traffic –
operated in conjunction with the slowdown in aggregate demand to pull the sector’s output to its lowest growth in
two decades. The performance of the services sector in the year gone by reflects the emergence of structural
impediments specific to each sub-sector. Services exports have, however, outperformed goods exports and
maintained global share in 2019-20, with software providing the cutting edge. Indian IT majors could benefit from
re-prioritising investments towards automation and efficiency gains from cloud computing and digitalisation, as
well as new alliances with global companies.

I.18 During the year, several initiatives were undertaken to develop various segments of the financial market
spectrum that are under the jurisdiction of the Reserve Bank. In the foreign exchange market, the focus turned to
incentivising access, bridging the segmentation between on shore and off shore activity, simplifying the hedging
regime within an overall rationalisation of regulations, and enhancing the ease of doing business in a principles-
based regulatory framework. In the debt market, specified securities issued by the Government of India were
opened to non-residents under the fully accessible route (FAR), among other initiatives to liberalise foreign
portfolio investments. The market borrowing programmes of the central and state governments were conducted
in alignment with the objectives of minimising cost and mitigation of risks. The development of the debt market
was carried forward through liquidity enhancement, expanding the investor base and improving debt management
strategies. In the money market, a revised liquidity management framework was put in place to empower the
Reserve Bank to actively manage liquidity conditions with the use of conventional and unconventional
instruments. Notably, longer term repo operations and special open market operations (OMOs), on top of currency
swaps that were launched in 2018-19, were added to the Reserve Bank’s arsenal of liquidity management tools.

I.19 In the regulatory and supervisory domain, several steps were taken during the year to strengthen financial
intermediaries and preserve financial stability. These initiatives were presented in the Bi-annual Financial Stability
Report which monitors the financial system by assessing risks to financial stability through systemic stress tests,
financial network analysis and appraisal of the overall regulatory framework. With regard to the banking system,
the ongoing efforts to align the prudential regulatory framework with global standards were carried forward.
Alongside improvements in corporate governance, risk management and credit delivery, cyber security was
strengthened while leveraging on technology. Past efforts for resolution of stressed assets seemed to start
showing results: after reaching a peak of 11.5 per cent at end-March 2018, a decline in the gross non-performing
assets (GNPA) ratio of scheduled commercial banks (SCBs) set in, taking it down to 8.5 per cent by end-March

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2020. The provision coverage ratio of SCBs improved significantly for the third consecutive year to reach 65.4 per
cent in March 2020.

I.20 The capital to risk-weighted assets ratio (CRAR) of SCBs improved to 14.8 per cent in March 2020 (14.3 per
cent a year ago). Initiatives were taken to strengthen the regulatory and supervisory framework of the cooperative
banking sector through review of trigger-based supervisory action, constitution of boards of management for
urban cooperative banks (UCBs) with deposits of ₹100 crore or above, rationalisation of exposure norms for single
and group borrowers of UCBs and amalgamation of district central cooperative banks in Kerala and development
of Central Fraud Registry (CFR) for UCBs. Further, the regulatory powers of the Reserve Bank were strengthened by
the amendments in certain sections of the Banking Regulation Act 1949, thereby bringing additional areas of
functioning of cooperative banks under its regulatory purview.

I.21 The asset-liability management framework for non-banking financial companies (NBFCs) was strengthened,
including revisions in liquidity risk management to align it with that of the banking sector. Regulation of housing
finance companies (HFCs) and wider supervisory powers over NBFCs were vested with the Reserve Bank.
Technology-enabled customer services, customer protection and strengthening of fraud detection were
concurrent pursuits.

I.22 Financial inclusion was taken forward with the release of the National Strategy for Financial Inclusion, 2019-24
and measures were undertaken for deepening the digital payment ecosystem. Further, efforts towards enhancing
financial literacy were also intensified. Under the roadmap for providing banking services in villages, as on
September 30, 2019, 99.2 per cent of the identified villages across the country with population less than 2,000 had
been provided with banking services, while 94.4 per cent of the identified villages with population more than 5,000
were provided access to banking services.

I.23 Driven by the Payment and Settlement Systems Vision 2019-21, efforts were made towards developing
efficient and secure payment and settlement systems with focus on the availability of user-friendly platforms at
affordable costs. The Reserve Bank worked towards expanding the reach of Unified Payments Interface (UPI) and
RuPay cards globally. Incentives were designed to promote digital payment usage. Improvements in customer
service included availability of National Electronic Funds Transfer (NEFT) on 24x7x365 basis, increase in operating
hours of Real Time Gross Settlement (RTGS), e-mandates on cards, Prepaid Payment Instruments (PPIs) and UPI,
expansion of biller categories under the Bharat Bill Payment System (BBPS) and enhancing the usage of National
Electronic Toll Collection (NETC) system. The share of digital transactions in the total volume of non-cash retail

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payments increased to 97.0 per cent during 2019-20, up from 95.4 per cent in the previous year. Currency
management was strengthened by replacement of currency verification and processing systems and integration of
currency management functions with the core banking solution of the Reserve Bank.

I.24 Turning the page back to the existential question, the available evidence did seem to converge on detecting a
cyclical downturn in India – synchronised globally – through 2018-19 and 2019-20, following one of the longest
expansions in recent history. Just as the decelerating phase of the cycle appeared to be troughing towards the
close of 2019-20, COVID-19 arrived and wrenched the narrative asunder. Today, the jury is out on a wide array of
possibilities that can characterise the future. They span from a V-shaped rebound due to a volcanic eruption of
pent-up, unlocked demand that sets the stage for a rising trajectory of renewed expansion, through a diversity of
intermediate iterations; to a structural stagnation brought about by behavioural and demographic changes. On this
sombre note, it is appropriate to gaze at what lies ahead in 2020-21 and beyond.

Prospects for 2020-21

I.25 After plunging off a precipice in March and undergoing a contraction in the first half of 2020 that is widely
regarded as deeper and more destructive than the Great Depression and the GFC, the global economy is starting to
break out of the free fall. Activity is beginning to bottom out in Q3:2020 as unlocking of economies begins in
varying degrees and pent-up demand is released. The easing of containment and social distancing has, however,
been hesitant, and has stalled in various countries due to fresh waves of infections and mortality. All around,
supply chains and production structures are in disarray and commodity prices, especially those of metals, are
reflecting the supply shock. The bigger impact of the pandemic has been on demand. The prices of non-
discretionary essential items have surged even as many discretionary items have gone out of transactions.
Precautionary saving instincts have gripped businesses and households amidst heightened risk aversion, while the
appetite for investment has evaporated. The pandemic has also exposed new inequities – white collar employees
can work from home while essential workers have to work on site, exposed to the risk of getting infected. In some
areas of work such as hospitality, hotels and restaurants, airlines and tourism, employment losses are more severe
than in other areas. The poorest have been hit the hardest.

I.26 A defining feature of the COVID-19 experience has been the unprecedented policy response. According to the
IMF, the total stimulus package (liquidity and fiscal measures) for G20 countries averaged 12.1 per cent of GDP (5.1
per cent of GDP for EMEs and 19.8 per cent of GDP for AEs). The policy fight back has calmed financial markets and
even produced asset price inflation out of sync with the underlying state of economic activity, prevented financial

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institutions and corporations from collapsing, and provided some protection to household incomes. Fiscal rules
have been set aside. The unparalleled expansion of central bank balance sheets, unbridled by conscience-keeping
inflation, has implied that they may be tacitly financing the stimulus, including by keeping interest rates unusually
low while debt, both public and private, swells in the virtual absence of servicing constraints. The outcome is that
governments and central banks are increasingly taking on the role of resource allocation that has traditionally been
performed by markets. This can inevitably bring in political consequences unless these authorities fashion timely
and credible exits after the virus has been overcome and the vaccine found. In the rain shadow of these
developments, the role of banks and non-banking financial entities as primal financial intermediaries has waned
while capital and bond markets have taken over. In all this, the usual risks are relegated to the background where
they may be sinisterly mutating – fiscal dominance; inflation; leverage; market failure. Meanwhile, the crisis
presents opportunities and the shape of the future will depend on how well they are exploited.

I.27 Global economic activity is well below pre-COVID levels. In Q1:2020, GDP contracted in the range of 1.2-13.6
per cent among AEs; among EMEs, growth varied between 4.5 per cent and (-) 6.8 per cent. Early GDP releases and
high frequency indicators suggest that contractions have been severe in Q2, while for Q3 the near-term outlook
remains clouded with available high-frequency indicators presenting a mixed picture. The global manufacturing
PMI emerged out of a 5-month contraction and rose to 50.3 in July. The global services PMI also posted a rise into
expansion at 50.5 in July. According to the World Trade Organisation (WTO), the volume of merchandise trade
shrank by 3.0 per cent year-on-year in Q1, but early estimates suggest a fall of 18.5 per cent in Q2. Global primary
commodity prices (released by the IMF) contracted in the first half of the year, going down by 13.4 per cent in July
2020 over December 2019. Crude oil prices have recovered after sharp falls in March and April on continuing
supply cuts by OPEC plus countries and improved demand prospects on gradual easing of lockdown restrictions –
Brent crude oil prices averaged at $42.8 per barrel in July 2020, up from a low of $23.3 per barrel in April 2020.
Gold prices had a remarkable performance, increasing by 25 per cent in July 2020 over December 2019, with the
ultra-high level of uncertainty spurring flights to safety. Apart from metals, food prices have surged since May,
reflecting supply disruptions. These factors have also moved inflation outcomes. In AEs, sizeable slack in demand
has kept inflation muted, whereas in several EMEs, spikes in food prices have shown up in headline inflation
firming up relative to recent history.

I.28 In its latest update (June 2020), the IMF has projected global growth at (-) 4.9 per cent for 2020, with a steeply
negative impact on economic activity in H1 and more gradual recovery than expected earlier. India’s growth is
projected at (-) 4.5 per cent for 2020-21. The projections set out by the OECD on June 10, 2020 present two
scenarios– single hit and double hit1 – the latter being one in which a second wave of rapid contagion erupts later
in 2020. Global growth is projected at (-) 6.0 per cent in the single hit scenario and (-) 7.6 per cent in the double hit

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scenario [India’s growth is projected at (-) 3.7 per cent and (-) 7.3 per cent, respectively, in 2020-21]. In the Global
Economic Prospects, the World Bank has projected the deepest global recession in eight decades in 2020, almost
three times as steep as the global recession of 2009, despite unprecedented policy support. Some developments
suggest that the shrinkage of world trade may be bottoming out in the third quarter of 2020. Global commercial
flights, which carry a substantial amount of international air cargo, had slumped by (-) 74.0 per cent between
January and April, but they rose 58.0 per cent through mid-June. Container port throughput also appears to have
staged a partial recovery in June, along with new export orders in PMIs. In April 2020, the WTO set out a relatively
optimistic scenario in which the volume of world merchandise trade in 2020 would contract by 13.0 per cent in
2020 and a pessimistic scenario in which trade would fall by 32.0 per cent. Given the contractions in global trade in
Q1 and Q2, meeting the optimistic projection for the year would require 2.5 per cent growth per quarter for the
rest of the year.

I.29 Turning to India, the NSO’s estimates of GDP for Q1:2020-21 are slated to be released on August 31.
Meanwhile, high frequency indicators that have arrived so far point to a retrenchment in activity that is
unprecedented in history. Moreover, the upticks that became visible in May and June after the lockdown was
eased in several parts of the country, appear to have lost strength in July and August, mainly due to reimposition
or stricter imposition of lockdowns, suggesting that contraction in economic activity will likely prolong into Q2. The
total e-way bills issuance, an indicator of domestic trading activity, increased by 70.3 per cent in June 2020 on a
month-on-month (m-o-m) basis; in July, however, it increased by only 11.4 per cent m-o-m and remained 7.3 per
cent lower than a year ago. During June 2020, inter-state e-way bills had increased by 91.3 per cent, but in July
they rose only by 15.3 per cent. Similarly, intra-state e-way bills, which had risen by 60.1 per cent (m-o-m) in June,
increased only by 9.1 per cent in July. The Google mobility trend, which tracks movement of people as a reflection
of underlying economic activity, picked up in June 2020 from its levels in April and May. Mobility around groceries
and pharmacies reached pre-COVID-19 levels, while mobility relating to retail and recreation was around 60.0 per
cent and transit activity was 40.0 per cent lower than that of February 2020 levels. In July, however, moderation
set in, with retail and recreation mobility stagnant, and some slide in people’s movement around groceries and
pharmacies.

I.30 Going forward, government consumption is expected to continue pandemic-proofing of demand, and private
consumption is expected to lead the recovery when it takes hold, with non-discretionary spending leading the way
until a durable increase in disposable incomes enables discretionary spending to catch up. An assessment of
aggregate demand during the year so far suggests that the shock to consumption is severe, and it will take quite
some time to mend and regain the pre-COVID-19 momentum. Private consumption has lost its discretionary
elements across the board, particularly transport services, hospitality, recreation and cultural activities.

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Behavioural restraints may prevent the normalisation of demand for these activities. The Reserve Bank’s survey for
the month of July indicates that consumer confidence fell to an all-time low, with a majority of respondents
reporting pessimism relating to the general economic situation, employment, inflation and income; however,
respondents indicated expectations of recovery for the year ahead. Urban consumption demand has suffered a
bigger blow – passenger vehicle sales and supply of consumer durables in Q1: 2020-21 have dropped to a fifth and
one third, respectively, of their level a year ago; air passenger traffic has ground to a halt. Rural demand, by
contrast, has fared better. Among underlying indicators, tractor sales picked up by 38.5 per cent in July, spurred by
the robust pace of kharif sowing, while the contraction in motorcycle sales eased in July (from 35.2 per cent in June
to 4.9 per cent in July). The decline in production of consumer non-durables turned positive in June. A fuller
recovery in rural demand is, however, being held back by muted wage growth which is still hostage to the migrant
crisis and associated employment losses. Initiative under the Pradhan Mantri Garib Kalyan Rojgar Abhiyaan is likely
to generate employment in rural areas. Along with increased wages under the Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA), they should provide a fillip to rural incomes.

I.31 Government consumption spending has provided a measure of relief, with central government’s revenue
expenditure, net of interest payments and major subsidies, having risen by 33.7 per cent in the first quarter of the
year. Public finances have, however, been stretched by the imperative to mitigate the impact of COVID-19 and
headroom for continuing support to aggregate demand may be severely diminished. In the case of state finances,
space is likely to be squeezed so much that cuts in growth-giving capital expenditure seem quite probable. The
future path of fiscal policy is likely to be heavily conditioned by the large overhang of debt and contingent liabilities
incurred during the pandemic. A credible consolidation plan, specifying actionables for reduction of debt and
deficit levels, will earn confidence and acceptability, rather than just extending the path of touch-down. As the
wind-down begins and consolidation resumes, it is prudent to expect lower contributions of GFCE to overall
demand. In order to boost fiscal revenues and mitigate the pains of this transition, big data and technology can be
leveraged to track and identify tax defaulters, increase the tax payer base by tracking their income and wealth
parameters, and by addressing the challenges confronting the GST regime through rationalisation, simplification of
returns and procedures, including automatic invoice matching, intelligence, enforcement, inspection and audit. It is
worthwhile to consider an evaluation of the experience with GST by an independent committee which can draw on
the lessons gained so far to recommend the way forward. Fiscal incentives for industry can be re-aligned in favour
of productive labour-intensive companies so as to generate employment.

I.32 Indicators of investment demand – the production of capital goods contracted by 36.9 per cent in June 2020 (-
64.4 per cent in April-June 2020) and import of capital goods contracted by 24.7 per cent in July 2020 (-46.7 per
cent in April-June 2020). The construction sector exhibited a sharp downturn, as reflected in consumption of steel

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in July 2020 (-29.1 per cent and -57.9 per cent in April-June 2020) and production of cement which contracted by
6.9 per cent in June 2020 (-38.8 per cent in April-June 2020). Declining capacity utilisation, the weakening of
consumption demand and the overhang of stressed balance sheets are restraining new investment. The corporate
tax cut of September 2019 has been utilised in debt servicing, build-up of cash balances and other current assets
rather than restarting the capex cycle. These underlying developments suggest that the appetite for investment is
anaemic and in need of more reforms.

I.33 Targeted public investment funded by monetisation of assets in steel, coal, power, land, railways and
privatisation of major ports by central and state governments under an independent regulator can be the way
forward to revive and crowd in private investment. In fact, goods and services tax (GST) Council type of apex
authorities can be set up in respect of land, labour and power to drive structural reforms. They could include
speedier implementation of the national infrastructure pipeline, a north-south and east-west road corridor
together with a high-speed rail project that build on the successes of the golden quadrilateral, alongside steps to
improve business sentiment and the environment for investment. States can be encouraged to publicise the
availability of litigation-free land in their jurisdictions with access to modern infrastructure. In the power sector,
the opportunity has arrived to leapfrog India into becoming the world leader in renewable energy by incentivising
the domestic production of solar panels and connecting dispersed transmission links with remote areas. For the
sector as a whole, elimination of cross-subsidisation through the tariff structure and provision of subsidy, if any,
through direct benefit transfer (DBT) should be a priority, along with due consideration to the privatisation of
electricity distribution companies (DISCOMS). With regard to railways, there is a strong case for manufacturing
units to be corporatised. The growth potential of land banks can be exploited, particularly in metropolitan areas,
by long-term leasing to the private sector, including for development of commercial real estate. FDI into railways
can be encouraged by removing bottlenecks in the access to infrastructure – land; procurement rules; project risk-
sharing mechanisms. A comprehensive policy is needed with regard to building adequate reserves of strategic
materials, including the initiatives undertaken for crude oil.

I.34 There is clearly a need for diversifying financing options. Alternatives to bank finance have to be assiduously
cultivated – capital markets and FDI offer opportunities to bring in investors with a relatively longer-term view that
is conducive to attracting durable capital as well as embedded technology. The setting up of the National
Investment and Infrastructure Fund (NIIF) in 2015 is a major strategic policy response in this direction. Promotion
of the corporate bond market, securitisation to enhance market-based solutions to the problem of stressed assets,
and appropriate pricing and collection of user charges should continue to receive priority in policy attention. There
is also a need for expanded footprints for specialised NBFCs classified as Infrastructure Finance Companies.

