A STUDY OF INVESTORS PERCEPTION TOWARDS PENSION SCHEMES IN INDIA. A Thesis submitted for the fulfillment of the award of

Transcription

1 A STUDY OF INVESTORS PERCEPTION TOWARDS PENSION SCHEMES IN INDIA A Thesis submitted for the fulfillment of the award of DOCTOR OF PHILOSOPHY IN BUSINESS ADMINISTRATION By Sapna Singh Under the Supervision of Nishant Kumar Department of Business Administration University of Lucknow Lucknow, India 2014

2 DEPARTMENT OF BUSINESS ADMINISTRATION UNIVERSITY OF LUCKNOW *************************************************** CERTIFICATE Date: 10/12/14 This is to certify that Mrs. Sapna Singh has carried out the research work presented in this thesis entitled A Study of Investors Perception towards Pension Schemes in India for the award of Doctor of Philosophy from Lucknow University, Lucknow under my supervision. The thesis embodies results of original work, and studies are carried out by the student herself and the contents of the thesis do not form the basis for the award of other degree to the candidate or to anybody else from this or any other University/Institution. Supervisor Dr. Nishant Kumar Assistant Professor Department of Business Administration i

3 DECLARATION I hereby affirm that my research work entitled A Study of Investors Perception towards Pension Schemes in India for the award of Doctor of Philosophy from Lucknow University, Lucknow is my original work and has not been submitted for any assessment or degree/diploma or award at the University of Lucknow or any other University/Institution. Sapna Singh Department of Business Administration COUNTERSIGNED This is to certify that the above declaration by the candidate is true to the best of my knowledge. Supervisor Dr. Nishant Kumar Assistant Professor Department of Business Administration University of Lucknow, Lucknow ii

4 ACKNOWLEDGEMENT It is my pleasant duty to express deep sense of gratitude to all those who were associated with me, for their constant support and affection which enabled me to complete this work. I am highly obliged to express my sincere thanks and gratitude to my guide Dr. Nishant Kumar, Department of Business Administration, University of Lucknow, for kindly accepting me as his Ph.D. student. His valuable guidance, suggestions, and critical examination of the work are deeply acknowledged. I am thankful to Prof. Sanjay Medhavi, Head, Department of Business Administration, University of Lucknow, Lucknow, for his guidance related to research norms of the University at all stages. I am also very grateful to Prof. Arvind Kumar, Dean, Faculty of Commerce, University of Lucknow. His incessant enthusiasm and inspiration have given me new dimension to work with proper attitude. Without his sustained and sincere efforts, this thesis would have not taken this shape. Further I am thankful to all the faculty members and staff of the Department of Business Administration for their help and suggestions during Thesis work. I express my special thanks to Prof. R. B. S. Verma, Lucknow University for carrying out this task. I would also like to thank my friends and relatives like Mr. Mayank Gangwar, Dr. Nupur Kashyap and Mr. Vivek Kumar Singh who have been helpful to me all the time throughout the completion of this thesis. iii

5 I would like to thank my husband Mohit and daughter Nirvee for supporting me in carrying out my research work. Lastly, I would like to dedicate this work to my mother Mrs. Sushma, my father Mr. L. B. Singh, my In-laws, and for being present with me all the time with their blessings. iv

6 PREFACE The growth of pension schemes has been phenomenal. The mobilization of funds by pension funds has been on the rise since When pension fund market was thrown open to the private sector in 2004, the corpus of pension fund in India has swelled tremendously. The main objective of the thesis is to study and find the current & prospective investors perception towards the pension schemes. Purposive sampling method is used to collect data. Hundred respondents each are taken from three main cities of Uttar Pradesh namely Lucknow, Kanpur and Allahabad cities. A structured questionnaire was given to 380 (300 selected for the study) respondents of the select cities which consisted of both open ended and close ended questions. The study is divided into six chapters. The first chapter is introductory in nature and deals with historical background of pension system, types of pension schemes, advantages and limitations of pension schemes. This chapter also discussed about new pension system (NPS). The second chapter deals with review of literature. Research Methodology is applied with in the third chapter. In research methodology we are collecting data to find the answer of the following questions given as follows: To find out the factors that influence the investor toward the investment in pension schemes, what are the problems faced by investors of pension scheme, which tools of investment are popular among the investors, what is the pattern of investment in pension schemes and what are the factors that discourage investors of pension schemes. In chapter 3, we are also testing hypothesis. Hypothesis given as follows: association between regular investment in pension scheme and occupation of the respondents, association between regular investment in pension scheme and education v

7 of the respondents, association between regular investment in pension scheme and income of the respondents, association between regular investment in pension scheme and expenditure of the respondents, association between regular investment in pension scheme and savings of the respondents, association between regular investment in pension scheme and marital status of the respondents, association between regular investment in pension scheme and age of the respondents and association between regular investment in pension scheme and gender of the respondents. The fourth chapter describes the geographical profile of the select cities and demographic details of respondents. The fifth chapter deals with analysis of the demographic profile of respondents of select cities of Uttar Pradesh State and perception of investors towards pension schemes investment. The sixth chapter gives the conclusion of the Study and gives suggestions based on the findings. It is inferred that most of respondents give first preference to children education followed by retirement planning. The main factor influencing the pattern of investment are high living standard, safety, tax exemption, flexibility, liquidity, diversification of risk, market trend, choice of scheme, reliability and affordability. The most popular sources of investment according to the respondents are savings A/c, insurance, mutual fund, pension schemes, P.P.F. A/c and, gold & silver. The important factors that influence the investor towards the selection of pension schemes in select cities of Uttar Pradesh state are high returns, tax policy, and market trends. Qualified persons use internet for getting the information about pension scheme. Female respondents prefer to get the information through professionals. 97% respondents prefer to invest their savings in pension schemes through systematic manner. Systematic investment is popular among the respondents. vi

8 CONTENTS Certificate Declaration Acknowledgement Preface Contents List of Figures List of Tables i ii iii v vii xiv xvi CHAPTER 1 INRODUCTION Preamble Need for Present Work Objective of the Present Work Introduction to Pension System Indian Pension System Coverage and Size Need to Increase the Growth and Coverage of Indian Pension Market The National Pension System & Its Provision The Reasons of Growing Pension Market.. 18 CHAPTER 2 LITERATURE SURVEY CHAPTER 3 RESEARCH METHODOLOGY Introduction Research Statement Research Design Objectives of Study.. 41 vii

9 3.2.2 Hypothesis Formation Nature of Data and Sources of Data Tools for Data Collection Sample Design Area of the Study Data Scaling and Measurement Tools and Methods of Data Analysis Tabulation and Classification of Data Frame Work of Data Analysis Chi-Square Test Garrett s Ranking Technique Likert s Scale Technique Scope of the Study Limitations of the Study CHAPTER 4 PROFILE OF SELECT CITIES OF UTTAR PRADESH Uttar Pradesh and Select Cities of Uttar Pradesh Uttar Pradesh Select Cities of Uttar Pradesh Lucknow Kanpur Allahabad Demographic Profile of Respondents of Select Cities of Uttar Pradesh 64 CHAPTER 5 DATA ANALYSIS Introduction Demographic Profile of Respondents of Select Cities of Uttar Pradesh City Wise Respondents of Select Cities of Uttar Pradesh State Gender Wise Classification of Respondents Age Wise Classification of Respondents.. 68 viii

10 5.1.4 Marital Status of Respondents Occupational Status of Respondents Literacy Level of Respondents Respondents Paying Income Tax Income Wise Classification of Respondents Expenditure Wise Classification of Respondents Classification of Respondents According to Savings Perception of Investors towards Pension Scheme Investment Purpose of Savings Purpose of Savings of Respondents of Select Cities of Uttar Pradesh Purpose of Savings of Respondents by Occupation Purpose of Savings of Respondents by Education Qualifications Purpose of Savings of Respondents by Monthly Income Purpose of Savings of Respondents by Age of Respondents Investment Alternatives Preference of Investment Alternatives by the Respondents of Select Cities of Uttar Pradesh State Rank for Investment Alternatives (Lucknow City) Rank for Investment Alternatives (Kanpur City) Rank for Investment Alternatives (Allahabad City) Rank for Investment Alternatives for Select Cities of Uttar Pradesh Garrett s Ranking Table (Lucknow City) Garrett s Ranking Table (Kanpur City) Garrett s Ranking Table (Allahabad City) 91 ix

11 Garrett s Ranking Table for All the Select Cities of Uttar Pradesh State Investment Alternatives of Respondents by Occupation Investment Alternatives of Respondents by Educational Qualifications Investment Alternatives of Respondents by Monthly Income Reasons for Investing in Pension Schemes Reasons for investment in Pension Schemes by Respondents of Select Cities of Uttar Pradesh State Ranks - Reasons for Investment in Pension Scheme (Lucknow City) Ranks - Reasons for Investment in Pension Scheme (Kanpur City) Ranks - Reasons for Investment in Pension Scheme (Allahabad City) Ranks - Reasons for Investment in Pension Scheme in Select Cities of Uttar Pradesh State Garrett s Ranking Table Reasons for Investment in Pension Scheme in Lucknow City Garrett s Ranking Table - Reasons for Investment in Pension Scheme in Kanpur City Garrett s Ranking Table - Reasons for Investment in Pension Scheme in Allahabad City Garrett s Ranking Table - Reasons for Investment in Pension Scheme in Select Cities in Uttar Pradesh State Reasons for Investment in Pension Scheme by Occupations Reasons for Investment in Pension Scheme by Educational Qualifications Reasons for Investment in Pension Scheme x

