M.

COM
MCO-04/2020-21
BUSINESS ENVIRONMET
1. Define Environmental Scanning? What are its characteristics? Discuss the various
approaches to environmental scanning.
Environmental scanning is the process of gathering information about events and their
relationships within an organization's internal and external environments. The basic purpose of
environmental scanning is to help management determine the future direction of the
organization.

Thomas Edison State University uses a continuous scanning system in which committee
members meet monthly to discuss internal and external events which have the potential to
effect the way the University does business. These events can include student enrollment
trends, in climate weather or natural disasters, world events, funding, federal legislation,
marketing, etc. Monthly findings are then aggregated quarterly and dispersed to all College
staff.

The Environmental Scanning Committee is a valuable resource to management, allowing them

to make decisions influenced from trended analysis of historical events to project future events.
The committee also assists in creating action plans to address these upcoming events,
reviewing action plans and appropriating resources for those plans, and putting management in
contact with fellow staff members with the knowledge base to provide quality data for decision
making.

Environment Characteristic

1: Atmosphere

a. none
b. methane gas
c. carbon dioxide gas
d. sulfur dioxide gas
e. oxygen gas

2: Temperature

a. very hot (like in a desert or volcano)

b. temperate (moderate temperatures year round)
c. very cold (like in Antarctica)

3: Surroundings

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a. primarily water (like an ocean)
b. very acidic/basic
c. mainly land (no lakes/oceans/etc.)
d. consists of methane lakes/molten lava

4: Light

a. little to no sunlight
b. abundant sunlight

5: Food Source

a. mineral/nutrient rich soil

b. barren soil (no nutrients)
c. sunlight
d. no plant life/organisms
e. plant life/organisms present
f. no sunlight

6: Other

a. fast predators
b. soft ground
c. multi-colored terrain
d. dimly lit, hard to find your prey

2. Explain the provisions of the Workmen’s Compensation Act, 1923 regarding employer’s
liability and the amount of compensation payable for injury caused to an employee in course
of employment.
1. Short title, extent and commencement. - (1) This Act may be called
The [Employee's] Compensation Act, 1923.
[(2) It extends to the whole of India
(3) It shall come into force on the first day of July, 1924.
2. Definitions. - (1) In this Act, unless there is anything repugnant in the subject or context,-
(b) "Commissioner" means a Commissioner for Workmen's Compensation appointed under
section 20;
(c) "compensation" means compensation as provided for by this Act;
[(d) "dependant" means any of the following relatives of a deceased ]workman [, namely:-
(i) a widow, a minor ] [legitimate or adopted][son, an unmarried ] [legitimate or
adopted][daughter, or a widowed mother; and

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 (ii) if wholly dependant on the earnings of the ]workman [at the time of his death, a
son or a daughter who has attained the age of 18 years and who is infirm;
(iii) if wholly or in part dependant on the earnings of the ]workman [at the time of his
death,-
(a) a widower,
(b) a parent other than a widowed mother,
(c) a minor illegitimate son, an unmarried illegitimate daughter or a
daughter ] [legitimate or illegitimate or adopted][if married and a minor or if
widowed and a minor,
(d) a minor brother or an unmarried sister or a widowed sister if a minor,
(e) a widowed daughter-in-law,
(f) a minor child of a pre-deceased son,
(g) a minor child of a pre-deceased daughter where no parent of the child is alive, or
(h) a paternal grandparent if no parent of the workman is alive.]
[ Explanation .-For the purposes of sub-clause (ii) and items (f) and (g) of sub-clause (iii),
reference to a son, daughter or child include an adopted son, daughter or child respectively;]
(e) "employer" includes any body of persons whether incorporated or not and any
managing agent of an employer and the legal representative of a deceased employer,
and, when the services of a workman are temporarily lent or let on hire to another
person by the person with whom the workman has entered into a contract of service or
apprenticeship, means such other person while the workman is working for him;
(f) "managing agent" means any person appointed or acting as the representative of
another person for the purpose of carrying on such other person's trade or business, but
does not include an individual manager subordinate to an employer;
[(ff) "minor" means a person who has not attained the age of 18 years;]
(g) "partial disablement" means, where the disablement is of a temporary nature, such
disablement as reduces the earning capacity of a workman in any employment in which
he was engaged at the time of the accident resulting in the disablement, and, where the
disablement is of a permanent nature, such disablement as reduces his earning capacity
in every employment which he was capable of undertaking at that time: provided that
every injury specified [in Part II of Schedule I] shall be deemed to result in permanent
partial disablement;
(h) "prescribed" means prescribed by rules made under this Act;
(i) "qualified medical practitioner" means any person registered under any [Central Act,
Provincial Act or an Act of the Legislature of a ][State] providing for the maintenance of a