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I.35 The progress made on building a modern physical infrastructure in the country over the last five years has
been noteworthy in the areas of roads, civil aviation and airport connectivity, telecommunication (including
internet and broadband penetration), and ports. India has also recorded an impressive growth in metro rail
projects for urban mass transportation. Nonetheless, the infrastructure gap remains large, needing around US $4.5
trillion of investment by 2040, as per the Economic Survey 2017-18, with emphasis on upgrading the poor quality
of infrastructure. India is currently ranked 70 out of 140 countries for infrastructure quality in the Global
Competitiveness Index and logistics performance. India’s ranking in the World Bank’s Logistics Performance Index
(LPI) is also low at 44 among 160 countries. Non-performing assets (NPAs) relating to infrastructure lending by
banks has also remained at elevated levels. In the context of COVID-19, a big push to certain targeted mega
infrastructure projects can reignite the economy.

I.36 It is also time to turn to the unlocking of entrepreneurial energies and risk appetite by improving the business
environment. Faster enforcement of contracts, including through expansion of judicial and insolvency capacities,
would be a game changer. Property registrations can be speeded up from the current 58 days, and a centralised
website can provide real time information on all regulatory compliance requirements. In general, the compliance
burden can be streamlined substantially. The COVID-19 crisis can be converted into an opportunity by using online
provision of education and training to implement reforms in the social infrastructure by skill development and
reskilling so as to prepare a labour force equipped to keep pace with a big thrust on infrastructure.

I.37 Information and communication technology (ICT) has been an engine of India’s economic progress for more
than two decades now. Leveraging on ICT has to be a key element of the future development strategy by reducing
transaction and communication costs and by improving the quality of capital. This could generate productivity
gains all around, with competent, reliable, and low-cost supply of knowledge-based solutions in India and
overseas. Indian IT firms are at the forefront of developing applications using artificial intelligence (AI), machine
learning (ML), robotics, and blockchain technology. This niche advantage needs to be leveraged to strengthen
India’s position as an innovation hub, coupled with India’s ‘Start-up India’ campaign which recognises the potential
of young entrepreneurs of the country and aims at providing them a conducive ecosystem. While HealthTech and
FinTech are the leading segments, Indian entrepreneurs can capitalise on opportunities across other sectors and
markets, and increase the depth and breadth of this ecosystem, especially in serving small and medium businesses,
and low and middle-income groups. Even before COVID-19, a global technological churn was underway, with rapid
advances in digital technologies and state-of-the-art computing/analytical capabilities. While non-tariff barriers
and issues relating to data privacy and data security may pose challenges, creative destruction is an integral
feature of a robust dynamic economy. The IT sector is best placed to drive this process and also manage its
consequences. Promoting young firms and start-ups and ensuring their survival will be critical for greater

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employment generation and higher productivity-led economic growth in India. It will be essential to reorient
resources and policy focus in this direction. Dynamic entrepreneurship, innovation and the ability to nurture ideas
to actualisation embodied in start-ups are the hallmarks of success in ICT.

I.38 Exports hold the key to a viable balance of payments and a dynamic manufacturing sector. The pandemic has
transformed the international environment for global value chains, with implications for the choice of product-
destination mix underlying a dynamic export strategy. Rather than spreading resources thinly and widely, it is time
to identify sunrise export categories that are reaping productivity gains and have dynamic linkages, both horizontal
and vertical, that strengthen footholds in emerging global value chains. For electronic goods for instance, the
ongoing diversification of production bases presents opportunities, provided India is able to leverage on FDI into
high-end segments in order to compete with currently preferred destinations for companies on the look out for
new locations for their manufacturing facilities. India has always enjoyed a comparative advantage in generic drugs
and pharmaceuticals exports, being the largest supplier in the world. India needs to regain its market share in
active pharmaceutical ingredients (APIs) by developing cost-effective and high-quality manufacturing processes
compliant with global standards. Another group of exports in which India’s competitive edge is progressively being
lost to new competition

- Readymade garments; gems and jewellery

- Is traditionally labour-intensive; regaining competitiveness hinges around labour reforms that

unfetter scale economies.

I.39 Foreign trade policy should increasingly focus on leveraging exports via free/preferential trade arrangements.
In this context, completion of the India-EU free trade agreement and a post-Brexit free trade agreement/
preferential arrangement with the UK may confer early mover advantages. India also needs to tie up special trade
arrangements with countries supplying rare materials that are essential to new export products which are gaining
ascendency in the competitiveness ladder. Designing a robust framework for promoting already identified sectors
– auto parts; drugs and pharmaceuticals; electronics; textiles; food processing – to enhance their productivity
should be a central feature of the export strategy, alongside exploitation of productivity gains from sectors such as
ICT, finance and business services. The strategy will also require more efficient logistics through achievement of
the targets set under the National Trade Facilitation Plan, which aims to transform the trade ecosystem by
reducing the time and cost of doing business. For many of India’s traditional exports, especially agricultural and

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allied products, stability in trade policy is critical, alongside a better alignment with the goal of doubling farm
incomes. In the context of exports of manufactures, a renewed focus on special economic zone (SEZ) type cluster-
based manufacturing export launching pads may be apposite to establish centres of manufacturing excellence
which also leverage on the natural link between exports and FDI.

I.40 Turning to production activity, Indian agriculture is undergoing a distinct transformation, notwithstanding
headwinds. The total production of foodgrains reached a record 2,966.5 lakh tonnes in 2019-20, while total
horticulture production – accounting for about 40 per cent of GVA in the farm sector – also reached an all-time
high of 3,204.8 lakh tonnes. India is now among the leading producers of milk, cereals, pulses, vegetables, fruits,
cotton, sugarcane, fish, poultry and livestock in the world. These achievements stand out in the overcast of gloom
on the outlook. They have provided the confidence to enact and continue with the historic National Food Security
Act (NFSA) which converts food security programmes into legal entitlements of subsidised foodgrains to two-thirds
of the population. Moreover, in the wake of the nationwide lockdown, the Government of India announced the
world’s largest food security scheme, the Pradhan Mantri Garib Kalyan Anna Yojana, for 80 crore ration card
holders. For non-ration card holders – particularly migrant labourers, stranded and the needy families – a provision
of 8 lakh tonnes of foodgrains has been made under the Atmanirbhar Bharat Abhiyan package.

I.41 Going forward, shifting the terms of trade in favour of agriculture is the key to sustaining this dynamic change
and generating positive supply responses in agricultural production. Experience shows that in periods when the
terms of trade remained favourable to agriculture, annual average growth in agricultural gross value added (GVA)
exceeded 3 per cent. Hitherto, the main instrument of incentive has been minimum support prices, but the
experience has been that price incentives have been costly, inefficient and even distortive. India has now reached
a stage in which surplus management has become a major challenge. The priority is to move to policy strategies
that ensure a sustained increase in farmers’ income alongside reasonable food prices for consumers. An efficient
domestic supply chain becomes critical here. Accordingly, the focus must now turn to the major reforms that are
underway to facilitate free trade in agriculture. First, the amendment of the Essential Commodities Act (ECA) is
intended to encourage private investment in supply chain infrastructure, including warehouses, cold storages and
marketplaces. Second, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 is
aimed at facilitating barrier-free trade in agriculture produce. Third, the Farmers (Empowerment and Protection)
Agreement on Price Assurance and Farm Services Ordinance, 2020 will empower farmers to engage with
processors, aggregators, wholesalers, large retailers, and exporters in an effective and transparent manner. With
this enabling legislative framework, the focus must turn to (a) crop diversification, de-emphasising water guzzlers,
however politically difficult it may be; (b) food processing that enhances shelf life of farm produce and minimises

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post-harvest wastes; (c) agricultural exports which expose the Indian farmer to international terms of trade and
technology; and (d) public and private capital formation in the farm sector.

I.42 Indian manufacturing has been locked in a structural slowdown for quite some time. Reversing this decline
warrants a complete rethink. The quality and efficiency of the physical infrastructure, which still significantly lags
behind the global median, has to be enhanced to help manufacturing take off. Benchmarking systems and
procedures with the best in the world could galvanise growth in the sector, aided by cleaning up of stressed
balance sheets of corporates by raising the efficiency of bankruptcy and solvency procedures. Large Indian firms
need to diversify their financing needs and reduce their excessive dependence on bank-based system, particularly
for infrastructure financing. The need for a workable public-private partnership model specific to India cannot be
over emphasised. Legacy issues of the Indian economy, viz., lengthy processes of land acquisition and payment of
compensation, environmental clearances, and time and cost overruns due to delays in project implementation,
need to be resolved with urgency. Reforming labour regulations and increasing female participation in the work
force through affirmative actions will bring down cost of production and improve productivity.

I.43 The MSME sector has the potential to become the engine of growth, but it has been underperforming for too
long owing to various structural reasons. This sector has been constrained by high cost of credit due to lack of
adequate information, lack of modern technology, no research and innovations, insufficient training and skill
development, and complex labour laws. Key reforms relating to MSMEs, viz., removal of definitional difference
between manufacturing and service-based MSMEs, increased threshold limit to define an enterprise as an MSME,
and adding turnover as another criteria to define MSMEs, besides investment scale, could turn out to be
harbingers of far reaching changes that can transform manufacturing in India.

I.44 Over the last two decades, the Indian economy has been driven by the services sector, which comprises a
heterogenous group of economic activities with varying degree of skill and organisational requirements across
banking and finance, education, healthcare, information technology, tourism, transport, telecom, trade including
e-commerce and space. After a peak in 2014-15, however, the services sector has undergone a sustained
moderation. Apart from generating productivity gains that boost output, the role of services in India assumes
importance from the point of view of employment generation as it is the biggest employer with a share of 44.4per
cent2 in measured employment.

I.45 During the last three decades, the successes achieved in ICT need to be expanded in other sectors, particularly
in healthcare and tourism, where India has an inherent advantage. There is also an urgent need to nurture talent

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which can exploit emerging opportunities in space technology, internet of things (IoT) and cyber security as well. It
would be essential to reorient resources and policy focus in this direction. Innovation and the ability to nurture
ideas into reality would be the key challenge. In this context, private enterprise and investment have the major
role.

I.46 Under the flexible inflation targeting framework adopted in 2016, headline CPI inflation has averaged 3.9 per
cent up to 2019-20, closely aligned with the target of 4 per cent. This has imparted credibility to the conduct of
monetary policy, instilled investor confidence and anchored inflation expectations. It has also enabled the re-
orientation of monetary policy to support growth which has been decelerating continuously for eight consecutive
quarters. Accordingly, the repo rate has been reduced by a cumulative 250 basis points since February 2019,
supported by liquidity injections of close to 5.0 per cent of GDP. The level of the repo rate is at its lowest ever. This
coordinated strategy has kept financial markets and financial institutions functioning normally, alleviated liquidity
stress due to the outbreak of COVID-19, provided households and businesses with confidence by substantially
easing financial conditions, and has kept the lifeblood of finance flowing.

I.47 In its early August 2020 meeting, the MPC noted the heightened uncertainty surrounding the macroeconomic
outlook on account of supply chain disruptions and cost push pressures. It expected headline inflation to remain
elevated in Q2:2020-21, but likely to ease in H2:2020-21, aided by favourable base effects. As regards the outlook
for growth, the MPC expected real GDP growth for the year 2020-21 as a whole to be negative. The MPC was of
the view that an early containment of the COVID-19 pandemic may impart an upside to the outlook. A more
protracted spread of the pandemic, deviations of the monsoon from the forecast of a normal and global financial
market volatility are the key downside risks. In this environment, the MPC observed that supporting recovery of
the economy assumes primacy in the conduct of monetary policy. While space for further monetary policy action is
available, it is important to use it judiciously to maximise the beneficial effects for underlying economic activity.

I.48 At the same time, the MPC was conscious of the upside risks to its medium-term inflation target. With
headline inflation ruling above the upper tolerance band around the target, but with economic activity and the
outlook remaining weak and uncertain, the MPC noted that the cumulative reduction of 250 basis points was
working its way through the economy, lowering interest rates in money, bond and credit markets, and narrowing
down spreads. Accordingly, the MPC decided to stay on hold, while awaiting a durable reduction in inflation to use
available space to support the revival of the economy.

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I.49 Turning to the financial sector, Indian banking has to be liberated from the risk aversion that is impeding the
flow of credit to the productive sectors of the economy and undermining the role of banks as the principal financial
intermediaries in the economy. The deterioration in the macroeconomic and financial environment is impinging on
asset quality, capital adequacy and profitability of banks. Regulatory dispensations that the pandemic has
necessitated in terms of the moratorium on loan instalments, deferment of interest payments and restructuring
may also have implications for the financial health of banks, unless they are closely monitored and judiciously
used. Although gross and net non-performing asset ratios had come down in March 2020 along with receding
slippage ratios, the economic fallout of the pandemic is likely to test this resilience, especially since the regulatory
accommodations announced in the wake of the outbreak have masked the consequent build-up of stress. Macro
stress tests reported in the July 2020 Financial Stability Report suggest that non-performing assets may surge 1.5
times above their March 2020 levels under the baseline scenario and by 1.7 times in a very severely stressed
scenario. The system level CRAR can drop to 13.3 per cent in March 2021 from its March 2020 level under the
baseline scenario and to 11.8 per cent under the very severe stress scenario.

I.50 Against this backdrop, a recapitalisation plan for public and private sector banks assumes critical importance.
The minimum capital requirements, which are calibrated on the basis of historical loss events, may no longer
suffice to absorb post-pandemic losses. The Reserve Bank has already advised banks and NBFCs to carry out
COVID-19 stress tests and take necessary remedial measures proactively. The ability to raise capital as well as build
resilience to ensure financial stability in anticipation of more frequent, varied and bigger risk events than in the
past shall be contingent on the governance standards in banks, particularly on strength of risk governance
framework. In this regard, the Reserve Bank has released a discussion paper on “Governance in Commercial Banks
in India” with the objective of aligning the regulatory framework with global best practices while being mindful of
the context of the domestic financial system. The main emphasis of the discussion paper is to empower the Board
of Directors. The Board, on its part, should set the culture and values of the organisation; recognise and manage
conflicts of interest; set the appetite for risk and manage risks within that appetite; exercise oversight of senior
management; and empower the oversight and assurance functions through various interventions. In tandem with
the evolving regulations, the supervisory approach of the Reserve Bank will have to be two-pronged – first,
strengthening the internal defences of regulated entities; and second, greater focus on identifying the early
warning signals and initiating corrective action. Greater emphasis will need to be placed on the assessment of
business models, governance and assurance functions (compliance, risk management, internal audit and vigilance
functions). It is important to reiterate that post-containment of COVID-19, a very careful trajectory has to be
followed in orderly unwinding of regulatory measures and the financial sector should return to normal functioning
without relying on the regulatory relaxations as the new norm.

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I.51 Coming to the NBFC sector, non-traditional and digital players are entering this space to deliver financial
services by way of innovative methods involving digital platforms. The goal of the Reserve Bank is to strengthen
the sector, maintain stability and reduce the scope for regulatory arbitrage. An optimal level of regulation and
supervision is sought to be achieved so that the NBFC sector is financially resilient and robust, catering to financial
needs of a wide variety of customers and niche sectors, and providing complementarity and competition to banks.
The NBFC sector largely depends on market and bank borrowings, thereby creating a web of inter-linkages with
banks and financial markets. As Housing Finance Companies (HFCs) now fall under the regulatory purview of the
Reserve Bank, the process of harmonising regulations for HFCs with those applicable for NBFCs assumes priority. A
robust liquidity risk management framework is in place for NBFCs and should, in time, apply to HFCs as well, with
the objective of ensuring proper governance and risk management structures, including functionally independent
chief risk officer (CRO) with clearly specified role and responsibilities. Due recognition of the systemic importance
of NBFCs/HFCs and their inter-linkages with the financial system and ensuring higher credit flow by appropriately
modulating exposure limits, enabling commercial bank lending to NBFCs and co-financing, and fostering active
engagement with stakeholders are the hallmarks of the evolving engagement with the sector.

I.52 In the wake of COVID-19, lockdowns and the requirement of social distancing are providing an impetus to the
wider adoption of digital payments. The operationalisation of the Payments Infrastructure Development Fund
(PIDF) is expected to provide the impetus to deployment of acceptance infrastructure across the country, more so
in underserved areas, and facilitate digitisation of payment transactions. The Reserve Bank will promote
development of offline payment solutions to further deepen the digital payments across the country. The recently
released framework for authorisation of new pan-India Umbrella Entity for retail payment systems will provide a
fillip to innovation and competition in the payments landscape and minimise concentration risk in retail payment
systems. The establishment of self-regulatory organisation(s) will be encouraged to increase industry participation
in the regulatory and supervisory process. Other initiatives include encouraging authorised payment system
operators to put in place Online Dispute Resolution (ODR) system for failed transactions.

I.53 Several initiatives are underway to transform the payments landscape in the country. Centralised payment
systems, viz., the RTGS system is available for customer transactions from 7 am to 6 pm; and since December 2019,
the NEFT system operates round the clock – 24x7x365. Another objective has been to drive down the cost of
digital transactions. Accordingly, processing charges for NEFT/RTGS applicable to member banks have been waived
and they, in turn, have been advised to extend this benefit to their customers. The path ahead will involve
establishing an Innovation Hub for the financial sector for innovative idea generation, licensing of National
Payments Corporation of India (NPCI)- like umbrella organisation(s) to foster competition and the development of
payment systems.

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I.54 Under ‘Utkarsh 2022’, which sets out the medium-term strategy of the Reserve Bank consistent with its core
purpose, mission and vision, the major deliverables adopted for the year ahead in various functional areas cover a
wide canvas. A dashboard will be developed for monitoring strategy execution. In the area of regulation and
supervision, a specialised cadre will be developed with the requisite skills and expertise, and it will be backed up by
a comprehensive supervisory database by linking up existing databases. Guidelines on securitisation and
operational risk will be set out in conformity with Basel III standards. Financial inclusion will be taken forward by
developing online financial literacy modules targeting specific sections of society. Consumer protection will be
bolstered by the financial education framework for creating awareness among members of public and by
implementing the recommendations of the in-house Committee for integrating three existingOmbudsman
Schemes3 into one Scheme. Financial market development will include developing a credit derivative market,
introduction of separate trading of registered interest and principal of securities (STRIPS) in State Development
Loans (SDLs) and the rationalisation of FEMA regulations for overseas direct investment. These initiatives would be
supported by technological developments in the form of upgrading Structured Financial Messaging Solution
(SFMS), improving penetration of acceptance infrastructure and the facilitation of point of sale (PoS) in smaller
centres. Training policies to upgrade the skill set of the Reserve Bank’s personnel will focus on issues related to
supply (courses offered for training), delivery (who delivers which courses, where and how) and assessment (of
institutions, trainers and trainees). In the context of developing the physical infrastructure, the goal will be to
obtain relevant ratings from Indian Green Building Council (IGBC)/ Green Rating for Integrated Habitat Assessment
(GRIHA) for at least one existing office and five existing residential buildings.