12 by Age Factors Influencing the Selection of Pension Schemes Rank Given By the Respondents to Factors Influencing the Selection of Pension Schemes (Lucknow City) Rank Given By the Respondents to Factors Influencing the Selection of Pension Schemes (Kanpur City) Rank given By the Respondents to Factors Influencing the Selection of Pension Schemes (Allahabad City) Rank Given By the Respondents to Factors Influencing the Selection of Pension Schemes of Select Cities of Uttar Pradesh Garrett s Ranking Table - Factors Influencing the Selection of Pension Schemes (Lucknow City) Garrett s Ranking Table-Factors Influencing the Selection of Pension Schemes (Kanpur City) Garrett s Ranking Table - Factors Influencing the Selection of Pension Schemes (Allahabad City) Garrett s Ranking Table - Factors Influencing the Selection of Pension Schemes of Select Cities of Uttar Pradesh State Sources of Information Sources of Information for Investors of Pension Schemes in Select Cities of Uttar Pradesh Sources of Information by Occupation of Respondents Sources of Information by Educational Qualifications of Respondents Preference of Pension Schemes Preference of Pension Schemes based on Structure Preference of Pension Schemes Based on xi

13 Objectives Preference of Pension Schemes by Occupation Preference for Payment of Investment Amount Options Preference for Payment Options of Investment Amount in Three Cities Amount Invested Regularly in Pension Scheme Amount Invested Regularly in Pension Schemes By Select Cities of Uttar Pradesh State Occupation by Regular Investment in Pension Scheme Regular Investment by Educational Qualifications Total Monthly Income of Respondents and Regular Investment in Pension Scheme Total Monthly Expenditure of Respondents and Regular Investment in Pension Scheme Total Monthly Savings of Respondents and Regular Investment in Pension Scheme Marital Status of Respondents and Regular Investment in Pension Scheme Age of Respondents and Regular Investment in Pension Scheme Gender of Respondents and Regular Investment in Pension Scheme Level of Fulfillment of Objective in Pension Scheme Level of Fulfillment of Investors Objective in Select Cities of Uttar Pradesh Average Level of Satisfaction of Respondent in Select Cities of Uttar Pradesh Factors Discouraging Investment in Pension Schemes Factors Discouraging Investment in Pension Schemes Main Eight Factors Discouraging Investment in Pension Schemes of Select Cities of xii

14 Uttar Pradesh Problems Faced by Respondents after Investing in Pension Scheme Problems Faced by Respondents after Investing in Pension Scheme of Select Cities of Uttar Pradesh 150 CHAPTER 6 CONCLUSION AND SUGGESTIONS Conclusion Suggestions Following Suggestions Can Be Incorporated By the Pension Schemes Provider Companies Suggestions for Pension Scheme Investors BIBLIOGRAPHY 163 xiii

15 LIST OF FIGURES FIGURES NO. TOPICS CHAPTER PENSION PAYMENT OF CIVIL EMPLOYEE AS A % OF TAX REVENUE AND GROSS DOMESTIC PRODUCTS (SOURCE: xiv PAGE NO. 1.2 NPS ARCHITECTURE 18 CHAPTER MAP OF UTTAR PRADESH MAP OF LUCKNOW MAP OF KANPUR MAP OF ALLAHABAD 63 CHAPTER GENDER WISE CLASSIFICATION OF RESPONDENTS AGE WISE CLASSIFICATION OF RESPONDENTS MARITAL STATUS WISE CLASSIFICATION OF RESPONDENTS 5.4 OCCUPATION WISE CLASSIFICATION OF RESPONDENTS LITERACY LEVEL OF RESPONDENTS RESPONDENTS PAYING INCOME TAX INCOME WISE CLASSIFICATION OF RESPONDENTS EXPENDITURE WISE CLASSIFICATION OF RESPONDENTS CLASSIFICATION OF RESPONDENTS ACCORDING TO SAVINGS 5.10 PURPOSE OF SAVINGS PURPOSE OF SAVINGS BASED ON OCCUPATION PURPOSE OF SAVINGS BASED ON EDUCATION QUALIFICATION 5.13 PURPOSE OF SAVINGS BASED ON MONTHLY INCOME PURPOSE OF SAVINGS BASED ON AGE OF RESPONDENTS 5.15 PREFERENCE OF INVESTMENT RANK FOR INVESTMENT ALTERNATIVES IN LUCKNOW RANK FOR INVESTMENT ALTERNATIVES IN KANPUR RANK FOR INVESTMENT ALTERNATIVES IN ALLAHABAD RANK FOR INVESTMENT ALTERNATIVES IN SELECT CITIES 5.20 RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES REASONS FOR INVESTMENT IN PENSION SCHEMES RANKING REASONS FOR INVESTMENT IN PENSION SCHEME RANKING REASONS FOR INVESTMENT IN PENSION 104

16 SCHEME 5.27 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME 5.28 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANKING BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS SOURCES OF INFORMATION FOR PENSION SCHEMES PREFERENCE OF PENSION SCHEMES BASED ON STRUCTURE 5.39 PREFERENCE OF PENSION SCHEMES BASED ON OBJECTIVES 5.40 LEVEL OF FULFILLMENT OF OBJECTIVE IN PENSION SCHEME xv

17 LIST OF TABLES TABLE NO. TOPICS xvi PAGE NO. CHAPTER COVERAGE OF THE INDIAN PENSION NETWORK ESTIMATION OF AGE WISE POPULATION 19 CHAPTER RANK OF TOP FIVE DISTRICTS DEMOGRAPHIC PROFILE OF RESPONDENTS 64 CHAPTER RESPONDENTS FORM EACH CITY GENDER WISE CLASSIFICATION OF RESPONDENTS AGE WISE CLASSIFICATION OF RESPONDENTS MARITAL STATUS WISE CLASSIFICATION OF RESPONDENTS 5.5 OCCUPATION WISE CLASSIFICATION OF RESPONDENTS LITERACY LEVEL OF RESPONDENTS RESPONDENTS PAYING INCOME TAX INCOME WISE CLASSIFICATION OF RESPONDENTS EXPENDITURE WISE CLASSIFICATION OF RESPONDENTS CLASSIFICATION OF RESPONDENTS ACCORDING TO SAVINGS 5.11 PURPOSE OF SAVINGS PURPOSE OF SAVINGS BASED ON OCCUPATION PURPOSE OF SAVINGS BASED ON EDUCATION QUALIFICATION 5.14 PURPOSE OF SAVINGS BASED ON MONTHLY INCOME PURPOSE OF SAVINGS BASED ON AGE OF RESPONDENTS 5.16 PREFERENCE OF INVESTMENT RANK FOR INVESTMENT ALTERNATIVES IN LUCKNOW RANK FOR INVESTMENT ALTERNATIVES IN KANPUR RANK FOR INVESTMENT ALTERNATIVES IN ALLAHABAD RANK FOR INVESTMENT ALTERNATIVES IN SELECT CITIES 5.21 RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES RANKING FOR INVESTMENT ALTERNATIVES TOP FIVE INVESTMENT ALTERNATIVES IN SELECT CITIES INVESTMENT ALTERNATIVES BASED ON OCCUPATION INVESTMENT ALTERNATIVES BASED ON EDUCATIONAL QUALIFICATIONS 5.28 INVESTMENT ALTERNATIVES BASED ON MONTHLY INCOME 5.29 REASONS FOR INVESTMENT IN PENSION SCHEMES

18 5.30 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME 5.31 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME 5.32 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME 5.33 RANKING REASONS FOR INVESTMENT IN PENSION SCHEME xvii RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANK AND MEAN SCORE OF REASONS FOR INVESTMENT RANK AND MEAN SCORE OF REASONS FOR INVESTMENT REASONS FOR INVESTMENT IN PENSION SCHEME IN SELECT CITIES RANK AND MEAN SCORE OF REASONS FOR INVESTMENT REASONS FOR INVESTMENT BASED ON OCCUPATIONS REASONS FOR INVESTMENT BASED ON EDUCATIONAL QUALIFICATIONS 5.41 REASONS FOR INVESTMENT BASED ON AGE RANK BASED ON INFLUENCING FACTORS RANK BASED ON INFLUENCING FACTORS RANK BASED ON INFLUENCING FACTORS RANK BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS RANKING BASED ON INFLUENCING FACTORS TOP TEN FACTORS FOR SELECTION OF PENSION SCHEMES IN THREE CITIES RANKING BASED ON INFLUENCING FACTORS SOURCES OF INFORMATION FOR PENSION SCHEMES SOURCES OF INFORMATION BASED ON OCCUPATION SOURCES OF INFORMATION BASED ON EDUCATIONAL QUALIFICATIONS 5.54 PREFERENCE OF PENSION SCHEMES BASED ON STRUCTURE 5.55 PREFERENCE OF PENSION SCHEMES BASED ON OBJECTIVES 5.56 PREFERENCE OF PENSION SCHEMES BASED ON OCCUPATION PREFERENCE FOR PAYMENT OPTIONS PREFERENCE FOR PAYMENT OPTIONS IN SELECT CITIES AMOUNT INVESTED REGULARLY IN SELECT CITIES REGULAR INVESTMENT BASED ON OCCUPATION REGULAR INVESTMENT BASED ON EDUCATIONAL QUALIFICATIONS REGULAR INVESTMENT BASED ON MONTHLY INCOME REGULAR INVESTMENT ON TO MONTHLY EXPENDITURE REGULAR INVESTMENT BASED ON MONTHLY SAVINGS 141

19 5.65 REGULAR INVESTMENT BASED ON MARITAL STATUS REGULAR INVESTMENT BASED ON AGE REGULAR INVESTMENT BASED ON GENDER LEVEL OF FULFILLMENT OF OBJECTIVE IN PENSION SCHEME SATISFACTION LEVEL FOR PENSION SCHEMES FACTORS DISCOURAGING INVESTMENT IN PENSION SCHEMES 5.71 FACTORS DISCOURAGING INVESTMENT PROBLEMS FACED BY RESPONDENTS AFTER INVESTING 150 xviii

