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International Business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics

, and transportation) that take place between two or more nations. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons. It refers to all those business activities which involves cross border transactions of goods, services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc. A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such

as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets. Areas of study within this topic include differences in legal systems, political systems, economic policy, language, accounting standards, labor standards, living standards, environmental standards, local culture, corporate culture, foreign exchange market, tariffs, import and export regulations, trade agreements, climate, education and many more topics. Each of these factors requires significant changes in how individual business units operate from one country to the next. The conduct of international operations depends on

companies' objectives and the means with which they carry them out. The operations affect and are affected by the physical and societal factors and the competitive environment. Operations * Objectives: sales expansion, resource acquisition, risk minimization Means * Modes: importing and exporting, tourism and transportation, licensing and franchising, turnkey operations, management contracts, direct investment and portfolio investments. * Functions: marketing, global manufacturing and supply chain management, accounting, finance, human resources

* Overlaying alternatives: choice of countries, organization and control mechanisms Physical and societal factors * Political policies and legal practices * Cultural factors * Economic forces * Geographical influences Competitive factors * Major advantage in price, marketing, innovation, or other factors. * Number and comparative capabilities of competitors * Competitive differences by country There has been growth in globalization in recent decades due

to the following eight factors: * Technology is expanding, especially in transportation and communications. * Governments are removing international business restrictions. * Institutions provide services to ease the conduct of international business. * Consumers know about and want foreign goods and services. * Competition has become more global. * Political relationships have improved among some major economic powers. * Countries cooperate more on transnational issues. * Cross-national cooperation and agreements. Studying international business is important because:

* Most companies are either international or compete with international companies. * Modes of operation may differ from those used domestically. * The best way of conducting business may differ by country. * An understanding helps you make better career decisions. * An understanding helps you decide what governmental policies to support. Managers in international business must understand social science disciplines and how they affect all functional business fields. Tom Travis, the managing partner of Sandler, Travis & Rosenberg, PA. and international trade and customs consultant, uses the Six Tenets when giving advice on how to

globalize one's business. The Six Tenets are as follows[3]: 1. Take advantage of trade agreements: think outside the border * Familiarize yourself with preference programs and trade agreements. * Read the fine print. * Participate in the process. * Seize opportunities when they arise. 2. Protect your brand at all costs * You and your brand are inseparable. * You must be vigilant in protecting your intellectual property both at home and abroad. * You must be vigilant in enforcing your IP rights. * Protect your worldwide reputation by strict adherence to labor and human rights standards. 3. Maintain high ethical standards * Strong ethics translate into good business.

* Forge ethical strategic partnerships. * Understand corporate accountability laws. * Become involved with the international business self-regulation movement. * Develop compliance protocols for import and export operations. * Memorialize your company's code of ethics and compliance practices in writing. * Appoint a leader. 4. Stay secure in an insecure world * Security requires transparency throughout the supply chain. * Participate in trade-government partnerships. * Make the most of new security measures. * Secure your data. * Keep your personnel secure. 5. Expect the Unexpected * The unexpected will happen.

* Do your research now. * Address your particular circumstances. 6. All global business is personal * Go to the source. * Keep communications open. * Keep the home office operational. * Fly the flag at your overseas locations. * Relate to offshore associates on a personal level. * Be available to overseas clients and customers 24/7. International Business in India looks really lucrative and every passing day, it is coming up with only more possibilities. The growth in the international business sector in India is more than 7% annually. There is scope for more improvement if only the relations with the neighboring countries are stabilized. The mind-blowing performance of the stock market in India has gathered all the more attention (in comparison to the other international bourses). India definitely stands as an opportune place to explore business

with its high-skilled manpower and budding middle class segment. Telecommunication. Information Technology and Electronics Hardware. Sectors having potential for International business in India – 1. On the other hand. the western part is known as the ‘commercial-capital of the country’. international business opportunity in India is surely huge. Different parts of the country are well-known for its different traits. The eastern part of India is known as the ‘Land of the intellectuals’.possibilities. . it is advisable not to formulate a uniform business strategy in India. with the northern part being the ‘hub of political power’. 2. whereas the southern part is known for its ‘technology acumen’. With such diversities in all the four segments of the country. With the diverse cultural setup.

Power and Non-conventional Energy. Retailing. Resource Conservation & Management Group. 9. Agriculture and Food Processing. R&D. Education. 6. . Environment. 12. Capital Market. 11. Manufacturing. 7. Housing. Sectors like Health. 10. Rural Development. Chemicals and Hydrocarbons. Pharmaceuticals and Biotechnology. Logistics. Small and Medium Enterprises (SME) and Urban Development are still not tapped properly and thus the huge scope should be exploited.3. 13. 8. Water Resources. Banking. Financial Institutions and Insurance & Pensions. 5. 4. Infrastructure.

These bodies help to identify the bilateral business co-operation potential and thereafter make apt policy recommendations to the different overseas Governments. have a host of services like – 1. They help to build strong relationships with the different international business organizations and the multinational corporations. . These bodies work closely with the Government and the different business promotion organizations to infuse more business development in India. With opportunities huge. India International Business community along with the domestic business community is striving towards a steady path to be the Knowledge Capital of the world.To foster the international business scenario in India. 3. bodies like CII. 2. the International Business trend in India is mind boggling. FICCI and the various Chambers of Commerce. 4.

Global Depository Receipts(GDR) / American Deposit Receipts (ADR) / Foreign Currency Convertible Bonds (FCCB) Foreign Investment through ADRs/GDRs. But. Indian companies are allowed to raise equity .It was evident till a few years back that India had a marginal role in the international affairs. The credit rating agencies had radically brought down the country's ratings. Foreign Currency Convertible Bonds (FCCBs) is treated as Foreign Direct Investment. as of now. The image was not bright enough to be the cynosure among the shining stars. Future definitely has more to offer to the entire world. after liberalization process and the concept of an open economy – international business in India grew manifold.

There is no restriction on the number of GDRs/ADRs/FCCBs to be floated by a company or a group of companies in a financial year. ports. These are not subject to any ceilings on investment. This condition can be relaxed for infrastructure projects such as power generation. whose direct foreign investment after a proposed GDRs/ADRs/FCCBs is likely to exceed 50 per cent/51 per cent/74 per cent as the case may be.capital in the international market through the issue of GDR/ADRs/FCCBs. . airports and roads. telecommunication. petroleum exploration and refining. There is no such restriction because a company engaged in the manufacture of items covered under Automatic Route is likely to exceed the percentage limits under Automatic Route. An applicant company seeking Government's approval in this regard should have a consistent track record for good performance (financial or otherwise) for a minimum period of 3 years.

ADR. * Conversion and reconversion (a.a. allowed. except for an express ban on investment in real estate and stock markets. two-way conversion or fungibility) of shares of Indian companies into depository receipts listed in foreign bourses. GDR norms further relaxed * Indian bidders allowed to raise funds through ADRs. 25 per cent of the FCCB proceeds can be used for general corporate restructuring.k. The re- . The FCCB issue proceeds need to conform to external commercial borrowing end use requirements. In addition. while extending tax incentives to non-resident investors. GDRs and external commercial borrowings (ECBs) for acquiring shares of PSEs in the first stage and buying shares from the market during the open offer in the second stage.There are no end-use restrictions on GDRs/ADRs issue proceeds.

000 for remittance under the employees stock option scheme (ESOP) and permitting remittance up to $ 1 million from proceeds of sales of assets here. Earlier. removal of the existing limit of $20.coversion of ADRs/GDRs would. whichever is higher. * Permission to retain ADR/GDR proceeds abroad for future foreign exchange requirements. however. * Any Indian company which has issued ADRs/GDRs may acquire shares of foreign companies engaged in the same area of core activity upto $100 million or an amount equivalent to ten times of their exports in a year. be governed by the Foreign Exchange Management Act notified by the Reserve Bank of India in March 2001. * Companies have been allowed to invest 100 per cent of the proceeds of ADR/GDR issues (as against the earlier ceiling of 50%) for acquisitions of foreign companies and direct investments in joint ventures and wholly-owned subsidiaries overseas. this facility was available only to Indian .

This limit has now been increased to 49% from the present 40%. On Fungibility Two-way fungibility of ADRs/GDRs issued by Indian . * Two way fungibility in ADR/GDR issues of Indian companies has been introduced subject to sectoral caps wherever applicable. * FIIs can invest in a company under the portfolio investment route upto 24 per cent of the paid-up capital of the company.companies in certain sectors. Stock brokers in India can now purchase shares and deposit these with the Indian custodian for issue of ADRs/GDRs by the overseas depository to the extent of the ADRs/GDRs that have been converted into underlying shares. It can be increased to 40% with approval of general body of the shareholders by a special resolution.

vide APDIR Circular No: 21 dated February 13th 2002. This would take place in the following manner: # Stock Brokers in India have been authorized to purchase shares of Indian Companies for reconversion # The Domestic Custodian would coordinate with the . then.Companies was permitted by the Government of India and the RBI. once a company issued ADR / GDR. to the extent of ADR / GDR which have been converted into equity shares and sold in the local market. and if the holder wanted to obtain the underlying equity shares of the Indian Company. The present rules of the RBI make such reconversion possible. Once such conversion took place. it was not possible to reconvert the equity shares into ADR / GDR. The RBI has now. issued operative guidelines for the 2 way fungibility of ADR / GDR. such ADR / GDR would be converted into shares of the Indian Company. Earlier.

No specific permission of the RBI will be required for the reconversion. investments under foreign currency convertible bonds and ordinary shares will be treated as direct foreign investment. the re-conversion of .Overseas Depository and the Indian Company to verify the quantum of reconversion which is possible and also to ensure that the sectoral cap is not breached. Two-way fungibility implies that an investor who holds ADRs/GDRs can cancel them with the depository and sell the underlying shares in the market. Besides. Re-issue of ADRs/GDRs would be permitted to the extent of ADRs/GDRs that have been redeemed and the underlying shares sold in the domestic market. The company can then issue fresh ADRs to the extent of shares cancelled. Accordingly. # The Domestic Custodian would then inform the Overseas Depository to issue ADR / GDR to the overseas Investor.

The custodian would monitor the re-issuance of ADRs/GDRs within the sectoral cap fixed by the Government. The RBI guidelines state that the transactions will be demand-driven and would not require company involvement or fresh permissions. but SEBI registered stockbrokers.41/2001-RB dated 2nd March 2001. Each purchase transaction will be only against delivery and payment received in foreign exchange through banking channels.FEMA.shares into ADRs/GDRs will be distinct from portfolio investments by foreign institutional investors (FIIs). For this purpose. RBI has conveyed general permission through a Notification No. all SEBI registered brokers will be able to act as intermediaries in the two-way fungibility of ADRs/GDRs. The RBI has already given general permission to brokers (not banks. for these brokers to buy shares on behalf of the overseas investor) to buy shares on behalf of overseas investors (this include both .

