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Working Papers | 1991

Implementation of Large Computer-Communication Projects in a Developing Country - A Case Study

Rekha Jain and G. Raghuram

The implementation of geographically dispersed computer-communication projects involving large financial outlays is a complex task, more so in a developing country context. This paper is focused around a case study which highlights some of the issues in the context of Indian Railways decision to implement a large computer-communication network for the management of it's freight operations. The case study is followed by a case analysis which first analyses the causes of project delay; then issues specific to this being a computer communication project, as well as issues which are of general nature and which we believe will be applicable to high technology projects involving large investments in a developing country context are discussed.

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Working Papers | 1991

European Economic Community Review of Literature Reactions in India: Part I: 1960-80

Gaikwad V R

This is our forth working paper (WP) on the EC. The first paper (WP 841, Jan.1990) analysed the basic motives underlying the formation of the EC as reflected in the writings of Jean Monnet-“The Father of the Common Market”. The paper discussed the gigantic changes of great historical significance taking place in Europe. Following the Common Market strategy EC is relentlessly moving towards its ultimate political objectives, i.e., a United States of Europe. Recent events in Eastern Europe and USSR are not spontaneous but result of the long-term strategy for uniting 'People of European Origin'. Gorbachov's perestroika and glanost are strategies to provide “freedom” to East Europeans and European (white) Russia to ultimately become members of a Unites States of Europe. Both Monnet's and Gorbachov's strategies have been and are being executed with great finesse, shrewdness and top level diplomacy to develop a sense of complacency among the non-European communities. Today, EC leaders talk about “a broader, Helsinki-type Europe, from San Francisco to Vladivostock”. Our analysis indicates that the driving force behind the 'Unity of Europe' and of “People of European Origin” is genetic-ethnic-racial. It indicates that Europe's march from nationalism to supra-nationalism leads to supra-Euracialism. EC-1992 is of great symbolic significance for non-European communities. It is exactly 500 years after Columbus reached North America in 11492; the beginning of ruthless exploitation of non-European communities since then. EC-1992 is a landmark, a symbol of consolidation of European power and Euracial fundamentalism. It can also be a prelude to War of Races. Against the United Europe and 'People of European Origin” where do non-European communities stand? Have they realised in time the long-term implications of European unification processes and taken timely steps so safeguard their future? Have they asked themselves the question, whether by cooperating with EC with an eye on short-term commercial gains, are they further strengthening Europe's drive towards its politico-racial objective? In our second paper (WP 854, Mar,1990) we have sought answers to these and related questions in the writings of western writers. In our third paper (WP872, July 1990) we have discussed twelve sets of questions which try to look at EC from our perspective, i.e., non-European perspective. In this paper we shall see whether Indian thinking on EC has been in any way different from that of the western writers. Did it go beyond the traditional, stereotype ways of looking a European Community? What basic issues and concerns dominated Indian thinking? What was their analysis of events and reading of the future? What strategies and actions they recommended? And so on. The paper reviews ICSSR's survey of research (trend reports) in various disciplines, especially, in Public Administration (Khilnani and Sinai, “Administration of External Affairs”), Macroeconomic (Manmohan Singh, “International Trade and Payments”), Management (C.P.Rao, “Marketing”), Political Science: International Studies (Prasad and Phadnis, “Area Studies”; Mahendra Kumar, “Foreign Policy”; K.Subrahmanyam. “Defence Policy and Analysis”). In addition, the paper reviews in detail the writings of eleven other Indian scholars from various disciplines. This review is an eye-opener. It tells us about our scholars', top political leaders' and bureaucrats' world view, their orientation towards EC, and their reading of the events and perceptions about the future. Readers can themselves check the validity of these writers' assumptions and conclusions and their perceptions against the current realities.