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 register of medical practitioners, or, in any area where no such last-mentioned Act is in
force, any person declared by the State Government, by notification in the Official
Gazette, to be a qualified medical practitioner for the purposes of this Act;
(k) "seaman" means any person forming part of the crew of any ship, but does not include
the master of [the] ship;
(l) "total disablement" means such disablement, whether of a temporary or permanent
nature, as incapacitates a workman for all work which he was capable of performing at
the time of the accident resulting in such disablement:
[Provided that permanent total disablement shall be deemed to result from every injury
specified in Part I of Schedule I or from any combination of injuries specified in Part II thereof
where the aggregate percentage of the loss of earning capacity, as specified in the said Part II
against those injuries, amounts to one hundred per cent. or more;]
(m) "wages" includes any privilege or benefit which is capable of being estimated in money,
other than a travelling allowance or the value of any travelling concession or a
contribution paid by the employer of a workman towards any pension or provident fund
or a sum paid to a workman to cover any special expenses entailed on him by the nature
of his employment;
(n) "workman" means any person who is-
(i) a railway servant as defined in [clause (34) of section 2 of the Railways Act, 1989
(24 of 1989)], not permanently employed in any administrative, district or sub-
divisional office of a railway and not employed in any such capacity as is specified in
Schedule II, or
[(i-a) (a) a master, seaman or other member of the crew of a ship,
(b) a captain or other member of the crew of an aircraft,
(c) a person recruited as driver, helper, mechanic, cleaner or in any other capacity in
connection with a motor vehicle,
(d) a person recruited for work abroad by a company, and who is employed outside
India in any such capacity as is specified in Schedule II and the ship, aircraft or
motor vehicle, or company, as the case may be, is registered in India, or]
(ii) employed in any such capacity as is specified in Schedule II, whether the contract
of employment was made before or after the passing of this Act and whether such
contract is expressed or implied, oral or in writing; but does not include any person
working in the capacity of a member of [the Armed Forces of the Unionand any
reference to a workman who has been injured shall, where the workman is dead,
include a reference to his dependants or any of them.
(2) The exercise and performance of the powers and duties of a local authority or of any
department [acting on behalf of the Government] shall, for the purposes of this Act, unless a

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contrary intention appears, be deemed to be the trade or business of such authority or
department.
[(3) The Central Government or the State Government, by notification in the Official Gazette,
after giving not less than three months' notice of its intention so to do, may, by a like
notification, add to Schedule II any class of persons employed in any occupation which it is
satisfied is a hazardous occupation, and the provisions of this Act shall thereupon apply, in case
of a notification by the Central Government, within the territories to which the Act extends, or,
in the case of a notification by the State Government, within the State, to such classes of
persons:
Provided that in making addition, the Central Government or the State Government, as the case
may be, may direct that the provisions of this Act shall apply to such classes of persons in
respect of specified injuries only.]

3. Can SEBI compel a public company to get its securities listed on Stock Exchanges while
making a public issue? On what grounds can the listed securities be delisted by a stock
exchange? Explain the rules in this regard.

Listing of Securities
A company, desirous of listing its securities on the Exchange, shall be required to file an application, in
the prescribed form, with the Exchange before issue of Prospectus by the company, where the securities
are issued by way of a prospectus or before issue of 'Offer for Sale', where the securities are issued by
way of an offer for sale. The company shall be responsible to follow all the requirements specified in the
Companies Act, the listing norms issued by SEBI from time to time and such other conditions,
requirements and norms that may be in force from time to time and included hereafter in these Bye-
laws and Regulations to make the security eligible to be listed and for continuous listing on the
Exchange.

