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MANAGEMENT PROGRAMMETerm-End Examination

December, 2OO8MS-3 : ECONOMIC ND SOCIALENVIRONMENT

Time : 3 hours MaximumMarks: 100(Weishtase 70?/o)

Note :(i) There are two Secfions : Section A and

Section B.(ii) Attempt any three questionst'rom SectionA.AII questionscarry 20 marks eqch.(iil Section B is compulsory and carries

40 marks.

SECTION A1. Explain the critical elements of economicenvironment,giving examples.What, according to

you, are the landmark developmentsof economicenvironment n India ? 20

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2; Critically evaluate impact of' structural changes inIndian industryon the industrialgrowth experience.Discuss the issues and impediments to growth ofIndia's foreign trade in the post-reformperiod.Critically examine the tax reforms and rccentdevelopments n the taxationpolicy and its impact onthe fiscalposition of the govemment.

5. Write short notes on any four of the following :(a) Role of the Government(b) IndustrialSickness(c) PublicAccountability(d) AdministeredPrices(e) Public Debt

4.

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SECTION B6. Read he casesituations ivenbelow and answer hequestions.givent the end of each casesituation. 20

(a) Birla CorporationThis company manufactures cement, juteproducts,automobilecomponents,PVC flooring,carbide,gases,synthetics nd steelcastings.By2OO3 04, their sales shot up by 10.6% toRs. 1,243.78 crore, from the previousyear.Profit after tax was Rs. 41.56 crore againstRs.4.19 crore n 2002- 03. Thiswas achievedby the company's improved performance ofcement division, and by a well planned costmanagement.The cement division alone, contributed for88.75o/o f the company's sales n 2002 - 03,and in 2003 - 04 they achieved ighercapacityutilisation.Total exports ncreasedo Rs. 50.80crore in 2003 - 04 from Rs. 48.19 crore in2002 - 03.

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In 2003 - 04, their jute exports increased,andthe companyhad a good performancerate' Thetotal saleof iron and steelcastingwas increasedto 948 tonnes in 2003 - 04, as comparedto855 tonnes n 2002 - 03. The automobilesectorhad to face a decline. Their calcium-carbideindustrystruggledmuch due to competition fromlow priced materialsfrom China and Romania,and duty free imports from Bhutan' Increase npower tariff also contributed much to theirstruggle.

Low interest rates activity in housingsector willcontinue to be robust, boosting demand forcement. Taking this into advantage, BirlaCorporation has decidedto expand capacity atits DurgapurCementPlantby 1 million tonnds'They are also working hard to make theproductioncapacityof ChanderiaCement 3 lakhtonnes per annum. Projectsare underwayto setup power plants of 27 MW, as new industrial

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undertaking at Satna, M.P. and Chanderia,Rajasthan.These power plants would enhancethe cost efficiencvof the units.Question :Discuss the business activities of BirlaCorporation in the light of above keymacroeconomic ariables.

(b) Eveready Industries IndiaEveready Industries India produces productsranging rom carbonzinc batteries,echargeablebatteries, alkaline batteries and flashlight, topacked tea and bulk tea. In 2003 - 04, thecompanyhadto facea lossbefore ax of Rs. 38lakhs,againsta profit before ax of Rs. 11.13crore in 2002 - 03. Sales increasedby about3o/o.Eveready has started to focus on outsourceproduction. They are trying to improve theirquality,and reduce costs.They had a very tough

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time due to the rising cost of input materials nglobal markets, especiallynon-ferrous materialslike zinc and brass. Due to high demand forcheap flashlights n the market,they have startedto source flashlightsfrom small scale industryunits and price them attractively.They have amarket share of 430/on zinc carbon batteries,and have launched a rechargeableorch, and2 models of CFL rechargeableanterns.Theyhave also started to manufacture cordlesstelephonebatteriesand AAA batteries.The company s alsoconcentrating n controllingcosts, and increasing he yield and efficiencyoftheir workers. They are planning to furtherimprove their distribution channels for packedtea. They are also initiating capacityenhancement at their tea factories. The teaplantation sector had to face a number ofproblems,ncludingow prices, ncreasing ostofproduction, declining export volume and pricerealisation,n 2003 - 04. A generalover-supply

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situation and the slowdown of consumptiongrowth adverselyaffected prices. Eveready hasinitiated various steps to rationalise theoperationsof their tea estates.Question :Discuss the impact of business trends onEvereadyndustries.