I.55 These future strategies will also require the Reserve Bank to be logistically empowered. The Reserve Bank is in
the process of revamping its data warehouse system into a new state-of-the-art Centralised Information
Management System (CIMS) covering data acquisition to dissemination and analytics spread across most business
areas of the Reserve Bank. A separate testing environment (sandbox) has been set up for simulating new
technologies in a secure manner. It will be used for testing system-to-system integration of banks’ Management
Information System (MIS) servers with the CIMS. The Central Information System for Banking Infrastructure (CISBI),
which supports banking network and financial inclusion policies, will be expanded by including co-operative banks,
ATMs and fixed-location business correspondents (BCs). The Central Fraud Registry (CFR) portal of SCBs,
augmented with new features is at an advanced stage of development. The Reserve Bank’s Data Science Lab (DSL)
will work towards improving data quality, forecasting, surveillance, early warning detection abilities, and
employing big data analytics to provide inputs for policy formulation and monitoring. The DSL will be expanded to
consist of an interdisciplinary team of experts comprising data scientists, statisticians, economists and IT
personnel, who would use various techniques encompassing programming, statistical methods, text and data

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mining and machine learning in various areas of interest to the Reserve Bank. A Granular Data Access Lab (GDAL)
has been planned in the CIMS environment in which techniques of data masking and other access restrictions are
envisaged to protect confidentiality of granular data.

I.56 The pandemic will inflict deep disfigurations on the world economy. The shape of the future is heavily
contingent upon the evolving intensity, spread and duration of COVID-19 and the discovery of the elusive vaccine.
Post-COVID-19, the overwhelming sense is that the world will not be the same again and a new normal could
emerge. As in the rest of the world, India’s potential output can undergo a structural downshift as the recovery
driven by stimulus and regulatory easing gets unwound in a post-pandemic scenario. Moreover, this recovery is
likely to be different – the GFC occurred after years of robust growth with macroeconomic stability; by contrast,
COVID-19 has hit the economy after consecutive quarters of slowdown. Furthermore, the GFC was essentially a
financial meltdown whereas the pandemic is a health crisis, which have deleterious ramifications across real and
financial sectors. So far, policy authorities have responded with an unprecedented defence, involving conventional
and unconventional measures in order to mitigate the unconscionable human and economic casualties. As
stimulus is unwound in a calibrated and non-disruptive manner in a post-pandemic scenario, deep-seated and
wide-ranging structural reforms in factor and product markets, the financial sector, legal architecture, and in
international competitiveness would be needed to regain potential output losses and return the economy to a
path of strong and sustainable growth with macroeconomic and financial stability.

 While the Reserve Bank of India’s accounting year is July-June, data on a number of variables are
available on a financial year basis, i.e., April-March, and hence, the data are analysed on the
basis of the financial year. Where available, the data have been updated beyond March 2020.
For the purpose of analysis and for providing proper perspective on policies, reference to past
years as also prospective periods, wherever necessary, has been made in this Report.

1 Under a single hit scenario, the current containment measures are assumed to be sufficient to overcome the
outbreak. In the double-hit scenario, a second wave of virus outbreak hits before the year end
(October/November) requiring return to another general lockdown.

2 Services sector inclusive of construction.

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3 Includes Banking Ombudsman Scheme, 2006; Ombudsman Scheme for NBFCs, 2018; and Ombudsman Scheme
for Digital Transactions, 2019.

Hypothesis of bop in the year 2019-20:

As per the balance of payment(bop) during 2019-20, the cad narrowed to 0.9% oh gdp in 2019-20 from 2.1% in
2018-19 on the bank of trade deficit which shrank to usd 157.5 billion in 2019-20 from usd 180.3 billion in 2018-19

Overall covid-19 effect our economy in different ways, we first get worse effects but at later stages pyr economy
slowly recovered from losses by exporting materials to different countries.

During this phase America is the 1st export partner of India and 1st import partner remains china only.

Bhopal school of social sciences, bhopal, mp

Research paper

Topic- effects of covid-19 on balance of payment of india

Submitted by- shweta shrivas

Bcom hons

Rollno. 18051146

Submitted to- vinod adwani sir

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PROJECT REPORT ON
“A STUDY ON IMPACT OF MERGER AND ACQUISITION ON
THE FINANCIAL PERFORMANCE IN

BANKING SECTOR IN INDIA”

Research Project Submitted in Partial Fulfillment of the
Requirements for the Degree of

BCOM (HONS)

by

SHWETA SINGH

to the

DEPARTMENT OF COMMERCE

BHOPAL SCHOOL OF SOCIAL SCIENCES

APRIL, 2021
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Guided by

Dr. Vinod Adwani, PhD

Assistant Professor

CERTIFICATE

It is certified that the work contained in the project report titled “A STUDY ON IMPACT OF MERGER
ACQUISITION ON THE FINANCIAL PERFORMANCE IN BANKING SECTOR IN INDIA” by SHWETA
SINGH has been carried out under my/our supervision and that this work has not been submitted elsewhere for a
degree*

Signature of Supervisor: …………….

Name : Dr . Vinod Adwani, ,Assistant Professor

Department : Commerce

Bhopal School of Social Sciences

April, 2021

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DECLARATION

I hereby declare that this project report entitled “A STUDY ON IMPACT OF MERGER
ACQUISITION ON THE FINANCIAL PERFORMANCE IN BANKING SECTOR IN
INDIA “ was carried out by me for the degree of BCOM (HONS)under the guidance and
supervision of DR.VINOD ADWANI ,ASST.PROFESSOR of Department of Commerce, BSSS
College. The interpretations put forth are based on my reading and understanding of the original
texts and they are not published anywhere in any form. The other books, articles and websites,
which I have made use of are acknowledged at the respective place in the text. This research report
is not submitted for any other degree or diploma in any other University.

SHWETA SINGH

B.COM (HONS.) 3rd C

Place: Bhopal

Date:30 April 2021

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ACKNOWLEDEMENT

I express my gratitude to Rev. Dr. Fr. John P.J.(Principal, BSSS) and Dr. Sr. Sonia Kurian
MSMI (Vice Principal, BSSS) for giving me an opportunity to be a part of this wonderful
institution, I would also like to thank Dr. Amit Kumar Nag(HOD - Dept. of Commerce) for his
support.

I would like to express a deep sense of thanks & gratitude to my project guide Dr. Vinod Adwani
,(Assistant Professor,Dept. of Commerce)for their substantial contribution of guidance,
encouragement , valuable suggestion & constant motivation have been responsible for the
successful completion of this project.Deadlines play a very important role in the successful
completion of the project on time, effectively and efficiently.

Last but not the least, I would like to thank my parents for their motivation. I must thanks to my
friends for their timely help &support for the completion of this project.

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SHWETA SINGH

TABLE OF CONTENT

S. NO. CONTENTS PAGE NO.

1 Chapter I: Introduction of the Topic 6 - 14

1.1 Rationale of the Study 7

1.2 Introduction to the industry 8-10

1.3 Introduction to the company 11-12

1.4 Justification of the topic 13-14

2 Chapter 2: Review of Literature 15-17

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2.1 International Reviews 16

2.2 National Reviews 17

3 Chapter 3 : Research Methodology 18-20

3.1 Objectives of the Study 19

3.2 Scope of the Study 19

3.4 Secondary data Study 20

3.5 Limitation of the study 20

4 Merger of PSBs in India 21-27

5 Conceptualization 28-37

6 Merger between PNB ,OBC & UBI 38-41

7 Chapter 4 : Data representation & Analysis 42-47

4.1 Data representation & Interpretation 43-47

8 Chapter 5. Results & Discussion 48-51

5.1 Major Findings 49

5.2 Discussions & Suggestions 50

5.3 Conclusion 51

References 52

Annuxure 53

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Chapter I: Introduction of the Topic

1.1 Rationale of the Study

1.2 Introduction to the Industry
1.3 Introduction to the Company
1.4 Justification of the Topic

INTRODUCTION

1.1 RATIONALE OF THE STUDY

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 With the globalization of the world economy, companies are growing by merger
and acquisition in a bid to expand operations and remain competitive. The complexity of
such transactions often makes it difficult to assess all risk exposures and liabilities, and
requires the skills of a specialist advisor.
 Banks are facing an increasingly competitive business environment, which is driving
them to constantly improve services and increase efficiency. Growth by cross-border
Mergers and Acquisitions (M&A) is one way for them to respond to this challenge, but a
number of serious obstacles still hamper this kind of expansion.
 a) Mergers and acquisitions (M&As), joint ventures (JVs) and other forms of strategic
alliances have recorded a tremendous growth in recent years.
 b) Acquisitions have become a generic strategy for many companies.
 c) To drive the global economy and control
 d) Facilitate synergies between merged organizations,
 e) Generate efficiency improvements and increase competitiveness.

f) The basic argument that M&As increase shareholder value through exploitation of synergies
is based on the assumption that the combined organization can be operated in a way that
generates greater value than would be the sum of the value generated by the “stand-alone”
companies (the 2+2>4 equation). Mergers and acquisitions (M&As) are driving most profit-
making sectors towards consolidation and concentration and nowhere is this truer than in the
financial services sector.

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1.2 INTRODUCTION TO THE INDUSTRY

History of Indian banking

The history of Indian Banking shows that seeds of banking in India were sown back in the 18 th
century when efforts were made to establish the General Bank of India and Bank of Hindustan in
1786 and 179 respectively. Later some more banks like Bank of Bengal, Bank of Bombay and the
Bank of Madras were established under the charter of British East India Company. These three
banks were merged in 1921 and it formed the Imperial Bank of India, which later became the State
Bank of India. The period between 1906 and 1911 witnessed the establishment of banks such as
Bank of India, Bank of Baroda, Canara Bank, Corporation Bank, Indian Bank and Central Bank
of India; these banks have survived to the present

Imperial Bank of India

The first major event in the history of banking in India took place in 1919 when the presidency
banks were amalgamated and “Imperial bank of India” was set up. Banking companies Inspection
ordinance was passed in January, 1946 and in February, 1946 the Banking Company’s restriction
of Branches Act was passed. In 1949, the Banking companies Act was passed which was later
amended to read as Banking Regulation Act. RESERVE BANK OF INDIA Page

Reserve Bank of India

Reserve Bank of India Act was passed in 1934 & Reserve Bank of India (RBI) was constituted as
an apex bank without major government ownership. Banking Regulations Act was passed in 1949.
This regulation brought Reserve Bank of India under government control. Under the act, RBI got
wide ranging powers for supervision &control of banks. The Act also vested licensing powers &
the authority to conduct inspections in RBI.

Nationalization of Banks

On 19 July 1969, the Government acquiring ownership and control of 14 major banks in the
country an Ordinance. This was done to bring commercial banks in to the mainstream of economic
development with definite social obligations and objectives. Later, on 5 April 1980, six more
commercial banks were nationalized.

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Automation in Banking sector

In recent years there has also been considerable change in the functioning of banks. There has been
an increase in the amount of technology used by these institutions e.g., some banks use cash
dispensers and offer twenty-four hours cash withdrawal facility, instant account details and money
transfer through computer network. Because of much more competition in the banking sector,
services have to be sold in ways never done earlier.

 Today, customers do all their banking transactions while sitting at home.

 Banks are introducing Automatic Teller Machine (ATM) cards.
 Debit and credit cards are used as well.

This promises to change the face of banking forever.

The organized banking system in India can be broadly divided into three categories:

(I) Commercial banks.

(ii) Regional Rural Banks and

(iii) Co-operative banks.

The Reserve Bank of India is the supreme monetary and banking authority in the country
and has the responsibility to control the banking system in the country. It keeps the reserves of all
commercial banks and hence is known as the “Reserve Bank". The banking sector in India can be
divided into two eras i.e., pre-liberalization era and post-liberalization era since 1991. In the pre-
liberalization era, the Government of India nationalized the 14 largest commercial banks in 1969.
A second dose of nationalization of six more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery. Later,
in the year 1993, the government merged New Bank of India with Punjab National Bank. It was
only the merger between nationalized banks and resulted in the reduction of the number of
nationalized banks from 21 to 20. the banking sector has seen a tremendous amount of change in
the post liberalization era i.e., in the early 1991; the then Narasimha Rao government embarked
the policy of liberalization. Licenses were given to small number of private banks like Global Trust
Bank, which later amalgamated with Oriental Bank of Commerce, Axis Bank (earlier UTI Bank),

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ICICI Bank and HDFC Bank. This move had augmented the growth in Indian Banking. Along
with the rapid growth in the economy of India, followed by the growth with strong contribution
from all the three sectors of banks, viz. government banks, private banks and foreign banks the
impact of globalization on Indian Banking has caused many changes in terms of regulations and
structural. With the changing environment, many different strategies have been adopted by this
sector to remain efficient and to surge at the forefront in the global arena. One such strategy is in
the course of consolidation is merger and acquisition.

 NEED OF MERGERS AND ACQUISITIONS IN BANKING INDUSTRY OF

INDIA

It is observed in literature that most of the work done on mergers and acquisition is based on
financial & accounting aspect like performance of banking institutions based on. Devos,
Kadapakkam & Krishnamurthy (2008) studied M&A as value creation, efficiency improvements
as explanations for synergies and produced evidence that suggests mergers.

Generate gains by improving resource allocation rather than by reducing tax payments of
increasing the market power of the combined firm. Kemal (2011) has used accounting ratios to
compare the post-merger profitability of two banks i.e., RBS and ABN AMRO. DeLong (2003)
studied sample of 54 bank mergers announced between 1991 and 1995, tests several facets of
focus and diversification.

 The study found that upon announcement, the market rewards the merger of partners that
focus their geography and activities and earning stream. Only of these facets, focusing
earn instreams enhances long-term performance. Shanmugam & Nair (2004) identified
factors in their study on mergers and acquisitions of banks in Malaysia like globalization,
liberalization and information technology developments have contributed to the need for
a more competitive, resilient and robust financial system
 There are few efforts have been made to measure the impact of bank’s M&A on their
employees and staff. However, apart from this some efforts have been made to study the

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state of customers in the course of M&A. Acquisitions often has a negative impact on
employee behavior resulting in counterproductive practices, absenteeism, low morale,
and job dissatisfaction. It appears that an important factor affecting the successful
outcome of acquisitions is top management’s ability to gain employee trust.
 Panwar (2011) studied ongoing merger trends in Indian banking from the viewpoint of
two important stakeholders of a banking firm- stockholders and managers.

The findings shows that the trend of consolidation in Indian banking industry has so far
been limited mainly to restructuring of weak banks and harmonization of banks and financial
institutions. Voluntary mergers demonstrating market dynamics are very few.

1.3 INTRODUCTION TO THE COMPANY

In India, the banking system has undoubtedly earned numerous outstanding achievements, in a
comparatively short time, for the World’s largest and the most diverse democracy. The reform
process of the banking sector or industry is part and parcel of the government strategic agenda
aimed at repositioning and integrating the Indian banking sector into the global financial system.
There have been several reforms in the Indian banking sector, as well as quite a few successful
mergers and acquisitions, which have helped it, grow manifold. Mergers and acquisitions are
most widely used strategy by firms to strengthen and maintain their position in the marketplace.

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M&A‟s are considered as a relatively fast and efficient way to expand into new markets and
incorporate new technologies. For instance, in 1993, Punjab National Bank acquired New Bank
of India. The only other nationalized bank merged with another except for State Bank of India
with its associate banks was the merger of Bharatiya Mahila Bank with State Bank of India in
2017. In August, 2019 the Government merged 27 public sector banks and reduced to 12. The
second largest PNB Amalgamated with- Oriental Bank of Commerce, United Bank of India and
Bank of India.

 What is Merger

Merger is defined as combination of two or more companies into a single company where one
survives and the others lose their corporate existence. The survivor acquires all the assets as well
as liabilities of the merged company or companies. Generally, he surviving company is the
buyer, which retains it identify, and the extinguished company is the seller. Merger is also
defined as amalgamation. Merger is the fusion of two or more existing companies. All assets,
liabilities and the stock stand transferred to transferee company in consideration of payment in
the form of:

 Equity shares in the transferee company,

 Debentures in the transferee company,
 Cash, or
 A mix of the above modes

 What is Acquisition?

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Acquisition in general sense is acquiring the ownership in the property. In the context of business
combinations, an acquisition is the purchase by one company of a controlling interest in the share
capital of another existing company.

 Methods of Acquisition: -

An acquisition may be affected by :

a) Agreement with the persons holding majority interest in the company management like
members of the board or major shareholders commanding majority of voting power;

b) Purchase of shares in open market;

c) To make takeover offer to the general body of shareholders;

d) Purchase of new shares by private treaty; e) Acquisition of share capital through the
following forms of considerations viz. Means of cash, issuance of loan capital, or insurance of
share capital.

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1.4 JUSTIICSTION OF THE TOPIC

The purpose for an offeror company for acquiring another company shall be reflected in the
corporate objectives. It has to decide the specific objectives to be achieved through acquisition.
The basic purpose of merger or business combination is to achieve faster growth of the corporate
business. Faster growth may be had through product improvement and competitive position.
Other possible purposes for acquisition are short listed below: -

(1) Procurement of supplies:

1. To safeguard the source of supplies of raw materials or intermediary product.

2. To obtain economies of purchase in the form of discount, savings in transportation costs,

overhead costs in buying department, etc.

3. To share the benefits of suppliers economies by standardizing the materials.

(2) Revamping production facilities:

1. To achieve economies of scale by amalgamating production facilities through more intensive

utilization of plant and resources.

2. To standardize product specifications, improvement of quality of product, expanding.

3. Market and aiming at consumers satisfaction through strengthening after sale Services.

4. To obtain improved production technology and know-how from the offered company.

5. To reduce cost, improve quality and produce competitive products to retain and improve
market share.

(3) Market expansion and strategy:

1. To eliminate competition and protect existing market.

2. To obtain a new market outlets in possession of the offeree.

3. To obtain new product for diversification or substitution of existing products and to enhance
product range.

4. Strengthening retain outlets and sale the goods to rationalize distribution.

5. To reduce advertising cost and improve public image of the offeree company.

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(4) Financial strength:

1. To improve liquidity and have direct access to cash resource;

2. To dispose of surplus and outdated assets for cash out of combined enterprise;

3. To enhance gearing capacity, borrow on better strength and the greater assets backing;

4. To avail tax benefits.

5. To improve EPS (Earning Per Share).

(5) General gains:

1. To improve its own image and attract superior managerial talents to manage its affairs;

2. To offer better satisfaction to consumers or users of the product

(6) Own developmental plans:

The purpose of acquisition is backed by the offeror company‘s own developmental plans. A
company thinks in terms of acquiring the other company only when it has arrived at its own
development plan to expand its operation having examined its own internal strength where it might
not have any problem of taxation, accounting, valuation, etc. But might feel resource constraints
with limitations of funds and lack of skill managerial personnel‘s. It has to aim at suitable
combination where it could have opportunities to supplement its funds by issuance of securities,
secure additional financial facilities, eliminate competition and strengthen its market position.