Except when otherwise allowed by the Governing Board or Managing Director or Relevant Authority in
any particular case and subject to compliance with such conditions as it or he may impose, tenders or
applications for subscription or purchase or book-building in respect of any new issue or offer for sale of
any security shall not be submitted unless the issuer or offerer offers to all a fair and equal opportunity
for subscription or purchase and on the same terms as to brokerage to all the trading members and
unless it is provided that all tenders and applications for subscription or purchase or book-building shall
rank alike for allotment or sale

The issuer or the offerer, prior to issuing further securities or offering securities for sale, shall obtain an
in principle approval from the Exchange for listing these securities on the Exchange.

Options or Futures in Securities

Options and futures in securities and in securities index or indices shall be admitted to dealings on the
Exchange by the Governing Board or Relevant Authority in accordance with the provisions of SCRA and
norms issued by SEBI from time to time and as may be specified in the relevant Bye-laws and
Regulations framed in this regard.
Listing Approval
The Exchange may grant approval to the issuer for any security sought to be listed on the Exchange on
completion of the listing conditions, requirements and norms by the issuer, as may be specified by the
Exchange from time to time. Such security shall be called listed security.
Admission to Dealings

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Admission to dealings shall mean permission granted by the Exchange to a security for commencement
of trading on the ATS of the Exchange as provided in these Bye-laws and the relevant Regulations.
Trading Allowed
Trading in securities admitted to dealings shall be allowed on the ATS of the Exchange as provided in
these Bye-laws and the relevant Regulations, and save as otherwise so provided, no other mode of
trading shall be allowed.
Trading in Securities Admitted to Dealings on Other Stock Exchanges
The Governing Board or Relevant Authority may, in its discretion and subject to such conditions as it
may deem proper, allow trading in any security or securities, admitted to dealings on any other stock
exchange. Such security shall be called permitted security.

If any issuer whose securities have been granted admission to dealings on the Exchange, be placed in
final or provisional liquidation or is about to be merged into or amalgamated with another company, the
Governing Board or Managing Director or Relevant Authority may withdraw the admission to dealings
on the Exchange granted to its securities. The Governing Board or Managing Director or Relevant
Authority may accept such evidence as it/he deems sufficient as to such liquidation, merger or
amalgamation. If the merger or amalgamation fails to take place or if any company placed in provisional
liquidation be reinstated and an application be made by such company for readmission of its securities
to dealings on the Exchange, the Governing Board or Managing Director or Relevant Authority shall have
the power of considering and of approving, refusing or deferring such application.
Any person, who may be aggrieved or affected by the decision of the Exchange to delist a security of any
company admitted to dealings on the Exchange, may appeal in writing, to SEBI, within thirty calendar
days from the date the Exchange has notified the decision to the company.
The Governing Board or Managing Director or Relevant Authority may readmit to dealings on the
Exchange the security of a company whose admission to dealings had been previously withdrawn, on
the fulfillment of conditions, norms, guidelines or requirements as may be prescribed by the Governing
Board or Managing Director or Relevant Authority and / or SEBI from time to tim
As and when the Central Listing Authority is constituted by SEBI or any authority under the relevant law
in relation to listing / delisting and trading / suspension of trading in securities of companies on a stock
exchange, the provisions, guidelines, norms and procedures governing the listing / delisting and
trading / suspension of trading in securities that may be stipulated by such Central Listing Authority shall
then be incorporated in the Bye-laws of the Exchange and shall be made applicable mutatis mutandis by
the Exchange.

4. Write short notes on the following:

(a)Economic Growth and Economic Development
One can define economic growth as the increase in the inflation-adjusted market value of the
goods and services produced by an economy over time. Statisticians conventionally measure
such growth as the percent rate of increase in real gross domestic product, or real GDP.
Growth is usually calculated in real terms - i.e., inflation-adjusted terms – to eliminate the
distorting effect of inflation on the prices of goods produced. Measurement of economic
growth uses national income accounting. Since economic growth is measured as the annual
percent change of gross domestic product (GDP), it has all the advantages and drawbacks of
that measure. The economic growth-rates of countries are commonly compared using the ratio
of the GDP to population (per-capita income).