20 Introduction Chapter 1 INTRODUCTION 1.0 Preamble The thesis focuses and seeks to identify the perception, attitude, behavior and factors influencing the prospective and current investors regarding the use and usefulness of different pension schemes for old age security. 1.1 Need for Present Work India is an emerging economy and if it wants to continue its growth, fight with poverty, reduce inequalities, remove corruption and increase productivity (Planning Commission, 2008), it s necessary for the government to provide a social safety. Otherwise, people will unable to fight with poverty because of income reductions involves due to social reason, medical reason, injury, and ageing (Krishna, 2010). India is facing problem of increasing informal sector, financially deprived people, non-educated and mobile population. To implement the social safety nets such as a pension system for a large population (Hussmanns, 2004). There is a need to implement Pension reform. Although it is difficult and challenging in terms of second generation economic reforms (Jenkins and Khilnani, 2004; IIEF, 2011), to implementing pension reforms it is necessary for the central government to provide solutions in terms of innovative policy. 1

21 Introduction An Indian economy is growing rapidly and it is one of the fastest growing economies in the world, but the socio-economic development of the country affected due to the vast structural problems. Unemployment is the main issue and 80% employee of total work force involved in the informal sector. The saving pattern for retirement is not up to the marks and most of the people depend upon their family after retirement, but in current scenario family support is less reliable at retirement due to migration of young generation from native place and decreasing trend in fertility. Population of 60+ age people increasing rapidly and better medical facility increased Longevity has increased rapidly. While the people of 60+ years of age are the fastest growing segment. Nearly every 8 th elderly person of the world lives in India. Most of the elderly people live in India are not covered by any formal pension system. Most of them depend upon their own earning as well as money gets from their children. This type of informal system is unable to provide satisfactory old age financial security and becoming increasingly strained. The annual growth rate is 3.8% for the over 60 age group. It was 55.3 million in 1991 and 75.9 million in 2001 (Swarup, 2013). So, this shows the need to increase the pension coverage for the workers of informal sector. 1.2 Objective of the Present Work The thesis studies and examines the prospective & current investors perception, preferences, attitude and factors toward the different 2

22 Introduction pension schemes as an investment product as well as to fulfill the need of old age security with specific reference to Uttar Pradesh s three major cities i.e. Lucknow, Kanpur and Allahabad. 1.3 Introduction to Pension System Pension is a welfare method to provide financial security during old age. People gets pension after completing required number of year services. Its payment starts after retirement on monthly basis and end on the death of the person. So that, pension provides long term income benefit in non-working years. It serves the purpose of independence and secures the life from financial risk & poverty. Modern method for pension is matured in the United Kingdom. Initially pension was optional and depends on individual to individual. The formal system for pension developed during 1713 for public sector employee of custom department in United Kingdom named as superannuation fund. In 1810, pension scheme was founded for the civil servants of British Government by Parliament (Sanyal and Singh, 2013). In United Kingdom, a state based pension scheme was proposed during At the start of twentieth century, developed countries proposed two types on pension schemes. First for state based and second based on occupation. The coverage of pension schemes was low due to the majority of workers working in the informal sector. The question arises that how can we provide pension. The pension can be delivered in two ways. The first method is Pay As You Go, in 3

23 Introduction this method the young workers paying pension for retired workers. They want same treatment from their younger s during old age. This type of system doesn t require any funding and adopted by many countries. The second method, each and every person belonging to different generation contributes income to a fund for a specified period of time. The return based on the contribution is utilized for payment of pension. In the above methods, two things is common i.e. one is time and other one is risk. The reason is that both involve the transferring of money from post-retirement to post-retirement. This involves risk of receiving less pension amount as compared to actual planning. There are three types methods given as follows for pension: (1) the defined benefits plan, in this plan person gets prior information of benefits prior to accepting the plan. (2) The defined contributions plan, in this plan each contributes for their regiment. In this method contribution is fixed and pension is in the form of annuity based on the returns on the investment. (3) The notional defined contribution plan, this method is same as defined contribution method. The contribution is fixed and based on earnings. The returns are based on gross domestic product of the country (Holzmann and Edward, 2006). In the literature three methods are discussed (Pordes, 1994). In the first method the social security system is funded by state. This method is classified in two ways and given as follows: (i) Universal 4

24 Introduction pension, in which all the citizens are gets pension benefits. (ii) Pension is based on following means test i.e. income, retirement from paid employment etc. The first method is social security tax raised by government and paid as pension. This is like defined benefit plan but some countries are following notional defined contribution plan. The second method defined in terms of occupational pension schemes. The employer is sponsoring the pension. These methods are funded by the employer as well as workers. The pension payment is paid from the fund on the retirement. This method is same as defined benefit method but its different version is based on individual retirement account. The third method is based on additional savings. In this method, other assets are used for retirement benefit. After retirement, a person can sell or rent their homes for this purpose. Individuals can also join another work after retirement Indian Pension System In India context, it has a long traditional old age financial support. Old age security concept started in 3 rd century B.C. In Sukraniti defined that a king will pay half of the earnings for the people those will serve for forty years (Gayithri, 2007). During the British colonial rule in 1981, the civil service pensions were defined by the Royal Commission. The further provisions made for pension in Government of India Acts defined in1919 and 1935 made. These schemes also adopted for public sector workers. After independence, to include 5

25 Introduction private sector for pension benefit several provident funds started (Goswami, 2001). Pension schemes in the Indian context given as follows: 1) Pension schemes for civil service employees 2) Employee s Provident Fund Organization Schemes (EPFO) 3) Pension schemes based Occupation 4) Public Provident Fund 5) National Old Age Pension Scheme 6) National Pension Scheme 7) Micro-pensions and other schemes The details of different schemes given as follows: 1. In civil service pension, it includes the employee of both i.e. central and state government. The pension payments are based on defined benefits plan and depend on the final salary and paid from the current revenues of governments. Currently these schemes are changed from defined benefit plan to defined contributory plan for the new employees. 2. Employee s Provident Fund Organization (EPFO), the Employees Provident Fund (EPF) started in It was amend in EPFO manages the fund; it also provides different schemes i.e. pension and insurance for organized sector workers. EPFO is the world s largest organizations to mange clients and huge volume of transactions. The EPFO assist the board and provides three schemes given as follows: 6

26 Introduction a. Employees' Provident Fund Scheme (EPFS), 1952, mandatory saving scheme. b. Employees' Pension Scheme (EPS), 1995, it provides pension to different members. c. Employees' Deposit Linked Insurance Scheme (EDLIS), 1976, it provides insurance benefits during death. The EPFO covers workers based on monthly earnings of i.e. Rs. 6,500 or less in an origination where twenty or more staff members. 3. Pension based on occupation; in the public sector origination pension provides in the same as civil servants. Now system is changing from defined benefit to defined contributory. The private sector origination is also contributing in these occupational schemes. The pension payment method of varies from organization to organization. The organization manage the pension fund itself or jointly with pension providers. 4. Public Provident Fund (PPF), PPF started in 1968 and it is a voluntary tax saving defined contributory saving option in their personal accounts. The benefit of this scheme is taken by all the citizens other than non-resident Indians. The main objective of this scheme is to save income tax. The minimum maximum contribution is defined. A person can withdraw from sixth year. The loan can also avail form third year to fifth year. 5. National Old Age Pension Scheme, the scheme was launched in 1995 for poor people more than 65 age. The Rs. 200 amount per month is contributed by the central government as well as 7

27 Introduction contribution by the different state governments. In 2011, the age was reduced from 65 to 60 years and also the central government contribution increased from Rs. 200 to Rs. 500 for the person age above 80 years. 6. National Pension Scheme (NPS), it is evolved after National pension scheme was started for new employees who join service after January1, Its origin is based on the report of Old Age Social and Income Security committee (GOI, 2000), Working Group s report (GOI, 2001) and Expert Group s report (GOI, 2002). These reports recommended forming a Pension Fund Regulatory and Development Authority (PFRDA) and PFRDA bill in introduced in Parliament in Initially this scheme was for government employee but later in year 2009, it is opened for all citizens. In 2009, a new scheme introduced i.e. voluntary savings in which individual can withdraw their savings according to their needs. To increase the coverage of NPS, another new scheme named as NPS-Lite was started. These all schemes are based on contribution of individual and not ensure for guaranteed pension. Till May 2013, 4,90,988 persons have subscribed to NPS. Out of these numbers of persons, more than fifty percent belonging to government services for which NPS is mandatory. For involving the unorganized sector in NPS, the government initiates new scheme named as swavalamban, in this scheme government made contribution of Rs per annum for the financial year and

28 Introduction 7. Micro-pensions and Other Schemes, it is provided by the microfinance institutions. Micro-pensions development is based on the working of micro finance instructions and working of non government organizations. The schemes provided by them are based on specific needs of individual groups in exchange of small contributions. Self-Employed Women s Association (SEWA) is the successful example of Micro-pension. 50,000 women are talking benefits of SEWA s micro-pension scheme. This scheme is achieving its goal because it is targeting on specific groups i.e. economically weaker section not the masses. Other schemes are based on the saving offered by banks, and schemes provided by insurance companies. Which will provides the dual benefit of insurance as well as pension Coverage and Size Majority of pensions payments are largely financed from current revenues for government organization or the participation of employee and employer in formal organization. Due to this reason, only 24 percent of the working individual getting benefits of pension provisions and most of them are from organized sector (Sanyal and Singh, 2013). Majority of workforce are belonging to the unorganized sector and not getting any benefit of formal pension system for old age financial security. It is calculated that in 2001, near about 8.2 percent of population was above 60 (Sanyal and Singh, 2013). The existing pension system contains a small segment of people. The 9

29 Introduction coverage of population by the existing pension schemes are shown in Table 1.1. Indian government pension liability on the civil servants was around 2.6% of Gross domestic product in year as shown in Figure 1.1. Pension bill of Indian Government was around 0.68% percent of Gross domestic product in year , 1.17% in year and 0.91% in year For year , pension liability was budgeted around Rs billion and around Rs billion in year The state governments also facing the same problem and their pension expenditure in year is budgeted around Rs. 1,404 billion i.e. 1.7% of Gross domestic product Need to Increase the Growth and Coverage of Indian Pension Market The low coverage of pension schemes is due to the factor that schemes are compulsory for central government employees and v voluntary for others. Pension reforms started in India after 1991 but major imitative taken place in year Three major initiatives given as follows: The change in the scenario for pension in 2004 for government employees, the implementation of new pension scheme for all people and the induction of new NPS-Lite scheme for the poor people that contains small savings. 10