The transactions will be governed by the Income-Tax Act.foreign investors as well as domestic shareholders). Benefits of fungibility The key benefits that could accrue to investors (ADR/GDR holders and domestic investors) and companies from twoway fungibility are: improvement in liquidity and elimination of arbitrage. The Central bank has said that since the demand for re-conversion of shares into ADRs/GDRs would be from overseas investors and not the company. As secondary market operations. the expenses would be borne by the investor. The conventional definition of liquidity is the ease with . the acquisition of shares on behalf of the overseas investors through the intermediary would fall within the regulatory purview of Securities and Exchange Board of India (SEBI).

This affected the depth. thereby. This essentially means that a liquid market for a security must have depth and breadth. A liquid market is said to have depth if buy and sell orders exist both above and below the prices (at which a stock or ADR/GDR) is transacting. The first reason was the low ADR issue size that accounted for low free-float in the US market and. ADRs/GDRs) can be bought or sold quickly with relatively small price changes. Similarly. the GDR market had been largely dormant (with the exception of a few high-profile stocks) for the past couple of years. In the one-way fungible regime. and aid speedy price discovery.which an asset (in this case. Second. ADRs/GDRs suffered from price volatility and liquidity problems. low trading volumes in the security. the market is said to have breadth if buy and sell orders exist in good volume. breadth and price-discovery . basically for two reasons.

process of GDRs in these markets. Reduction/elimination of arbitrage In an efficient market. Under the one-way fungibility regime. Obviously. Two-way fungibility may at least revive some market interest in these stocks. though identical assets (namely stocks in the domestic market and ADRs/GDRs in the overseas markets) traded at different prices (at a discount/premium). If the prices of such an asset differ. and so should an identical asset trading in two different markets. two assets with identical attributes must sell for the same price. a profitable opportunity arises to sell the asset where it is overpriced and buy it back where it is under priced. the arbitrage opportunities . arbitrageurs (speculators aiming to exploit these riskless opportunities) can step in and exploit this profit opportunity.

Indian Companies required approval of the Government of India before issue of Foreign Currency Convertible Bonds (FCCBs). # The FCCBs raised shall be subject to the sectoral limits* .went a begging because of restrictions on the capital account. The RBI. market forces may trigger a realignment of prices. By introducing two-way fungibility. has vide FEMA Notification No : 55 dated March 7th 2002. Accordingly: # Indian Companies seeking to raise FCCBs are permitted to raise them under the Automatic Route upto US 50 Million Dollars per financial year without any approval. liberalised these rules. minimising the widely divergent premium/discount levels prevailing between ADR/GDR prices and the domestic stock prices. Euro Issues by Indian Companies Earlier.

# capital expenditure including domestic purchase/installation of plant.prescribed by the Government of India. equipment and buildings and investments in software development. # prepayment or scheduled repayment of earlier external . # Maturity period for the FCCBs shall be at least 5 years and the "all in cost" at least 100 basis points less than that prescribed for External Commercial Borrowings. GDR end-uses will include: # financing capital goods imports. Some restrictions had been imposed previously on the number of issues that could be floated by an individual company or a group of companies during a financial year. There will henceforth be no restrictions on the number of Euro-Issues to be floated by a company or a group of companies in a financial year.

companies are permitted to access foreign capital market through Foreign Currency Convertible Bonds for restructuring of external debt that helps to lengthen maturity and soften terms. including working capital requirements of the company raising the GDR. investments in stock markets and real estate will not be permitted. not more than 25 per cent of FCCB issue proceeds may be used for general corporate restructuring . Up to a maximum of 25 per cent of the total proceeds may be used for general corporate restructuring. However. # investments abroad where these have been approved by competent authorities. Currently. In addition to these. and for end-use of funds which conform to the norms prescribed for the Government for External Commercial Borrowings (ECB) from time to time. # equity investment in JVs/WOSs in India.borrowings.

including working capital requirements. and the expectation of the Government is that FCCBs should have a substantially finer spread than ECBs. Accordingly. foreign investment (equity/preference shares) upto certain specified limits would be permitted by Reserve Bank under Automatic . The policy and guidelines for Euro-issues will be subject to review periodically. the all-in costs for FCCBs should be significantly better than the corresponding debt instruments (ECBs). Ministry of Industry. Companies will not be permitted to issue warrants along with their Euro-issue. FCCBs are available and accessible more freely as compared to external debt. Sectoral Caps As per the Foreign Investment guidelines issued by the Government of India.

# Foreign investment (equity/preference) upto 51% in (i) industries/items included in part 'B' of Annexure III to Ministry of Industry's Press Note No.14 (1997 Series)** as amended from time to time provided the foreign investment in a project does not exceed .14 (1997 series) dated 8th October 1997** # Foreign Investment upto 100% in industries/items included in Part 'D' of Annexure III.Route as under: In relaxation of earlier guidelines. in software development # Foreign investment (equity/preference) upto 74% in industries/items included in part 'C' of Annexure III to Ministry of Industry's Press Note No. GDR end .uses will include : # Foreign investment (equity/preference) upto 50% in respect of Mining activities. to Ministry of Industry's Press Note No.14 (1997 series) dated 8th October 1997** and (ii) a trading company primarily engaged in export activity.

These instruments are called EDRs when private markets . A GDR is very similar to an American Depositary Receipt. The shares trade as domestic shares. A financial instrument used by private markets to raise capital denominated in either U. Investopedia Says Investopedia explains Global Depositary Receipt .S. dollars or euros.Rs.GDR Mean? 1. The shares are held by a foreign branch of an international bank. Global Depositary Receipt . 2. 2.GDR 1.1500 crores. but are offered for sale globally through the various bank branches.GDR What Does It Mean? What Does Global Depositary Receipt . A bank certificate issued in more than one country for shares in a foreign company.

airports. Foreign Investment through GDRs Global Depository Receipt (GDRs) enables the elevation of equity capital of Indian companies in the global market.are attempting to obtain euros. The Indian companies who are seeking government's approval for enrolling in this sector are required to have a good track record in terms of financial performance or other matters for a minimum period of three years. petroleum exploration and refining. and ports. roads. Foreign Investment through GDRs . GDRs are usually calculated in foreign dollars and not subjected to any other currency or ceilings in terms of investments.Clearance from FIPBFIPB is responsible for the clearance of Euro-issue to be . this requirement of three years is not mandatory. For infrastructure projects such telecommunication. power generation.

is likely to witness a 51 percent increase in the foreign direct investment amount after the proposed Euro issue. capital expenditure of domestic purchase or installation of plants. Use of GDRs in Foreign Direct InvestmentThe proceeds of GDRs are used for providing financial assistance to import capital goods. and equity investment in JV/WOSs in India. a manufacturing company. Restrictions in Foreign Investment through GDRs- . For example. The manufacturing company therefore is required to seek the FIPB approval before obtaining the final approval from Ministry of Finance in case of a project. defrayal or scheduled repayment of earlier external loans.floated by a company or a group of companies in the financial year. instrument and constructing and investment in software development procedures. which does not abide by Annex-III of the New Industrial Policy. which is entitled to the regulations and norms of Annex-III of the New Industrial Policy.

Recent Change in the Dimensions of India's Foreign Trade Whole world has recognized India as super power of 21st century.Foreign Direct Investments in stock markets and real estate market through GDRs are not allowed. India is youngest county in the world growing a rate of more than 8 percent. The proceeds of investments can be stopped either in the foreign country from where the FDI is coming or in India depending on the use of funds that are being approved for end uses. FDI investments under every circumstance require prior approval of the Indian government. At the same time it provides opportunities to India in terms of extracting the . Large population of India provides market to the countries of the world.

India is an emerging economic power with vast human and natural resources. India was under social democratic-based policies from 1947 . as markets opened for international competition and investment. Economy of India The economy of India is the twelfth largest economy in the world by nominal value[9] and the fourth largest by purchasing power parity (PPP). Economists predict that by 2020. following economic reform from the socialist-inspired economy of post-independence India. the country began to experience rapid economic growth.[10] In the 1990s. and a huge knowledge base.potentials of its manpower and other resources to emerge as real super power.[11] India will be among the leading economies of the world. India's foreign trade should also reflect her potentials to emerge as a super power. In the 21st century.

accounting for about 52% .[16][17][18] However. Agriculture is the predominant occupation in India. and public ownership.[12][13][14][15] Since 1991. protectionism. leading to pervasive corruption and slow growth.[13][14] A revival of economic reforms and better economic policy in 2000s accelerated India's economic growth rate.to 1991. continuing economic liberalisation has moved the economy towards a market-based system.3% of GDP which would be among the highest in the world. By 2008.6% of the country's GDP while the industrial and agricultural sector contribute 20% and 17.1%[19] as well as the return of a large projected fiscal deficit of 10.5% respectively. the year 2009 saw a significant slowdown in India's official GDP growth rate to 6.[20][21] India's large service industry accounts for 62. India had established itself as the world's second-fastest growing major economy. The economy was characterised by extensive regulation.

[23] Major industries include telecommunications.of employment.[13] India currently accounts for 1. The service sector makes up a further 34%.5% of World trade as of 2007 according to the WTO. sheep.[24] while its per capita (PPP) of US$2. goats.[22] The labor force totals half a billion workers. India's trade has grown fast. ranked 139th in the world.932 is ranked 128th.[25][26] Previously a closed economy. water buffalo. Major agricultural products include rice. India's total merchandise trade (counting exports and imports) was valued at $294 billion in 2006 and India's services trade . poultry and fish. cattle. petroleum. jute. mining. According to the World Trade Statistics of the WTO in 2006. transportation equipment. food processing. sugarcane. tea. and industrial sector around 14%. steel. wheat. chemicals.[23] India's per capita income (nominal) is $1032. cement. cotton. machinery. oilseed. potatoes. information technology enabled services and software. textiles.