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The "rate of economic growth" refers to the geometric annual rate of growth in GDP between
the first and the last year over a period of time. This growth rate represents the trend in the
average level of GDP over the period, and ignores any fluctuations in the GDP around this trend.
Economists refer to an increase in economic growth caused by more efficient use of inputs
(increased productivity of labor, of physical capital, of energy or of materials) as intensive
growth. In contrast, GDP growth caused only by increases in the amount of inputs available for
use (increased population, for example, or new territory) counts as extensive growth.
Development of new goods and services also generates economic growth. As it so happens, in
the U.S. about 60% of consumer spending in 2013 went on goods and services that did not exist
in 1869.

(b)Fiscal Policy
Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883-
1946), who argued that economic recessions are due to a deficiency in the consumption
spending and business investment components of aggregate demand. Keynes believed that
governments could stabilize the business cycle and regulate economic output by adjusting
spending and tax policies to make up for the shortfalls of the private sector. His theories were
developed in response to the Great Depression, which defied classical economics' assumptions
that economic swings were self-correcting. Keynes' ideas were highly influential and led to
the New Deal in the U.S., which involved massive spending on public works projects and social
welfare programs.

In Keynesian economics, aggregate demand or spending is what drives the performance and
growth of the economy. Aggregate demand is made up of consumer spending, business
investment spending, net government spending, and net exports. According to Keynesian
economists, the private sector components of aggregate demand are too variable and too
dependent on psychological and emotional factors to maintain sustained growth in the
economy.

Pessimism, fear, and uncertainty among consumers and businesses can lead to economic
recessions and depressions, and excessive exuberance during good times can lead to an
overheated economy and inflation. However, according to Keynesians, government taxation
and spending can be managed rationally and used to counteract the excesses and deficiencies
of private sector consumption and investment spending in order to stabilize the economy. 

When private sector spending turns down, the government can spend more and/or tax less in
order to directly increase aggregate demand. When the private sector is over optimistic and
spends too much, too fast on consumption and new investment projects, the government can
spend less and/or tax more in order to decrease aggregate demand. 

This means that to help stabilize the economy, the government should run large budget deficits
during economic downturns and run budget surpluses when the economy is growing. These are
known as expansionary or contractionary fiscal policies, respectively.  

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Listing Conditions and Requirements

The Governing Board or Managing Director or Relevant Authority may not grant admission to
dealings on the Exchange to a security of an issuer unless the issuer complies with the listing
conditions, requirements and norms, under the SCRA, SCRR, the Companies Act, the Rules,
Bye-laws and Regulations of the Exchange and the norms, as may be prescribed by the Exchange
and/or SEBI from time to time

The Governing Board or Managing Director or Relevant Authority shall ensure that no listing or
trading permission is granted unless the issuer complies with all the conditions, requirements or
norms, as may be provided in the relevant Regulations from time to time, including despatch of
physical share certificates to, and/or credit of demat shares to the accounts of all the security-
holders, maintained with the depositories.

Where the Exchange is the stock exchange with whose consultation the basis of allotment is
decided, the Governing Board or Managing Director or Relevant Authority of the said stock
exchange shall intimate the depositories about approval granted for admission to dealings on the
Exchange for any security.

The company shall execute a Listing Agreement, in the prescribed form with the Exchange, prior
to approval of the listing application of the company. Any addition or amendment to the
provisions of the Listing Agreement, as may be prescribed by SEBI and/or the Exchange shall
become applicable to the company as if such addition or amendment was part of the Listing
Agreement.

In the case of a new issue or further issue by any issuer the Governing Board or Managing
Director or Relevant Authority may grant permission for trading in any security at the Exchange
on the same day as on all other stock exchanges where such security admitted to dealings is
granted permission for trading.

(c) Problems and prospects of Small Scale Sector

Problems faced by Small Scale Industries
The following are the problems faced by Small Scale Industries:

1. Poor capacity utilization

In many of the Small Scale Industries, the capacity utilization is not even 50% of the installed
capacity. Nearly half of the machinery remains idle. Capital is unnecessarily locked up and idle
machinery also occupies space and needs to be serviced resulting in increased costs.