30 Introduction Scheme Year Coverage in Millions EPFO Civil Servants State Government Local Bodies Central Government Autonomous Bodies State Government Autonomous Bodies Defense P.P.F NPS (excluding 2-6) NOAPS Formal Sector coverage outside EPFO Micro-pension and other Private pension Total Table 1.1 : The Coverage of Pension The data collected form the following source: (1) EPFO Annual Report, , ; (2) (3)(4)(5)(6) (7) The World Military Balance, ; (8) Stelten (2014); (9) (10) The Estimated of NSSO 61 st Round and Tendulkar Report; (11) Stelten (2014); (12) Stelten (2014). 11

31 Introduction Figure 1.1 : Pension Payment of Civil Employee as a % of Tax Revenue and Gross domestic products (Source: The current contributory new pension system covers very small portion of informal workforce. The NPS is not getting success to involve those people that are unable to save money for old age security. Financial knowledge required to understand the new pension system is also inadequate. Thus, new pension system is not achieving its goal. Considering these reasons the NPS getting slow response so far, cause majority of customers from the government organization, for whom NPS is mandatory (Sanyal et. al., 2011). The new pension system not provides any guarantee to get minimum pension, so its objective to provide of welfare is defeating. So, there is a need to improve NPS, which can ensure minimum pension and cover large population and also reduce fiscal cost of India & increase the growth of Indian pension market. 12

32 Introduction The National Pension System & Its Provisions In this sub-section we are describing about the new pension system, its infrastructure and implementation issues. In India ageing population is growing rapidly. So, there is a need to provide the financial security at old age. In 1998, the Ministry of Social Justice and Empowerment formed the Committee for Old Age Social and Income Security to address the financial issue of old age. The Old Age Social and Income Security committee focuses on 3 issues: 1. The pension liability for government employees was unaffordable. 2. The current system for private workers was not satisfactory to provide pension at old age. 3. There are no provisions for informal sectors workers to avail the pension. A committee is formed to look these problems and made their recommendation for the solutions in their report, Old Age Social and Income Security (Dave, 2000). The committee recommended that there is a need of contributory system that buildup wealth for pension provisions. Shah (2006) summarizes the key points for the development of new system. These points are given as follows: (1) To increases the coverage of pension; (2) It should be affordable for individual; (3) It should be in the reach of every required individual; (4) Investment should be based on requirement and choice; (5) It should be covered by regulatory framework; and (6) It should be 13

33 Introduction sustainable in long-run. Old Age Social and Income Security committee name as National pension system for implementation. The National pension system started in 2004, and grown to assets of around USD 7 billion and around 6 million accounts. It is implemented as a mandatory for government employees and voluntary for others. The new pension system divided in different schemes and there is lack of choice for investor to maximize their investment. The Second point is that, there is transparency difference between new pension scheme and Employees Provident Fund Organization. So, there is need to clearly defined transparency issues of new pension scheme. Third issue is inconsistent tax saving provisions. These issues makes new pension system unfavorable in compare to old system. In addition to these factors some other factors such as fees charged, the gap between current new pension system and originally defined new pension system. There is a need to adopt the new pension system in such way that it covers the original recommendation of Old Age Social and Income Security report. There is a need to focus on these issues such as payout policies should be clear and need to develop pension systems based on occupation that will focus on informal sector for the development of intuitional framework of new pension system. The key issue has been the lack of mechanism for regulation. There is a need to define independent mechanism for regulating the 14

34 Introduction pension system. For achieving this purpose Pension Fund Regulatory Development Authority bill passed in This makes Pension Fund Regulatory Development Authority, an independent regulator for regulating new pension system. Pension Fund Regulatory Development Authority working on issue that makes new pension system as defined in Old Age Social and Income Security report. It long term goal is to provide universal pension that can reach to every individuals. The Implementation In 2002, Government of India decided on the basis Old Age Social and Income Security report that new employs those recruits from first January 2004 onward will get pension benefit through new pension scheme. The employer and employee contribution set 10% for each in the employees new pension scheme account every month. The new pension scheme is implemented in the following bodies as on March 2014: In all the accounting formations of India Governments, and majority of central autonomous bodies. Till March 2014Twenty five State Governments implemented the new pension scheme provisions (Department of Financial Services, 2014). In August 2003, the Department of Economic Affairs notified a regulator for monitoring the working of new pension scheme, before the start of the working of the new pension scheme in January Finally, the pension fund regulatory development authority bill 15

35 Introduction presented Indian Parliament and passed by in 2005, and was finally passed by Parliament in 2013 (Dave, 2006). In April 2009 the new pension scheme was open to all citizens on a voluntary basis. Specific to informal sector in April 2010, a different scheme offered named as NPS-Lite. In respect to NPS-Lite, a different scheme launched named as Swavalamban for the worker of informal sector for each financial year, where government will contributes 1000 Rs. in worker account, those contribute minimum 1000 Rs. in their NPS-Lite account. The non government organizations and nonbanking companies named as aggregators in this scheme are eligible to perform different functions. In December 2011, the corporate model of new pension scheme was launched for the employees of the corporate sector including undertakings of public sector (Renuka, 2014). New Pension Scheme Infrastructure New pension scheme (NPS) started in 2004 for new recruits of Government of India services. Although PFRDA Bill not passed by the parliament of India in The bill includes the process and procedure for the private contracts between the different institutional parties involved in the future pension system. The following parties involved in the future pension system: a. Points of Presence (PoP) There are two types of PoP. One for central government departments and bodies i.e. PoP-SP & PoP for others. 16

36 Introduction b. A Central Record-keeping Agency (CRA) to maintain the records. c. Pension Fund Managers (PFMs) for margining the funds. d. A Custodian for this purpose. e. The flow of funds will be mange by the Trustee Bank between the government and the central record-keeping agency. f. To access and monitor the working of the PFMs, Custodian and Trustee Bank. A new pension scheme (NPS) trust is created under the Indian Trusts Act, 1882 for this purpose. g. Annuity will be provided by different service providers. Contributions of employee are sending from the POPs to the Trustee Bank. The Trustee Bank sends this money to the respective PFMs. Who will invest this money according to guidelines and procedures given by the pension fund regulatory development authority. The role of Trustee Bank is important for the flow of funds between the different stakeholders. At the time of retirement, it is mandatory for the investors to buy an annuity product from the any one annuity service providers notified by the pension fund regulatory development authority. There are two different kind accounts defined in new pension scheme with different restrictions. The first one is Tier-I account, it does not allow withdrawals till retirement age and second one is Tier-II account, it does not holds any restriction for withdrawals. If a person wants to open Tier II account, it has to open Tier I first. Tire-I account for the employees working in the government sector. The government employee can also contribute in Tire-II account after fulfilling the Tire-I contribution. 17

37 Introduction Figure 1.2 : NPS Architecture 1.4 The Reasons of Growing Pension Market If we can increase the coverage of pension market or can provide the pension to everyone. It means to say that peoples those qualifying age i.e. 60 and 60+ will be eligible for receiving pension. The UNDESA calculated the future population in Estimation of population from year 2010 to 2050 periods is given in the Table 1.2 for every five year intervals. 18

38 Introduction Year Total Population No. % No. % No. % No. % No. % No. % Table 1.2 : Estimation of Age Wise Population* *No. denotes in million and % values in terms of total population. 19

39 Literature Survey Chapter 2 LITERATURE SURVEY The factors influencing a person to collect wealth can be immense. It basically depends on the need of the person who has to accomplish the set targets and goals of his life. Accumulation of wealth assures the person that he would not have to face any adversity at the old age. There are many issues that drive the investors to get involved in the investment planning such as life expectancy, requirement of income and possible expenditures, policies related to taxation etc. are also important that affect planning retirement policy to meet the future requirement. Since life expectancy has risen in past 30 years and amounts to increase 2-3 years more than expected per decade and further continues to grow throws our focus on planning the retirement and meeting the needs of life (Selene, 2005). People get involved in some or the other financial planning as the basic nature of human is to save little for the future purposes. This may be strategized according to the earnings and the requirements of person. Seeing life expectancy growth planning of retirement becomes important though people are not so serious about this matter till their mid- life because they are busy meeting their other important expenses (Grace, Weaven and Anderson 2008). Planning for retirement must start early then only it can be strategically implemented to serve its basic purpose. The living standard and the expenses are the key factors which govern the investment patterns of 20

40 Literature Survey the investors since the taxation laws regarding change brings confusion in the mind of investors and also the future is uncertain, the perception comes in as spending in retirement policies is less beneficial (Selene, 2005). People accumulate wealth because of their income so income is the primary source of collecting wealth so it needs to be earned so that it is invested (Selene, 2005). Income can be controlled by the individuals to some extent but the external factors lay pressure on the income levels because future being unpredictable and any unplanned expense can come in front of a person. Since accumulation of wealth can be planned but it cannot be perfect so it gives room for retirement planning and financial need may vary depending on the gender so the gender perspective is also important in retirement planning. Therefore, it is important to explore and contrast the issue of financial retirement planning from the perspectives of both male and female consumers. Savings behavior associated with retirement planning has often been explored in the context of retirement behavior theories. Commonly used theories are associated with the individual choice perspective, life course perspective and cumulative advantage perspective. In relation to individual choice, retirement is viewed as a stage in life which is planned and worked toward by the individual. Furthermore, the road to retirement can be designed in accordance with the individual s preferences for abrupt work termination or for a gradual withdrawal from the workforce (Ekerdt et. al., 2001). 21