[28] Even though the arrival of Green Revolution brought end to famines in India.[13] Despite robust economic growth. up by a record 72% from a level of $253 billion in 2004.[30] History . up from 6% in 1985.[29] 40% of children under the age of three are underweight and a third of all men and women suffer from chronic energy deficiency. The recent economic development has widened the economic inequality across the country.[27] Despite sustained high economic growth rate. India's trade has reached a still relatively moderate share 24% of GDP in 2006. approximately 80% of its population lives on less than $2 a day (PPP). Thus. India's global economic engagement in 2006 covering both merchandise and services trade was of the order of $437 billion. India continues to face many major problems.inclusive of export and import was $143 billion.

made tools and weapons. a permanent settlement that flourished between 2800 BC and 1800 BC. Evidence of well planned streets. domesticated animals. Pre-colonial The citizens of the Indus Valley civilisation.India's economic history can be broadly divided into three eras. and traded with other cities. practiced agriculture. which included the world's first urban sanitation systems and the existence of a form of municipal . The advent of British colonisation started the colonial period in the early 19th century. which ended with independence in 1947. beginning with the pre-colonial period lasting up to the 18th century. used uniform weights and measures. The third period stretches from independence in 1947 until now. a drainage system and water supply reveals their knowledge of urban planning.

such as textiles.[35] Religion. Although many kingdoms and rulers issued coins. played an influential role in shaping economic activities. with agriculture the predominant occupation.[34] whose economies were largely isolated and self-sustaining. especially Hinduism. Villages paid a portion of their agricultural produce as revenue to the rulers.[36] The caste system functioned much like medieval European guilds. This satisfied the food requirements of the village and provided raw materials for hand-based industries.3% of the population of the region constituting present-day India resided in villages.government. barter was prevalent. and the caste and the joint family systems.[33] The 1872 census revealed that 99. ensuring the division of . food processing and crafts. while its craftsmen received a part of the crops at harvest time for their services.

and agricultural products such as pepper.[38] Assessment of India's pre-colonial economy is mostly qualitative. which totalled £16 million. producing each variety of cloth was the specialty of a particular subcaste. One estimate puts the revenue of Akbar's Mughal Empire in 1600 at £17. cinnamon.5 million. in some cases. Calicos. the Middle East and South East Asia in return for gold and silver. shawls.[39] India. . owing to the lack of quantitative information. For instance.[37] Textiles such as muslin. Estimates of the per capita income of India (1857–1900) as per 1948–49 prices. providing for the training of apprentices and. allowing manufacturers to achieve narrow specialization. in certain regions. opium and indigo were exported to Europe. in contrast with the total revenue of Great Britain in 1800.labour.

Pune and Kolhapur. western. After the loss at Panipat. when India was firmly under the British crown. British East India company entered the Indian political theatre. Indore. However. Nagpur. It existed alongside a competitively developed network of commerce. Baroda.by the time of the arrival of the British. Gwalior state had a budget of Rs. 30M. the country remained in a state of political instability due to internecine wars and conflicts. Jhansi. manufacturing and credit. at this time. was a largely traditional agrarian economy with a dominant subsistence sector dependent on primitive technology. the Maratha Empire disintegrated into confederate states of Gwalior. at its peak. The Maratha Empire's budget in 1740s.[4 Colonial . was Rs. central and parts of south and north India were integrated and administered by the Maratha Empire. After the decline of the Mughals. 100 million. Until 1857.

India had become a strong market for superior finished European goods. as strategy to diminish British economic superiority by boycotting British products and the reviving the market for domestic-made products and production techniques.[41] The economic policies of the British Raj effectively bankrupted India's large handicrafts industry and caused a massive drain of India's resources. This was because of vast gains made by the Industrial revolution in Europe. Calcutta. Company rule in India brought a major change in the taxation environment from revenue taxes to property taxes. .An aerial view of Calcutta Port taken in 1945. saw increased industrial activity during World War II. which was the economic hub of British India.[42][43] Indian Nationalists employed the successful Swadeshi movement. resulting in mass impoverishment and destitution of majority of farmers and led to numerous famines. the effects of which was deprived to Colonial India.

a common-law and an adversarial legal system. comparable to Europe's share of 23. standardized weights and measures. to a low of 3. on paper. a civil service that aimed to be free from political interference. capital markets. encouraged free trade.[44] It also created an institutional environment that.[45] India's colonisation by the British coincided with major changes in .8% in 1952".The Nationalists had hoped to revive the domestic industries that were badly effected by polices implemented by British Raj which had made them uncompetitive to British made goods. and created a single currency with fixed exchange rates.6% in 1700.3%. It also established a well developed system of railways and telegraphs. An estimate by Cambridge University historian Angus Maddison reveals that "India's share of the world income fell from 22. guaranteed property rights among the colonizers.

At the same time right-wing historians have countered that India's low economic performance was due to various sectors being in a state of growth and decline due to changes brought in by . and left-nationalist economic historians have blamed colonial rule for the dismal state of India's economy in its aftermath and that financial strength required for Industrial development in Europe was derived from the wealth taken from Colonies in Asia and Africa.the world economy—industrialisation. agriculture unable to feed a rapidly growing population. However. The impact of the British rule on India's economy is a controversial topic. Leaders of the Indian independence movement. India had one of the world's lowest life expectancies. at the end of colonial rule.[46] with industrial development stalled. and low rates for literacy. and significant growth in production and trade. India inherited an economy that was one of the poorest in the developing world.

Both started from about the same income level in 1950.[48] Five-Year Plans of India resembled central planning in the . Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. The graph shows GDP per capita of South Asian economies and South Korea as a percent of the American GDP per capita. business regulation. and central planning. state intervention in labor and financial markets. industrialization. a large public sector. with a strong emphasis on import substitution.colonialism and a world that was moving towards industrialization and economic integration Independence to 1991 Compare India (orange) with South Korea (yellow). Policy tended towards protectionism.

Soviet Union.and technology-intensive heavy industry and subsidizing manual. rather than the more extreme Soviet-style central command system. along with the statistician Prasanta Chandra Mahalanobis. insurance. among other industries. machine tools. were effectively nationalized in the mid1950s. because it involved both public and private sectors and was based on direct and indirect state intervention. low-skill cottage industries was . water.[51] [dead link] The policy of concentrating simultaneously on capital. mining. Steel. regulations and the accompanying red tape.[49] Elaborate licences.[50] Jawaharlal Nehru. and electrical plants. They expected favorable outcomes from this strategy. carried on by Indira Gandhi formulated and oversaw economic policy. telecommunications. were required to set up business in India between 1947 and 1990. the first prime minister. commonly referred to as Licence Raj.

once accepted as inevitable. has not returned since the end of colonial. especially the "East Asian Tigers".[52][dead link] The rate from 1947– 80 was derisively referred to as the Hindu rate of growth. because of the unfavourable comparison with growth rates in other Asian countries. which provided the increase in production needed to make India self-sufficient in food grains. Famine in India.criticized by economist Milton Friedman.[45] The Rockefeller Foundation's research in high-yielding varieties of seeds. thus improving agriculture in India. who thought it would waste capital and labour. Since 1991 . their introduction after 1965 and the increased use of fertilizers and irrigation are known collectively as the Green Revolution in India. and retard the development of small manufacturers.

which was India's major trading partner. The collapse of the Soviet Union. Prime Minister Narasimha Rao along with his finance minister Dr.[56] Since then. caused a major balance-of-payments crisis for India. industrial and import licensing) and ended many public monopolies.[55] In response. . and the first Gulf War. While this increased the rate of growth. it also led to high fiscal deficits and a worsening current account. allowing automatic approval of foreign direct investment in many sectors. which in return demanded reforms. the government led by Rajiv Gandhi eased restrictions on capacity expansion for incumbents. which found itself facing the prospect of defaulting on its loans. which caused a spike in oil prices. Manmohan Singh initiated the economic liberalisation of 1991. removed price controls and reduced corporate taxes. The reforms did away with the Licence Raj (investment.8 billion bailout loan from IMF.In the late 80s.[54] India asked for a $1.

[59][60] In . during this period.the overall direction of liberalisation has remained the same. Germany. By 2035. although no party has tried to take on powerful lobbies such as the trade unions and farmers. While the credit rating of India was hit by its nuclear tests in 1998. literacy rates and food security. UK and Russia by 2025 and Japan by 2035. or contentious issues such as reforming labour laws and reducing agricultural subsidies. it was projected to be the third largest economy of the world. it has been raised to investment level in 2007 by S&P and Moody's. This has been accompanied by increases in life expectancy. irrespective of the ruling party. behind US and China. Goldman Sachs predicted that India's GDP in current prices will overtake France and Italy by 2020. but with a few major setbacks.[57] Since 1990 India has emerged as one of the fastest-growing economies in the developing world.[58] In 2003. the economy has grown constantly.

and Fishing in India India ranks second worldwide in farm output.7 Billion from IMF as a total role reversal from 1991. Sectors Agriculture Farmers work inside a rice field in Andhra Pradesh. employed 60% of the total workforce[22] and despite a steady decline of its share in the GDP. Animal husbandry in India. India is the second largest producer of rice in the world after China[61] and Andhra Pradesh is the 2nd largest rice producing state in India with West Bengal being the largest. [62] Main articles: Agriculture in India. Forestry in India.6% of the GDP in 2007. logging and fishing accounted for 16.2009 India purchased 200 Tons of Gold for $6. Agriculture and allied sectors like forestry. is still the largest economic sector and plays a significant role in the overall socio-economic development of .

due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation.[66] . accounting for 10% of the world fruit production. rice.[66] It is the third largest producer of tobacco. silk. However. peanuts and inland fish.[63] India is the largest producer in the world of milk. turmeric and black pepper.[66] India is the largest fruit producer.India. coconuts.[64] It also has the world's largest cattle population: 193 million. ginger. application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. technology. Yields per unit area of all crops have grown since 1950. [65] It is the second largest producer of wheat. international comparisons reveal the average yield in India is generally 30% to 50% of the highest average yield in the world. tea. sugar. cotton. sapotas and mangoes. It is the leading producer of bananas. cashew nuts.

about one-third of the industrial labour force is engaged in simple household manufacturing only. India is 16th in the world in terms of nominal factory output.6% of the GDP and employ 17% of the total workforce.[22] However.India is the second largest producer and the largest consumer of silk in the world. with the majority of the 77 million kg (2005)[67] production taking place in Karnataka State. and Doddaballapura.[75][dead link] In absolute terms.[74] Industry accounts for 54. world's least expensive car in production.[68][69] Industry and services India has one of the world's fastest growing automobile industries[72][73] Shown here is Tata Motors' Nano. the upcoming sites of a INR 700 million "Silk City".[76] . particularly in Mysore and the North Bangalore regions of Muddenahalli. Kanivenarayanapura.

including the threat of cheaper Chinese imports.[78] Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output. focusing on designing new products and relying on low labour costs and technology. which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition. opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods. the Indian private sector. [77] Post-liberalisation. revamping management. It has since handled the change by squeezing costs. Economic reforms brought foreign competition.India's small industry makes up 5% of carbon dioxide emissions in the world.[79] Tirupur has gained universal . led to privatisation of certain public sector industries.

accounting for 55% in 2007 up from 15% in 1950. casual wear and sportswear.[74] India is fifteenth in services output. but highly skilled. business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000.[22] Business services (information technology.[80] Dharavi slum in Mumbai has gained fame for leather products.recognition as the leading source of hosiery. knitted garments. It provides employment to 23% of work force. and an availability of a large pool of low cost. The growth in the IT sector is attributed to increased specialization. It has the largest share in the GDP. educated and fluent English-speaking workers.5% in 1951–80. and it is growing fast. on the supply . information technology enabled services.5% in 1991–2000 up from 4. growth rate 7. Tata Motors' Nano attempts to be the world's cheapest car.