2. Incompetent management

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Many Small Scale Industries are run in an incompetent manner by poorly qualified
entrepreneurs without much skill or experience. Very little thought has gone into matters such
as demand, production level and techniques, financial availability, plant location, future
prospects etc. According to one official study, the major reason for SSI sickness is deficiency in
project Management i.e., inexperience of promoters in the basic processes of production, cash
flow etc

3. Inadequate Finance
Many Small Scale Industries face the problem of scarcity of funds. They are not able to access
the domestic capital market to raise resources. They are also not able to tap foreign markets by
issuing ADR’s (American Depository Receipts) GDR’s (Global Depository Receipts) etc because of
their small capital base. Banks and financial institutions require various procedures and
formalities to be completed. Even after a long delay, the funds allocated are inadequate.

Bank credit to the small scale sector as a percentage of total credit has been declining. It fell
from 16% in 1999 to 12.5% in 2002. Small Scale Industries are not able to get funds immediately
for their needs. They have to depend on private money lenders who charge high interest.
Finance, as a whole, both long and short term, accounts for as large as 43% of the sector’s
sickness.

4. Raw material shortages

Raw materials are not available at the required quantity and quality. Since demand for raw
materials is more than the supply, the prices of raw materials are quite high which pushes up
the cost. Scarcity of raw materials results in idle capacity, low production, inability to meet
demand and loss of customers.

5. Lack of marketing support

Small Scale Industries lack market knowledge with regard to competitors, consumer
preferences, market trends. Since their production volume is small and cannot meet demand
for large quantities their market is very restricted. Now with the process of liberalization and
globalization they are facing competition from local industries as well as foreign competitors
who sell better quality products at lower prices. For e.g. heavily subsidized but better quality
imports from China has made most of the Indian SSI units producing toys, electronic goods,
machine tools, chemicals, locks and paper etc., unviable.

6. Problem of working capital

Many Small Scale Industries face the problem of inadequate working capital. Due to lack of
market knowledge their production exceeds demand, and capital gets locked in unsold stock.
They do not have enough funds to meet operational expenses and run the business.

7. Problems in Export
They lack knowledge about the export procedures, demand patterns, product preferences,
international currency rates and foreign buyer behavior. Small Scale Industries are not able to
penetrate foreign markets because of their poor quality and lack of cost competitiveness. In

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countries like Taiwan, Japan etc. products produced by Small Scale Industries are exported to
many foreign countries. But in India not much thought and focus has gone into improving the
export competitiveness of Small Scale Industries.

5. Comment on the following statements:

(a)Export promotion capital goods scheme does not facilitate import of capital goods in India.

In order to facilitate import of capital goods for producing quality goods and services and
enhance India’s manufacturing competitiveness, the Central Government has been
implementing a Scheme called the Export Promotion Capital Goods Scheme under the Foreign
Trade Policy for manufacturer exporters with or without supporting manufacturer(s), merchant
exporters tied to supporting manufacturer(s) and service providers.

Under the Scheme, EPCG Authorizations are issued with actual user condition and import
validity of 24 months to import capital goods (except those specified in negative list) for pre-
production, production and post-production at zero customs duty, and subject to fulfilment of
specific Export Obligation equivalent to 6 times of duties, taxes and cess saved on capital goods,
to be fulfilled in 6 years from date of issue of Authorization. In addition, the Authorization
holder is required to fulfil Average Export Obligation achieved by him in the preceding three
licensing years for the same and similar products. However, if minimum 75% of specific Export
Obligation and 100% of Average Export Obligation is fulfilled within half the original export
obligation period, remaining export obligation can be condoned. Further, in case of indigenous
sourcing of capital goods and for exports of Green Technology products, specific EO is only 75%.
For Units located in North East Region and Jammu & Kashmir, specific EO is only 25%. Presently,
capital goods imported for physical exports are also exempt from IGST and Compensation Cess
up to 31.03.2019.

The number of defaulters reported in the last three years is 1347 nos. in 2015-16; 1122 nos. in
2016-17 and 1031 nos. in 2017-18. The Regional Authorities have taken penal action under the
Foreign Trade (Development & regulation Act), 1992 by issuing show cause notices and passing
adjudication orders for recovery of customs duty along with interest.

(b)WTO provides forum for negotiations.