41 Literature Survey In contrast to individual choice theory, Retirement planning is affected by the factors such as the experience, age, education, gender, income, etc. which can be an opportunity or constraint which influence the retirement planning (Devaney and Haejeong, 2003; DeViney, 1995). Therefore, anticipating the retirement depends on the situational approach towards their future life (Ekerdt et. al., 2001). Cumulative advantage theory states that advantages and disadvantages are based on previous successes and failures of a person which is also closely related to human capital model. According to this model investment in oneself results in higher income and therefore increases retirement options (Angela, 1996; Garry, 1975). Although this theory is contradicted by the real issues such as females of similar education levels, capabilities and experience are often paid less than man (Devaney and Haejeong, 2003). However it is argued by Ekerdt et. al. (2001, p. 162), regardless of the way that retirement behavior is theorized, there is a meta-model of older workers that assumes they are on a path to retirement, holders of plans and preferences. Consumer decision making theory is another way in which behavior of individual s could be understood concerning retirement planning. Financial products influence the decisions regarding financial planning for future retirement. This is appropriate relating to financial planning for retirement which is directed toward pension 22

42 Literature Survey funds and other savings schemes. Consumer decision-making theory states the process of decision making as the one which starts with the need recognition, and evaluation of various alternative products and thorough searching before purchase of any investment (Dewey, 1933). Needs are recognized when there is difference between actual and desired states and it is enough to motivate an initiation action in order to correct the differences (Hill, 2001). In the case of retirement planning or superannuation, need recognition is difficult because one can realize his need over a period of time and when the individual reaches his age of retirement this difference becomes apparent and it is not easy then to rectify it. Further it is important to analyze how decision- making of consumer changes when the decision to get into a product category such as superannuation becomes necessary, such as in Australia where in all employees must contribute minimum to 9% to their superannuation funds. When government policies are applicable it diminishes the need recognition by the consumer and also the prospective investors don t go through the stage of the decision-making process (Dewey, 1933), also the consumer is not motivated to search other options, this happens because need recognition occurs at social level rather than individual level ultimately policy decisions in relation to the financial retirement plans must be contained within economic theory, and the theories of human behavior have not been considered relating to the consumers such as stakeholders associated with consumption have been ignored. 23

43 Literature Survey Investors and Financial Planning for Retirement Investors get confused and are often disinterested about financial products including retirement planning (Vidler, 2004). Contribution to pension plans is not preferred by many investors than value in paying off their debts. Young investors (aging from 18 to 24 years) do recognize to plan their retirement fund, so this behavior does not result into appropriate savings (Webster, 1997). Age of the investor is such an obvious variable that has a significant impact on financial planning for the purpose of retirement also not of less importance is the gender of the investor. Because of the social and economic changes working conditions and patterns have changed and affect men and women in their own ways in recent decades (Weagley and Eunjeong, 2004). Individuals tend to accumulate retirement wealth depending on their gender experiences In particular show that different working patterns are followed by men and women throughout their lives which influences their ability to accumulate wealth. For example, now women are equally significant contributors at work places as men but according to research more than half of working women do not contribute to any retirement plans. However, women who contribute do not contribute at par as males but less than them because of breaks in their careers (U.S. Department of Labor, 2007). While this could be questioned, that this is not the case in Australia where it is compulsory to contribution for superannuation (pension) by all 24

44 Literature Survey workers. Women s are more comfortable in the part-time/casual employment sector because of their family issues and non employment issues for a long period affect the sum of amount accumulated at the time of retirement as retirement fund. Previous researches show that men and women do differ significantly in the area of financial decision making. For example, women chose less risky investment options than men and their investment decisions differ significantly. Investment decision differ in women as they prefer investment vehicle with low risk and men on other hand are much more capable in taking financial risks because they have an upper hand in the family decisions (Sunden and Brian, 1998) and are more informed about the financial choices which is also termed as financial expertise in men. Financial expertise or financial literacy is another different aspect related to gender. Studies show low financial literacy in women allover which makes it appear that women are significantly low in their financial knowledge than men. (Euwals, Angelika and Axel, 2004). Worthington (2005, 2006), earlier researches show that there is a significant difference in both men and women regarding financial decision making and it was also acknowledged that women show low score in their financial knowledge and low overall information of retirement funds than men. Knowing this it becomes obvious that men have more confidence and competence to take financial decisions regarding personal loans, stocks and bonds insurance in contrast to women who are much comfortable and convinced with the financial management taken as a 25

45 Literature Survey whole (Chen and Ronald, 1998). Women rely on their spouses basically for financial decisions and don t see themselves as separate individual regarding their life decisions. So they pay little attention to their decisions including any retirement plan. Women prefer combined retirement rather than separate offers (Selene, 2005). For example, women spend most part of their life in child rising without payment and also have irregular job life which makes them financially dependent on their spouse income for all needs irrespective of its financial nature which can be future or immediate financial need (Jefferson and Alison, 2005). This Makes men more confident in financial dealing and gives higher freedom of actions to them in situations where men have to exhibit being financially wise than women who experience, while women experience a related sense of jealousy and deficiency (Furnham and Michael, 1998). Grace et. al. (2010), planning for the superannuation is examined with reference to individual choice of life course and cumulative advantage perspectives and also studying investors behavior theories. Retirement planning is dealt with point of both men and women. The behavioral aspect of investor is examined by dealing with perception of retirement. In-depth information was gathered by adopting a qualitative research design in context to real life in order to form a theory. 21 semi structured exploratory interviews were conducted to aid in the identification and the description of the various feelings and thoughts that both female and male customers have regarding the financial retirement planning. The 21 in-depth 26

46 Literature Survey interview findings show that perspectives differs gender wise regarding retirement planning. Males are driven towards perspective of individual choice wherein assumption comes that retirement is ought to be next stage in individuals life where lifestyle is contributing to the present standards of living. Women basically go on the life course viewpoint where the life is not dependent on the presumptions and assumptions about the future stages in life but be the one who consider the circumstances of one s life dependent to outcomes. To enhance the value of research, methodology of perceptual mapping was considered and analysis was done thus giving the knowledge about the behavior and attitude of investors towards financial retirement planning. Beck's (1984), findings show that people who were more motivated for retirement programs planning were the economically and socially advantaged worker who could have easily got opportunity to get into such programs. It was found that people benefitting most from the retirement preparation programs were the older workers and those who were less educated, with low occupational status, no pension scheme coverage, and consequently with low retirement income. Everyone does not get actively involved in any schemes how so ever the scheme may be for them only (Hayes and Marcie, 1993). Fillenbaum et. al. (1985), stated that the real motivation to plan retirement comes from perception of adequacy of individual income by high income group people to take action in maintaining their 27

47 Literature Survey status quo as regards to the standard of living and expenditures in retirement. People with low income don t foresee changes in their living standards and those who come under middle class feel trapped in planning retirement or any other financial investment because they are always in condition of hand to mouth and with very less savings. Richardson and Keith (1989), found out that the age and income were one of the most important predictors of financial planning. People reaching the time of retirement got more involved in investments or savings. The family responsibilities and life cycle affects the individual s ability to plan and invest in any investment option. Regular expenses such as raising children, paying home mortgages and the liabilities of family are firstly met before planning retirement and the left over resources are only freed for retirement savings. Attitudes differ from planning retirement or socioeconomic indices such as seriousness towards retirement may be of less importance for preretirement planning. Numerous studies suggest that preparation for retirement typically increases with the age and older age groups show greater interest in financial preparation for retirement (Evans, David and Raymond, 1985; Kilty and John, 1986). Anticipatory planning must be started early approx fifteen years prior to actual retirement, but such process is not very familiar in the United States and also among professional (Kilty and John, 1986; Block, 1984). Moreover, occupational 28

48 Literature Survey employment provides low rates of pension coverage, job mobility and the possible retirement income is influenced by level of income or wages earned by labor force who work as labors most of their life (Rix, 1993). Malroutu et. al. (1995), to examine the effect of the socio demographic factors, data from the 1989 Survey of Consumer Finance was used, work related, human capital, and objective variables were cheeked on the perceived adequacy of the retirement income of the pre-retirees. After adding subjective variables to the analysis, pre-retirees' perception was positively related to planning to save within 5 years with of having adequate retirement income. Gender differences studies show that in retirement planning men as compared to women are financially soundly prepared to leave the workforce (Glass et. al., 1998a; 1998b). Beyond the economic factors that contribute to gender differences in savings, different psychological accounts have been advanced to explain why women are more poorly prepared. Specifically, compared to men, while making financial decisions women tend to bear less risk (Powell et. al., 1997; Sunden and Brian, 1998), and overlook the essence of retirement planning treating it as less important (Kragie, Martin and Marilyn, 1989). Furthermore, it has been suggested that women often view financial planning as being a male s responsibility (Glass et. al., 1998b). 29

49 Literature Survey Joy and Douglas (2005), designed to complement that line of work by exploring the extent to which demographic factors (age, income gender, and educational background) are related workers perceptions of financial stability in retirement. Results revealed that demographic variables were associated with individuals perceptions of how difficult it will be to fund their retirement, and perceptions of the importance of income from personal savings, pension plans, Social Security, and family members. Findings are discussed in terms of how perceptions of income are related to income patterns experienced by current retirees. All together, the results show that the need to develop public policy initiatives and tailored retirement intervention programs is that it meets the needs of subgroups of workers. Several studies have shown that savings tendencies are positively related to income (Bassett et. al., 1998; Grable and Lytton, 1997; Glass et. al., 1998a). Many younger individuals report they lack extra money to save for retirement (Devaney and Su, 1997), a finding that is consistent with the significant positive correlation between age and income (Hayslip et. al., 1997). Moreover, lesseducated individuals (Hayslip et. al., 1997) and women (Rix, 1990) typically earn lower pre-retirement salaries than more-educated individuals and men, which limits the likelihood of contributory retirement savings among members of the former two groups. This implies that those with the lowest level of income (and thus, those who are the least likely to save) are young women with limited 30