(7) Strategic purpose:

The Acquirer Company view the merger to achieve strategic objectives through alternative type
of combinations which may be horizontal, vertical, product expansion, market extensional or other
specified unrelated objectives depending upon the corporate strategies. Thus, various types of

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combinations distinct with each other in nature are adopted to pursue this objective like vertical or
horizontal combination.

(8) Corporate friendliness:

Although it is rare but it is true that business houses exhibit degrees of cooperative spirit despite
competitiveness in providing rescues to each other from hostile takeovers and cultivate situations
of collaborations sharing goodwill of each other to achieve performance heights through business
combinations. The combining corporate aim at circular combinations by pursuing this objectives.

Chapter 2: Review of Literature

2.1 International Reviews

2.2 National Reviews

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2.1 INTERNATIONAL REVIEWS:

Annalisa Caruso and Fabrizio Palmucci : Analyzed the market reaction to M&A in the
banking sector, particularly interesting because of the higher complexity of corporate governance
and the importance that the M&A activity has had in recent years in Europe, especially in Italy. In
this research they performed an event study on the Italian market (in the period 1994-2003) with
two main goals: first they observe if and when there is a positive value creation, and when private-
benefits of control represent one of the drivers of the operations; secondly investigated the
determinants of their results, looking at the characteristics of the banks, regulation, the role of
minority shareholders and that of the Bank of Italy.

Mathieu Luypaert : Empirically investigated the industry determinants of shareholder value

creation in a sample of horizontal M&As in Europe during the period 1997–2006.The results
show that industry concentration, industry-level operating performance, and the ratio of

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combined target and bidder size relative to the minimum efficient scale in the corresponding
industry are significantly negatively related to the total value creation in M&As. The relation
between industry sales growth and combined value creation is U-shaped. We also find some
evidence that the value creation in M&As is significantly higher in recently deregulated industries.
Finally, the data reveal that the distribution of M&A value between target and bidder investors is
determined by firm-level variables rather than by industry characteristics.

George E Halkos & Dimitrios (2004) : Applied non-parametric analytic technique (data
envelopment analysis, DEA) in measuring the performance of the Greek banking sector. He proved
that data envelopment analysis can be used as either an alternative or complement to ratio analysis
for the evaluation of an organization's performance. However, analysis of the causes of failure has
often been shallow and the measures of success weak.

2.2 NATIONAL REVIEWS:

Medhat Tarawneh (2006) :Financial performance is a dependent variable and measured by

Return on Assets (ROA) and the intent income size. The independent variables are the size of
banks as measured by total assets of banks, assets management measured by asset utilization ratio

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(Operating income divided by total assets) operational efficiency measured by the operating
efficiency ratio (total operating expenses divided by net income)

Vasant desai (2007): The Reserve Bank of India plays a very vital role. It is known as the banker’s
bank. The Reserve Bank of India is the head of all banks. All the money formulations of
commercial banks are done under the Reserve Bank of India. The RBI performs all the typical
functions of a good central bank as it is involved in planning the economy of the country. The
main function is that the RBI should control their credit. It is mandatory for the Bank to maintain
the external value of the rupee. Major function is that it should also control the currency.

Kuriakose Sony & Gireesh Kumar G. S (2010) : Assessed the strategic and financial similarities
of merged Banks, and the relevant financial variables of respective Banks were considered to
assess their relativity. The result of the study found that only private sector banks are in favor of
the voluntary merger wave in the Indian Banking Sector and public sector Bank are unwilling
towards their type of restructuring. Target Banks are more leverage than bidder Banks, so the
merger helps in attaining optimum capital Structure for the bidders and the asset quality of target
firms is very poor.

Anand Manoj & Singh Jagandeep (2008) : Studied the impact of merger declarations of five
banks in the Indian Banking Sector on the shareholders’ bank. These mergers were the Times Bank
merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd with the
ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and the Bank of
Punjab merged with the centurion Bank. The announcement of merger of Bank had positive and
significant impact on shareholder’s wealth.

Dangwal and Kapoor (2010) : Undertook the study on financial performance of nationalized
banks in India and assessed the growth index value of various parameters through overall
profitability indices. They found that out of 19 banks, four banks had excellent performance, five
banks had good performance and six banks had poor performance. Thus the performance of
nationalized banks differ widely.

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Chapter 3 : Research Methodology

3.1 Objectives of the Study

3.2 Scope of Study

3.3 Secondary data Study

3.4 Limitation of the Study

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RESEARCH METHODLOGY

3.1 OBJECTIVES OF THE STUDY:

1) To study the merging procedure in banks

2) To study the reasons effects of merger and acquisition in banks in India.

3) To study the impact of mergers and acquisitions on financial and employment conditions.

3.2 SCOPE OF STUDY:

The Scope of this study includes merger of Oriental Bank of Commerce and Global Trust Bank
which took place in 2004. The merger happened as per the rules of Reserve Bank of India and
after the merger the working of both banks came under one name i.e., Oriental Bank of
Commerce.

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In terms of Coverage, we took reference of all the mergers which have taken place since 1961.
This reference gave more credibility to our project and set up a good comparative study. The
study’s Main focus remained thru merger of OBC & GTB.

3.3 SECONDARY DATA STUDY:

Secondary data is being used.

-Data Analysis Procedure: The data analysis is completely based on secondary data which is
analyzed with the help of books and e- newspapers, websites, etc.

-Data Collection Procedure: This research is descriptive in nature. Secondary source of data has
been used for this from journals, magazines, books, and government sources or websites.

3.4 LIMITATION OF THE STUDY:

 Mergers & Acquisitions are hard to occur, so the information about them is very less.

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 The information was collected from secondary data, so the limitation occurred in the
exact interpretation.
 As the process of mergers and acquisitions of banks is kept secret with the general
public, so the exact procedure and the reasons behind them are difficult to find.
As the data has been taken form the books and various websites, the data available is
not recent.

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 MERGER OF PSBs IN INDIA

There is a long history for PSBs with regard to their Ms&As.Chronologically Ms&As in Indian
PSBs can be divided into five phases. Each of these phases are briefly presented below

♦ Phase – I: Merger of Punjab National Bank and New Bank of India (1993-94)

In the year 1993-94, first ever merger between two nationalized banks i.e. merger of New Bank
of India with the Punjab National Bank was made to protect the interest of the stakeholders of
New Bank of India as it was a loss-making bank. This was an example for strong bank protecting
a weaker bank.

♦ Phase – II: Merger of State Bank of India and State Bank of Saurastra (2008)

Merger of State Bank of India and State Bank of Saurastra in 2008 have reduced the number of
SBI associate banks from seven to six. Merger was considered in order to increase the State
Bank of India’s competency with international presence. Earliest merger between SBI and its
associates was with State Bank of Saurastra as it was fully owned by the State bank of India.
And State Bank of Saurastra was smaller than any other associate banks of SBI.

♦ Phase – III: Merger of Five SBI associate banks and Bharatiya Mahila Bank
merged with SBI (2017)

Country’s largest lender, SBI has entered the group of the top 50 banks (in terms of Assets) in
the world as a result of its merger with five associate banks and Bhartiya Mahila Bank.

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The total customer base of the bank has reached 37 crores with the 24000-branch network and
nearly 59000 ATMs across the country.

♦ Phase – IV: Merger of Bank of Baroda, Dena Bank and Vijaya Bank (2019)

On 1st April 2019 Bank of Baroda was merged with Dena Bank and Vijaya Bank. As a result,
Bank of Baroda became India's second-largest PSBs. Merged Bank of Baroda’s key indicators
look as shown in Table-1.

Table – 1: Key Indicators of Merged Bank of Baroda

Financial Bank of Baroda Vijaya Bank Dena Bank Merged Entity

Parameters (BoB)
Total Business 10,29,810 2,79,575 1,72,940 14,82,325
(Rs. Cr.)

Gross Advances 4,48,330 1,22,350 69920 6,40,600

(Rs. Cr.)
Deposits (In Cr.) 5,81,485 1,57,325 1,03,020 8,41,830
Domestic 5502 2130 1858 9490
Branches

Employees 56360 15875 13440 85675

Net NPA 5.40% 4.10% 11.04% 5.71%

CASA Ratio 35.52% 24.91% 39.80% 34.06%

Source: Business Standard, 30th August, 2020

♦ Phase – V: Mega-Merger (six PSBs merging with four PSBs)

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Finance Minister Smt. Nirmala Sitharaman announced four new sets of PSBs’ mergers; United
Bank of India and Oriental Bank of Commerce merging with Punjab National Bank; Syndicate
Bank merging with Canara bank; Corporation Bank and Andhra Bank merging with Union Bank
of India; Allahabad Bank merging with Indian bank. This has been popularly considered as
mega-merger of PSBs.

After the mega-merger six PSBs namely Indian Overseas Bank, Bank of Maharashtra, Uco
Bank and Punjab and Sind Bank, which have a strong regional focus, will continue as separate
entities. Central Bank of India and Bank of India will also continue to operate separately as
before. After completion of the merger, the country will have 12 public sector banks, including
State Bank of India and Bank of Baroda.

Table 2: Participant PSBs in Mega-merger

Anchor bank Amalgamating bank

Punjab National Bank Oriental Bank of Commerce, United Bank of India
Canara Bank Syndicate Bank

Union Bank of India Andhra Bank, Corporation Bank

Indian Bank Allahabad Bank

Table 3: Post -Mega Merger Top 10 Banks Ranked by Business size (March 2019)

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Sl. Name of the bank Business Market share

No (Rs. in Lakh Cr.) (%)
SBI 52.05 22.5
Punjab National Bank + Oriental Bank of 17.07 7.07
Commerce + United Bank
HDFC Bank 17.50 7.6
Bank of Baroda 16.13 7
Canara + Syndicate Bank 15.20 6.6
Union Bank + Andhra Bank + 14.60 5.9
Corporation Bank
ICICI Bank 12.72 5.5
Axis Bank 10.60 4.6
Bank of India 9.03 3.9
Indian Bank + Allahabad Bank 8.08 3.9
Source: Business Standard, 30th August, 2020

Table 4: Post-merger key indicators of Punjab National Bank

Indicators Punjab Oriental Bank United Bank Punjab National

National of Bank + Oriental
Bank Commerce Bank of
Commerce +
United Bank
Total advances 506194 171549 73150 750867
(Rs. Cr.)
Total deposits 676030 232645 134983 1043659
(Rs. Cr.)
Employees 65116 21729 13804 100649

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Branches 6992 2390 2055 11437

CASA (%) 42.16 29.40 51.45 40.52

Net NPA (%) 6.55 5.93 8.67 6.61

Capital 9.73 12.73 13.00 10.77

adequacy (%)

Source: Business Standard, 30th August, 2020

Punjab National Bank, Oriental Bank of Commerce and United Bank are merged to make India's
second largest bank with Rs, 17.94 lakh Crore business, 7.7% market share, 100649 employees
and 11437 branches.

Table 6: Post-merger key indicators of Union Bank

Indicators Union Andhra Corporation Union + Andhra +

Bank Bank Bank Corporation Bank
Total advances (Rs. 325392 178690 135048 639130
Cr.)
Total deposits (Rs. 415915 219821 184568 820304
Cr.)

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Employees 37262 20346 17776 75384

Branches 4292 2885 2432 9609
CASA (%) 36.10 31.39 31.59 33.82
Net NPA (%) 6.85 5.73 5.71 6.30
Capital adequacy (%) 11.78 13.69 12.30 12.39
Source: Business Standard, 30th August, 2020

Union Bank of India merged with Andhra Bank and Corporation Bank to create fifth-largest
public sector bank in India with Rs, 14.59 lakh Crore business, 6.3% market share, 75384
employees and 9609 branches

Table 7: Post-merger key indicators of Indian Bank

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Indicators Indian Bank Allahabad Bank Indian + Allahabad

Total advances (Rs. 187896 163552 351448
Cr.)
Total deposits (Rs. 242076 214335 456411
Cr.)
Employees 19604 23210 42814
Branches 2875 3229 6104
CASA (%) 34.71 49.49 41.65
Net NPA (%) 3.75 5.22 4.39
Capital adequacy (%) 13.21 12.51 12.89
Source: Business Standard, 30th August, 2020

Indian Bank merged with Allahabad Bank makes India's seventh-largest public sector bank with
Rs, 8.08 lakh Crore business, 3.5% market share, 42814 employees and 6104 branches. involves
in big deals. However, the same may not be the case with a larger bank, as the financial strength
of the bank is better and can withstand the risk involved in big deal.

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CONCEPTUALIZATION

The phrase mergers and acquisitions or M&A refers to the aspect of corporate finance
strategy and management dealing with the merging and acquiring of different companies as well
as other assets. Usually, mergers occur in a friendly setting where executives from the respective
companies participate in a due diligence process to ensure a successful combination of all parts.
Historically, though, mergers have often failed to add significantly to shareholder value.

Although the economic consideration is similar for both Mergers & Acquisitions but the legal
procedure involved in Mergers and Acquisitions are different:-

A) Mergers: The term merger or amalgamation refers to a combination of two or more

corporate (in this case banks) into a single entity. Mergers are governed by companies Act,
the court & law.

B) Acquisition: This may be defined as an act of acquiring effective control by one corporate
over the assets or management of the other corporate without any combination of both of them.
Acquisitions are a regulated activity by SEBI

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Difference between Merger and Acquisition

Basically, there is no difference between merger and acquisition. Both relate to an

investment in acquisition of a bank/company. The difference lies only in the operational process
of acquisition. In merger, one bank gets merged with the other losing its own identity by way of
share transactions/asset/liability transfers. In acquisition/takeover, one company/a group of
companies acquires the controlling interest on ownership of capital without making any
corporation to lose its own individual identity.

But in the eyes of law, the operational process marks a big difference. While merger is covered
regulated/covered by the Companies Act, 1856, the acquisition/takeover is regulated/covered by
the takeover norms prescribed by SEBI. As such, the process is supervised by the High Court
and the Registrar of Companies, while the process of acquisition/takeover is undertaken as per
norms of SEBI.

“Merger refers to finding an acceptable partner, determining upon how to pay each other and
ultimately creating a new company, which is a combination of both the companies.”

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“Acquisition refers to buying out another company and taking it into the fold of the acquiring
company. This is done by paying the acquired company, the value of its capital and depending
upon the circumstances, a premium over the capital amount.”

Acquisitions and mergers both involve one or multiple companies purchasing all or part of
another company. The main difference between a merger and an acquisition is how they are
financed.

Basically, a merger involves a marriage of two or more banks. It is generally accepted that
mergers promote synergies. The basic idea is that the combined bank will create more value than
the individual banks operating independently. Economists refer to the phenomenon of the “2+2 =
5” effect brought about by synergy.

 The resulting combined entity gains from operating and financial synergies.

MERGERS & ACQUISITIONS: VALUATION

Investors in a company that is aiming to take over another one must determine whether the
purchase will be beneficial to them. In order to do so, they must ask themselves how much the
company being acquired is really worth. Naturally, both sides of an M & A deal will have ideas

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about the worth of a target company: its seller will tend to value the company at as high of a
price as possible, while the buyer will try to get the lowest price that he can. There are, however,
many legitimate ways to value companies. The most common method is to look at comparable
companies in an industry, but dealmakers employ a variety of other methods and tools when
assessing a target company. Here are just a few of them:

1. Comparative Ratios - The following are two examples of the many comparative metrics on
which acquiring companies may base their offers:

2. Price-Earnings Ratio (P/E Ratio) - With the use of this ratio, an acquiring company makes
an offer that is a multiple of the earnings of the target company. Looking at the P/E for all the
stocks within the same industry group will give the acquiring company good guidance for what
the target's P/E multiple should be.

3. Enterprise-Value-to-Sales Ratio (EV/Sales) - With this ratio, the acquiring company makes
an offer as a multiple of the revenues, again while being aware of the price-to- sales ratio of
other companies in the industry.

4. Replacement Cost - In a few cases, acquisitions are based on the cost of replacing the target
company. For simplicity's sake, suppose the value of a company is simply the sum of all its
equipment and staffing costs. The acquiring company can literally order the target to sell at that
price, or it will create a competitor for the same cost. Naturally, it takes a long time to assemble
good management, acquire property and get the right equipment. This method of establishing a
price certainly wouldn't make much sense in a service industry where the key assets - people and
ideas - are hard to value and develop.

5. Discounted Cash Flow (DCF) - A key valuation tool in M&A, discounted cash flow.

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 WHY DOES ORGANIZATIONS GOES FOR MERGER & ACQUISITION

Synergy

Synergy is the magic force that allows for enhanced cost efficiencies of the new business.
Synergy takes form of revenue enhancement & cost saving.

 Staff Reduction

Merger tends to mean job losses from accounting, marketing & other departments.

 Economies Of Scale

A bigger company places a bigger order of various items & can save more cost & in better
negotiation position.

 Acquiring New Technology

To stay competitive, companies need to stay on top of technological development. By buying a

smaller company with unique technology, a larger company can develop a competitive edge.

 IMPROVED MARKET REACH & INDUSTRY VISIBILITY

A merge may extend two companies marketing & distribution opportunities. Capital can
raise easily in a bigger company than a smaller company. INCREASED MANAGERIAL
SKILLS Occasionally a firm will have good potential that is finds it unable to develop fully
because of deficiencies in certain areas of management or an absence of needed product or
production technology.

 Synergy: The Premium for Potential Success

For the most part, acquiring companies nearly always pay a substantial premium on the stock
market value of the companies they buy. The justification for doing so nearly always boils down

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to the notion of synergy; a merger benefits shareholder when a company's post-merger shares
price increases by the value of potential synergy. Let's face it, it would be highly unlikely for
rational owners to sell if they would benefit more by not selling. That means buyers will need to
pay a premium if they hope to acquire the company, regardless of what pre-merger valuation
tells them. For sellers, that premium represents their company's future prospects. For buyers, the
premium represents part of the post-merger synergy they expect can be achieved. The following
equation offers a good way to think about synergy and how to determine whether a deal makes
sense. The equation solves for the minimum required synergy

Horizontal Mergers

This type of merger involves two firms that operate and compete in a similar kind of business.
The merger is based on the assumption that it will provide economies of scale from the larger
combined unit.