The WTO provides a forum for negotiating agreements aimed at reducing obstacles to
international trade and ensuring a level playing field for all, thus contributing to economic
growth and development. The WTO also provides a legal and institutional framework for the
implementation and monitoring of these agreements, as well as for settling disputes arising
from their interpretation and application. The current body of trade agreements comprising the
WTO consists of 16 different multilateral agreements (to which all WTO members are parties)
and two different plurilateral agreements (to which only some WTO members are parties).

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Over the past 60 years, the WTO, which was established in 1995, and its predecessor
organization the GATT have helped to create a strong and prosperous international trading
system, thereby contributing to unprecedented global economic growth. The WTO currently
has 164 members, of which 117 are developing countries or separate customs territories. WTO
activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General.
The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately
CHF 200 million ($180 million, €130 million). The three official languages of the WTO are
English, French and Spanish.
Decisions in the WTO are generally taken by consensus of the entire membership. The highest
institutional body is the Ministerial Conference, which meets roughly every two years.
A General Council conducts the organization's business in the intervals between Ministerial
Conferences. Both of these bodies comprise all members. Specialised subsidiary bodies
(Councils, Committees, Sub-committees), also comprising all members, administer and monitor
the implementation by members of the various WTO agreements.
More specifically, the WTO's main activities are:
— negotiating the reduction or elimination of obstacles to trade (import tariffs, other barriers
to trade) and agreeing on rules governing the conduct of international trade (e.g. antidumping,
subsidies, product standards, etc.)
— administering and monitoring the application of the WTO's agreed rules for trade in goods,
trade in services, and trade-related intellectual property rights
— monitoring and reviewing the trade policies of our members, as well as ensuring
transparency of regional and bilateral trade agreements
— settling disputes among our members regarding the interpretation and application of the
agreements
— building capacity of developing country government officials in international trade matters
— assisting the process of accession of some 30 countries who are not yet members of the
organization
— conducting economic research and collecting and disseminating trade data in support of the
WTO's other main activities
— explaining to and educating the public about the WTO, its mission and its activities.
The WTO's founding and guiding principles remain the pursuit of open borders, the guarantee
of most-favoured-nation principle and non-discriminatory treatment by and among members,
and a commitment to transparency in the conduct of its activities. The opening of national
markets to international trade, with justifiable exceptions or with adequate flexibilities, will
encourage and contribute to sustainable development, raise people's welfare, reduce poverty,
and foster peace and stability. At the same time, such market opening must be accompanied by
sound domestic and international policies that contribute to economic growth and
development according to each member's needs and aspirations.

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(c) India has been categorized as highest indebted country.
Debt is not bad. Many firms raise large chunks of it in their growth and expansion phases. Some
ease out of it with time. Others struggle. But while the stakeholders – banks, financial markets
and shareholders – can technically put pressure on a firm to course-correct, it’s not the same or
as simple with the States of India.
 
So how do the States of India measure up on their debt outstanding and ability to service
it? IndiaSpend’s Dhritiman Gupta looks at debt and debt servicing capabilities of the major
states and comes away surprised by some of the findings.
 
For one, states like Maharashtra may lead the league tables for indebtedness but show far
more promise as financial entities. To be fair, this might be intuitively known to many. What
may not be known is that states like Punjab, Rajasthan and Uttar Pradesh have the highest debt
to GDP ratios. This means they are borrowing way beyond their ability to service the interest.
 
Bengal Comes In Third
 
The only non-surprise is West Bengal, the third most indebted state in the country and the
worst when it comes to ratio between income and its liabilities. Another worrying aspect is the
rate of growth in debt. As the tables show, Haryana, Karnataka and Tamil Nadu have
accumulated debt at staggering rates in the last three years.
 
Interestingly, among the top 5 most indebted states, only Maharashtra and Gujarat are
considered more `industrialised’. West Bengal, Andhra Pradesh and Uttar Pradesh are under-
developed, with at least 70% of its population in agriculture.
 
It’s also useful to look at the rate at which some states are accumulating debt. Uttar Pradesh,
West Bengal, Rajasthan, Bihar and Goa have been careful about raising debt, at least in the last
year – at below 10%. While Chattisgarh and Haryana topped the charts by raising debt at the
rate of 20% and 18.3% respectively.
 