[85] Regulations prevent most foreign investment in retailing. or those looking to outsource their operations.side. seven Indian firms were listed among the top 15 technology outsourcing companies in the world. and even within states. annual revenues from outsourcing operations in India amounted to US$60 billion and this is expected to increase to US$225 billion by 2020.[83] In March 2009. Moreover. over thirty regulations such as "signboard licences" and "anti-hoarding measures" may have to be complied before a store can open doors.[81][82] In 2009. from states. There are taxes for moving goods to states. The share of India's IT industry to the country's GDP increased from 4.[85] .8 % in 2005-06 to 7% in 2008.[84] Organized retail such supermarkets accounts for 24% of the market as of 2008. matched on the demand side by an increased demand from foreign consumers interested in India's service exports.

Some hospitals woo medical tourism.Tourism in India is relatively undeveloped. and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)). public and foreign owned commercial banks and cooperative banks.[88] . like ceremonies and short duration loans. especially for non-productive purposes. together known as scheduled banks). but growing at double digits. The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas.[86] Banking and finance The Indian money market is classified into: the organised sector (comprising private.

270 out of 5 lakh (500. the number of bank branches has increased from 10. retail trade. from 1. followed by six others in 1980.000 during the same period.270 or 48%.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Shown here is the World Trade Center of Mumbai Prime Minister Indira Gandhi nationalised 14 banks in 1969. and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture. to ensure that the banks fulfill their social and developmental goals. Since then.Mumbai is the financial and commercial capital of India. small businesses. small-scale industry.910 in 2003 and the population covered by a branch decreased from 63.800 to 15.[89][90] . Despite an increase of rural branches.120 in 1969 to 98.860 or 22% of the total number of branches in 1969 to 32. The total deposits increased 32. etc. only 32.000) villages are covered by a scheduled bank.

The public sector banks hold over 75% of total assets of the banking industry. other reforms have opened up the banking and insurance sectors to private and foreign players.587 MW.[91] Since liberalisation. with the private and foreign banks holding 18. cattle. and gold. the government has approved significant banking reforms.[22][92] More than half of personal savings are invested in physical assets such as land.2% and 6. While some of these relate to nationalised banks (like encouraging mergers. Tamil Nadu.5% respectively. Shown here is a wind farm in Muppandal. houses.[93] Natural resources India has the world's fifth largest wind power industry. with an installed wind power capacity of 9. reducing government interference and increasing profitability and competitiveness). .

050 km² by 2025. titanium. manganese.269. Irrigation accounts for 92% of the water utilisation.78% of total land area). India's inland water resources comprising rivers.100 mm. canals. and is expected to rise to 1.400 km² and receives an average annual rainfall of 1.[94] India's major mineral resources include coal. mica. with the balance accounted for by industrial and domestic consumers. India had the world's third largest fishing industry.India's total cultivable area is 1. In 2008. India has a total water surface area of 314.219 km² (56. and comprised 380 km² in 1974. chromite. ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. bauxite. which is decreasing due to constant pressure from an ever growing population and increased urbanisation. iron. limestone and .

sugarcane). India is the world's fifth largest consumer of oil. India's dwindling uranium reserves stagnated the growth of nuclear energy in the country for many years.[98] .[95] India's huge thorium reserves — about 25% of world's reserves — is expected to fuel the country's ambitious nuclear energy program in the long-run. wind and biofuels (jatropha.[96] However. India meets most of its domestic energy demand through its 92 billion tonnes of coal reserves (about 10% of world's coal reserves).[97] India is also believed to be rich in certain renewable sources of energy with significant future potential such as solar. the Indo-US nuclear deal has paved the way for India to import uranium from other countries. As of 2010.thorium. [edit] Petroleum and Natural gas ONGC platform at Bombay High in the Arabian Sea.

1 billion barrels[101] and Mangala Area in Rajasthan an additional 3. Hindustan Petroleum Corporation Limited (HPCL) and Indian Petrochemicals Corporation Limited (IPCL).[100] of which Bombay High is believed to hold 6. parts of Gujarat.India's oil reserves.[102] In 2009.56 million barrels of oil per day. found in Bombay High. India imported 2. Rajasthan and eastern Assam. There are some major private Indian companies in oil sector such as Reliance Industries Limited (RIL) which operates the world's largest oil refining complex.[22][99] India's total proven oil reserves stand at 11 billion barrels.[104] . making it one of largest buyers of crude oil in the world. [103] The petroleum industry in India mostly consists of public sector companies such as Oil and Natural Gas Corporation (ONGC). meet 25% of the country's domestic oil demand.6 billion barrels.

Dr. Indian Pharmaceutical Industry is often compared to Pharmaceutical Industry in the USA.Pharmaceuticals India has a self reliant Pharmaceuticals industry. Today. External trade and investment . In terms of the global market. Reddy's Laboratories. but it has been growing at approximately 10% per year. India currently holds a modest 1-2% share. Pharmaceutical Industry in India is dotted with companies like Ranbaxy Laboratories. India is an exporter of countries like United States and Russia. The majority of its medical consumables are produced domestically. Cipla which have created a niche for themselves at world level.

[106] In 2008. to protect its economy and to achieve self-reliance. a large percentage of the capital flows consisted of foreign aid.[108] India's exports were stagnant for the first 15 years after . Foreign trade was subject to import tariffs. commercial borrowing and deposits of non-resident Indians. export taxes and quantitative restrictions. these approvals were needed for nearly 60% of new FDI in the industrial sector. export obligations and government approvals. The restrictions ensured that FDI averaged only around US$200 million annually between 1985 and 1991.8% of global commercial services export. India accounted for 1. restrictions on technology transfer.[107] Until the liberalization of 1991. while foreign direct investment (FDI) was restricted by upper-limit equity participation.45% of global merchandise trade and 2.India's economy is mostly dependent on its large internal market with external trade accounting for just 20% of the country's GDP. India was largely and intentionally isolated from the world markets.

080. 63. the value of India's international trade has become more broad-based and has risen to Rs.[109] The exports during April 2007 were $12. the UK. Since liberalization. equipment and raw materials.1. due to the predominance of tea. the US.250 crores in 1950– 51.109 crores in 2003–04 from Rs. . major export commodities included engineering goods. gems and jewellery. Major import commodities included crude oil and related products. the UAE. agricultural products. chemicals and pharmaceuticals.31 billion up by 16% and import were $17. textiles and garments. Japan and the EU.06% over the previous year. India's major trading partners are China.[110] In 2006-07. Imports in the same period consisted predominantly of machinery. demand for which was generally inelastic. iron ore and other minerals. due to nascent industrialization. petroleum products.68 billion with an increase of 18. jute and cotton manufactures.independence.

India's balance of payments on its current account has been negative. While participating actively in its general council meetings. gold and silver. For instance. India has been crucial in voicing the concerns of the developing world.[112] [edit] Balance of payments Cumulative Current Account Balance 1980-2008 based on the IMF data Since independence. covering 80. electronic goods. India has continued its opposition to the inclusion of such matters as labour and environment issues and other non-tariff barriers into the WTO policies. India's exports have been consistently rising.[111] India is a founding-member of General Agreement on Tariffs and Trade (GATT) since 1947 and its successor. the WTO. Since liberalisation in the 1990s (precipitated by a balance of payment crisis).3% of its .machinery.

. As a result.[113] In 2007-08. until this time. India's foreign currency reserves stood at $285 billion in 2008.[114] Although India is still a net importer. at a cost of $61. India imported 120. the overall balance was only occasionally positive on account of external assistance and commercial borrowings. Due to the global late-2000s recession. up from 66.imports in 2002–03.[115] The steep decline was because countries hit .e.2% in 1990–91.2% respectively in June 2009.2% and 39.1 million tonnes of crude oil.72 billion. India's growing oil import bill is seen as the main driver behind the large current account deficit. largely on account of increased foreign direct investment and deposits from nonresident Indians. since 1996–97 its overall balance of payments (i. more than 3/4th of the domestic demand. including the capital account balance) has been positive. both Indian exports and imports declined by 29.

[115] India's reliance on external assistance and commercial borrowings has decreased since 1991–92. External Commercial Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to Indian corporates. Declining interest rates and reduced borrowings decreased India's debt service ratio to 4. India's trade deficit reduced to 252.[117] In India. such as United States and members of the European Union. account for more than 60% of Indian exports. and since 2002–03.5% in 2007. it has gradually been repaying these debts.5 billion rupee.[116] However.hardest by the global recession. (2000– . The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB policy guidelines. since the decline in imports was much sharper compared to the decline in exports. [118] [edit] Foreign direct investment in India Share of top five investing countries in FDI inflows.

363 7.2007)[119] Rank Country Inflows (Million USD) Inflows (%) 1 Mauritius 85.177 5. and jewellery. information technology and other significant areas such as auto components.37% 3 United Kingdom 15.040 9.742 5.24%[120] 2 United States 18. India is a preferred destination for foreign direct investments (FDI). Despite a surge in foreign investments. apparels. India has positioned itself as one of the front-runners of the rapidly . chemicals. pharmaceuticals.98% 4 Netherlands 11.[121] India has strengths in telecommunication.06% As the fourth-largest economy in the world in PPP terms.178 44. due to some positive economic reforms aimed at deregulating the economy and stimulating foreign investment. However. rigid FDI policies resulted in a significant hindrance.81% 5 Singapore 9.