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Working Papers | 1991

A Valuation Model for Indeterminate Convertibles

Jayanth R. Varma

Many issues of convertible debentures in India in recent years provide for a mandatory conversion of the debentures into an unspecified number of shares at an unspecified time; the conversion ratio (i.e., the number of shares per debenture) is to be determined by the Controller of Capital Issues (CCI). There are serious problems in arriving at a rational value for these "indeterminate convertibles". Even if the investor can make some estimate of the likely conversion terms, there is no valuation model available to arrive at a price. This paper applies the general theory of derivative securities (Cox, Ingersoll and Ross, 1985) to obtain a valuation model for these instruments. The model shows that the naive valuation model which sets the value of the debenture equal to the current stock price times the expected conversion ratio is likely to be a significant overestimate of the price. It also shows that changes in the stock price lead to less than proportionate changes in the debenture price unlike in the case of pre-specified conversion terms. Similarly, the CAPM beta of the debenture would be significantly lower than that of the share. While the model does not obviate the need for obtaining estimates of unobservable parameters related to the market expectations about the likely conversion ratio, the qualitative insights given by the model are quite useful. The model is successful in explaining some of the empirical patterns and anomalies that have been observed in ongoing empirical research into the market prices of these debentures.

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Working Papers | 1991

Market Valuation Model Under Differential Taxes, Inflation, Recurring Investments and Flotation Costs

Ragunathan V and Jayanth R. Varma

The extent literature on valuation identifies several important variables affecting the value of a firm. These include, corporate and personal taxes, reinvestments, leverage, dividend policy, and inflation. But, most of the papers have focussed only on a small number of these variables at a time and constructed comparatively simple valuation models designed to answer relatively limited questions in valuation theory. However, the fact remains that the above variables interact in quite complex ways, and it is necessary to have a comprehensive valuation model which captures most of the complexities and subtleties of real world corporate finance. This paper is an attempt at developing such a model. The model is capable of supporting both the Gordon and MM type assumptions about the investment policy of the firm. It allows for personal taxes with differential tax rates for dividends, interest and capital gains. The model also takes into account flotation costs on debt and equity. Further, unlike other models which define capital gains as the increase in the book value which in turn equals retained earnings, this model interprets capital gains as the increase in the market value of the share. Finally, the model is modified to take into account Lintner's concern about inflation eroding the real value of the firm's assets, particularly, net monetary working capital. The paper also numerically depicts the impact of manifold taxes on valuation and the complex interactions of different variables in influencing the firm value.

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Working Papers | 1991

Protection to Domestic Industry: An Empirical Investigation

Aggarwal Ashok K

Recently there has been widespread debate on impact of protection on performance of domestic industry. It has been argued that protection to the Indian Industry during the last 40 years has resulted in poor performance of the industry in terms of productivity, technological development, low competitiveness because of poor quality of products at very high prices. Could we not have grown at the same rate as some of the Newly Industrialized Countries (NICs) by following the more open policy towards foreign capital and exports rather than following import-substitution path? This empirical study attempts to answer some of the questions posed above. This study examines the extent of protection to the domestic industry for the period 1974-78 (1970s) and 1982-84 (1980s). International average unit values and domestic prices of the industry are used to find the implicit and effective protection. It also examines the impact of protection on relative performance by using three different performance parameters. To study the distortionary effects on production technology it examines the relationship between protection and physical capital intensity. The main findings of the study are: (i) that protection has increased in the 1980s as compared to 1970s (ii) there is no conclusive evidence about the impact of protection on the performance variables over the two periods (iii) poor performance of Indian exports could not be attributed to the poor price competitiveness of our exports (iv) there is no evidence of distortionary effects of protection on the production technology.

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Working Papers | 1991

Dilemmas of renewable Energy: The Case of the Solar Cooker Programme in Gujarat, India

Moorthy Ravi C

This article presents a set of measures for evaluating a social development programme such as the non-conventional energy programme. The specific case discussed and evaluated here is that of the solar cooker programme. Subsequently, the attempt is to identify key decision areas and raise some questions which may help focus better on the marketing problems confronting the programme.