50 Literature Survey educational backgrounds. Income has also been linked to participation in employer-sponsored retirement savings programs (Basset et al., 1998; Gale and Scholz, 1994). Specifically, Francis (1998), found that those in lower income brackets can expect to receive minimal support from 401(k) plans, whereas those in the highest brackets can expect to receive substantial support from this source. The estimates of Wiatrowski (1993), showed that the percentage of Americans who were supported by pension plans would have increased from 55 percent in 1988, to 88 percent at the end of the year This increase in coverage would appear to be a positive step toward improving the financial stability of many future retirees. It is important to note, however, that this predicted change in coverage is not because there will be an increase in the absolute number of pension programs available. Rather, the change occurs due to a substantial increase in coverage from the existing pension programs as the end result of an influx of women who entered the workforce during that 30-year period (Wiatrowski, 1993). Because defined benefit pension programs typically determine payouts based on preretirement income levels and length of employment, individuals who change jobs (Wiatrowski, 1993) or have discontinuous work histories (Rix, 1990) can expect to receive smaller benefits. Therefore, women those who are covered by these types of plans are expected to 31

51 Literature Survey receive less pension income as compared to men due to their discontinuous working and low pre-retirement earning levels (Talaga and Beehr, 1995). It has also been shown that income and educational level are related to the availability of employer-sponsored pension plans, as well as participation rates in those plans (Talaga and Beehr, 1995). It has also been shown that income and educational level are related to the availability of employer-sponsored pension plans, as well as participation rates in those plans (Basset et. al., 1998; Gale and Scholz, 1994; Grable and Lytton, 1997). High paying income sources for most of the retirees is from Social Security rather than any other source (Kleinman, Anandarajan and Lawrence, 1999). However, some segments of the population have a tendency to be liable on Social Security than others. DeVaney and Su (1997), it is also clearly known fact that women are more expected to be dependent on Social Security as being compared to men. DeVaney and Su, (1997), found that retired women received 57.2 percent of their total income from the Social Security, whereas men received 36.6 percent of their income from this source. Even though women receive a high fraction of their retirement income from Social Security than men but in the way of monthly benefits they receive less. The lower level of Social Security benefits as was the case with pensions earned by women has been accredited to lower pay scales in their career history and frequently interrupted or intermittent work patterns (Block, 1984; Rix, 1990). 32

52 Literature Survey Wills and Ross (2002), proposed a model states that individuals must involve in the decision of saving for retirement themselves and any such model of savings decision must be made for personal retirement saving. More specifically involvement of the individual is looked in the term of awareness about the need to save for the retirement purpose and knowing the procedure of how savings can be done for the same. A sense of perceived ownership comes by such activity which helps the customer in having confidence. The model of the experiential learning cycle concept shows that the fundamentals of the investment are grounded in it. Experience is lacked on the basis of little involvement or non involvement. Individuals do not learn to save for the retirement purposes till they take any investment decision. Personal retirement savings are required for financial purpose. It is important for individuals to be involved in the decision to experience the art of planned savings. Since the life expectancy has raised people live longer and equally important is the increasing number of the people in retirement leading to reduced workforce. It is important for the individuals to be actively participating in investment for their retirement. Robb (2010), examined the attitudes of employees toward annuitisation of retirement assets and explored the basic relationship between employees attitudes and their characteristics toward immediate annuities. Collection of data for this study was done through online questionnaires ed to the employees who participated in the defined contribution plan. The survey gathered 33

53 Literature Survey information on retirement portfolio losses, expected longevity, financial confidence, familiarity with annuities, and attitudes toward immediate annuities. A total of 744 individuals answered the survey for a response rate of 43.2% on the basis of results drawn from independent t tests; it was found that there were statistically important differences between the attitudes of women and men toward immediate annuities. Women held more positive attitudes toward immediate annuities than men, and women who had taken a retirement planning class had more positive attitudes than women who had not attended a retirement class. In contrast, men who had attended a retirement class expressed less positive interest towards immediate annuities as compared to men who had not. Male overconfidence in their investment knowledge and skills may explain this finding. A Pearson correlation coefficient expressed a negative correlation between the attitudes toward annuities and risk aversion. As investment risk tolerance decreases, attitudes toward immediate annuities become more positive. An analysis of variance found that individuals had more positive attitudes towards the immediate annuities who had larger than average life expectancies than subjects with shorter than average life expectancies. Surprisingly, individuals claiming to be the most familiar one with the immediate annuities showed the least interest toward annuities. Income and assets, marital status, and financial confidence were not statistically significantly related to attitudes toward annuities. Implications for 34

54 Literature Survey consumers, financial professionals, educators, and policymakers were drawn from the results of the study. Lai (2008), aims to recognize the perception of the younger generations and various factors such as age, situation, information and performance factor which affects in perceiving the retirement and influence the choice of pension product and its decision making. Further the decision making about the pension purchase is made in contrast to the people s mindset towards the retirement and the purchase decision correspondingly. The confidence in decision making comes with how well it serves the need of individual after retirement. The methods involved in research are survey questionnaires, descriptive statistics. The findings demonstrate that though the difference in ages showed difference in the perception about the retirement but a similar model of pension purchase is followed. Decision making of pension purchase also includes the discussion about performance factor, Information channel and the situational factors. The results sub sequential to the studies helps in motivating the pension providers to promote pension products even more efficiently and effectively by educating the people for better planning of retirement when the customer knows the possible benefits of pension for retirement. The level of self- satisfaction comes from the work lives overall portrayal before the retirement. Hopkins et. al. (2006), the level of satisfaction and planning depends on how we look and perceive 35

55 Literature Survey about the retirement. The transition of retirement is stressful for one who doesn t and comforting for those who plan their retirement and future sources of income. Self evaluation plays a great role in estimating work life and post retirement life. Retirement transition turns to old age and disruption. For those who consider their work life transition to retirement as a matter of self identity which becomes the centrality of individuals work role and it is comparatively lower for retirees who view retirement as a new beginning and continuation. Higher the self-actualization of an individual before retirement, the lower will be the expectation after the retirement. However, it should be noticed that satisfaction of self identity must be built on the premises that good financial planning is necessary to meet individual physiological needs. One s level of selfactualization at work does not mainly affect and defines the individuals perceptions of retirement. Cocco and Lopes (2004), Study Of Defined Contribution Or Defined Benefit. An experimental study of pension choices states that individual pension choices range between two different plans that are defined contribution (DC) and a defined benefit (DB plans). The difference in the DB plans is in their contribution rates and way of calculation in retirement benefits, as a proportion of lifetime earnings or as a proportion of final salary. Other determinants of pension choices, found that: (i) individuals with higher income growth options prefer DB final salary plans, and have low interest in choosing the DC plan; (ii) individuals with higher earnings instability 36

56 Literature Survey do not prefer DB final salary plans; (iii) Ones with high earnings may preferably choose either the DB or the DC final salary plan. Evidence shows that different pension plans are basically selected with personal choices. Gort (2009), stated in his study on Active Management and Overconfidence quoted that: in the practical study over Swiss pension plans, pension plans that favored active management over indexing in implementation of their strategic asset allocation were examined. Experimental surveys show, that their success has been below expectations, because the performance of Swiss pension plans in international equities and domestic was below than market indices. The results of this study of decision makers of Swiss pension plans throws some light on why popularity active management is still maintained. Imam (2011), in his paper he examined the potential and actual role played by government in pension fund management.in investment performance the government plays an important role in the term of risk and return and by properly placing the pension funds in taking advantage of the benefits. Typically Pension funds embrace low proportions of equity in their portfolios which affects the growth of pension funds growth and low equity proportions mean more safety for the pension funds. To some extent home bias occurs because, it is not necessary for regulators to lay strict limits on the proportion of equities and thus a substantial extent for improvement in the status 37

57 Literature Survey of current system is possible. Other issue which requires attention is the tax treatment for making the new pension scheme equitable. Rono et. al. (2010), focused in their study on the return of investments for pension schemes and pension funds which comes under the impact of RBA guidelines and analyzing it. Random sampling was done of 175 fund trustees. Participation in the survey amounted to 13 fund managers from registered fund management companies. The questionnaire was filled through the drop- and-pick method. Data was analyzed using the SPSS (Statistical Package for Social Sciences) and was summarized using descriptive statistics, such as standard deviation mean, percentages t-tests, and frequencies for mean differences were used. The study found that return for annual investment for retirement benefits schemes in the last three years ranged from 10 to 27.52% and sometimes lowering below the annual inflation. 38

58 Research Methodology Chapter 3 RESEARCH METHODOLOGY 3.0 Introduction Data are an essential input to the effective analysis of the perception of the investors toward the investment in pension schemes. So, we have applied Research Methodology. Research Methodology provides way to solve a particular problem. It provides a way to solve a problem in scientific manner. Research Methodology performs different steps that are implemented by researcher in solving his research problem. J. W. Best (1999) defined that Research is well thought-out to be proper, organized, exhaustive process of carrying on the scientific method of study. It involves a more organized arrangement of analysis usually resulting in some of formal record of procedures and report of result or conclusions. This chapter focuses on Design of the sampling strategy associated with the definition of the experimental hypothesis and of the variable of interest. It brings about the inferential study of the perception analysis in the select cities. 3.1 Research Statement The problem studied in the present context is entitled - A Study of Investors Perception towards Pension Schemes in India The research work focuses on current and prospective investor's perception 39

59 Research Methodology towards pensions schemes in cities of Lucknow, Kanpur and Allahabad in Uttar Pradesh State. The study has been undertaken to formulate and test the different hypothesis to find to the following questions: 1. What are the factors that influence investment in Pension Schemes? 2. What are the problems faced by investors of Pension Scheme? 3. Which tools of investment are popular among the investors? 4. What is the pattern of investment in Pension Schemes? 5. What are the factors that discourage investors of Pension Schemes? 3.2 Research Design In this section we are describing about the design of research. In research design, we are discussing about the objective of the study, hypothesis formation, nature of data as well as source of data, tools and techniques used for data collection, sample design, area of the study, data Scaling and measurement methods and finally tools and methods used for of data analysis. The research design is based on the theoretical structure within which research is conducted. It constitutes the plan for collection, arrangement and analysis of data. A research design includes an outline of what the researcher will do from writing the hypothesis and its operational implication to the final analysis of the data. In this study, we are applying descriptive research design strategy. 40