The upward moving growth curve of the real-estate sector owes . removed restrictions on expansion and facilitated easy access to foreign technology and foreign direct investment FDI. double taxation is avoided due to a tax treaty between India and Mauritius. India's recently liberalized FDI policy (2005) allows up to a 100% FDI stake in ventures. The size of the middle-class population stands at 300 million and represents a growing consumer market.[122] The inordinately high investment from Mauritius is due to routing of international funds through the country given significant capital gains tax advantages.[121] India has a large pool of skilled managerial and technical expertise. effectively creating a zero-taxation FDI channel. Industrial policy reforms have substantially reduced industrial licensing requirements. and Mauriitus is a capital gains tax haven.growing Asia Pacific Region.

recreational facilities.some credit to a booming economy and liberalized FDI regime.[123] This automatic route has been permitted in townships. A number of changes were approved on the FDI policy to remove the caps in most sectors.and regional-level infrastructure. In March 2005. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing. resorts. commercial premises. educational institutions. housing. and city. industrial parks. Fields which require relaxation in FDI restrictions include civil aviation. commodity exchanges. construction development. petroleum and natural gas. the government amended the rules to allow 100 per cent FDI in the construction business. built-up infrastructure and construction development projects including housing. hospitals. hotels. credit-information services and mining. FDI inflows .

[127] 61. The exchange rate as on 23 March 2010 is 45.[125] A critical factor in determining India's continued economic growth and realizing the potential to be an economic superpower is going to depend on how the government can create incentives for FDI flow across a large number of sectors in India.45 to a EUR.40 INR the USD. according to the government's Secretariat for Industrial Assistance. The FDI inflow for 2007-08 has been reported as $24 billion[124] and for 200809. The Indian .5 billion in fiscal year 200607 (April-March). it is expected to be above $35 billion.8bn in the previous fiscal year.19 to a GBP.into India reached a record $19.[126] Currency The Indian rupee is the only legal tender accepted in India. and 68. This was more than double the total of US$7.

both of which peg their currency to that of the Indian rupee. Since September 2009 there has been a constant appreciation in Rupee versus most Tier 1 currencies.000 rupee note. due to a strong domestic market. . 10 and 20 paise coins which have been discontinued by the Reserve Bank of India). A rising rupee also prompted Government of India to buy 200 tonnes of Gold from IMF. 5. the lowest-denomination coin in circulation is the 25 paise coin (it earlier had 1. 2. India managed to bounce back sooner than the western countries. The highest-denomination banknote is the 1. The rupee is divided into 100 paise.50 to a United states dollar and on 10 January 2010 as high as Rupee 73. However.[128] The Rupee hit a record low during early 2009 on account of global recession.rupee is accepted as legal tender in the neighboring Nepal and Bhutan. On 11 January 2010 Rupee went as high as 45.93 to a British Pound.

but is still even more than the 73.7% of the population lives on less than $2.5 a day in nominal terms. Income and consumption * 85.50 (PPP) a day. which is around 20 rupees or $0.[129][130][131][132][133] .5% in 1981.6%.The RBI. It was down from 86. manager of exchange control and as an issuer of currency. It serves as the nation's monetary authority. headed by a governor who is appointed by the Central government of India.0% in Sub-Saharan Africa. The RBI is governed by a central board. down from 92. This is much higher than the 80.5% in Sub-Saharan Africa. regulator and supervisor of the financial system.[129] * 75.6% of the population lives on less than $2 a day (PPP). the country's central bank was established on 1 April 1935.

* 24. more people can afford a bicycle than ever before.6% of its population is living below the new international poverty line of $1.[129] The World Bank further estimates that a third of the global poor now reside in India. sleeping.[129][134] * 41.1% in 1981.3% of the population earned less than $1 (PPP. down from 42. around $0. with ownership rates ranging from around 30% to 70% at state level. cooking.[135] Housing is modest.6 m2) per person in rural areas and . Some 40% of Indian households owns a bicycle." and "one in every three urban Indians lives in homes too cramped to exceed even the minimum requirements of a prison cell in the US. Today. "a majority of Indians have per capita space equivalent to or less than a 10 feet x 10 feet room for their living.25 (PPP) per day. washing and toilet needs."[136] The average is 103 sq ft (9.8% in 1981. down from 59.25 in nominal terms) a day in 2005. According to Times of India.

India has not had famines since the Green Revolution in the early 1970s. successive governments have implemented various schemes. under planning. official figures estimate that 27. The proportion of underweight children is nearly double that of Sub-Saharan Africa. living in abject poverty.[139] A 2007 report by the state-run National Commission for Enterprises in the Unorganised Sector (NCEUS) found that 65% of Indians. While poverty in India has reduced significantly.9 m2) per person in urban areas. around 10 rupees in nominal terms) a day in 2004-2005.[136] Around half of Indian children are malnourished. lived on less than 20 rupees per day[140] with most working in "informal labour sector with no job or social security. or 750 million people.117 sq ft (10. to alleviate ."[141] Since the early 1950s.5%[138] of Indians still lived below the national poverty line of $1 (PPP.[30][137] However.

All these programmes have relied upon the strategies of the Food for work programme and National Rural Employment Programme of the 1980s. the largest programme of this type in terms of cost and coverage.poverty. that have met with partial success. the Indian parliament passed the Rural Employment Guarantee Bill.[142] In August 2005. The question of whether economic reforms have reduced poverty or not has fuelled debates without generating any clear cut answers and has also put political pressure on further economic reforms. which promises 100 days of minimum wage employment to every rural household in all the India's 600 districts. especially those involving the downsizing of labour and cutting agricultural subsidies. which attempted to use the unemployed to generate productive assets and build rural infrastructure.[143][144] [edit] Employment See also: Indian labour law .

[145] India's labor .Agricultural and allied sectors accounted for about 60% of the total workforce in 2003 same as in 1993–94.[145] Official unemployment exceeds 9%. services have seen a steady growth. but employment only at 2. The NSSO survey estimated that in 1999–2000. Almost 30% of workers are casual workers who work only when they are able to get jobs and remain unpaid for the rest of the time. While agriculture has faced stagnation in growth. two-thirds of which are in the public sector. nearly 10% of the population were unemployed and the overall unemployment rate was 7. with rural areas doing marginally better (7.[145] Only 10% of the workforce is in regular employment.7%). Of the total workforce.3%. 106 million.5% annually. Regulation and other obstacles have discouraged the emergence of formal businesses and jobs. India's labor force is growing by 2.3% a year.2%) than urban areas (7. 8% is in the organised sector.

The Indian government is implementing the world's . setting up public sector enterprises. Government schemes that target eradication of both poverty and unemployment (which in recent decades has sent millions of poor and unskilled people into urban areas in search of livelihoods) attempt to solve the problem. reservations in governments. The decreased role of the public sector after liberalization has further underlined the need for focusing on better education and has also put political pressure on further reforms.[142][147] Child labor is a complex problem that is basically rooted in poverty. by providing financial assistance for setting up businesses.regulations are heavy even by developing country standards and analysts have urged the government to abolish them. etc. skill honing.[13] [146] Unemployment in India is characterized by chronic or disguised unemployment.

[150] Shown here is a residential area in the Mumbai metropolitan area.[148] In 2006.[149] Economic trends India's 300 million strong middle-class population is growing at an annual rate of 5%. remittances from Indian migrants overseas made up $27 billion or about 3% of India's GDP. Numerous nongovernmental and voluntary organizations are also involved. Special investigation cells have been set up in states to enforce existing laws banning employment of children (under 14) in hazardous industries. The allocation of the Government of India for the eradication of child labor was $10 million in 1995-96 and $16 million in 1996-97. with primary education targeted for ~250 million. The allocation for 2007 is $21 million. .largest child labor elimination program.

[15] Goldman Sachs has outlined 10 things that it needs to do in order to achieve its potential and grow 40 times by 2050. raise educational achievement 3. control inflation . the report stated that India would continue to remain a lowincome country for decades to come but could be a "motor for the world economy" if it fulfills its growth potential. and that the Indian economy will surpass the United States (in US$) by 2043. based on increased and sustaining growth.[15] In spite of the high growth rate. increase quality and quantity of universities 4. more inflows into foreign direct investment. India’s GDP per capita in US$ terms will quadruple". improve governance 2. These are 1.In the revised 2007 figures. Goldman Sachs predicts that "from 2007 to 2020.

5. increase trade with neighbours 8.[151] Issues Agriculture An Indian farmer Main article: Agriculture in India Slow agricultural growth is a concern for policymakers as some two-thirds of India’s people depend on rural employment for a living. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal . improve environmental quality. introduce a credible fiscal policy 6. increase agricultural productivity 9. improve infrastructure and 10. liberalize financial markets 7.

India's large agricultural subsidies are hampering productivity-enhancing investment. Farmers' access to markets is hampered by poor roads. price risks and uncertainty.lack of good extension services are among the factors responsible. rudimentary market infrastructure. slow progress in implementing land reforms . – World Bank: "India Country Overview 2008"[152] The low productivity in India is a result of the following factors: * According to "India: Priorities for Agriculture and Rural Development" by World Bank. Infrastructure and services are inadequate. and credit markets are hurting the market. land.[153] * Illiteracy. Overregulation of agriculture has increased costs. and excessive regulation. Government interventions in labor.

000 m²) and is subject to fragmentation. as revealed by the fact that only 52.[154] which result in farmers still being dependent on rainfall. * Adoption of modern agricultural practices and use of technology is inadequate.[153] Irrigation facilities are inadequate. due to land ceiling acts and in some cases. family disputes. specifically the Monsoon season. A good monsoon results in a robust growth for the . Such small holdings are often over-manned. * The average size of land holdings is very small (less than 20.6% of the land was irrigated in 2003–04. resulting in disguised unemployment and low productivity of labour. unsustainable and inequitable. high costs and impracticality in the case of small land holdings.and inadequate or inefficient finance and marketing services for farm produce. hampered by ignorance of such practices. The irrigation infrastructure is deteriorating. * World Bank says that the allocation of water is inefficient.

which .[155] Farm credit is regulated by NABARD. while a poor monsoon leads to a sluggish growth.000 villages to the Internet by 2013. under the supervision of the Ministry of Agriculture. which is the statutory apex agent for rural development in the subcontinent. rice and rubber farmers in the event of natural disasters or catastrophic crop failure. India's population is growing faster than its ability to produce rice and wheat. fruit. One notable company that provides all of these insurance policies is Agriculture Insurance Company of India and it alone insures almost 20 million farmers. India has many farm insurance companies that insure wheat.economy as a whole.[156] This will provide farmers with up to date crop prices for the first time.[29] The most important structural reform for self-sufficiency is the ITC Limited plan to connect 20.