Vertical Mergers

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Vertical mergers take place between firms in different stages of production/operation, either as
forward or backward integration. The basic reason is to eliminate costs of searching for prices,
contracting, payment collection and advertising and may also reduce the cost of communicating
and coordinating production. Both production and inventory can be improved on account of
efficient information flow within the organization.

a) Market-extension occurs when two companies that sell the same products in different
markets merge.

b) Product-extension occurs when two companies that sell the different but related products in
the same market merge.

♦ Conglomerate Mergers

Conglomerate mergers are affected among firms that are in different or unrelated business
activity. Firms that plan to increase their product lines carry out these types of mergers. Firms
opting for conglomerate merger control a range of activities in various industries that require
different skills in the specific managerial functions of research, applied engineering, production,
marketing and so on. This type of diversification can be achieved mainly by external acquisition
and mergers and is not generally possible through internal development. These types of mergers
are also called concentric mergers. Firms operating in different geographic locations also
proceed with these types of mergers.

a) Purchase mergers occurs when one company purchase other company. The purchase is
made either by cash or through the issue of some kind of debt instrument, and the sale is taxable.

b) Consolidation mergers occur when a brand-new company is formed and both companies are
bought & combined under the new entity. Tax terms are the same as those of a purchase merger.

 IMPACT OF M&As ON FINANCIAL AND EMPLOYMENT CONDITIONS OF

BANKS

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Most importantly, integrating differing company systems and procedures requires harmonization
of various aspects of terms and conditions of employment: pay scales, job titles, entitlements and
other benefits, job descriptions, reporting and supervisory lines are all subject to revision to ensure
common practice in the newly combined organization.

1. M&As, remuneration and other compensation issues

a. Two conflicting aims appear to characterize current practices in
b. financial sector remuneration: the need to reduce Labour costs within a context of
increasing competition and decreasing profitability and the necessity to compensate and
adequately reward employee performance and commitment within an environment of
continuous and challenging change.

2. M&As and working time

a. Banks’ adoption of the retailing model is encouraging them to adjust their hours to
customer requirements, extending opening hours on at least one day a week and even
opening some branches on traditionally closed days such as Sundays – a trend which has
aroused strong trade union reactions in a number of countries. It goes without saying that
M&As can provide an opportunity for management to opt for more customer-friendly
working hours like ICICI Bank from 8am to 8pm.

3. M&As as factors of stress and demotivation

M&As generate high levels of staff anxiety and stress as their working world is turned upside
down, their jobs come under threat and their career prospects and professional competence are
called into question.

a. it is much easier for managers to convince shareholders about the merits of proposed
mergers than it is to persuade their own staff.

4.M&As and job security

Not surprisingly, empirical evidence shows that workers everywhere are feeling increasing
insecurity in their employment. Companies are restructuring and downsizing more often,
increasingly replacing full-time jobs with part time, casual or temporary jobs and outsourcing.

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 IMPACT OF M & As ON CONSUMERS

New technology and the increased ability of financial institutions to offer a wider range of
products and services have benefited those with the means to access them. Consumers with a
regular income and a good credit history are able to borrow money more readily and cheaply
than ever before, although this has often led to widespread debt encumbrance. Consumers of
retail services with more restricted incomes, with poor credit histories or unstable social
backgrounds, are finding it more difficult to get access to the mainstream financial services
sector traditional banking services.

A process that has run in parallel to that of merger and acquisition activity within the
financial services sector has been that of 'demutualization'. Insurance companies and building
societies have been prominent mutual organizations, which are effectively 'owned' by their
members, that is, by consumers who held policies or debt products and who have the right to
vote on policy and other matters at Annual General Meetings.

 Reactions by consumers to mergers

Again, it is virtually impossible to determine the exact impacts of specific mergers and
acquisitions on levels of customer loyalty from the available evidence. This kind of information
is highly sensitive, and is not easily released by firms. However, it is generally known that the
industry sees declining levels of customer loyalty as a problem, although levels of customer
mobility vary markedly between sectors.

Levels of mobility are relatively high in price- sensitive sectors such as car and household
insurance, whereas it is lower for more complex products such mortgages and lower still for
banking services. In all product areas a growing number of consumers are prepared to move their
business from one firm to another.

IMPACT OF M&As ON FINANCIAL PERFOMANCE OF BANKS

In a few years from now there would be greater presence of international players in Indian
financial system and some of the Indian banks would become global players in the coming years.

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Also, competition is not only on foreign turf but also in the domestic field. The new mantra for
Indian banks is to go global in search of new markets, customers and profits. But to do so the
Indian banking industry will have to meet certain challenges. Some of them are –

 Foreign Banks –

India is experiencing greater presence of foreign banks over time. As a result, number of issues
will arise like how will smaller national banks compete in India with them, and will they
themselves need to generate a larger international presence?

Second, overlaps and potential conflicts between home country regulators of foreign banks and
host country regulators: how will these be addressed and resolved in the years to come? It has
been seen in recent years that even relatively strong regulatory action taken by regulators against
such global banks has had negligible market or reputational impact on them in terms of their
stock price or similar metrics.

 Greater Capital Market Openness –

An important feature of the Indian financial reform process has been the calibrated opening
of the capital account along with current account convertibility. It has to be seen that the
volatility of capital inflows does not result in unacceptable disruption in exchange rate
determination with inevitable real sector consequences, and in domestic monetary conditions.
The vulnerability of financial intermediaries can be addressed through prudential regulations and
their supervision; risk management of non-financial entities. This will require market
development.

 Technology Is The Key

IT is central to banking. Foreign banks and the new private sector banks have embraced
technology right from their inception and continue to do so even now. Although public sector
banks have crossed the 70%level of computerization, the direction is to achieve 100%.
Networking in banks has also been receiving focused attention in recent times. Most recently the

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trend observed in the banking industry is the sharing of ATMs by banks. This is one area where
perhaps India needs to do significant ‘catching up’. It is wise for Indian banks to exploit this
globally state-of-art expertise, domestically available, to their fullest advantage.

 Consolidation

We are slowly but surely moving from a regime of "large number of small banks" to "small
number of large banks." The new era is one of consolidation around identified core competencies
i.e., mergers and acquisitions. Successful merger of HDFC Bank and Times Bank; Stan-chart
and ANZ Grind lays; Centurion Bank and Bank of Punjab have demonstrated this trend. Old
private sector banks, many of which are not able to cushion their NPA’s, expand their business
and induct technology due to limited capital base should be thinking seriously about mergers and
acquisitions.

 Public Sector Banks

It is the public sector banks that have the large and widespread reach, and hence have the
potential for contributing effectively to achieve financial inclusion. But it is also they who face
the most difficult challenges in human resource development. They will have to invest very
heavily in skill enhancement at all levels: at the top level for new strategic goal setting; at the
middle level for implementing these goals; and at the cutting-edge lower levels for delivering the
new service modes.

 Cost Management

Cost containment is a key to sustainability of bank profits as well as their long-term viability.
In India, however, in 2003, operating costs as proportion of total assets of scheduled commercial
banks stood at 2.24%, which is quite high as compared to in other economies. The tasks ahead
are thus clear and within reach.

 Governance

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The quality of corporate governance in the banks becomes critical as competition intensifies,
banks strive to retain their client base, and regulators move out of controls and micro-regulation.
The objective should be to continuously strive for excellence.

Improvement in policy framework, regulatory regime, market perceptions, and indeed, popular
sentiments relating to governance in banks need to be on the top of the agenda – to serve our
society’s needs and realities while being in harmony with the global perspective.

MERGER BETWEEN PUNJAB

NATIONAL BANK, ORIENTEL
BANK OF COMMERCE AND
UNITED BANK OF INDIA

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INTRODUCTION TO BANKS

(PNB,OBC AND UBI)

The government has decided to Merger three banks –PUNJAB NATIONAL BANK,
ORIENTEL BANK OF COMMERCE and UNITED BANK OF INDIA — to reduce the
amount of capital it needs to put into these banks and help clean their balance sheets. The three
merged state-owned banks will the third-largest lender after State Bank of India and HDFC
Bank. The name of the merged entity and the share-swap ratio will be decided soon. Bank
unions, however, were quick to oppose the merger.

While ORIENTAL BANK OF COMMERCE has been placed under the prompt corrective
action framework by Reserve Bank of India with restriction on lending, UNITED BANK OF
INDIA is among the only two lenders to have reported a profit in 2017-18. As a percentage of
total assets, UNITED BANK OF INDIA has the highest net non-performing assets at 11.04%

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while ORIENTAL BANK OF COMMERCE has 4.10% and PUNJAB NATIONAL BANK
5.4%.

♦ United Bank of India focuses on the business growth and profitability, while gives due
importance on risk management in professional environment. Currently United Bank of
India has more than ` 54,536 crores of deposits as well as ` 35,727 crores of gross
advances. Its head office is located in Kolkata, with 36 Regional Offices and 2054
Branch Offices
♦ Punjab National Bank (PNB) is a Financial and Banking service bank owned by
Government of India. It’s headquarter is in New Delhi, India. The bank was established
in 1894. As of June 2019, the bank has more than 115 million clients, 7,036 branches and
8,906 ATMs.
♦ Oriental bank of commerce is an Indian public sector bank. Headquartered at Gurgaon,
Haryana has 2390 branches and 2625 ATMs all over India. Rai Bahadur Lala Sohan Lal
the main Chairman of the Bank, established OBC in 1943 in Lahore. Within four years of
its existence, OBC needed to confront Partition.

REASON OF MERGER

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140

 In merger, one bank gets merged with the other losing its own identity by way of share to
increase Market Share
 Economies of scale of non-profitable bank increases
 Profit for Research and development.
 Benefits on account of tax shields like carried forward losses or unclaimed depreciation
 Reduction of competition and financial risk.

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141

The Merging of Punjab National Bank, United Bank of India and Oriental Bank of Commerce
came into effect from April 1, 2020. There will be no retrenchment of employees due to the
merger Oriental Bank of Commerce, United Bank of India with Punjab National Bank: SS
Mallikarjuna Rao, MD & CEO, Punjab National Bank

The merger will create the second largest nationalized bank of the country – both in terms of
business and branch network. The synergy from the amalgamation will create a globally
competitive, next generation bank, PNB 2.0, the bank had said in a release and added that all
customers, including depositors, will be treated as PNB customers.

In August 20, finance minister Nirmala Sitharaman had announced the consolidation of 10 state-
run lenders into four bigger banks. PNB, Oriental Bank of Commerce (OBC) and United Bank of
India (UBI) will be merged to form the second-largest state-run bank in the country, with a
business of ₹17.95 trillion (loans plus deposits) and will be at least 1.5 times that of PNB.

CURRENT SCENARIO

Sr. Bank name PSB Rank by size

No.
1 State Bank of India Largest
nd
2 Punjab National Bank 2 largest
3 Bank of Baroda 3rd largest
4 Canara Bank 4th largest
5 Union Bank of India 5th largest
6 Bank of India 6th largest
7 Indian Bank 7th largest
8 Central Bank of India 8th largest
9 Indian overseas Bank 9th largest
10 UCO 10th largest

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Chapter 4 : Data representation & Analysis

4.1 Data representation & Interpretation

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143

4.1 DATA REPRESENTATION & INTERPRETATION

 Financial Analysis

For our research paper we have used various ratios and variables such as profit margin, revenue
total deposits, total assets and market capitalization for estimating the pre-merger and post
merger impact of Punjab National bank, oriental bank of commerce and united bank of India.

 Financial Performance Before Merger

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144

INTERPRETATION:

From the above table we can say that the financial performance of the banks is improving as the
Earning per share of PNB has increased from -54.63 to -29.68. The current net interest margin is
2.21 which means that the Interest margin has also increased when compared to all the three
banks pre-merger. And the amalgamation also led to a Market Capitalization of 363,089 and an
improvement in profit margin from -50.31 to -38.5.

 Net interest margin ratio:

The net interest margin ratio measures the how successful is the companies investing its
funds in comparison to its expenses on the investments of the company. The net interest margin
of Punjab national banking, oriental bank of commerce and united bank of India is decreasing

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145

year by year. But the interest margin of three companies is positive that means banks invest
efficiently in all the years.

 Market capitalization:

Market capitalization of the companies indicates outstanding shares of stock. The market
capitalization of the Punjab national bank has decreased to 231,158.50 in 2018 that means the
Punjab national that means they have limited resource and it is riskier for investors to invest in
PNB. The oriental bank of commerce and united bank of India are not performing well compared
to Punjab national bank.

 Profit margin

The profit margin of the all three companies is negative in the 2018 means the Punjab national
bank, oriental bank of commerce and united bank of India cost of production exceeds the total
sales which indicates company’s inability to control costs. In 2017 oriental bank of commerce is
(- 5.93) the company is not performing well when compared to Punjab national bank and united
bank of India.

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146

The graph shows about the total deposits of the Punjab national bank which is compared with the
deposits of oriental bank of commerce and united bank of India. In the year 2016 the deposits
were more than the 2019 deposits in Punjab national bank after the announcement of merger .

 Financial Performance After Merging

Year Punjab national bank

Earnings per Net interest Market Profit
share margin capitalization margin
2019 -29.68 2.21 363,089.40 -38.5

INTERPRETATION:

The Punjab national bank is not performing well after the merger with oriental bank of
commerce and united bank of India. The earning per share of the Punjab national bank in 2019 is
negative and also their profit margin is (-38.5) that means after the merger the companies is not
profitable. The net interest margin of the Punjab national bank has increased to 2.21 compared to
2018 which indicates bank is earning interest on loans compared to the amount it is paying in
interest on deposits after the merger this shows there is a slight growth in the future.

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147

From the above graph, we can see that in the year 2019 there has been a growth in the revenue of
all the three banks, as per we can conclude that this merger has been profitable and there has
been improvement in the efficiency of operations.

 BENEFITS DERIVED FROM MERGER AND ACQUISITION

After studying various cases of mergers in the banking sector a large number of benefits can be
seen which are as follows:

a) Better corporate governance.

(PUNJAB NATIONAL BANK, ORIENTEL BANK OF COMMERCE and UNITED

BANK OF INDIA)

b) Increase in the network / branches.

(Bank of Madura / ICICI)

c) Increase in customer base.

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148

(Bank of America / Fleet Boston)

d) Reduction in NPA.

(Nedungadi Bank / Punjab National Bank)

e) Compliance with statutory requirement.

(Global Trust Bank / Oriental Bank of Commerce)

f) Fulfilling more responsibility towards society.

(Bank Of Madura / ICICI)

g) Improved financial position.

(Global Trust Bank / Oriental Bank Of Commerce)

After merger of the PUNJAB NATIONAL BANK, ORIENTEL BANK OF COMMERCE

and UNITED BANK OF INDIA following changes has been take place:

a) Change in management

b) New ways of providing services to customers. (e-payment-railway tickets)

c) Change in debt recovery policy.

After analyzing the whole case of merger of the Global Trust Bank with Oriental Bank of
Commerce following conclusions can be drawned.

The quantitative factors that are taken as the criteria for measuring the corporate governance
after the consolidations can be achieved in a better manner, like:

a) Net profits

b) Increase in deposits / credibility

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149

c) Increase in customer base / network

d) More loans and advances

e) Fulfilling statutory requirement

f) Sound financial position

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Chapter 5. Results & Discussion

5.1 Major Findings
5.2 Discussions & Suggestions
5.3 Conclusion

5.1 MAJOR FINDINGS

A Combination of factors- increased global competition regularity changes , fast changing

technology ,need for faster growth and industry excess capacity- have felled mergers and
acquisitions (M&A) in recent times.The M & A phenomenon has been noticeable not only in
developed markets like US, Europe and Japan but also emerging markets like India.

Major Acquisition have strategic implications because they leave little scope for trial and error and
are different to reserve.

Furthermore , the risks involved are much more than financial in scope. A failed merger can disrupt
work processes, diminish customer confidence, cause employees to leave and result in poor

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employee motivation levels . So the old saying discretion is the better part of valor. Is well and
truly applicable here.

A comprehensive assessment of the various risks involved is a must before striking an M&A deal.

Even if the probability of a failure is very low but the consequences of the failure are significant ,
once should think carefully before rush to complete the deal.

5.2 DISCUSSIONS & SUGGESTIONS

The future outlook of the Indian banking industry in 2015 to 2020 is that a lot of action is set to
be seen with respect to M & A’s, with consolidation as a key to competitiveness being the
driving force.

Both the private sector banks and public sector banks in India are seeking to acquire foreign
banks. As an example, the State Bank of India, the largest bank of the country has major

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overseas acquisition plans in its bid to make itself one of the top three Banks in Asia, and among
the top 20 globally over next few years. Some of the PSU banks are even planning to merge with
their peers to consolidate their capacities. In the coming years we would also see strong
cooperative banks merging with each other and weak cooperative banks merging with stronger
ones.

While there would be many benefits of consolidation like size and thereby economies of scale,
greater geographical penetration, enhanced market image and brand name, increased bargaining
power, and other synergies; there are also likely to be risks involved in consolidation like
problems associated with size, human relations problems, dissimilarity in structure, systems and
the procedures of the two organizations, problem of valuation etc. which would need to be
tackled before such activity can give enhanced value to the industry.

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153

5.3 CONCLUSION

The merger of UBI and OBC into PNB will lead to the creation of the country's second largest
bank after State Bank of India. Both in terms of business and branch network, the three banks
collectively had a business of Rs. 18 lakh crores at the end of March that originated through
11,437 branches amongst them. As a result of all this the merged bank will be able to operate
more efficiently and serve more customers with better services.

The concept of merger and acquisition can also be a risky process which has to be adopted, as it
may bring various, problems to the banks in terms of the management, it working etc.

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REFERENCE

Websites: -
https://acadpubl.eu/hub/2018-119-12/articles/6/1387.pdf

http://finance.mapsofworld.com/merger-acquisition/india.html

http://www.economywatch.com/mergers-acquisitions/international/banking-sector.html

http://www.irdindia.in/journal_ijrdmr/pdf/vol4_iss2/9.pdf

http://www.rediff.com/money/2008/feb/25hdfc.htm

https://www.obcindia.co.in/obcnew/site/index.aspx

http://www.irdindia.in/journal_ijrdmr/pdf/vol4_iss2/9.pdf

OTHER: - Books
a) Mergers & Acquisitions- J. Fred Weston & Samuel C. Weaver

b) Financial Services – M. Y. Khan

c) Mergers and acquisitions text and cases Kevin K. Boeh, Paul W. Beamish – 2007

d) Gaplin and Henron, The Complete Guide to Mergers and Acquisitions (2005)

e) Corporate growth through merger and acquisitions S.Shiva Ramu – 1998 Newspapers &
Magazines.

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155

f) Research Methodology By C.R Kothari.