66% Debt Growth For Haryana
 
Equally, Chattisgarh and Haryana have the lowest debt to GDP ratios and have thus the
freedom to borrow more (IndiaSpend is not analysing the areas where the funds raised are
being used or the reasons behind it, at least in this round). It’s also possible that some states
are borrowing more aggressively to fund development but some states like Bengal are
borrowing to some extent to only meet past liabilities.
 
The states that have added the most debt, proportionately or above 40%, are West Bengal,
Tamil Nadu, Karnataka and Haryana. Haryana takes the cake with a whopping 66% rate of
growth of debt since 2009.
 

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Now, let’s look at the debt positions of the 17 `Non-Special Category’ States. The states are
ranked in a descending order of the amount of outstanding debts at March end 2012.
Budgetary Estimates (BE) are figures that are budgeted for and Revised Estimates (RE) are the
final numbers.
 
States With Outstanding Debts
 
Growt
h %
from
Growth %
State Ranks 2009 2010 2011(RE) 2012(BE) 2009
in 2012
till
2012
(BE)
1. Maharashtra 1,86,670 2,03,440 2,25,200 2,48,460 10.32 33
2. Uttar Pradesh 1,92,770 2,06,430 2,24,010 2,44,510 9.15 26
3. West Bengal 1,50,430 1,75,510 1,93,410 2,11,590 9.30 41
4. Andhra Pradesh 1,10,050 1,23,680 1,36,010 1,53,840 13.10 39
5. Gujarat 1,09,860 1,23,470 1,38,590 1,52,890 10.31 39
6. Tamil Nadu 86,150 1,01,710 1,13,830 1,32,590 16.48 54
7. Rajasthan 84,240 91,750 99,190 1,07,230 8.10 27
8. Karnataka 65,220 84,530 90,240 1,01,720 12.72 56
9. Kerala 67,010 75,450 82,610 93,010 12.50 39
10. Madhya Pradesh 60,310 67,920 73,830 82,820 12.10 37
11. Punjab 61,530 67,780 74,020 82,350 11.25 34
12. Bihar 55,780 59,510 64,350 70,660 8.90 27
13. Haryana 33,500 41,020 46,930 55,560 18.3 66
14. Orissa 43,900 45,720 48,290 53,290 10.35 21
15. Jharkhand 24,020 26,980 29,310 33,900 15.60 41
16. Chattisgarh 15,030 16,250 17,120 20,560 20.09 37
17. Goa 7,150 8,430 9,090 9,760 7.3 37
 

(d)Technology transfer does not bridge the technological gap between business and nation
states.
Technology Gap Theory is a model developed by M.V. Posner in 1961, which describes an
advantage enjoyed by the country that introduces new goods in a market. The country will
enjoy a comparative advantage as well as a temporary state of monopoly until other countries
have achieved the ability to imitate the new good. Unlike the past theories which assume the
market to be fixed and given, such as the Heckscher-Ohlin theory, the technology gap model
addresses the technological changes. It suggests a state of economy influenced by science,

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politics, markets, culture and most importantly, uncertainty, which threatens the mainstream
neoclassical economists as they explain economic outcomes mainly based on the natural
endowment scarcity. The theory is backed up by the ideas of Joseph Schumpeter. As a result,
the technology gap theory is often rejected by neoclassical economists.
The theory assumes that the two countries have similar factor endowments, demand
conditions, and factor price ratios before trade. The only difference is the technique. The
technology gap exists between the time the new products are imported from external markets
and the substitutes are created by domestic producers. Meanwhile, according to Ponser, the
gap is constituted by three lags as follows:

1. Foreign Reaction Lag: The time required for the innovative firms to produce the
products with new technology, and these products will later be exported to external
countries.
2. Domestic Reaction Lag: The time taken by all domestic firms to continue producing
relatively newer versions of products as to retain their shares in the global market,
before they realize the threat of the new products imported. Within the period, there is
also an imitation lag, which suggests the time the local entrepreneurs need to learn to
adopt the new technology to make and sell substitutes.
3. Demand Lag: The time that the domestic consumers need to acquire or adapt their
tastes for the new products.
The total lag is calculated by subtracting the demand lag from the imitation lag. If the demand
lag is longer than the imitation lag, then the domestic market will start to demand the foreign
goods. The demand of imported goods overriding the domestic products will in turn leads to
the erosion of the local market and deficit in the trade balance.

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