[157] The Right to Information Act (2005) and equivalent acts in .should minimise losses incurred from neighbouring producers selling early and in turn facilitate investment in rural areas. The economic reforms of 1991 reduced the red tape. 2007 Main article: Corruption in India Corruption has been one of the pervasive problems affecting India. Yet. a 2005 study by Transparency International (TI) India found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office. bureaucracy and the Licence Raj that had strangled private enterprise and was blamed by Chakravarthi Rajagopalachari for the corruption and inefficiencies. [edit] Corruption Overview of the index of perception of corruption.

computerisation of services and various central and state government acts that established vigilance commissions have considerably reduced corruption or at least have opened up avenues to redress grievances. that require government officials to furnish information requested by citizens or face punitive action. Private sector data relates to non-agriculture establishments with 10 or more employees.[142] The current government has concluded that most spending .[158][159] [edit] Government Main article: Government of India See also: Taxation in India and Corruption in India The number of people employed in non-agricultural occupations in the public and private sectors.[157] The 2009 report by Transparency International ranks India at 84th place and states that significant improvements were made by India in reducing corruption. Totals are rounded.the Indian states.

India's absence rates are one of the worst in the world.[162][163][164][165] The government of India is highly indebted and its former investment-grade status has deteriorated to near junk status. including "vast armies of paper-shuffling peons".[160] At local level. It is not unheard of that a majority of a state's assembly seats can be held by convicted criminals.[160] The Economist's 2008 article about the Indian civil service stated that the Indian central government employs around 3 million people.[160] Lant Pritchett calls India's public sector "one of the world's top ten biggest problems — of the order of AIDS and climate change".[161] One study found that 25% of public sector teachers and 40% of public sector medical workers could not be found at the workplace. [166] India's current public-debt to GDP ratio is 60% (US is . administration can be worse.fails to reach its intended recipients.

[170] An optimistic estimate is that only one in five job-seekers in India has ever had any sort of vocational training.[169] However. Indian Road Network. Ports in . Despite growing investment in education.53%).[167] [edit] Education Main article: Education in India India has made huge progress in terms of increasing primary education attendance rate and expanding literacy to approximately two thirds of the population. 40% of the population is illiterate and only 15% of the students reach high school.[168] The right to education at elementary level has been made one of the fundamental rights under the Eighty-Sixth Amendment of 2002.[171] [edit] Infrastructure See also: Transport in India. education is still far behind developing countries such as China and continues to face challenges.

urban-bias and an inability to scale investment. Development of infrastructure was completely in the hands of the public sector and was plagued by corruption. This has prompted the government to partially open up infrastructure to the private sector allowing foreign investment[142][173][174] which has helped in a sustained growth rate of close to 9% for the past six quarters. transportation. Water supply and sanitation in India.[172] India's low spending on power. and Communications in India Rapid increases in exports has resulted in congestion on highways across India. construction. Shown here is the Yashwantrao Chavan expressway in Maharashtra.[175] .India. bureaucratic inefficiencies. telecommunications and real estate. Electricity in India. States of India by installed power capacity. at $31 billion or 6% of GDP in 2002 had prevented India from sustaining higher growth rates.

882 households in 2002.[180] . As of 2005 the electricity production was at 661. [176] While 80% of Indian villages have at least an electricity line. electricity demand exceeded supply by 15%.Some 600 million Indians have no mains electricity at all. The stolen electricity amounts to 1.000 bbl/day.6 billion kWh with oil production standing at 785. Power outages are common.[177][179] Almost all of the electricity in India is produced by the public sector.[177] According to a sample of 97.[176] Many buy their own power generators to ensure electricity supply.[178] Some half of the electricity is stolen. compared with 3% in China. In 2007.[176] Multi Commodity Exchange has tried to get a permit to offer electricity future markets. electricity was the main source of lighting for 53% of rural households compared to 36% in 1993.5% of GDP. just 44% of rural households have access to electricity.

[182] Container traffic is growing at 15% a year. [184] Most urban cities have good water supply water 24 hours a day. however it is still growing at slower rate and is expected to boom after the launch of 3G and wimax services. while some smaller cities face water shortages in summer season.Indian Road Network is developing. Trucking goods from Gurgaon to the port in Mumbai can take up to 10 days. there were only 7.[181] India has the world's third largest road network. A World Bank report says it is an institutional problem in water agencies."[185] [edit] Labour laws .57 million broadband lines in India in November 2009. Internet use is rare.[183] Some 60% of India’s container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai. or "how the agency is embedded in the relationships between politics and the citizens who are the consumers.

intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs.[13][171][186] A recent report highlights a growing labor unrest all over India which .[152] India's restrictive labor regulations hamper the large-scale creation of formal industrial jobs. Given the country’s momentum of growth.Main article: Indian labour laws India’s labor regulations — among the most restrictive and complex in the world — have constrained the growth of the formal manufacturing sector where these laws have their widest application. – World Bank: India Country Overview 2008. Better designed labor regulations can attract more labor. the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade.

creating a stable platform for natural resource investment that balances . but the implementation of provisions cited is a big question mark. The Constitution provides protection of child labour. [188] [edit] Economic disparities Main articles: Economic disparities in India and Poverty in India Lagging states need to bring more jobs to their people by creating an attractive investment destination. in form of fundamental rights. Pakistan (85th).[187] India ranked 133th on the Ease of Doing Business Index 2010.is hampering the industrial output. Reforming cumbersome regulatory procedures. improving rural connectivity. and Nigeria (125th). establishing law and order. slavory. behind countries such as China (89th). equality of opportunities and forced labor etc.

business interests with social concerns. Orissa. – World Bank: India Country Overview 2008[152] Slums next to high-rise commercial buildings in Kaloor. Rajasthan. and Uttar Pradesh .[191] . Madhya Pradesh.Bihar. and providing rural finance are important. Hundreds of people. Kochi. poverty.[190] Seven low-income states . Jharkhand. reside in such shabby areas. Chhattisgarh. mostly comprising migrant labourers who come to the city seeking job prospects.[189] One of the critical problems facing India's economy is the sharp and growing regional variations among India's different states and territories in terms of per capita income. availability of infrastructure and socio-economic development.are home to more than half of India's population.

with infrastructure like well developed ports.1%). or Madhya Pradesh (3. Uttar Pradesh (4.5%).Between 1999 and 2008. or Delhi (7.7%).4%) were much higher than for Bihar (5. urbanisation and an educated and skilled workforce which .4%) compare well with middle-income countries. but industries still tend to concentrate around urban areas and port cities[194] After liberalization. the annualized growth rates for Maharashtra (9%).8%).[185] On the other hand. Haryana (8. the more advanced states are better placed to benefit from them.7%) and rural Punjab (2.[193] Poverty rates in rural Orissa (43%) and rural Bihar (40%) are some of the worst in the world.[192] Gujarat (8.[185] The five-year plans have attempted to reduce regional disparities by encouraging industrial development in the interior regions. rural Haryana (5.4%).

[197] . which although being geographically and historically determined. India's score is 21/100 on sanitation. etc. and focusing more on sectors like tourism. and Healthcare in India On Yale and Columbia's Environmental Performance Index. compared with 67/100 for the region and 48/100 for the country income group.attract manufacturing and service sectors. The union and state governments of backward regions are trying to reduce the disparities by offering tax holidays. Water supply and sanitation in India.. Kerala Main articles: Environment of India. can become a source of growth and is faster to develop than other sectors. cheap land. [195][196] [edit] Environment and health Calicut Medical College.

but has over the period evolved into an institution that plays a major role in partnering Indian Industries including small and medium enterprises.The Export-Import Bank of India. also known as Exim Bank of India. The bank began its operations as a supplier of export credit. The Government of India launched the Export-Import Bank Of India with an aim to augment exports from India and also to combine the country's foreign trade and investment with the overall economic growth. is the leading export finance institution in the country. The bank offers wide-ranging services for enhancing the prospect . Export-Import Bank Of India Initiatives Export-Import Bank of India has been one of the prime institutions that encourages project exports from India. The bank was set up in the year 1982 under the Export-Import Bank of India Act 1981.

of Indian project exports. Some of the services of the bank include: overseas investment finance. film . the bank offers support to small and medium enterprises in their export marketing efforts consisting of financing the soft expenditure linking to completion of tactical and systematic export market development plans. The facilities consist of direct equity participation by the bank in the overseas venture and non-funded activities by the overseas venture and loan to the Indian companies for equity participation in the venture abroad. Export-Import Bank Of India Objective The primary objective of the Export-Import Bank of India is to provide financial assistance to importers and exporters and function as the top financial institution. As part of Exim Bank's marketing Finance Program. Exim Bank's Overseas Investment Finance program gives a variety of facilities for Indian reserves and acquirements overseas.

coordinator and consultation to India's Foreign Trade.finance. In the period of 2005.2006 the total amount of loan given out by the bank amounted to 150. export credit. service exports and deferred payment exports. finance for export oriented units and agricultural & SME finance. while this figure shot up to Rs. Export Credit Guarantee Corporation of India Ltd. commercial banks that are certified foreign exchange dealers and the Reserve Bank of India. Commerce and external Affairs. The bank is the coordinator of the Working Group Mechanism for the clearance of projects. Export-Import Bank Of India and Foreign Trade Export-Import Bank of India plays the role of source of finance. This working group gives clearance to contracts sponsored by Exim Bank or .389 million. promoter. 220.760 million in the flowing year. This group comprises of Exim Bank and Government of India representatives from the Ministries of Finance.

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Importers. to spearhead the initiative to promote and support Agri-exports. Small and Medium Enterprise: The group handles credit proposals from SMEs under various lending programmes of . preshipment Agri Business Group.community. The Group handles projects and export transactions in the agricultural sector for financing. The Bank's functions are segmented into several operating groups including: Corporate Banking Group which handles a variety of financing programmes for Export Oriented Units (EOUs). Project Finance / Trade Finance Group handles the entire range of export credit services such as supplier's credit. and overseas investment by Indian companies.

Legal. Internal Audit. Information Technology. to enable them establish their products in overseas markets. [edit] External linksRole of EXIM Bank of India in Foreign Investment . Besides these. Loan Recovery.the Bank. Export Services Group offers variety of advisory and valueadded information services aimed at investment promotion Export Marketing Services Bank offers assistance to Indian companies. Corporate Finance. the Support Services groups. Management Information Services. Human Resources Management and Corporate Affairs. which include: Research & Planning.