NEWSPAPER AND MAGAZINES: -

 The economic times

 The financial express

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156

ANNEXURE

FROM 2005-2020

S. No Name of the Bank Name of the Banks that got Merged Year of Merger

Oriental Bank of Commerce and

1 Punjab National Bank 2020
United Bank of India

2 Canara Bank Syndicate Bank 2020

Andhra Bank and

3 Union Bank of India 2020
Corporation Bank

4 Indian Bank Allahabad Bank 2020

Vijaya Bank and

5 Bank of Baroda 2019
Dena Bank

State Bank of Travancore (SBT)

State Bank of Bikaner and Jaipur (SBBJ)
State Bank of Hyderabad (SBH)
6 State Bank of India 2017
State Bank of Mysore (SBM)
State Bank of Patiala (SBP)
Bharatiya Mahila Bank (BMB)

7 Kotak Mahindra Bank ING Vyasa Bank 2014

8 ICICI Bank Bank of Rajasthan Ltd. 2010

9 HDFC Bank Centurion Bank of Punjab 2008

10 ICICI Bank Ltd Sangli Bank 2007

11 Indian Overseas Bank Bharat Overseas Bank 2007

Centurion Bank of
12 Lord Krishna Bank 2006
Punjab

13 Federal Bank Ganesh Bank of Kurandwad 2006

14 Nainital Bank Bank of Baroda 2006

15 IDBI Ltd United Western Bank 2006

16 Bank of Punjab (POB) Centurion Bank 2005

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 A STUDYONCUSTOMERSATISFACTION TOWARDS FAST-FOOD
OUTLETS WITH REFERENCE TO DOMINO’S AND PIZZA HUT

Research Project Submitted in Partial Fulfillment of the Requirements for the

Degree of

BCOM HONOURS
by
SIMRAN MEENA

to the

DEPARTMENT OF COMMERCE
BHOPAL SCHOOL OF SOCIAL SCIENCES

April, 2021
Submitted by Guided by
Simran Meena Dr Vinod Adwani
Associate Professor
Department of Commerce

aaaaaaa
CERTIFICATE

It is certified that the work contained in the project report titled A study on customer satisfaction
towards fast-food outlets (with reference to Domino’s and Pizza Hut)by Simran Meena, has
been carried out under my/our supervision and that this work has not been submitted elsewhere
for a degree*

Signature of Supervisor: …………….

Name: Dr Vinod Adwani

Department: Commerce

Bhopal School of Social Sciences

April, 2021

bbbbbbb
DECLARATION

I hereby declare that this project report entitled A study on customer satisfaction towards fast-
food outlets (with reference to Domino’s and Pizza Hut)was carried out by me for the degree
of BCOM(Honours) under the guidance and supervision of Dr. Vinod Adwani of Department of
Commerce, BSSS College. The interpretations put forth are based on my reading and
understanding of the original texts and they are not published anywhere in any form. The other
books, articles and websites, which I have made use of are acknowledged at the respective place
in the text. This research report is not submitted for any other degree or diploma in any other
University.

Place: Bhopal

Name of the Student: Simran Meena

Class & Section: BCOM (HONOURS) IIIrd year ‘C’

Date: 15 April, 2021

ccccccc
 ACKNOWLEDGEMENT

I would like to thank our Principal Dr. Fr. John P.J. and Vice Principal Dr Sr Sonia Kurien for
their immense support and blessings. I thank our HOD Dr Amit Kumar Nag for his support. I
would like to express my special thanks of gratitude to my research guide Dr. VinodAdwani,
Associate Professor of Department of Commerce for his valuable suggestions and guidance and
for giving me the golden opportunity to do this wonderful research project on the topic:“A Study
on Customer Satisfaction towards Fast-Food Outlets (with reference to Domino’s and Pizza
Hut)”, Without his help it would have been difficult for me to have reached this state of completion
of my project report. Also, I would like to thank my parents and friends who helped me a lot in the
preparation of this project.
I wish to acknowledge the help of all those who have provided me information, guidance and other
help during my research period.

SIMRAN MEENA

B.COM HONOURS IIIrd YEAR

ddddddd
PREFACE
This project on has been prepared in partial fulfillment of the requirement of the programme
B.COM HONOURS in the academic year 2020-21. The whole project is measured through
questionnaire, the data further analyzed and interpreted and the result was obtained. A blend of
learning and knowledge required during my theoretical studies at the organization is presented in
this project report. This project is a stepping stone for my career.

My study contains the following chapters:

Chapter I: INTRODUCTION OF THE TOPIC

Chapter II: REVIEW OF LITERATURE

Chapter III: RESEARCH METHODOLOGY

Chapter IV: DATA REPRESENTATION AND ANALYSIS

Chapter V: RESULTS AND DISCUSSIONS

eeeeeee
INDEX

Contents Page No.

Chapter 1: INTRODUCTION OF THE TOPIC 1-8

1.1 Rationale of the study 2

1.2 Introduction of the Industry 4
1.3 Introduction to the company 5
1.4 Justification of the Topic 8
Chapter 2: REVIEW OF LITERATURE 9-15
2.1 International Reviews 10
2.2 National Reviews 13
Chapter 3: RESEARCH METHODOLOGY 16-18

3.1 Objective of the study 17

3.2 Research Hypothesis 17

3.3 Scope of the study 17
3.4 Research Design 18
3.5 Limitation of the study 18
Chapter 4: DATA REPRESENTATION AND ANALYSIS 19-53

4.1 Data representation and Interpretation 20

4.2 Hypothesis testing 52

Chapter 5: RESULTS AND DISCUSSIONS 54-57

5.1 Major findings 55

5.2 Discussions and Suggestions 55

5.3 Conclusion 56

References 58

ANNEXURE 60-63

 Copy of Blank questionnaire 60

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CHAPTER 1

INTRODUCTION TO THE TOPIC

1.1 Rationale of the study

1.2 Introduction to the Industry
1.3 Introduction to the company
1.4 Justification of the topic

1
1.1 Rationale of the study:

This research aims to explore consumers' overall behavior toward fast-food chains. More
specifically, the purpose here is to identify the key factors that influence the consumer's preference
of Domino’s and Pizza Hut brands of fast-food restaurants. The main purpose of the study is to
seem at the preference of consumers towards the acquisition of Pizzas and their opinion about the
consumption patterns. This study is both descriptive and analytical to examine the purchase
preference of consumers on Pizza.

Consumer satisfaction:

 Customer satisfaction refers to how pleased (or dissatisfied) consumers are with a
company’s goods, services, or overall experience. Customer satisfaction refers to a
customer’s perception of your business and what you have to give in terms of quality,
value, and aspirations. This information will say a lot about how consumers feel about your
brand and how they will connect with it in the future. (indeed, 2021)

 Customer retention and customer satisfaction are inextricably related. Customer retention
drives revenue and ensures a company’s long-term viability. Customer satisfaction scores
are one of the best measures of how a business will perform in the future. While metrics
like profits and shares show valuable details on how well a company is doing at a particular
time, customer satisfaction scores are one of the best indicators of how well a company
will perform in the future. (indeed, 2021)

Consumer satisfaction survey:

 A customer satisfaction survey is a tool that businesses use to determine how satisfied their
customers are with their product or service. This is a crucial step in assisting the customers
in achieving success. They’re particularly useful for finding dissatisfied customers as well
as those who love your brand so much that they might become brand advocates. The value

2
 of getting customer reviews is inextricably linked to this overview of your customers’
perspectives. (Salemme, 2021)

Purpose of consumer satisfaction survey:

 Successful company owners and managers soon learn that retaining clients is less
expensive than acquiring new ones. If such marketing practices scare customers away, the
company will invest time and resources on ads and other attempts to attract new customers.
These business owners understand that flaws in product production or distribution
contribute to dissatisfied customers, so they gather feedback through online surveys. This
survey helps them in understanding the customer preference and expectations which further
helps them in modifying the products and services as per customers need and helps them
in formulating strategies which help them attract customers and win the edge over the
competition. (indeed, 2021)

Objective of consumer satisfaction:

 Every good customer survey programmed must have a specific set of goals that, once
accomplished, will lead to improved results. The following are the most basic goals that
any consumer surveying programmed can achieve:

 Understanding the customers’ preferences and specifications.

 Identifying how well the company and its rivals are meeting these demands and goals.
 Based on your results, build service and/or product standards.
 Examining patterns over time so that prompt action can be taken.
 Establishing targets and expectations to assess how well you’ve accomplished your
objectives. (NBRI)

 Factors affecting consumer satisfaction:

3
  Customer satisfaction refers to a customer’s overall opinion of a supplier and the goods
and services they receive. The following are some of the major factors that can influence
customer satisfaction: (Management Study Guide)

 The supplier’s capability by department.

 Aspects of products and services that is technical, engineering, or re-engineering.
 The type and quality of the supplier’s response.
 The willingness of the supplier to meet deadlines and how quickly they are reached.
 The supplier provides customer support.
 Management of complaints.
 The product’s price, quality, cost, and productivity.
 Personal characteristics of the supplier, such as etiquette and friendliness.
 The willingness of the supplier to handle the entire consumer life cycle.
 Functions and operations those are compatible and easy to use. (Management Study
Guide)

1.2 Introduction to the industry:

 As Indians continue to feast, the fast-food industry is booming. The Food sector has been
witnessing a marked change in consumption patterns, particularly in terms of food, fueled
by what can be described as a perfect ingredient for any industry – high disposable incomes.
Since they all see tremendous potential in India, a growing number of foreign fast-food
chains are flocking to the country. In urban areas, the huge upwardly mobile population
tends to eat out more often for business or pleasure. The well-known Indian chains like
Nirulas are among the numerous players operating in India. Aside from these, it appears
that some of the most well-known multinational food chains are eyeing India. Sbarro,
Burger King, KFC, Dunkin Donuts, and Subway, to name a few, are among them. At the
moment, all of these players are vying for a small piece of the pie, as Indians are not big
fans of fast food, but they see a lot of promise.
 The players are battling it out over goods, pricing, and positioning, all in the hopes of
converting their first Trial purchases into daily purchases by offering excellent service. The
emphasis is on product consistency and taste standardization. The secret to success is

4
 consistency, as well as standardization. When it comes to fast food, the customer is pressed
for time and needs a consistent taste experience.
 Aside from that, each player has its consumer expansion strategy.
 - Some argue that price isn't a deciding factor because fast food isn't a single diet among
Indians and therefore isn't a price-sensitive market.
 - Others are competing on the remarkably diverse positioning, given the market's limited
size.
 - For the most part, it seems that targeting children is the best approach.
 - Advertising is well-liked.
 However, as competition heats up, most chains are expanding their scope and attempting
to develop a national presence.
 · The fast-food industry of India is experiencing phenomenal growth and is one among the
fastest-growing sectors within the country, with the compounded annual growth rates of
the market crossing 25%. Further, on the rear of adjusting and busy lifestyles, fast emerging
middle-class population, and surging income, the industry will still grow at a pace in
coming years. It now accounts for roughly half of all restaurant revenues within the
developed countries and continues to expand there and in many other industrial countries
within the coming years. But some of the most rapid growth is occurring in the developing
world; where it’s radically changing the pattern-people eat. People buy nutriment because
it’s cheap, easy to organize, and heavily promoted. This paper aims at providing
information about the fast-food industry, its trend, the reason for its emergence, and several
other factors that are responsible for its growth.

1.3 Introduction to the company:

1.3.1 Domino’s:
 Thomas Monaghan created the Domino's brand in the United States of America in 1960.
Since then, the company has grown into a global network of over 8,500 pizza restaurants
in over 60 countries, with over 2,000 franchisees. Domino's Pizza has built a
straightforward business model based on delivering high-quality pizzas on time throughout
its 49-years of existence. Domino's Pizza, Inc. went public in 2004 and is now traded on
the New York stock market.

5
 Domino's Pizza India Ltd. was founded in March 1995 as the master franchisee of
Domino's Pizza International Inc. of the United States of America in India and Nepal.
Furthermore, through its wholly-owned subsidiary, the firm owns the master franchise
rights for Sri Lanka and Bangladesh. Pizza from Domino's There are 274 stores in India.
In 55 towns, 20 states, and the United States Territories (as of 31st august 2009). Dominos
is the largest pizza chain in India and the fastest growing global fast-food chain in terms of
store count between 2006-2007 and 2008-2009, according to the India retail report 2009.
 Domino’s Pizza opened its first international store in Winnipeg, Canada on May 13, 1983.
In the same year, Domino's opened its 1,000th store worldwide, and by 1995, the company
had a total of 1,000 stores worldwide. Tom Monaghan, the founder of Domino's Pizza,
declared his retirement in 1998, selling 93 percent of the company to Bain Capital Inc. for
around $1 billion and ceasing to be active in day-to-day operations. David A. Brandon was
appointed as Chairman and Chief Executive Officer of the company a year later.
 Domino's pizza is actively working to create items that are tailored to the preferences of its
customers, delighting them in the process. Domino's is a firm believer in the 'think global,
act local' approach.
 As a result, Domino's Pizza has consistently innovated with delectable new items such as
crusts, toppings, and flavors that appeal to Indian palates. Furthermore, dominos' slogan
has been to provide customers with high-quality, low-cost goods.
 Consumers have responded positively to initiatives such as fun meals and pizza mania.
Since 2008, the company has expanded its menu to include Oven Baked Sandwiches and
Bread Bowl Pasta, as well as its Inspired New Pizza, a regular update to its core hand-
tossed product, renew from the crust up with sauce, cheese, and garlic-seasoned crust.
 Domino's vision is centered on "exceptional people on a quest to be the best pizza delivery
business in the world," dedicated to "bringing fun and excitement to our customers' lives
by delivering pizzas to their doorstep in 30 minutes or less," and all of the company's
strategies are geared toward fulfilling this promise to its vast and ever-growing customer
base. Domino's is continually striving to cater to its customers' preferences to achieve the
WOW effect (good factor). Domino's is committed to its "Think local, act regional"
strategy. As a result, Domino's has become more suited to the tastes of the locals, and the
Indian market has embraced it.

6
 1.3.2 Pizza Hut:

 Pizza Hut, a Yum! brands affiliate, is the biggest pizza company in the world. Pan Pizza,
Thin ‘N Crispy Pizza, Hand-Tossed Style Pizza, and Stuffed Crust Pizza are only a few of
the pizzas available. Pizza Hut was founded 55 years ago in Wichita, Kansas, and is now a
globally recognized brand that serves more pizza, pasta, and wings than any other
restaurant. Co. is a true pioneer in the pizza industry, having been the first to bring Pan
Pizza to America and the first to sell it online.
 Pizza Hut has over 13,300 restaurants in 88 countries, including over 7,800 in the United
States and over 5,500 outside the United States, as of January 1, 2014. This does not include
the Yum! China and India divisions. The strong Pizza Hut Red Roof icon is being used to
accelerate the growth of Delivery, Express, and Dine-In networks all over the world.
 The company began building delivery carryout units in 1988, and it is now its fastest-
growing division. With Delivery, Co.'s plan is to use its existing scope to quickly extend
the brand in both developed and emerging markets. In the United States, for example, in
the last three years, Pizza Hut has opened more than 600 new “Delco” stores specializing
in delivery and carry-out.
 The company's Express division, which can be found in shopping malls, large department
outlets, travel centers, and military bases, is a big leader in the United States, and it is
spreading internationally. Dine-in has always been a big part of Co.'s business. Pizza Hut
restaurants with a "Pizza and More" menu plan are being established in a number of
international markets.
 In the United States, Pizza Hut has launched a new sub-brand called Wing Street, making
it the first major American chain to offer wings, sides, and complete chicken dinners. In
1996, Pizza Hut opened its first Indian location in Bangalore. With a phenomenal average
growth rate of more than 40%, it has amassed a dominant and substantial share of the pizza
market since then.
 Pizza Hut does not offer any of the pizzas that it does in other countries in India. Rather, it
customized its menu to meet the needs of Indian customers. A menu that has continuously
developed and expanded to appeal to the evolving needs and diverse tastes of customers in

7
 various parts of the world has been a key factor in Pizza Hut's success. Pizza Hut has clearly
defined itself as a brand with an Indian heart by understanding the pulse of its customers
in India. In addition to a wide variety of vegetarian pizzas, it was the first pizza chain in
India to open a 100 percent vegetarian restaurant in Surat, followed by Ahmedabad and
Chowpatty.

1.4 Justification of the topic:

The aim of this research is to explore consumers' overall behavior towards fast-food chains. More
specifically, the purpose here is to identify the key factors that influence these consumers'
preference of Domino’s and Pizza hut brands of fast-food restaurants. According to market
researches and surveys, Indians have become the major customers of Pizza. Two of the best brands
which hold the highest market shares, are Domino's and Pizza Hut. The main purpose of the study
is to look at the consumer's satisfaction towards the pizza outlets. This study is both descriptive as
well as analytical with an objective to examine the purchase preference of consumers on Pizza.
The statistics are computed from the survey using a well-structured questionnaire to extract the
options of the customers. This study finds the comparison between Domino's and Pizza Hut
consumers towards their preference, liking of services, and affordability. This study is useful to
entice further strategies for improving customer satisfaction towards the particular pizza outlet.
Moreover, it will enable pizza manufactures also to improve their products based upon the
preference of the customers.