7. Read the case situationsand answer the questionsgivenat the end. 20(a) Steel Authority of India

Steel Authorityof India, s a leadingsteelmakerin India. They produceand sell a broad rangeof steelproducts, ncludinghot and cold rolledsheets and coils, galvanizedsheets, electricalsheetsstructurals,ailwayproducts,plates,barsand rods, stainless teel and other alloy sheets.They produce iron and steel at 4 integratedplantsand 3 specialsteelplants, ocatedmostlyin the easternand centralregionsof India.

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The company recorded its highest ever salesturnover of Rs. 24,\78 crore in 2003 - 04,compared o Rs. 79,207 crore in 2002-03.The company has recorded a significantturnaround with net profit of Rs. 2,5L2 croreduring 2003- 04, from a loss of Rs. 304 crorein 2002 - 03. The reasons for thisturnaroundare the increasen production, costreduction measures, eduction in borrowings,improved product mix and buoyancyin thesteelmarket.The debt-equityratio improved dramaticallydueto better cash management and improvedprofitability. The total cost of production waslowered by 4o/oon accountof measures ocusedon reduction in usageof coking coal/other rawmaterials,n energyconsumptionand controlonadministrative expenditure. The companyrelieved 2000 employees through voluntaryretirement.

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The major challengehat the sector aces s theshortageof raw materials,ncludingcokingcoal,coke, etc. The scarcity has resulted in rise ininternational oal prices.The companycan facethis challenge only by finding alternativeinputmaterials ike coal tar, petroleum, uel etc.Question :Discuss the business performance oI SteelAuthority of India.Do they face challenges

(b) Gas Authority of India Limited (GAIL)

The Gas Authority of India is a leadingpublicsector enterprise,whose activitiesrange fromgas marketing and distribution through trunkand regional systems, to retailing of naturalgas, and processinggas for production andmarketing of liquefied petroleum gas (LPG),liquid hydrocarbonsand petrochemicals.Theyare ranked among the top 10 companiesof

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The intensification of domestic explorationactivities under the new exploration andlicensingpolicy has led to the discoveryof newoil and gas reserves.The current share of gasin primary energy consumption is 8o/o'Macroeconomic policies would drive thedemand for gas in the coming years' Theindustrial sector also has a large appetite forgas.The growing urbanpopulationwill requiregreateravailabilityof compressed atural gas'While supplysourcesof gas are geographicallydispersed, India lacks interstate pipelineinfrastructurefor supply of gas to the markets'Gas Authority of India (GAIL) has made someprogress in the implementation of the grid,covering acquisitions, preparing feasibilitystudies, identification of markets andprocurement of gas management systems'Exploration, production, import of gas andother technologyorientedprojectsmake up thebulk of GAIL's business evelopmentplans for

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the coming years. The company's aim is totransform itself into an integrated energycompanywith involvementn the upstreamanddownstreampower sector, and also undertakeprojects in countries n West Asia and SouthEast Asia in gas nfrastructure evelopmentandprocessing. t is alreadyassociatedwith varioustransnationalgas pipelineprojects n India, andis also involved n liquefiednatural gas (LNG)import projects.It also plans to interface withsimilar initiatives or increasinggas supplies nthe market. It would undertake a low costexpansion of its infrastructureof gas pipelinesand networks, to increasegas usage in themarket.Question :Discuss he business tructureand performanceof GasAuthority of India.

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