This article focuses on the Role of EXIM Bank of India in Foreign Investment. banks and business communities. The financial assistance provided by the EXIM Bank widely includes the following: * Direct financial assistance * Foreign investment finance * Term loaning options for export production and export development * Pre-shipping credit * Buyer's credit * Lines of credit . various financial institutions. An Overview of EXIM BankThe main objective of Export-Import Bank (EXIM Bank) is to provide financial assistance to promote the export production in India. EXIM Bank is a fully owned bank by the Government of India and is governed by the Board of Directors and gets tax return from the government.

Various Stages of Exports Covered by EXIM Bank* Development of export makers * Expansion of export production capacity * Production for exports * Financing post-shipment activities * Export of manufactured goods * Export of projects * Export of technology and softwares Forms of Financial Assistance Provided by EXIM Bank to Indian Companies- .* Reloaning facility * Export bills rediscounting * Refinance to commercial banks The Export-Import Bank also provides non-funded facility in the form of guarantees to the Indian exporters.

and exporters of various softwares in India.Term loans are provided to those exporters who deal with exporting of goods and services and this enables them to offer delayed credit to the foreign buyers.EXIM Bank offers term loans to the 100 percent export oriented units. and other services.* Delayed Payment Exports. Commercial banks take part in this program either directly or under risk syndication arrangements. The construction or turnkey project exporters enjoy the provision of rupee mobilization. units involved in free trade zones. to . technology.Indian companies which are highly involved in the execution of export activities beyond the cycle time of six months are funded by EXIM Bank. This system of deferred credit covers Indian consultancies. EXIM bank also works in association with International Finance Corporation. Washington. * Term loans for export production. * Pre-shipment credit.

the foreign players are entitled to a sum of financial assistance in order to import goods and services on deferred payments .funded facilities to deemed exports from India. Financial Assistance Provided by EXIM Bank to Overseas Companies* Foreign Buyer's Credit. EXIM Bank also provides funded and non.provide financial assistance to the small scale and medium industrial units in terms of ameliorating the export production capacity of these units in India. * Foreign Investment Finance. * Financing export marketing.EXIM bank provides financial assistance for equity contribution to the Indian companies who form Joint Venture with the foreign companies.It helps the exporters carry out their export market development plan in Indian market.

Similarly.'Imports' imply the physical movement of goods into a country from another country in a legal manner. across their international borders. It refers to the goods that are produced abroad by foreign producers and are used in the domestic economy to cater to the needs of the domestic consumers.* Lines of Credit. 'exports' imply the physical .EXIM bank also offers financial assistance to the overseas financial institutions and various government agencies for import of goods and services from India.The foreign banks are entrusted with funding from EXIM bank in order to provide the same to the their clients across the globe for importing of goods from India Imports and exports are the two important components of a foreign trade. Foreign trade is the exchange of goods and services between the two countries. * Reloaning Options to Foreign Banks.

1992. the imports and exports have made the world a local market. Thus. exports and imports are regulated by the Foreign Trade (Development and Regulation) Act. It refers to the goods that are produced domestically in a country and are used to cater to the needs of the consumers in foreign countries. In India. The salient features of the Act are as follows:* It has empowered the Central Government to make provisions for development and regulation of foreign trade . The country which is purchasing the goods is known as the importing country and the country which is selling the goods is known as the exporting country. which replaced the Imports and Exports(Control) Act.movement of goods out of a country in a legal manner. 1947. and gave the Government of India enormous powers to control it. The traders involved in such transactions are importers and exporters respectively.

by facilitating imports into. by notification in the Official Gazette. in all or specified cases as well as subject them to exemptions. and augmenting exports from India and for all matters connected therewith or incidental thereto. * It authorizes the Central Government to formulate and announce an Export and Import (EXIM) Policy and also amend the same from time to time. restrict and regulate exports and imports. * The Central Government can prohibit. * It provides for the appointment of a Director General of Foreign Trade by the Central Government for the purpose of .

* Under the Act. the Government of India formulates and announces an Export and Import policy (EXIM policy) and amends it from time to time. He shall advise Central Government in formulating export and import policy and implementing the policy. every importer and exporter must obtain a 'Importer Exporter Code Number' (IEC) from Director General of Foreign Trade or from the officer so authorised. But he does it after giving the licence holder a reasonable opportunity of being heard.the Act. EXIM . * The Director General or any other officer so authorised can suspend or cancel a licence issued for export or import of goods in accordance with the Act. * As per the provisions of the Act .

but also in the over all economic development of the country. The principal objectives of the policy are:o To facilitate sustained growth in exports of the country so as to achieve larger percentage share in the global merchandise trade. o To provide domestic consumers with good quality goods and services at internationally competitive prices as well as creating a level playing field for the domestic producers.policy refers to the policy measures adopted by a country with reference to its exports and imports. where the import and export of items plays a crucial role not just in balancing budgetary targets. Such a policy become particularly important in a country like India. .

consumables and capital goods required for augmenting production and providing services. thereby improving their competitiveness to meet the requirements of the global markets. industry and services. o To enhance the technological strength and efficiency of Indian agriculture. there are some other laws which control the .o To stimulate sustained economic growth by providing access to essential raw materials. o To generate new employment opportunities and to encourage the attainment of internationally accepted standards of quality. components. intermediates. Besides this Act.

1953 * Coffee Act. 1972 * The Enemy Property Act.export and import of goods. 1968 . 1947 * The Marine Products Export Development Authority Act. 1942 * The Rubber Act. These include:* Tea Act.

Within the Ministry. The Department is also entrusted with responsibilities relating to multilateral and bilateral commercial relations. 1975 At the central level. state trading.the Department of Commerce is responsible for formulating and implementing the foreign trade policy. the Ministry of Commerce and Industry is the most important organ concerned with the promotion and regulation of the foreign trade in India.The matters relating to foreign trade are dealt with by the following divisions of the Department :- .* The Export (Quality Control and Inspection) Act. The Ministry has an elaborate organizational set up to look after the various aspects of trade. 1963 * The Tobacco Board Act. export promotion measures and development and regulation of certain export oriented industries and commodities.

is headed by the Director General of Foreign Trade. Export Services Division 9. It is responsible for implementing the . Finance Division 3. Trade Policy Division 5. Supply Division The Department's jurisdiction extends over:(a) Two Attached Offices:* Directorate General of Foreign Trade (DGFT):. Economic Division 4.1. Administrative and General Division 2.with its headquarters at New Delhi. Foreign Trade Territorial Division 6. Export Products Division 7. Export Industries Division 8.

with its headquarters at New Delhi. * Directorate General of Supplies and Disposal (DGS&D):. inspection of stores. It functions as the executive arm of the Supply Division of the Department of Commerce for conclusion of Rate Contracts for common user items. shipment and clearance of imported stores/cargo. It has three Regional Offices located at Chennai. is headed by the Director General. procurement of stores. Mumbai and Kolkata. (b) Five Subordinate Offices:- . The regional offices are located at 33 places.Foreign Trade Policy/Exim Policy with the main objective of promoting Indian exports. The DGFT also issues licences to exporters and monitors their corresponding obligations through a network of regional offices.

The main objective of SEZs is to provide certain common facilities and a duty free environment for exporters. compiling and publishing/ disseminating trade statistics and various types of commercial information required by the policy makers. traders as well as overseas buyers. researchers. Each Zone is headed by a Development Commissioner and is administered as per the SEZ scheme announced on 31st March. . * Office of Development Commissioner of Special Economic Zones:. importers.with its office located at Kolkata.* Directorate General of Commercial Intelligence and Statistics (DGCI&S):.The Special Economic Zones (SEZs) are geographically exclusive enclaves separated from domestic tariff areas. exporters. is headed by the Director General. 2000. It is entrusted with the work of collecting.

Provident fund balances etc.9.is located in Mumbai with a Branch office at Kolkata. * Pay and Accounts Office (Supply):.* Office of the Custodian of Enemy Property (CEP):. buildings. debentures. including those of DGS&D.1965 and 26.1977 are vested in the Custodian of Enemy Property for India.1968. All immovable (like land.) and movable properties (like securities.9. etc.) all over India belonging to or held by or managed on behalf of Pakistani nationals between the period 10. viz. fixed deposits and other amounts lying in the enemy nationals' bank accounts. are performed by the Chief Controller of Accounts (CCA) under the Departmentalized Accounting System. bank balances. shares. The office is functioning under the Enemy Property Act.The payment and accounting functions of Supply Division. Payment to suppliers across the country is made through this .

development. The Board serves as a guide of the coffee industry in India.The Pay and Accounts Office.organisation. extension. (c) Ten Autonomous Bodies:* Coffee Board :. Government of India. The Board focuses on research. accounting of transactions and other related matters through the four Departmental Pay & Accounts Offices in Delhi. functioning under the Ministry of Commerce and Industry.The Coffee Board of India is an autonomous body. two in Kolkata and one in Chennai. quality . is responsible for the payment of claims. * Pay and Accounts Office (Commerce & Textiles):. two in Mumbai. common to both the Department of Commerce and the Ministry of Textiles.

* Rubber Board :. * Tea Board :. promoting tea exports . and the domestic and external promotion of Indian coffee.upgradation. market information. supplying technical advice to rubber growers. This is done by assisting and encouraging scientific .aiding research and developmental activities for augmentation of tea production and improvement of tea quality as well as encouraging and assisting small growers sector financially and technically.technical and economic research.manufacture. . and training growers in improved methods of plantation and cultivation.marketing of tea.The primary functions of tea board include rendering financial and technical assistance for cultivation.The board is engaged in the development of the rubber industry.

The activities of the Board includes the regulation of the production and curing of Virginia Tobacco with regard to the demand in India and abroad. in place of Tobacco Export Promotion Council. It is one of the Commodity Boards functioning under the Ministry of Commerce & Industry.The Government of India established the Tobacco Board. under the Tobacco Board Act of 1975 to regulate production.Spices Board was constituted on 26th February 1986 under the Spices Board Act 1986.The Tobacco Board Act aims at the planned development of Tobacco Industry in the country.* Tobacco Board:. * Spices Board :. which lead to market problems. It is an autonomous body responsible . promotion of overseas marketing and to control recurring instances of imbalances in supply and demand.