8
CHAPTER 2
REVIEWOF LITERATURE

2.1 International Reviews

2.1 National Reviews

9
2.1 International Reviews:

1. R.Raffio in his studytitled: “Domino's pizza”, he discovered that Domino's is now the
country's second-largest chain, estimated at over $ 200 million and with S 400 million in
revenue. It has experienced remarkable growth, with 1000 units added to the now 1200-
unit chain in the last five years. As a result, according to the report, Domino's has been
successful in overcoming adversity and establishing a profitable company. It also looks at
how the pizza chain operates today, its policies and development plan, and whether the
fast-food chain will go public in the immediate future. (RAFFIO, 2007)

2. M. Pratscher in the article titled: “Can Domino’s dominate the pizza market”? He
discovered that there was widespread diversification in the fast-food industry. The most
successful and fastest-growing food service segment is Domino's pizza, but takeout and
delivery sales in general are expected to triple over the next decade. Domino's popularity
can be attributed to a number of factors, including a robust training program and reward
awards, which is why the fast-food industry has so much potential. (PRATSCHER.M,
2010)

3. MinniJaitly in his studytitled: “Current trends in the foodservice sector in the Indian
subcontinent”. According to the article, India has a diverse culture as well as its own
distinct culinary tastes. Despite the fact that Indian culture is largely associated with the
prominent use of a few main ingredients and spices, there are regional, cultural, and climate
variations. India is quickly emerging as a major consumer goods and processed food
market. according to the article India has diversified culture and its own unique food

10
 preferences. Although Indian culture is largely associated with the pronounced use of some
key ingredients and spices, differences in region, culture, climate. India is rapidly
becoming a key market for consumer goods and processed foods. India is a great market
for prepared foods because of its busy lifestyle, increased awareness, and desire to emulate
the West. Most fast-food restaurants, such as Pizza Hut, McDonald's, Domino's Pizza,
KFC, among others Food processing has been designated as a major thrust field by the
government, which recognizes the industry's potential. This ensures that the government
would have subsidies as well as significant tax benefits. However, in order to effectively
combine Western trends with Indian flavors, it is essential to first understand the common
influences and main flavors of Indian cuisine. (JAITLY, 2010)

4. In an article done by Tse and Wilton they have mentioned that satisfaction is described as
a consumer's response to an assessment of the perceived difference between prior
expectations and actual product performance as perceived after consumption. (WILTON,
1998)

5. Suprenantin his article stated that satisfaction Leads to Desirable Outcomes, such as repeat
purchases, adoption of other goods in the line, brand loyalty, store patronage, and,
eventually, higher sales and increased profit share. (SURPRENANT, 1977)

6. Sepannen, etal., in their article mentioned that customers want a higher-quality product or
service that is also easier to use or use and has lower prices than ever before. Internal
performance, productivity, adaptability, and customer support can all be improved by
enhancing a company's or organization' operations. (SEPANNEN, 2004)

7. Evellyne, Elisante& Reuben in their article found that customer satisfaction is largely
determined by the pace at which services are delivered, as well as the responsiveness and
courteousness of the company's employees. (EVELLYNE, 2009)

11
8. Smith Marshal Customers' expectations of how well the organization performs on key
performance metrics and aspects of the business are measured by customer satisfaction.
Services promptness, staff responsiveness, and knowing the customer's problem are
common examples. (MARSHAL, 2000)

9. Biehal and Stephens Hawkins in their study titled: “Liking towards the brand itself can
influence liking for the brand” stated that whether consumers like or dislike the product
does not necessarily lead to brand acceptance or rejection. So, even though consumers may
like the product that they see, it does not necessarily mean that they will go out and buy
the brand. Usually, the consumer uses their attitude towards the product in brand choice
equaled that of attitude towards the brands. (HAWKINS, 1992)

10. KELLY WHITNEYin his study stated that customer advocacy and customer satisfaction
the typical measurements around customer satisfaction of service delivery are customer
advocacy or customer loyalty is typically very different and there are questions around
willingness to repurchase and willingness to recommend you to others. You can make a
customer satisfaction, but they will really recommend you to others, and will they really
repurchase from you again unless you ask these questions, you won't know. There is
nothing like the voice of customers. (WHITNEY, 2006)

12
2.1 National Reviews:

1. Anita Goyal and N.P Singh in their study“titled: “Consumer perception about Fast
food in India” he noted that the majority of India's young generation prefers fast food
outlets for fun and variety because they place the highest importance on taste and quality.
So, according to the post, the Indian young generation prefers homemade goods and is also
hygienic conscious, which is why they prefer homemade things but only go to Domino's
for a fun outing. (ANITA GOYAL, 2007)

2. Jagwinder Singh and B.B Goyal in their study titled: “Comparative analysis of rural
& urban Indian consumer’s attitude towards foreign products”,they discovered that
rural consumers were more fascinated by foreign products than urban consumers because
rural people believe that foreign products are of high quality, a sign of prestige, and a large
range of models they found, while urban people are very price conscious and only make
decisions after evaluating the product. According to the article, Indian producers will face
a significant threat from foreign brands in the future, especially in the consumer durables
category, since India is one of the world's most promising and fastest growing economies,
with a large rural population. (SINGH, 2008)

3. Ali Nasir,Mirza Ashfaq Ahmed, Iram Nazir, Huma Zafar, Zahra Zahid in their
studystated that price, atmosphere, outstanding employee service, and security services are
often sought by those who go to a restaurant for a family celebration. There's a chance that
customers who go to restaurants for family celebrations will overlook the high prices
because they want high quality. Consumers who go to restaurants because there is no one

13
 to cook at home or because they are far away from home will always seek the lowest price,
sacrificing outstanding protection, service, and food quality. Since they are business people
and high quality is important to them, customers who attend family celebrations would
place a higher value on quality and the environment than on price.(ALI NASIR, 2014)

4. Vidya, B. etc., in their study titled “Fast-food consumption pattern and obesity” found
that taste and time factors, watching television while consuming junk foods, advertisements
regarding junk foods over the televisions, and the parents themselves getting these junk
foods are some of the factors related to junk food consumption. Customer satisfaction is a
term used to describe people's personal feelings about foods and services in the fast-food
industry, and it is regarded as one of the most critical aspects of the industry. (VIDYA,
2015)

5. Salami and C.G.E. Ajobo in their studytitled “Consumer perception about fast-food
restaurants” found that customers patronize fast-food for the change and not because of
nutritional value and fast-food is not yet perceived as a clear alternative to homemade
cooking. They also discovered that the type of food and its consistency are the most
important factors in assessing customer loyalty and satisfaction with a particular restaurant.
They also say that tangible items in restaurants improve the dining experience. (AJOBO,
2012)

6. Goyal and N.P. Singh in their study stated thatage, gender, variety, price, delivery,
convenience, venue, cleanliness, nutritional value, consistency, taste, service, and seating
capacity are some of the factors that influence fast food consumption.(SINGH, 2007)

14
7. Deivanai.Pin the study titled “Consumer Behavior towards fast-food products with
reference to Domino’s”suggested that the pizza manufactures should increase the
vegetables and energetic content mixes considering the health point of view. Also,
mentioned that the company has been offering various services with high-quality foods in
order to increase the number of customers by meeting their needs and demands in line with
current fast-food market trends and demand. Customer satisfaction is an important goal of
corporate marketing campaigns, since high levels of satisfaction can contribute to high
levels of customer loyalty. (DEIVANAI.P, 2013)

8. Kinnarry Thakkar and Mrunmayee R.Thatte in their study they selected two fast-food
outlets. The factors like variety, quality etc., are considered and found that price of the
items affect frequency of visit to maximum extent.(R.THATTE, 2014)

9. Yesodha Devi N &, Kanchana V.S. in their study titled “A study on consumer preference
and satisfaction towards restaurants” in which they examined that Quality & Taste are the
two major factors to select a restaurant. Customers are more discerning and demanding and
they always want to experiment with the money they spend, they also found that the Indian
restaurant industry has come of age by diversifying its services and is trying to cater to the
Indian taste buds and is staying in competitive arena amongst international giants and is
able to provide better services to the customers.(V.S., 2009)

10. SARINGAPANI in the study stated that it is a proven fact that cost of retaining customer
is much lower than acquiring a new one and CRM helps the industry not only building
relationship but also financial returns. (SARINGAPANI, 2006)

15
CHAPTER 3

RESEARCH METHODOLOGY

3.1 Objective of the study

3.2 Research Hypothesis
3.3 Scope of the study
3.4 Research Design
3.5 Limitation of the study

16
3.1 OBJECTIVES OF THE STUDY:
 Primary objective

1. To study customer satisfaction towards fast-food outlets (with reference to Domino’s and
Pizza Hut).

 Secondary objective

1. To study the factors considered by customers at the time of selecting the fast-food outlet
(concerning Domino’s and Pizza Hut).
2. To find out which factors are more preferred by the customers while selecting the pizza
outlets.
3. To know the customer satisfaction in pricing factor while selecting the fast-food outlet.

3.2 Research Hypothesis:

Ho: The two attributes, price and selection of fast-food outlet are independent.

H1: The two attributes, price and selection of fast-food outlet are dependent.

3.3 Scope of the study:

The scope of the study is limited to the Bhopal city.This study is mainly confined to the customer
satisfaction only. Scope of the study is to find which fast-food chain among Domino’s and Pizza
Hut is more preferred by the consumer and also preferred on which factor. For the purpose of the

17
study descriptive research is used, where the data is collected by using both primary and secondary
sources. This study will help the pizza manufactures to learn about customer satisfaction levels in
terms of price, quality and other factors. As a result, the findings will help the service providers to
concentrate on these factors in order to close consumer mentality gaps.

3.4 Research Design:

• Geographical area: Data will be collected from the people of Bhopal.

• Duration of study: 2 months.
• Sample size: 60 respondents.
• Sampling technique: CONVENIENCE SAMPLING. The convenience
sampling method has been used because the selection of units from the
population has been done based on easy or accessibility. The disadvantage
of convenience sampling is that the units that are easiest to obtain may not
be represented
• SAMPLIMG SELECTION: Inclusion criteria- people of age 13 and
above.
• DATA COLLECTION PROCEDURE: for this research study data will
be collected through questionnaire from approximately 60 respondents.
• DATA ANALYSIS PROCEDURE: Qualitative data will be used.
• DATA COLLECTION INSTRUMENT: Questionnaire will be circulated
among respondents through google forms.

3.4.1 Research Methodology:

 Primary data – structured questionnaire.

 Secondary data – literature review of research paper, online sites and articles.

18
 3.5 LIMITATIONS OF STUDY
 I have considered Bhopal City for the study results may vary due to differences in culture
and eating habits in other parts of the state and region.

 The finding of the study was based on the assumptions that respondents have given correct
information.Information provided by respondents may be biased.
 The final conclusion can be also affected by some of the extraneous variables.

CHAPTER 4

19
DATAREPRESENTATION AND ANALYSIS

4.1 Data representation and Interpretation

4.2 Hypothesis Testing

4.1 Data representation and Analysis:

Q.1) Gender of Respondents?

Respondents No. of Respondents Percentage (%)

Male 26 43.3%
Female 34 56.7%
Table 4.1.1

20
 Graph 4.1.1

Interpretation: In the survey there are 60 respondents out of which 26 are males and 34 are
females.

21
Q.2) What is your age?

Respondents No. of respondents Percentage (%)

13-20 19 31.7
20-40 37 61.7%
40-60 3 5%
More than 60 1 1.7
Table 4.1.2

Graph 4.1.2

Interpretation: The majority of respondents are between the age of 20-40 accounting for
37(61.7%), people of 13-20 age group accounts for 19(31.7%), people between 40-60 age group
accounts 3(5%) and only 1(1.7) respondent belongs to more than 60 age group.

22
Q.3) What is your occupation?

Options No. of respondents Percentage

Student 33 55%
House maker 10 16.7%
Business 7 11.7%
Service 10 16.7%
Table 4.1.3

Graph 4.1.3

Interpretation: Out of 60 respondents, 33(55%) are students, 10(16.7%) are house maker,
7(11.7%) are businessmen and remaining 10(16.7%) are servicemen.

Q.4) What is your current monthly income?

23
 Options No. of respondents Percentage (%)
Nil 41 68.3%
Below 10k 4 6.7%
10k-20k 6 10%
20k-40k 5 8.3%
More than 40k 4 6.7%
Table 4.11.4

Graph 4.1.14

Interpretation: The monthly income of majority of respondents is Nil accounting for 41(68.35),
6(10%) respondents have monthly income between 10k-20k, 5(8.3%) respondents have monthly
income between 20k-40k, 4(6.7%) respondents have below 10k and other 4(6.7%) respondents
have more than 40k as their monthly income.

24
Q.5) Have you ever been to pizza outlet?

Options No. of respondents Percentage (%)

Yes 60 100%
No 0 0%
Table 4.1.5

Graph 4.1.5

Interpretation: From the above table it can be inferred that out of 60 respondents all have gone
to pizza outlets.

25
Q.6) Does accessibility matters in selecting the pizza outlet?

Options No. of respondents Percentage (%)

Yes 36 60%
No 24 40%
Table 4.1.6

Graph 4.1.6

Interpretation: Out of 60 respondents, for 36 (60%) respondents accessibility matters while

selecting the pizza outlets and for 24 (40%) respondents’ accessibility doesn’t matter while
choosing the pizza outlets.

26
Q.7) Does price matters in selecting the pizza outlet?

Options No. of respondents Percentage (%)

Yes 44 73.3%
No 16 26.7%
Table 4.1.7

Graph 4.1.7

Interpretation: Out of 60 respondents, 44(73.3%) respondents said that price doesn’t matter for
them while selecting the pizza outlet and rest 16(26.7%) respondents said that price do matters for
them while choosing the pizza outlet.

27
Q.8) Which pizza outlet you generally prefer to visit?

Options No. of respondents Percentage (%)

Domino’s 43 71.7%
Pizza Hut 17 28.3%
Table 4.1.8

Graph 4.1.8

Interpretation: From 60 respondents, 43(71.7%) respondents have selected Domino’s and

remaining 17(28.3%) have selected Pizza hut.

Q.9) On what basis would you generally prefer to visit this outlet?

28
1) It is pocket friendly.

Options No. of respondents

a) Strongly Agree 5
b) Agree 19
c) Neutral 11
d) Disagree 7
e) Strongly Disagree 1
Table 4.1.9.1

Interpretaton: Out of 43 respondents, 5 respondents are strongly agreed and 19 respondents are
agreed that Domino’s is pocket friendly. There are 19 respondents who are neutral on this. The
number of respondents who are disagreed and strongly agreed on this are 7 and 1 respectively.

2) It tastes good.

Options No. of respondents

a) Strongly Agree 13
b) Agree 28
c) Neutral 2
d) Disagree 0
e) Strongly Disagree 0
Table 4.1.9.2

Interpretation: Out of 43 respondents, 13 respondents are strongly agreed and 28 respondents are
agreed that Domino’s is tastier. There are 2 respondents who are neutral on this. The number of
respondents who are disagreed and strongly disagreed are 0.

3) It provides variety in menu.

Options No. of respondents

a) Strongly Agree 18
b) Agree 17

29
 c) Neutral 6
d) Disagree 1
e) Strongly Disagree 1
Table 4.1.9.3

Interpretation: Out of 43 respondents, 18 respondents are strongly agreed and 17 respondents are
agreed that Domino’s provides variety in menu. There are 6 respondents who are neutral on this.
The number of respondents who are disagreed and strongly disagreed are 1 and 1 respectively.

4) It provides good customer services.

Options No. of respondents

a) Strongly Agree 7
b) Agree 26
c) Neutral 7
d) Disagree 2
e) Strongly Disagree 1
Table 4.1.9.4

Interpretation: Out of 43 respondents, 7 respondents are strongly agreed and 26 respondents are
agreed that Domino’s provides good customer services. There are 7 respondents who are neutral
on this. The number of respondents who are disagreed and strongly disagreed are 2 and 1
respectively.

5) The ambience is good.

Options No. of respondents

a) Strongly Agree 11
b) Agree 25
c) Neutral 2
d) Disagree 5
e) Strongly Disagree 0
Table 4.1.9.5

30
Interpretation: Out of 43 respondents, 11 respondents are strongly agreed and 25 respondents are
agreed that Domino’s has good ambience. There are 2 respondents who are neutral on this. The
number of respondents who are disagreed and strongly disagreed are 5 and 0 respectively.

6) It gives more offers.

Options No. of respondents

a) Strongly Agree 24
b) Agree 18
c) Neutral 1
d) Disagree 0
e) Strongly Disagree 0
Table 4.1.9.6

Interpretation: Out of 43 respondents, 24 respondents are strongly agreed and 18 respondents are
agreed that Domino’s provides good customer services. There is 1 respondent who is neutral on
this. The number of respondents who are disagreed and strongly disagreed are 0 and 0 respectively.

7) It offers good quality food.

Options No. of respondents

a) Strongly Agree 16
b) Agree 21
c) Neutral 5
d) Disagree 0
e) Strongly Disagree 1
Table 4.1.9.3

Interpretation: Out of 43 respondents, 16 respondents are strongly agreed and 21 respondents are
agreed that Domino’s provides good quality food. There are 5 respondent who are neutral on this.
The number of respondents who are disagreed and strongly disagreed are 0 and 1 respectively.

31
Graph 4.1.9

32
Q.10) What time of a day you prefer to eat there?

Options No. of respondents Percentage (%)

Morning 0 0%
Afternoon 8 18.6%
Evening 32 74.4%
Night 3 7%
Table 4.1.10

Graph 4.1.10

Interpretation: From 43 respondents out of 60 who chooses Domino’s, 32 respondents prefer to

visit domino’s outlet in the evening, 8 respondents like to go in the afternoon and 3 respondents
prefer to go in the night.

33
Q.11) How frequently do you visit?

Options No. of respondents Percentage (%)

Daily 0 0%
Weekly 4 9.3%
Monthly 11 25.6%
Occasionally 28 65.1%
Table 4.1.11

Graph 4.1.11

Interpretation:From 43 respondents, majority of respondents visit Domino’s outlet occasionally

which accounts for 28(65.1%). The respondents who visit the outlet monthly accounts for
11(25.6%) and remaining 4(9.3%) respondents visit the outlet weekly.

34
Q.12) Do you face difficulties while placing an order?

Options No. of respondents Percentage (%)

Yes 2 4.7%
No 25 58.1%
Sometimes 16 37.2%
Table 4.1.12

Graph 4.1.12

Interpretation: From 43 respondents, 2(4.7%) respondents face difficulty while placing an order,
16(37.2%) respondents sometimes face difficulties, and the remaining 25(58.1%) respondents did
not face any difficulty while placing an order.

35
Q.13) Does advertisement of Domino’s influence you to visit this outlet?

Options No. of respondents Percentage (%)

Yes 20 46.5%
No 23 53.5%
Table 4.1.13

Graph 4.1.13

Interpretation: Out of 43 respondents, 20(46.5%) respondents says yes that advertisement

influenced them to visit this outlet and the remaining 23(53.5%) says no that advertisement did
not influenced them to visit this outlet.

36
Q.14) How much money do you spend there?

Options No. of respondents Percentage (%)

0-200 8 18.6%
200-500 23 53.5%
More than 500 12 27.9%
Table 4.1.14

Graph 4.1.14

Interpretation:From 43 respondents, 8(18.6%) respondents spend money between 0-200,

12(27.9%) respondents spend more than 500 and the majority of the respondents which is
23(53.5%) spend money between 200-500.

37
Q.15) On scale of 1 to 5 rate the overall experience at Domino’s?

Options No. of respondents Percentage (%)

1 1 2.3%
2 3 7%
3 15 34.9%
4 19 44.2%
5 5 11.6%
Table 4.1.15

Graph 4.1.15

Interpretation: From 43 respondents, 19(44.2%) and 15(34.9%) respondents rate the overall
experience at Domino’s as 4 and 3 respectively on the scale of 1 to 5. While the remaining
5(11.6%), 3(7%) and 1(2.3%) respondent rate the over experience at Domino’s as 5, 2 and 1
respectively on the scale of 1 to 5.

