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CENTRAL LIBRARY ECONOMIC ENVIRONMENT AND HUMAN RESOURCE MANAGEMENT l niversih of Calcutta Central l.tlirun G17054 Bhabatosh Banerjee Jita Bhattacharyya Kanika Chatterjee Mahalaya Chatterjee VATM r.» » u V, c fl»%v Special Assistance Programme fL'tiC) Department of Commerce UNIVERSITY OF CALCUTTA CENTRAL LIBRARY 0 2002 □ Department ni Cumintivc, UAivcniiy L>t t';ikui[:i ecu 3 <?g^. Published : November. 20i>2 7 333. 06^3 Ec 19 Price : Rs 250.00 Gi 10054 Printed m InJini hy Dr Bhiibutosh Bnnerjee, Ovordiijdtor, DSA m Commerce. l!im'i:rsity ot CalcuHu. -it ApflitWI Priiftcrs 7B, Siturum Ghosli Sued. Ko!k;itu J dd *1' {Ph 241 >4249/3969] a Ad published by him on behalf o< University el C LLluntiiT. tii) CENTRAL LIBRARY preface Mu.l prescnl research volume is a compilation of papers pertaining lo ilw ihnm area. Economic Environment and Human Resource Management. wliK'li seeks to merge two different, albeit closely related contemporary, issues, There nHi} arise considerable debate ns to the tenuous connection heiwccn these mo research (hemes and their sequencing in terms of the prioruy of the issues—quality of human beings in a society as a determinant of the quality ol economic transactions* or vice versa. As a netcssai ^ l F.ifi I icivtion, we state [hat die two research themes in que-U^n and iheir ordering m this volume are based strictly on the nomenclature ol the third thrust area prescribed lor the purpose ul research under the Second Phase u| die Special Assistance Programme in Commerce grained by the University Grants Commission The volume presents the reader with fourteen research-based papers, evenly distributed between the iwin research themes that fall under the ilinisi area. Indeed, they focus on varied aspects of the somewhat broadly defined thrust area, Most of the papers, il not all. are carved out ol presentations made at die 3rJ National Conference of the USA Programme in Commerce i2"‘! Phase) held during March 2^-24, 2002. The C onferencc was inaugurated h> the Vice-Chancellor ol the University ol Calcutta. Professor Asis Kumar Bancrjec, who stressed on ihe need for integration ol the themes For meaningful academic interae- lions Pro lessor D* N, Rao, Centre fur Economic Studies and Planning. School nf Social Sciences, Jawalmrlal Nehru University add a UCC Expert on the Advisory Committee, spoke .iv the Chief Guest Me elaborated die concept of human resources, ihe fallacy ol rate of return approach, limitation ol the human capital approach and HEM in the con tern of globalisation. Two keynote addresses were giveh on the themes respec tively by Professor P. N Ray, Member, Slate Planning Board, Go\ emSicni of West Bengal* and Professor K K, Chaudhuri, Director National Ensrituic uf Management Calcutta While Fiofcssor Roy dwelt on “Impact «t Globalization on Indian Economy1 in a comprehensive anil Lucid way. Professor Chaudhuri highlighted the issues in I1RM and the actions needed on the pan of management T hese two drought-provoking lectures set the time of discussion in the subsequent sessions dealing with two themes ol Economic Environment and Human Resource Management, The other distinguished speakers included Professoi SuftUifan Das. pro-Vice Chan cel toi fur kcmicmic All airs. University of Calcutta. Professor Raruijit K Chakiaborty. Dean ol ihe Faculty ol Commerce; Social Welfare and fiii) CENTRAL LIBRARY business Management, mtiversrty oi 1 alculii* Professor Aiun Kximat Dana Gupta, former Dear of Commerce, Social Wo] I arc and Business M.kn.i^niL'ni. University "i Calcutta, ProlessiH Shirin Ruthurc I ^lmh l• | the Faculty H Financial Studies. University of Delhi (South Campus) ami POE) feasor S. K. ChnkrabuMy, Manage men l Centre tor Human Values. Indian Institute of Management Calcutta There is no doubt that the deliberations that hud taken place in tin; Conference helped the authors significantly lo revise their papers. Of course, the papers as we see them in their present form, arc a culmination ol seveL.it rounds of revision, enhancement and enrichment subsequent to j Hind review of all of them by experts in icrms ol both content and the >i\ !c o| presentation There are seven papers under the theme "Economic Environment' The Tirst one is by Mahalaya Chaltcrjec, winch seeks to deliberate upon the significant impacts ol the nev, economic policy on the Indian economy over the last decade. With the help ol" Jala drawn primarily from official sources, critical sectoral issues are examined, especially