PES Business Review

Rupak Kumar Jha ¹, Surajit Bhattacharyya ¹

Affiliations
1 Department of Humanities & Social Sciences, Indian Institute of Technology, Bombay, Powai, Mumbai, IN

Abstract

This paper examines selected components of social security system in India and compares them with their OECD counterparts. Historically, the Indian policy makers have viewed the pension system as a welfare measure and therefore, it lacks in financial professionalism, diversification, and in the belief that pension funds can also he treated as an asset. The Indian system is biased towards the organized formal sector as workers in this sector are benefitted with the provisions under various labor laws. Even then the pension provisions in India are way far behind the OECD benchmark. In the unorganized sector, old age income remains mainly confined to voluntary savings. The New Pension System although making the pension amount an old age asset, is silent on the social security provisions to the poor. The average income earners are not able to replace their pre-retirement earnings with pensions compared to most of the OECD countries. In terms of the gross pension wealth, India is nearer to the OECD average only in the low income category for men. Out of 5 percent of health care expenditure as a percentage of GDP, government's share in India accounts even less than 1 percent which is significantly lower than the OECD benchmark.

Keywords

Social Security System, Pension Funds, India, OECD.

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Surajit Bhattacharyya ¹, Arunima Saxena ²

Affiliations
1 Indian Institute of Technology, Mumbai, IN
2 Institute of Management Technology, Nagpur, IN

Abstract

The Law of Proportionate Effect depicts that firm's growth rate is independent of its size; Gibrat (1931). Some of the existing studies support the Law: Hymer and Pashigian (1962), Mansfield (1962), among others. However, Gale (1972), Shepherd (1972) and recently Punnose (2008) report a positive relationship, while Haines (1970) and Evans (1987) observe an inverse relationship between firm size and profitability. Baumol (1959) opined that rate of return increases with firm size.

Manufacturing firms' data from Steel and Electrical & Electronics (EE) industries are considered for the period 2004-05 to 2006-07. Firm size affects current profitability: positively in Steel and negatively in the other. Some more determinants of firm performance are explored. Retained earnings have negative impact on profitability in Steel but, positive in EE. Bank credit is found negatively significant in both the industries. Market share of firms and industry concentration ratio (CR₄) although inconsistently are the other significant determinants of firms' performance. Market value of firms (Tobin's Q) is found positively significant, reflecting the importance of high brand equity for corporates. Interestingly, the impact of size is affected by firms' market value: firm size positively affects profitability both in Steel and EE.

Keywords

Gibrat's Law, Firm Size, Profitability, Tobin's Q, Manufacturing Firms.

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