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Working Papers | 1991

Gantt Chart Colouring

V. Venkata Rao and Prasad C Syam

This paper presents three rules for colouring of a Grant Chart that displays the machine and job schedules of a job shop. These rules have been used on the job schedules of a real job shop and the performance of the proposed rules has been measured with respect to four different data sets of the above job shop. Of the three rules the rule based on the jobs using the critical machines performed most satisfactorily according to the measure of performance used. This measure of performance is based on the principle of proper colouring according to which operations of the same job should receive the same colour, while neighbouring operations of a machine should receive different colours. The paper also proposed the concept of degree of neighbourliness which may form the basis for new heuristics for colouring.

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Working Papers | 1991

Biodiversity and Poverty Vis-à-vis Biotechnology and Prosperity

Anil K. Gupta

The debate on intellectual property rights of third world farmers, pastoralists and artisans has almost always been guided by the fear that the industry in the developing countries (particularly drug industry) would be wiped out if patent rights demanded by the western companies were granted. This position, I contend, stems from inability of the elite scientists and policy planners in these countries to recognise the strength of the indigenous knowledge systems. It is assumed that there is no knowledge reserve in these developing countries which can provide a bargaining strength to these countries. I argue that this is neither a very sensible position nor very useful one while negotiating on this subject. There is a tremendous richness in the knowledge systems of the developing society much of which is in great demand. Unfortunately we have not realised its importance. The results is our excessive dependence on imported technologies and lack of development of indigenous capacities. I also share the dilemma of a third world researcher who by documenting such richness of local knowledge tries to make the farmers' wisdom a common property. Whether this tactical effort would make third world planners shift their stand, agree to sign the convention, patent all the land races, file cases for royalty from companies using any of these plants and refuse the concept of biodiversity as a common heritage remains to be seen. DNA finger printing as a biotechnological tool can be a means of establishing the relationship between patented land races and any new plant variety. The paper also argues that biodiveristy is rich in the regions of high environmental risks such as drought, floods, hailstorm etc. Without protecting the knowledge resources of the people in these regions, extraction of their knowledge poses serious ethical and professional dilemma.

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Working Papers | 1991

Mastershares: Market Prices Divorced From Fundamentals

Samir K. Barua and Jayanth R. Varma

The shares of a closed-end Mutual Fund may be regarded as derived securities because their value depends entirely on the prices of securities that comprise the fund portfolio. Therefore, the Net Asset Value (NAV) of these shares, after adjustments for winding up costs, can be regarded as their fundamental value. In an efficient market, the prices of these shares would move in line with the changes in their NAV. This paper examines the relationship between the price and the NAV of Mastershares, the first closed-end fund in India. The investigations revealed that there is excessive volatility in prices, not justified by the fluctuations in the NAV. The price also show a mean reverting behaviour. These observations are in line with recent works on irrationality in pricing of securities and emphasize the doubts raised about efficacy of standard test for market efficiency.

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Working Papers | 1991

Option Trading: A Primer and a Proposal

Gupta Ramesh

The option industry has witnessed explosive growth since 1973 when the first organized option exchange opened in Chicago. Moreover, this growth is continuing into the 1990s as entirely new types of options are created and as more of the traditional options on securities are listed and traded. Options on commodities, options on financial indices and options on future contracts are all exciting new products. Understanding these new products well enough to sell them has been straining the capacity of the world security industry. At present, instruments prevalent in India are meant primarily to raise resources from public for corporate sector. We hardly have any mechanism or instruments which would help the investors in managing the risk commensurate with their preferences. It is high time that option trading is launched in Indian stock exchanges. This paper provides a primer on option trading and a preliminary proposal for its implementation in India. For successful launching of option trading in India we would require the following: 1 The standardization of the terms of option contracts. 2 The careful selection of underlying security. 3 The appointment of a number of market makers with adequate financial resources. 4 The creation of an Option Clearing House as the single guarantor of every exchange traded option. 5 The creation of an active secondary market. 6 The creation of a central market place with its attendant regulatory, surveillance and price dissemination capabilities. 7 The creation of paperless trading and book-entry transfer system.

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