agriculture, industry, labour market, information technology, and international trade. [lie second paper hy Pahiira Giri conceptualises an economic environment by identifying (he key factors that characterise the economic cm ironment of a country, as a frame of reference for analysing (he changes hi the Indian economic environment in the post-reform period. The author concludes that the increasing musket orientation of the Indian economy has ushered in Us wake greater risk^ and uncertainty, Dipli Kumar Chakravorty then makes a case \<*t Indian public sector enterprises tPSEs) in (he emerging economic scenario where privatisation appears to rule the roost. With the help oi data. Cluikra vorty argues lhat privatisation of enterprises might dampen the Indian economy because of the pervasive phenomenon of poverty, and because of (he PSEs capaeiiy to achieve social objectives, with a total factor productivity (hat is higher than that Of the private sector enterprises. Jita Bhaitacbaryya handles deftly the crucial issue of foreign direct investment (FDI) and its role in shaping not only the capital market hut also the economy as a whole. The author discusses ihe importance of FD1 in India lis .1 source ol foreign capital to combat the shortage of financial resources .is well ,is technologies and skills. India's FDI policy in the pre- uul post-relnrm periods arc analysed and the conditions conducive to inflow of FDI as also ihe problems associated with l7F>l in India .ire examined, Ihe fifth paper by Swag at a Sen calls for a fresh look at (h^ cxisling financial reporting system in the conlcxl ol challenges and opportunities raised by the new economy that is rooted in intellectual capital and powered t iv | CENTRAL LIBRARY ^ revolutionary developments in information and cnmitiunicaiions lech holngies. Sen makes an earnest attempt m clnriry die significant issues hoi ore iho financial reporting function tbai need to he addressed. In ihi> connection, notable international efforts and initiatives io cope with the 1 In'' 1 -llJ" challenges arc reviewcdr as also ihc Endian response lo these challenges. Runajjoy llliaiiacliaryya Maces ihc developments in (Fte tud^mL'c r:iiLi regime in India doting the 1990s* The author points out that it was neither ihc introduction of LERMS, nor the introduction of full convertibility in eIk ( urreni Account that have significantly influenced ihc exchange rate. Instead, the exchange rate was fully adjusted by the twu major politics Ail devaluation in July 1991 and trade account convert)bj]iny nf February 1991 . . Malay Gupta considers ihc problems and prospects associated with (he Indian banking seciorH which is by tar. ihc most dominant element of the Indian financial system. The author contrasts the pattern of growth in Indian banking m the hationnlisalion ;md liberalisation eras The major areas ol performance improvement of banks as proposed ih the two-phase recommendations of the Narsimham Committee arc discussed with particular iclcicnec to nsk management The wide horizon ol Ihc theme of Human Resource Managemcm" embracing diverse issues of universal relevance is covered by seven papei writers, Rajih Diisgupta sets the light note lot managing human resources m the context of a changing environment, primarily sn the realm of manpower [darning. In doing so, the author suggests thal al a time when the winds of change in tile corporate world beg for more judicious use of all resources, in trapi encoring rather than downsizing would serve as a more meaningful, humane and mutually beneficial long-term solution In attempting to highlight tine significant human resource dimension in a total quality environment Hlu ubmanjar Panda pa I takes a cue from Demmg„ the 4ell known quality expert, to underscore the importance of good' people, and people who are improving, For die survival and Competitive ness of organisations. The author suggests that the three elements oi' human resource effectiveness—skills, abilities, and know ledge—may he improved effective!', through continuous training and ed ucniion. Matftyendu .Saha takes a strategic approach to human resource management i HRM (■ io point out that the excellence ot people a pivo^l lactcn tor organisational excellence as well as tor the achievement of competitive advantage. En [Fits reg.iul, he suggests that human resource accounting represents u unique opportunity id enriching HRM practices by I v> CENTRAL LIBRARY identifying and measuring human resources and common iea I mg iLijs infortnalittn to