60 Research Methodology Objectives of the Study (a) Key objective of the study is to study the perception of investors towards the investment in pension schemes. (b) Subsidiary objectives of the study are as follows: 1. To analyze the problems of investors in investing their money in pension scheme. 2. To analyze the investors level of fulfillment of objectives regarding pension scheme. 3. To examine the pattern of investment for Pension Schemes in Lucknow, Kanpur and Allahabad city. 4. To study investors preference with regards to pension scheme v/s other investment products Hypothesis Formation Hypothesis formation involved the design of the experimental hypothesis and of the variable of interest involving definition of the sampling units, the target population, the sampling frame, and the sampling frame is a register of the target population which defines all the sampling units within the target population. The choice of sampling method will depend on the objectives of the survey and perhaps on the survey technique being employed. Strict experimental method requires that each hypothesis should be accompanied by an equivalent null hypothesis whose validity is to be tested. Thus, if the hypothesis is that speeds have decreased, the null hypothesis might be that "speed has not decreased or alternatively 41

61 Research Methodology that speed has increased". The difference between these alternative null hypotheses is that the first is less restrictive, and therefore less likely to be rejected than the second. The following hypothesis created to test the relationship between different factors and investment in pension scheme: 1. Association between regular investment in pension scheme and occupation of the respondents. 2. Association between regular investment in pension scheme and education of the respondents. 3. Association between regular investment in pension scheme and income of the respondents. 4. Association between regular investment in pension scheme and expenditure of the respondents. 5. Association between regular investment in pension scheme and savings of the respondents. 6. Association between regular investment in pension scheme and marital status of the respondents. 7. Association between regular investment in pension scheme and age of the respondents. 8. Association between regular investment in pension scheme and gender of the respondents. To test the hypothesis, we are use Chi-square test of independence for the above hypothesis. 42

62 Research Methodology Nature of Data and Sources of Data This study considers primary as well as secondary data. Primary data is the data that is collected for the first time and that is original in nature. This data has been collected through questionnaire. Secondary data has been collected by someone else. Secondary data has been collected from news papers, magazines, websites, general discussion with pension fund managers and employee s of different pension funds organizations of and published data of PFRDA and pension fund companies Tools for Data Collection The study covers both types of data i.e. primary and secondary. Primary data was collected with the help of questionnaire which was distributed and collected from the respondents of Lucknow, Kanpur and Allahabad cities of Uttar Pradesh State. The questionnaire has two sections; the first section relates to demographical profile of respondents and the second part relates to questions regarding the perception of investors towards pension schemes. The data has been collected directly by door to door investigation. Sample respondents were requested to give a free and frank response Sample Design Purposive sampling method is used to collect data. Hundred respondents each are taken from three highly populated cities of Uttar Pradesh namely, Lucknow, Kanpur and Allahabad cities. A 43

63 Research Methodology structured questionnaire was given to respondents of the select cities which consisted of both open ended and close ended questions. (a) Population - Population includes Pension schemes investors of selected cities of the Uttar Pradesh State. (b) Sample element - Individual Pension schemes investors are the sample element. (c) Sampling technique - Purposive sample technique is applied to select the sample. (d) Sample size - The sample size of 100 respondents each was taken from Lucknow, Kanpur and Allahabad cities. Total 380 respondents from these cities were asked to fill up the questionnaire. Out of 380 respondents total 300 respondents select for the study. The number of respondent s approaches and select for the three cities given as follows: For Lucknow, Total 140 respondent s approaches and 100 selected. For Kanpur, Total 125 respondent s approaches and 100 selected. For Allahabad, Total 115 respondent s approaches and 100 selected. Due to the partial response from some respondents, we have discarded some respondent. (e) Questionnaire design - A Structured questionnaire was prepared and distributed among the selected Pension schemes investors of the Lucknow, Kanpur and Allahabad cities to study their perception and preferences regarding pension schemes. 44

64 Research Methodology Area of the Study The study is limited to the three cities of Uttar Pradesh State. Lucknow, Kanpur and Allahabad cities are selected for research study as they are the three highly populated cities in Uttar Pradesh Data Scaling and Measurement In order to increase accuracy of research work, qualitative data scaling techniques such as nominal scale and ordinal scale are used Tools and Methods of Data Analysis Tabulation and Classification of Data The data was collected through a questionnaire and tabulated. The data has been classified on the basis of age, education, qualifications, occupation, monthly income, gender, marital status, monthly savings; monthly expenditure held by the respondents. Cross tabulation has been done according to different variables Frame Work of Data Analysis The data was analyzed with the help of Statistical package for social science (SPSS.10). It is a software package, which is widely used of statistical analysis. It includes various ranges of statistical procedures that used to summarizing data, determining whether the differences between groups are statistical significant or not. SPSS also contains several tools for analyzing data, including functions for recording data and computing new variable as well as merging and aggregating data files. Chi-Square Test was applied for testing the 45

65 Research Methodology hypothesis at 5% level of significance. Data was analyzed with the help of tables, charts and diagram. Statistical technique like percentile was used to analyze the data. Descriptive analysis has been used. Garrett s Rank technique was conducted to determine the most important factors affecting Pension scheme investment. Likert s scale technique was also used for analyzing the satisfaction level of respondents for the pension schemes Chi-Square Test Karl Pearson in 1900 developed a non-parametric test. The test is used to test the significance of the inconsistency between experimental (observed) frequencies and the theoretical frequencies (expected) obtained on the basis of theory or hypothesis. This type of test is known as Chi-Square Test ( 2 -test), and is used to test whether the discrepancy between expected and observed values may be attributed to the chance (fluctuations of sampling). Chi-square test used to judge the significance of association between attributes. It is necessary that the observed as well as theoretical or expected frequencies must be grouped in the same way and the theoretical distribution must be adjusted to give the same total frequency as we find in case of observed distribution. 2 value is then calculated as follows: 2 = (foij - feij)/ feij Where foij = Observed frequency 46

66 Research Methodology feij = Expected frequency 2 observed < 2 Critical Accept the Null Hypothesis and if, 2 observed < 2 Critical Reject the Null Hypothesis 2 Critical value taken from the table based on degree of freedom and 5% level of significance. Conditions Characterizing the 2 Test The Chi-square test can be validly applied if the following conditions are satisfied: (i) (ii) The observations recorded are collected on a random basis. The sample observations should be independent, i.e., no individual item should be included twice or more in the samples. (iii) The total number of observations should be reasonably large, say N > 50. (iv) The data should be expressed in such forms that for the convenience of comparison and the given distribution should never be replaced by relative frequencies or proportions Garrett s Ranking Technique To find out the most significant factor which influences the respondent, this technique applied. To apply this method, each respondent have been asked to assign the rank for all factors and the outcomes of such ranking have been converted into score value with the help of the following formula: 47

67 Research Methodology Percent position = Where, Rank given for the i th variable by j th respondents Number of variable ranked by j th respondents With the help of Garrett s Table, the percent position estimated is converted into scores. Then for each factor, the scores of each individual are added and then total value of scores and mean values of score is calculated. The factors having highest mean value is considered to be the most important factor Likert s Scale Technique This scale is used to the study of social attitudes follow the pattern devised by Likert. In this scale, the respondent is asked to respond to each of the statements in terms of several degrees, usually five degrees (but at times 3 or 7 may also be used) of agreement or disagreement. In our research we are talking seven degree. Likert scales are developed by utilizing the item analysis approach wherein a particular item is evaluated on the basis of how well it discriminates between those people whose total score is high and those whose score is low. Those items or statements that best meet this sort of discrimination test are included in the final instrument. Thus, summated scales consist of a number of statements which express either a favorable or unfavorable attitude towards the given object to which the respondent is asked to react. The respondent 48

68 Research Methodology indicates his agreement or disagreement with each statement in the instrument. Each response is given a numerical score, indicating its favorableness or unfavorableness, and the scores are totaled to measure the respondent s attitude. In other words, the overall score represents the respondent s position on the continuum of favorable - unfavorableness towards an issue. 3.3 Scope of the Study The present research work is an attempt to study the investors perception towards pension schemes of three major cities of Uttar Pradesh, namely; Lucknow, Kanpur and Allahabad. It involves understanding the basic concept of social security, various pension schemes, investment alternatives, factors influencing investment, investor s expectation regarding the pension schemes, investors preference of different investment options and satisfaction level of investor towards the pension schemes investment. Similar studies on this line may be conducted in other cities too and for different investment products in India. Further research can also be conducted for studying perceptions of pension fund managers towards investment of funds. 3.4 Limitations of the Study In this work the data was collected and interpreted with utmost reliability and consistency but due to prejudices of a few respondents and a flaw in present characteristics of this type of study, certain limitations of the study are as follows: 49

69 Research Methodology 1. The study depicts the present scenario in the select cities and hence the result may not be applicable to another period of time. 2. This research work considered only 300 respondents out of 380 respondents of the select cities. 3. Answer to the questionnaire depends upon the beliefs and prejudices of investors. 4. It is assumed that respondents are true and honest in expressing their views and have filled the questionnaire honestly and without any bias. 5. The present study is restricted to information collected about the Pension schemes investors with the help of questionnaire. 50

70 Profile of Select Cities of Uttar Pradesh Chapter 4 PROFILE OF SELECT CITIES OF UTTAR PRADESH 4.0 Uttar Pradesh and Select Cities of Uttar Pradesh Uttar Pradesh The state is located in north India. Lucknow is capital of state. Ghaziabad, Allahabad, Kanpur, Lucknow, Moradabad, Aligarh, and Varanasi are well recognized for their industrial value in the Uttar Pradesh as well as in India. It covers 243,290 km 2 land area and it is approximately equal to 6.88% of the total land area of the country. It is the 4 th largest state in India and also the most populous state in India. It is also the 4 th largest state by economy and its gross domestic product is 7080 billion. Agriculture and service industries plays important role in state economy. Service sector includes travel as well as tourism industry, hotel & motel industry, real estate market, stock exchange, insurance and financial consultancies. It has a huge population and high growth rate. The population of Uttar Pradesh increased 26 percent during the period of 1991 to Its number comes first in terms of population in India and as on 1 March 2011, its population is 199,581,477. Uttar Pradesh contributes percent of Indian population. The inhabitant s density is 828 citizens per kilometer 2. It is one of the densest states in India. It has more number of metropolitan cities than any other state. In terms of urban residents of the state, its position is 2 nd in 51