38
Q.16) Would you recommend Domino’s to others?

Options No. of respondents Percentage (%)

Yes 39 90.7%
No 4 9.3%
Table 4.1.16

Graph 4.1.16

Interpretation: From 43 respondents, 39(90.7%) respondents says yes that they will recommend
Domino’s to others and rest 4(9.3%) respondents says no that they will not recommend Domino’s
to others.

39
Q.17) On what basis would you generally prefer to visit this outlet?

1) It is pocket friendly.

Options No. of respondents

a)Strongly Agree 1
b) Agree 3
a) Neutral 3
b) Disagree 8
c) Strongly Disagree 2
Table 4.1.117.1

Interpretation: Out of 17 respondents, 1 respondents are strongly agreed and 3 respondents are
agreed that Pizza Hut is pocket friendly. There are 3 respondents who are neutral on this. The
number of respondents who are disagreed and strongly agreed on this are 8 and 2 respectively.

2) It tastes good.

Options No. of respondents

a) Strongly Agree 2
b) Agree 14
c) Neutral 1
d) Disagree 0
e) Strongly Disagree 0

40
 Table 4.1.17.2

Interpretation: Out of 17 respondents, 2 respondents are strongly agreed and 14 respondents are
agreed that Pizza Hut is tastier. There is 1 respondent who is neutral on this. The number of
respondents who are disagreed and strongly disagreed are 0 and 0 respectively.

3) It provides variety in menu.

Options No. of respondents

a) Strongly Agree 2
b) Agree 8
c) Neutral 1
d) Disagree 6
e) Strongly Disagree 0
Table 4.1.117.3

Interpretation: Out of 17 respondents, 2 respondents are strongly agreed and 8 respondents are
agreed that Pizza Hut provides variety in menu. There is 1 respondent who is neutral on this. The
number of respondents who are disagreed and strongly disagreed are 6 and 0 respectively.

4) It provides good customer services.

Options No. of respondents

a) Strongly Agree 4
b) Agree 10
c) Neutral 1
d) Disagree 2
e) Strongly Disagree 0
Table 4.1.17.4

Interpretation: Out of 17 respondents, 4 respondents are strongly agreed and 10 respondents are
agreed that Pizza Hut provides good customer services. There is 1 respondent who is neutral on
this. The number of respondents who are disagreed and strongly disagreed are 2 and 0 respectively.

5) The ambience is good.

41
 Options No. of respondents
a) Strongly Agree 6
b) Agree 8
c) Neutral 3
d) Disagree 0
e) Strongly Disagree 0
Table 4.1.17.5

Interpretation: Out of 17 respondents, 6 respondents are strongly agreed and 8 respondents are
agreed that Pizza Hut has good ambience. There are 3 respondents who are neutral on this. The
number of respondents who are disagreed and strongly disagreed are 0 and 0 respectively.

6) It gives more offers.

Options No. of respondents

a) Strongly Agree 1
b) Agree 8
c) Neutral 5
d) Disagree 3
e) Strongly Disagree 0
Table 4.1.17.6

Interpretaton: Out of 17 respondents, 1 respondents are strongly agreed and 8 respondents are
agreed that Pizza Hut give more offers. There is 5 respondent who are neutral on this. The number
of respondents who are disagreed and strongly disagreed are 3 and 0 respectively.

7) It offers good quality food.

Options No. of respondents

a) Strongly Agree 6
b) Agree 11
c) Neutral 0
d) Disagree 0
e) Strongly Disagree 0
Table 4.1.17.7

42
Interpretation: Out of 17 respondents, 6 respondents are strongly agreed and 11 respondents are
agreed that Pizza hut provides good quality food.There are 0 respondent who are neutral on this.
The number of respondents who are disagreed and strongly disagreed are 0 and 0 respectively.

Graph 4.17

43
Q.18) What time of a day you prefer to eat there?

Options No. of respondents Percentage (%)

Morning 0 0%
Afternoon 7 41.2%
Evening 8 47.1%
Night 2 11.8%
Table 4.1.18

Graph 4.1.18

Interpretation: From 17 respondents, 8(47.1%) respondents prefer to visit Pizza Hut outlet in the
evening, 7(41.2%) respondents like to go in the afternoon and 2(11.8%) respondents prefer to go
in the night

44
Q.19) How frequently do you visit?

Options No. of respondents Percentage (%)

Daily 0 0%
Weekly 4 23.5%
Monthly 8 47.1%
Occasionally 5 29.4%
Table 4.1.19

Graph 4.1.19

45
Interpretation: From 17 respondents, majority of respondents visit Pizza Hut outlet occasionally
which accounts for 5(29.4%). The respondents who visit this outlet monthly accounts for 8(47.1%)
and remaining 4(23.5%) respondents visit this outlet weekly.

Q.20) Do you face difficulties while placing an order?

Options No. of respondents Percentage (%)

Yes 2 11.8%
No 12 70.6%
Sometimes 3 17.6%
Table 4.1.20

46
Graph 4.1.20

Interpretation: From 17 respondents, 2(11.8%) respondents face difficulty while placing an

order, 3(17.6%) respondents sometimes face difficulties, and the remaining 12(70.6%)
respondents did not face any difficulty while placing an order.

Q.21) Does advertisement of Domino’s influence you to visit this outlet?

Options No. of respondents Percentage (%)

47
 Yes 10 58.8%
No 7 41.2%
Table 4.1.21

Graph 4.1.21

Interpretation: Out of 17 respondents, 10(58.8%) respondents says yes that advertisement

influenced them to visit this outlet and the remaining 7(41.2%) says no that advertisement did not
influenced them to visit this outlet.

48
Q.22) How much money do you spend there?

Options No. of respondents Percentage (%)

0-200 4 23.5%
200-500 7 41.2%
More than 500 6 35.3%
Table 4.1.22

Graph 4.1.22

Interpretation: From 17 respondents, 4(23.5%) respondents spend money between 0-200,

6(35.3%) respondents spend more than 500 and the majority of the respondents which is
7(41.2%) spend money between 200-500.

49
Q.23) On scale of 1 to 5 rate the overall experience at Domino’s?

Options No. of respondents Percentage (%)

1 0 0%
2 0 0%
3 5 29.4%
4 11 64.7%
5 1 5.9%
Table 4.1.23

Graph 4.1.23

Interpretation: From 17 respondents, 11(64.7%) and 5(29.4%) respondents rate the overall
experience at Pizza hut as 4 and 3 respectively on the scale of 1 to 5. While the remaining 1(5.9)
respondent rate the over experience at Pizza hut as 5.

50
Q.24) Would you recommend Pizza Hut to others?

Options No. of respondents Percentage (%)

Yes 16 94.1%
No 1 5.9%
Table 4.1.24

Graph 4.1.24

Interpretation: From 17 respondents, 16(94.1%) respondents says yes that they will recommend
Domino’s to others and rest 1(5.9%) respondents says no that they will not recommend Domino’s
to others.

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4.2 Hypothesis Testing:

Q.7) Does price matters in selecting the Pizza outlets?

Respondents Yes % No % Total %

Male 20 76% 6 23 26 100%
Female 24 70% 10 30% 34 100%
Table 4.2.1

Ho: The two attributes, price and selection of fast-food outlet are independent.

H1: The two attributes, price and selection of fast-food outlet are dependent.

Respondents Yes No Total

Male 20 6 26
Female 24 10 34
Total 44 16 60
Table 4.2.2

Respondents Observed Expected (O-E)2 (O-E)2/E

(O) (E)
Male
Yes 20 (26*44)/60 = 0.88 0.0461
19.06
No 6 (26*16)/60 = 0.86 0.1240
6.93
Female
Yes 24 (34*44)/60 = 0.86 0.0344
24.93
No 10 (34*16)/60 = 0.88 0.0971
9.06
Total 0.3016
Table 4.2.3

52
Decision:

P = 0.05

d.f. = (r-1) (c-1)

= (2-1) (2-1)

=1

X2 0.05, 1 = 3.841>x2 = 0.3016

Since the table value X2 at 5% level of significance and 1degree of freedom which is 3.841. As the
calculated value of Chi square test is less than the expected value, the null hypothesis that the two
attributes, price and selection of fast-food outlet are independent is accepted.

53
Chapter 5

RESULTS AND DISCUSSIONS

5.1 Major Findings

5.2 Discussions and suggestions

5.3 Conclusion

54
5.1 Major Findings:

 There are 36 female respondents and 24 male respondents.

 In the study female are leading the sample and males showed less interest in participating
in the study.
 People in the 20-40 age group were found to visit pizza joints more often.
 On the occupation side, the number of students is more (33 person).
 It is found that 100% of respondents had gone to the pizza outlets, Domino’s or Pizza Hut.
 36(60%) respondents said that accessibility matters while selecting the pizza outlet and
24(40%) respondents say that it doesn’t matter.
 44(73.3%) respondents said that price matters while choosing the pizza outlet and on the
other hand 16(26.7%) respondents say it doesn’t matter.
 In the survey out of 60 respondents 43 respondents like to eat at Domino’s and only 17
respondents like to eat at Pizza Hut because Domino’s is cheaper than Pizza hut.
 Due to the accessibility strategy and pricing strategy people prefer to eat more at Domino’s.
 According to the survey, people think that Domino’s has better food quality than Pizza
Hut.
 Majority of the customers of both the houses spend money between 200-500.
 25 respondents of Dominos think that it has a good ambience out of 43 respondents while
only 8 respondents think that the ambience of pizza hut is good out of 17 respondents.
 Majority of the respondents of both houses did not face any problem while placing an order.
 Most of the respondents of Domino’s prefer to visit the outlet occasionally while the
respondents of Pizza hut prefer to visit this outlet monthly.
 Respondents of both the houses prefer to visit these outlets in the evening.

55
5.2 Discussions and suggestions:

 There should be more varieties of food items on the menu so that people should have all
the things in one place.
 There should be more of a new variety of Pizzas on the menu to attract people.
 Both the houses should increase the number of their outlets so that it should be within reach
of people and people come easily.
 Both pizza houses (that is Domino’s and Pizza hut) should focus more on hygiene and
healthy food so that people like to come frequently.
 It is suggested that both the pizza houses should concentrate on the areas of ambience and
locational strategy.
 As a study shows that customers are not influenced by the advertisement of the outlet. So,
it is suggested that stores should design different innovative advertising campaigns and
should use more well-known celebrities as brand ambassadors to increase their sales or to
increase their market share.
 As the study shows that customers attract towards that outlet more which provides more
special offers, so it is suggested that stores should concentrate more on special offers but
no compromise in the quality of food.
 As the majority of customers visit the pizza outlets monthly or occasionally. So, it is
suggested that these outlets should give more offers and discounts to capture more
customers and retain loyal customers.
 They should maintain consistency in taste and quality of products.

5.3 Conclusion:

Fast food's popularity stemmed from changes in our lifestyles. Changing habits, the breakdown of
the joint family structure, an increase in the number of working women, and western presence in
urban areas are all contributing to the growth of the fast-food industry. Finally, the key problem in
all types of business sectors is determining market demand and needs. If keep consumer

56
satisfaction, that will increase more loyal consumers. As long as business companies need to pay
more attention to what consumers are thinking, what factors influence them negatively, what
factors we need to change. Consumer satisfaction is the part of marketing and plays an important
role in the market. Moreover, for measuring customer satisfaction, this study was conducted and
to examine the relationship between customer satisfaction to price, product quality, locations,
environment, and menu variety are the key determinants of consumer satisfaction and demands in
the purchase of fast-food chain industry. Also, companies that are working in Fast-Food chain
industries need to focus more on price, menu variety, employee behavior.

After analyzing the responses to the survey, it has been determined that Domino's is favored over
Pizza Hut. It preserves continuity in taste and quality while also making more deals because it
provides high-quality food at reasonable prices. To summarize, we can conclude that Domino's is
increasing rapidly by pleasing its customers by offering quality and consistent service. On the other
hand, we can conclude that Pizza Hut must prioritize customer loyalty in order to maintain existing
customers and attract new ones. This level of customer satisfaction can only be achieved if Pizza
Hut retains its quality while still maintaining price control. We discovered that the organization
has adjusted to new business entrants and has managed to remain afloat solely due to its
consistency. But it is also concluded that if Pizza hut does not keep a focus on its quality and
prices, it might lose its customers and the market share.

57
References:

1. Research Methodology book by C.R. Kothari.

2. Advanced Statistics book by S.M. Shukla.
3. Statistical Methods by S.P. Gupta.

A study on consumer preference and satisfaction towards restaurants [Journal] / auth. V.S. YESODHA DEVI N AND
KANCHANA. - [s.l.] : Indian Journal of Marketing, 2009. - 2009 : Vol. 39.

A Study On Customer Satisfaction On Domino's [Report] / auth. SURPRENANT. - 1977.

A Study On Customer Satisfaction On Domino's [Report] / auth. WILTON TSE AND. - 1998.

A STUDY ON CUSTOMER SATISFACTION ON DOMINO'S [Report] / auth. EVELLYNE ELISANTE AND REUBEN. - 2009.

A STUDY ON CUSTOMER SATISFACTION ON DOMINO'S [Report] / auth. SEPANNEN ETAL. - 2004.

Can domino's dominate the pizza market? [Report] / auth. PRATSCHER.M. - 2010.

Comparative analysis of rural and urban Indian consumer's attitude towards foreign products [Report] / auth.
SINGH JAGWINDER. - [s.l.] : JOURNAL OF STRATEGIC MARKETING, 2008.

Consumer behaviour towards fast food products with special reference to Domino's [Journal] / auth.
DEIVANAI.P. - [s.l.] : International Research Journal of Business and Management, 2013. - 1,June 2004 : Vol. 5.

Consumer perception about fast-food in India [Report] / auth. ANITA GOYAL N.P SINGH. - [s.l.] : BRITISH FOOD
JOURNAL, 2007.

Consumer perception about fast-food in India [Journal] / auth. SINGH GOYAL AND N.P.. - [s.l.] : British Food
Journal, 2007. - Vol. 2.

Consumer perception about fast-food restaurants [Journal] / auth. AJOBO SALAMI AND C.G.E. - [s.l.] : Journal of
Management and Business Research, 2012. - 1,January2012 : Vol. 12.

Consumer perception of food franchise [Journal] / auth. R.THATTE KINNAEEY THAKKAR AND MRUNMAYEE. - [s.l.] :
International of Scientific and Research, 2014. - 3,March 2014 : Vol. 4.

58
Current trends in the foodservice sector in the Indian subcontinent [Report] / auth. JAITLY MINNI. - [s.l.] : Midas
food International, 2010.

Customer Satisfaction Towards Pizza hut [Report] / auth. MARSHAL SMITH. - 2000.

CUSTOMER SATISFACTION TOWARDS PIZZA HUT [Report] / auth. SARINGAPANI. - 2006.

CUSTOMER SATISFACTION TOWARDS PIZZA HUT [Report] / auth. WHITNEY KELLY. - 2006.

Domino's pizza [Report] / auth. RAFFIO R. - [s.l.] : RESTAURANT BUSINESS, 2007.

Fast-food consumption pattern and obesity [Journal] / auth. VIDYA. - [s.l.] : British food jounal, 2015. - 12,March
2015 : Vol. 2.

Impact of Different Determinants on Customer's Satisfaction level [Journal] / auth. ALI NASIR MIRZA ASHFAQ
AHMED, IRAM NAZIR, HUMA ZAFAR, ZAHRA ZAHID. - [s.l.] : International Journal of Business and Management
Invention, 2014. - 9,PP.32-40,(2014) : Vol. 3.

Liking towards the brand itself can influence liking for the brand [Report] / auth. HAWKINS BEST AND CONEY. -
1992.

Predicting consumer patronage behaviour in the fast-food business [Report] / auth. IBRAHIM YASSER AND
VIGNALI, CLAUDIO. - [s.l.] : Innovative Marketing, 2005.

59
Annexure:

Questionnaire on Customer Satisfaction towards Fast-food Outlets (with reference to

Domino’s and Pizza Hut)

Gender

 Female
 Male
Age

 13-20
 20-40
 40-60
 More than 60
Q1) What is your occupation?

 Student
 House Maker
 Business
 Service
Q2) What is your current monthly income?

 Nil
 Below 10K
 10k-20k
 20k-40k
 More than 40k
Q3) Have you ever been to Pizza outlet?

 No
 Yes
Q4) Does accessibility matter in selecting the pizza outlet?

 Yes
 No

60
Q5) Does price matters in selecting the pizza outlet?

 Yes
 No
Q6) Which pizza outlet you generally prefer to visit?

 Domino's
 Pizza Hut

Following are the questions if the respondent selects Domino’s:

Q7) On what basis would you generally prefer to visit this outlet?

i. It is pocket friendly.
(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

ii. It tastes good.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

iii. It provides variety in menu.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

iv. It provides good customer services.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

v. The ambience is good.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

vi. It gives more offers.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

vii. It offers good quality food.

(a) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

61
Q8) What time of a day do you prefer to eat there?

 Morning
 Afternoon
 Evening
 Night
Q9) How frequently do you visit?

 Daily
 Weekly
 Monthly
 Occasionally
Q10) Do you face difficulties while placing an order?

 Yes
 No
 Sometimes
Q11) Does advertisement of Dominos influence you to visit this outlet?

 Yes
 No
Q12) How much money do you spend there?

 0-200
 200-500
 More than 500
Q13) On the scale of 1 to 5(1 being the lowest and 5 being the highest) rate the overall experience
at Domino's.

 Lowest 12345 Highest

Q14) Would you recommend Domino's to others?

 Yes
 No

62
Following are the questions if the respondent selects Pizza hut:

Q15) On what basis would you generally prefer to visit this outlet?

i. It is pocket friendly.
(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

ii. It tastes good.

(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

iii. It provides variety in menu.

(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

iv. It provides good customer services.

(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

v. The ambience is good.

(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

vi. It gives more offers.

(b) Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

vii. It offers good quality food.

i. Strongly Agree (b) Agree (c) Neutral (d) Disagree (e) Strongly Disagree.

Q16) What time of a day do you prefer to eat there?

 Morning
 Afternoon
 Evening
 Night

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Q17) How frequently do you visit?

 Daily
 Weekly
 Monthly
 Occasionally
Q18) Do you face difficulties while placing an order?

 Yes
 No
 Sometimes
Q19) Does advertisement of Pizza Hut influence you to visit this outlet?

 Yes
 No
Q20) How much money do you spend there?

 0-200
 200-500
 More than 500
Q21) On the scale of 1 to 5(1 being the lowest and 5 being the highest) rate the overall experience
at Pizza Hut.

 Lowest 12345 Highest

Q22) Would you recommend Pizza Hut to others?

 Yes
 No

64