interested users. Srulin.ith Praharaj highlights die significance ot creativity as an ossojm iiil factor In] effect ivepess of work performance Lind enhance me ni in die t|iiali(> t>l lilt ot organisational workers means of an empirical siudy based on executives ]n the government deportments of West Bengal, he in[l. i^ dial the government department* should wgik towards building more stimulating environments to fostci human creativity, and tnp management should enable a more open work culture. In the interest cd encouraging creativity necessary organisational restructuring* continuous training, increase in mleUeciuaJ diversity, and greater autonomy should he brought iihoui The paper by Kanika Chatter ieo reminds us that we live in a time of decision being faced by the hard choice of survival 01 destruction. Sure enough, tlieic urgeiici lor an intellectual revolution IrOtli knowledge to wisdom Business leaders of Lhe Finnic muit model themselves on whole- brain, wisdom leadership with holistic wisdofn instead ul fragmentary knowledge a* (he starting point ol leadership. Hence, the aulhoC ask* for a substitution of the traditional concept ol human resource management with human potential management (HPM), which denotes mi integrative process of enhancing human capabilities through enrichment oJ existing human potential and inspiration for discovery and realisation of all Latent potential. The wisdom leader, through die powered silence, Intuition and progjL-ssivc ascent towards (ho Higher Sell, can lead humanity through the supreme ia^k of inspirational motivation, io realise the flow oE tmniksftakri within the various kosas or sheaths of the being. Ralna ,Sen discuses die outcome ot iia industrial relations rese;irch project—South Am a and Vietnam Pmicul on Tripartism 'SAVPGT)—in the context of globalixrnion, The project was an ILO action research programme landed by the Norwegian Government In enlarge ihc ambit oJ labour management consultation within enterprises. The basic objective of ihe project that stinted in 1999 atul is still under way was to supplement collective bargaining with consultation or dialogue among management aru.1 labour/unions at the enterprise level* The pilot phase, juf the project was completed in gid-2001, Sharmistha Huneijee's paper is based on a survey covering the problems laced in designing an objective pci loi manic-based incentive scheme in (he hotel industry En Kolkata. In tins regard, she explicitly assumes that incentive schemes L unction best when they are related to die el tort* ul personal employment in un organization* As un integral part of die study, Oanerjee has attempted m formulate a performance-related <vi) CENTRAL LIBRARY incentive scheme incorporating three fools—Guest Compliments Distinc tion t ards, anti Suggestion Schemes. As incentives, the paper suggests titles d] honour in the nature ol Star* Ndv ;i or Super Nova ns a way t>t recognition »1 the services of the employee s endeavour According to Iter, fhe suggested schemes may well he modi fled to suit the needs o] other units in the service sector. We express our gratitude to the authorities of the Universiiy Grants Commission. New Dello. lor funding the publication ol ihe present volume. We are deeply indebted u> the Vice-Chancellor, Professor Asis Kumar Bnncrjcc. for his encouragement and support He has favoured us with n Foreword to this volume. Thanks are also due to the authors tor iheir contributions arid to other colleagues in the Department for their constant encouragement and support in the form of review of papers. We are also grateful to two external reviewers Professor Arun Kumar Dana Gupta, fortncil) id the University of Calcutta, and Professor Kama Prasad Bancrjjcc, Eastern Institute tor Integrated Learning in Management, Kolk.it a, who helped the authors to enrich their coniributions by their valuable comments. Last but not least, we record our appreciation lor puhlicaiion of ihe volume by M/s Ajnnui Printers within a given time frame and budget limit. Department of Commerce Bhabatosh Biiiierjce University of Calcutta Jitu Bhattacharyya Kolkttta 7t>[) 073 Kanikn Chalterjec Mahal ay a Chattarjee October 30, 2002 Editors f vn) CENTRAL LIBRARY Pfof. Asis Kumar Bancrjtc 24I-32KK V]C.’L-Ch\NCJ-.LUiK Telephone Ntxs. 241-0071 241-49*4 Fax No. 91 *33-24 1-32H8 Senate House Kolkata - 700 073 October 30, 2002 Foreword It gives me great pleasure to write this foreword to Economic Environment and Human Resource Management', a research volume that relates to one of the thrust