71 Profile of Select Cities of Uttar Pradesh India and constitutes 11.8 percent of Indian urban population i.e million. In 2011 census, its literacy rate was 70 percent as compared to national average i.e. 74 percent. It has a huge number of citizens, those belonging to below the poverty line. Planning Commission made estimation for the year stated that it had 59 million citizens, those belonging to below the poverty line and its position is on top in India in terms of poor people. The following list showed national ranks of top five districts of Uttar Pradesh: Rank In India District Population Growth Rate (%) Sex Ratio Literacy (%) Density Per Kilometer 2 13 Allahabad 5,959, Moradabad 4,773, Ghaziabad 2,358, Azamgarh 4,616, Lucknow 4,588, Kanpur 4,572, Table 4.1 : Rank of Top Five Districts 52

72 Profile of Select Cities of Uttar Pradesh It has around thirty universities, including four central universities, twenty state universities; eight deemed universities, two IITs, one IIM, one NIT, and one IIIT and several polytechnics, technical colleges and ITIs. In terms of net state domestic product from the period , state holds the third largest economy in the country, with a net state domestic product of 7080 billion. Agriculture and related works is the primary occupation in state. Most of the farmers producing Wheat and it are the state's main food crop and sugarcane is the main commercial crop. About 70% of India's sugar comes from this state. Most of the industries are situated in the Kanpur region, purvanchal region and the Noida region. Major locomotive plants situated in Mughalsarai. Major manufacturing products include engineering products, electronics, electrical equipment, cables, steel, leather, textiles, jewellery, frigates, automobiles, railway coaches, and wagons. Uttar Pradesh has more number of small-scale industrial units as compared to other states, i.e. 12% of over 2.3 million units while cement production is the top sector of small and medium scale industries with 359 manufacturing clusters. From the period 2009 to 2010, the tertiary zone of the economy i.e. service industries was the largest contributor to the gross domestic product of the state, it is contributing 44.8 percent of the state domestic product as compared to 44 percent from the primary sector and 11.2 percent from the secondary sector. During the 11 th five-year 53

73 Profile of Select Cities of Uttar Pradesh plan, from the period 2007 to 2012, the average gross state domestic product growth rate was 7.28 percent. It was lower than 15.5 percent, the average for all states of the country. The state s per capita gross state domestic product growth was Rs , lower than the national per capita gross state domestic product growth of Rs The state's total financial debt stood at 2000 billion in the year Labor efficiency is higher at an index of 26 than the national average of 25. The tourism industry is as also playing important role to strengthen the economy. Noida and Lucknow is growing as major centers for the information technology industry and related business. Due to this, state is attracting foreign direct investment. Some large-scale industries situated in Sonebhadra district in eastern Uttar Pradesh and it is also known as the "Energy Capital of India". According 2013 data released by Telecom Regulatory Authority of India (TRAI), it reveals that state had the largest number of mobile subscribers in the country. In Uttar Pradesh a total of million mobile phone connections out of million in India. 54

74 Profile of Select Cities of Uttar Pradesh Figure 4.1 : Map of Uttar Pradesh 55

75 Profile of Select Cities of Uttar Pradesh Select Cities of Uttar Pradesh Lucknow Lucknow is situated in the Uttar Pradesh state in northern India and it is the capital of Uttar Pradesh. City is the district headquarters as well as divisional headquarters of Lucknow Division. Lucknow city was established in 1775 because of nawab of Awadh changed his capital from Faizabad to Lucknow. Lucknow city is one of the most prosperous and glittering cities in India. In 2011 census records, district population is 4,588,455 and it has 9 th rank in India. The district has a population density of 1,815 peoples per kilometer 2. From the period 2001 to 2011, its population growth rate was 25.79% and its sex ratio is 906 females for every 1000 males. It has a 79.33% literacy rate. In current scenario, job market of Lucknow is on uptrend. Lucknow placed 6 th among all the cities in India for fastest job-creation, the city is a major market and trading place in northern India and an emerging center for producers of goods and services. Due to the capital of state, the Government organizations and the public sector are the main employers of the middle class. Liberalization has created many opportunities in the business and service sector and self-employed professionals are burgeoning in the city. The distribution of main workers in the year 2001 by different categories reveals that almost 21% people are involved in cultivation while another 6% are agriculture based laborers. This is reasonably 56

76 Profile of Select Cities of Uttar Pradesh understandable in the district where rural population percentage is low as 37%. What is remarkable is that the share of population in rural areas has registered a decline from about 37% in year 1991 to 36% in year In the same row cultivators declined from 29.73% in year 1991 to 21.06% and agricultural laborers declined from 8.70% to 6.50% in the year Agricultural fervor of the workforce shows a decline in favor of non-agricultural activities in the state. Lucknow is the head office of both the Small Industries Development Bank of India as well as The Pradeshiya Industrial and Investment Corporation of Uttar Pradesh. Confederation of Indian Industry and Entrepreneurship Development Institute of India is also situated in the city to promote the business activities. The following manufacturing units situated in the Lucknow such as HAL, Tata Motors, Eveready Industries, Omax Auto and Scooters India Limited. The small-scale and medium-scale manufacturing units are situated in the Chinhat, Aishbagh, Talkatora, Amausi and Mohanlalganj area. City has the fastest rising property business as well as its rates increasing due to the redevelopment of several areas. There are several malls and multiplex situated in Lucknow city. Traditionally, Lucknow district is also known as a mandi town for world class mangoes, melons, and grains production in the surrounding areas. City is known for small scale industries. These industries are based on its exclusive styles of embroidery, such as Chikan work and Zardozi work, both of which are also export to other 57

77 Profile of Select Cities of Uttar Pradesh countries. Chikan is also used by fashion designers in, T.V. serials, and Bollywood movies and abroad. These works are also popular in other states and has very high demand. Figure 4.2 : Map of Lucknow 58

78 Profile of Select Cities of Uttar Pradesh Kanpur Kanpur is the largest urban district in Uttar Pradesh. It is 10 th biggest city in India and 2 nd largest city in terms of number of industries in Northern India. Kanpur city is also known as Leather City because it contains world level largest and finest tanneries (approximately 350 in numbers). The city is the headquarters of Kanpur district and Kanpur division. It is the main center for commercial and industrial activities in north India. It was main center of the industrial revolution in India. Kanpur was also known as "Manchester of the East". Today city is known for the production of Ghari detergent power, Red Tape Shoes, Goldie spices, Duncans Industries, many middle-scale industries and Hosiery business etc. The offices of various financial/commercial organizations and top level banks are also situated in the Kanpur city. Reserve Bank of India (RBI) has its office in Kanpur city. The Registrar of companies has also its office in Kanpur. The UTI, IDBI and various insurance companies have their major offices in the city. Apart from these almost all nationalized/ private limited banks offices situated here. The Standard Chartered Grindlays bank also has its branch in the city for the development of business. Stock exchange is also situated in the city. The Major trading places in the Kanpur city are Leather based products, Stock exchange, Spices, Textiles, Fertilizers & Chemicals, Hosiery, Soaps & Detergents, Electrical goods and lots of General merchant. 59

79 Profile of Select Cities of Uttar Pradesh On the basis of year 2011 census data, district has a population of 4,572,951 inhabitants. It has a population density of 1,449 peoples per kilometer 2. From the period 2001 to 2011, its population growth rate was percent. Allahabad district sex ratio is 852 females for every 1000 males. It has percent literacy rate. It has an area of over 605 km 2. Figure 4.3 : Map of Kanpur 60

80 Profile of Select Cities of Uttar Pradesh Allahabad It is one of the major & largest districts in state. The three rivers of India - Ganges, Yamuna and the mythical river of Sarasvati - meet at a point in the Allahabad district, known as Sangam, considered holy by Hindus. Allahabad was once the capital of United Province before independence. Allahabad is also one of the greatest educational hub having lots of major educational institutes like IIIT, MNNIT, University Of Allahabad, Ewing Christian College and Gautam Buddh Technical University affiliated number of Engineering Colleges, MotiLal Nehru Medical College, JK Institute - these provides higher education. Allahabad is an agricultural district. The main crops are wheat, rice and pulses in some area. Tube wells and canals are used for irrigation purpose. The Income of the city gets boost up because of a number of economic activities taking place here such as primary activities, agriculture and animal husbandry, fishing, forestry and logging, mining and quarrying etc. There are secondary activities and manufacturing which may be registered or unregistered. One can get to see a large number of constructions taking place in Allahabad which again improvises the Allahabad economy. Because of the huge number of domestic as well as international tourists coming here in the Allahabad city, the tourism industry got a sufficient boost. Among the several reasons of attracting people, the Kumbh Mela is the major one. The Kumbh Mela is not only famous in India but 61

81 Profile of Select Cities of Uttar Pradesh worldwide and therefore millions and millions of devotees come here in Kumbh Mela organized here in every 12 years, thereby gearing up the economy of Allahabad and making it largest gathering of humans in the whole world. There are a large number of small as well as large scale industries found in the Allahabad city which made the economy of Allahabad develop and helped in accelerating the development of the city. Some of the significant industrial organizations found in the Allahabad district are ITI Naini, Geep Industries, Triveni Sheet Glass Limited, IFFCO, Raymond Synthetics Karchanna and Hindustan cable Limited. In 2011 census it has 5,959,798 peoples in the districts. It has 13 th rank in India on the basis of population. As of 2011 it is the most populous district of Uttar Pradesh. Its population density is 1,087 peoples per kilometer 2. From the period 2001 to 2011, its population growth rate is percent. Its sex ratio is 902 females for every 1000 males. Allahabad has highest literacy rate in the region and close to national average. Its literacy rate is percent as compared to national average i.e. 74 percent. 62

82 Profile of Select Cities of Uttar Pradesh Figure 4.4 : Map of Allahabad In the next section, we are representing city wise demographic profile of respondents. 63