areas of the Special Assistance Programme (Second Phase) ol the UGC in the Depart ment of Commerce. Economic Environment and Human Resource Management are two distinct themes. Their integration into one research volume will promote interesting academic interactions., There is no doubt that economic environment and human resource management are complementary to each other. This volume contains many research papers in emerging areas of economic environment and human resource management conlrib- uled mostly by the faculty members of the Department of Commerce. Their efforts are praise worthy, I wish this volume would promote further interactions and research on the subjects. /X l . Prof. Asis Kumsr Banerjee Vice-Chancellor University ol Calcutta fix) CENTRAL LIBRARY Economic Environment & Human Resource Management Conten t.s The Economic Liivironmeiii of India A Decade of ilic N e w Eci h h i iti 1 l Pot ic j, 1—21 MuUtility a Chatter}? & Emerging Economic environment in India-Some Issues 22-30 Pabitra Gin — Indian Public Em er prises in Ihe Emerging Ecom>irm I’m ironmenl 31 -44 — Dipti Ktiwar C^takFavoFty Rule ol Foreign Direct Investment in the Indian Economy 45-62 BhattttL'iitttyytt — J1* jci Corporate Financial Reporting in (he Nev. Economy Issues arid Challenges 63-90 — Srri From Fixed lt> Flexible Exchange Rales The Case InUiu ^ I ^102 Rdnnja1 Bin ti rm rlt < u yya Risk Management in Indian Banking—A Nov* Challenge . 103-117 — Malay Gupta Managing Some Aspects of Human Resources in .. MK-t2« Ti nines of Change Ritjib Dasfiitptti — Human Rcii .ujilc Management in (i Total Quality r.nvLruninenl .. 129-143 Dhrubaratyttn foumtnpat — Human Resource Management - An Accountant's Perception 144- I fill Malayan Jit Saint — Cttativhy An Important Factor for Improving Quality ln i Work Luc fQWL) 161-177 Srtttiitfitfii Rrahamj — Wist&jm Leadership The Key in Holistic Human Potential Management I7H-200 Kttnika Chatictjvt — Suppl omen ling Collective Bargaining will} Pitrljdpiit^ e fSocialJ Dialogue- in line Context id Glutaali/atioiji .. 201-215 Rat tut St‘tt Performance Related Incentive Scheme lor Hotel Industry Personnel in KoJkfltu A Case Study „ 210-227 SJuitmimhtt Rant'?fee — fxi) CENTRAL LIBRARY THE ECONOMIC ENVIRONMENT OF INDIA : A DECADE OF THE NEW ECONOMIC POLICY MAHALAYA CHATTERJEE 1. INTRODUCTION The Mew Economic Policy w^is adopted in 1991 when the Congress Party tame into power with a thumping majority Though P.V Nnrsimha Rao was die prune minister, the main architect of ihe New Economic Policy was the [hen Finance Minister, I.>r Mamnohan Sm^h, a noted economist The main thrust ol this policy was LPG, Le. Liberalisation. Privatisation and Globalisation. A decade has passed since then. There has been lot a ol change; in the political scenario of India. The Congress Party losi his supremacy in the national polilics. There have been unsuccessful experi ments wuh coal ton governments, and presently the National Democratic 11 Alliance is in power at the Centre. The Bharatiya Janata Parly (BJP) with more than twenty political parties of different strength ami ideologies as then partners maintains a working majority. But this change in the polthcal ideology has not affected ihe so-called reform process ai the national level. Though some of (he mass organisations of the BJP sometimes talk of 'swadesliiL. the real experience is that the NDA government is more vigorous with the reforms than the previous Congress or United Front Coalition govern ments. Thcre are also some noticeable changes in the international scenario. There has been a remarkable slowdown of the US economy, reflected in the different indices o( the share markets and the Easl Asian Miracle has been changed to East Asian Debacle. The World Bank introduced the Structural Adjustment Programme (SAP) in many countries of the world in 1980, This was accompanied by the Stabilisation Programme of the IMF. It requires no separate mentioning (hat these two organisations believed in the Same economic philosophy. But the second hall of the I99(ls was dominated by a new international organisation, the World trade Organisation (WTO), It was formed in 1445 as I he outcome ol the GAVl negotiations, concluding in [he Murakesh agreement There were different agreements signed on intellectual property rights (TRIPS), jtivestment (TRIM) and services (GATS) They required time-bound implementation n| the programme In their member countries by phases within definite tirnCripedod and non' implementation was punishable by a dispute-