The Export Inspection Council is responsible for the enforcement of quality control and compulsory preshipment inspection of various commodities meant for export and notified under the Export (Quality Control & Inspection) Act. NewDelhi :. * Export Inspection Council (EIC). 1963.for the export promotion of the scheduled spices and production or development of some of them such as Cardamom and Vanilla. New Delhi :. .is engaged in the following activities:o Training of Personnel in modern techniques of international trade. * Indian Institute of Foreign Trade (IIFT).

commodity surveys.is registered under the Societies Registration Act. o Organisation of marketing research.The main aim of this Institute is to undertake research of raw materials for the packaging industry. Mumbai :. market surveys. to organise training programmes on . * Indian Institute of Packaging (IIP). area surveys.o Organisation of Research in problems of foreign trade. o Dissemination of information arising from its activities relating to research and market studies.

specifying standards.packaging technology and to stimulate consciousness of the need for good packaging etc.functions under the Ministry of Commerce. * Marine Products Exports Development Authority (MPEDA). marketing. extension and training in various aspects of the marine industry. . The Authority is responsible for development of the marine products industry with special focus on marine exports. increasing exports. Kochi :. The role envisaged for the MPEDA is comprehensive covering fisheries of all kinds. Government of India and acts as a coordinating agency with different Central and State Government establishments engaged in fishery production and allied activities. processing.

* Agricultural and Processed Food Products Export Development Authority (APEDA). (d) Export Promotion Councils (EPCs):Presently there are twelve EPCs under the administrative control of the Ministry of Commerce. to provide better income to the farmers through higher unit value realization and to create employment opportunities in rural areas by encouraging value added exports of farm produce.The Councils perform both the advisory and executive functions. and to promote their exports.These councils are registered as non-profit organisations under the Companies Act. New Delhi :. .The aim is to maximize foreign exchange earnings through increased agro exports.These councils are also the registering authorities under the Import Policy for Registered Exporters.came into existence in 1986 to further develop agricultural commodities and processed foods.

It provides the content.With the .set up under the Societies Registration Act promotes arbitration as a means of settling commercial disputes and popularises the concepts of arbitration among the traders. * Indian Council of Arbitration (ICA). New Delhi :. * Indian Diamond Institute (IDI). Chennai and Kolkata. direction and thrust to India's global export effort.is an apex body of various export promotion organizations and institutions with its major regional offices at Delhi. Surat :. particularly those engaged in international trade.(e) Other Organisations:* Federation of Indian Export Organisations (FIEO):. Mumbai.

the Indian Diamond Institute (IDI) was established as a pivotal institute for imparting technical skills to the Gems and Jewellery industry in the areas of Gemology and Jewellery manufacture. 1989 with a view to providing an effective mechanism to maintain continuous dialogue with trade and industry in respect of major developments in the field of International Trade. * Export Promotion Board (EPB):. .was set up on May 5. design and global competitiveness of the Indian Jewellery.provide policy and infrastructural support through greater coordination amongst concerned Ministries for boosting the growth of exports.objective of enhancing the quality. (f) Advisory Bodies * Board of Trade (BOT):.

where required.* Directorate General of Anti-Dumping & Allied Duties (DGAD):. (g) Public Sector Undertakings:The following trading/service corporations are functioning under the administrative control of the Department of Commerce:* State Trading Corporation (STC) of India Ltd. under Customs Tariff Act. * MMTC (Minerals and Metals Trading Corporation of .The Directorate is responsible for carrying out investigations and to recommend. the amount of anti-dumping duty/countervailing duty on the identified articles which would be adequate to remove injury to the domestic industry.

India) Limited. * India Trade Promotion Organisation (ITPO) ^ Top Foreign Trade Policy In India. 1992. and augmenting exports . The Act provides for the development and regulation of foreign trade by facilitating imports into. * Export Credit Guarantee Corporation (ECGC) of India Ltd. * PEC Ltd. the main legislation concerning foreign trade is the Foreign Trade (Development and Regulation) Act.

(ii) may prohibit. India and for matters connected therewith or incidental thereto. by notification in the Official Gazette. Accordingly. the Ministry notifies a trade policy on a regular basis with certain underlined objectives.from. In exercise of the powers conferred by the Act. including formulation and implementation of the export-import policy. The earlier trade policies were based . (iii) is authorised to formulate and announce an export and import policy and also amend the same from time to time. As per the provisions of the Act. in all or specified cases as well as subject them to exemptions. (iv) is also authorised to appoint a 'Director General of Foreign Trade' for the purpose of the Act. the Ministry of Commerce and Industry has been set up as the most important organ concerned with the promotion and regulation of foreign trade in India. restrict and regulate exports and imports. the Government :(i) may make provisions for facilitating and controlling foreign trade.

The reform measures introduced in the subsequent policies have focused on liberalization. replacing the hitherto nomenclature of EXIM Policy by Foreign Trade Policy (FTP) is another step in this direction. openness and transparency. etc. With economic reforms.on the objectives of self-reliance and self-sufficiency. While. the later policies were driven by factors like export led growth. They have provided an export friendly environment by simplifying the procedures for trade facilitation. improving efficiency and competitiveness of the Indian industries. globalisation of the Indian economy has been the guiding factor in formulating the trade policies. A vigorous export-led growth strategy of doubling India’s share in global . The announcement of a new Foreign Trade Policy for a five year period of 2004-09. It takes an integrated view of the overall development of India’s foreign trade and provides a roadmap for the development of this sector.

.merchandise trade (in the next five years). identifies key strategies. constitute the main plank of the policy. spells out focus initiatives. The policy sets out the core objectives. with a focus on the sectors having prospects for export expansion and potential for employment generation. The key strategies for achieving its objectives include:* Unshackling of controls and creating an atmosphere of trust and transparency. * Simplifying procedures and bringing down transaction costs. outlines export incentives. and also addresses issues concerning institutional support including simplification of procedures relating to export activities. All such measures are expected to enhance India's international competitiveness and aid in further increasing the acceptability of Indian exports.

* Facilitating technological and infrastructural upgradation of the Indian economy. . * Facilitating development of India as a global hub for manufacturing. especially through import of capital goods and equipment. trading and services. particularly in semiurban and rural areas. * Avoiding inverted duty structure and ensuring that domestic sectors are not disadvantaged in trade agreements.* Neutralizing incidence of all levies on inputs used in export products. * Identifying and nurturing special focus areas to generate additional employment opportunities.

Accordingly. * For the agriculture sector :- . and (iv) Leather & Footwear. specific policy initiative for these sectors have been announced. The FTP has identified certain thrust sectors having prospects for export expansion and potential for employment generation. These thrust sectors include: (i) Agriculture. and * Activating Indian Embassies as key players in the export strategy. * Revitalizing the Board of Trade by redefining its role and inducting into it experts on trade policy.* Upgrading the infrastructure network related to the entire foreign trade chain to international standards. (iii) Gems & Jewellery. (ii) Handlooms & Handicrafts.

. Under the scheme. flowers. vegetables.o.o A new scheme called "Vishesh Krishi Upaj Yojana (Special Agricultural Produce Scheme)" to boost exports of fruits. exports of these products qualify for duty free credit entitlement (5 per cent of Free On Board (f. o Utilizing funds from the 'Assistance to States for Infrastructure Development of Exports (ASIDE) scheme' for development of AEZs. minor forest produce and their value added products has been introduced.Export Zone (AEZ). o Duty free import of capital goods under Export Promotion Capital Goods (EPCG) scheme. permitting the installation of capital goods imported under EPCG for agriculture anywhere in the Agri.b) value of exports) for importing inputs and other goods.

* For the handlooms and handicraft sector :o Enhancing to 5 per cent of Free On Board (f. and liberalization of the export of plant portions. tubers and planting material. derivatives and extracts to promote export of medicinal plants and herbal products. o Exemption of samples from countervailing duty (CVD). embellishments and samples for small manufacturers. o Authorizing Handicraft Export Promotion Council to import trimmings. and .o Liberalization of import of seeds. bulbs.o.b) value of exports duty free import of trimmings and embellishments for handlooms and handicrafts.

o. o Increase in duty free import of commercial samples of jewellery to Rs.b value of exports. o Duty free re-import entitlement for rejected jewellery allowed up to 2 per cent of f.o. and o Permission to import of gold of 18 carat and above .b) value of exports.o Establishment of a new Handicraft Special Economic Zone. * For the gems and jewellery sector :o Permission for duty free import of consumables for metals other than gold and platinum up to 2 per cent of Free On Board (f.1 lakh.

o Import of machinery and equipment for Effluent Treatment Plants for leather industry exempted from customs duty.b) value of exports and that for duty free import of specified items for leather sector to 5 per cent of f. * For the leather and footwear sector. embellishments and footwear components for leather industry to 3 per cent of Free On Board (f.o.o.b value of exports. These include:o Increase in the limit for duty free entitlements of import trimmings. the specific policy initiatives are mainly in the form of reduction in the incidence of customs duties on the inputs and plants and machinery. and .under the replenishment scheme.

In order to review the progress and policy measures. It provided for an active involvement of the State Governments in creating an enabling environment for boosting international trade. The supplement provided renewed thrust to agricultural exports by extension of 'Vishesh Krish Upaj Yojna' to poultry and . Also.o Re-export of unsuitable imported materials (such as raw hides and skin and wet blue leathers) has been permitted. different categories of advance licences were merged into a single category for procedural facilitation and easy monitoring. each year. "Annual Supplements" to the five year Foreign Trade Policy (FTP) have been announced by the Ministry :o The Annual Supplement announced in April. by setting up an Inter-State Trade Council. 2005 incorporated additional policy initiatives and further simplified the procedures.

which was renamed as "Vishesh Krishi and Gram Udyog Yojana". (iii) permission to export polished precious and semi precious stones for treatment abroad and re-import in order to enhance the quality and afford higher value in the international market.dairy products and removal of cess on exports of all agricultural and plantation commodities. o The Annual Supplement put forward in April 2006. refining and re-export. . To further meet the objective of employment generation in rural and semi urban areas. Also. export of village and cottage industry products were included in the 'Vishesh Krishi Upaj Yojana'. (ii) permission for export of jewellery on consignment basis. These include:. a number of measures were introduced in order to achieve the objective of making India a gems and jewellery hub of the world. announced the twin schemes of 'Focus Product' and 'Focus Market'.(i) allowing import of precious metal scrap and used jewellery for melting.

Some of the important measures introduced by it are:. (ii) service tax on services rendered in India and utilized by exporters would be exempted/remitted. They included the . the third Annual Supplement to the Foreign Trade Policy was announced on 19 April. (iii) categorization of exporters as 'One to Five Star Export Houses' has been changed to 'Export Houses & Trading Houses'. 2007). (iv) expansion of ceiling. with rationalization and change in export performance parameters.(i) exemption from service tax on services (related to exports) rendered abroad. o The final annual supplement to the Foreign Trade Policy for 2004-2009 was announced in April 2008 in which several innovative steps were proposed. scope and coverage under the 'Focus Market Scheme (FMS)' and 'Focus Product Scheme (FPS)'.2007 (effective from 1 st April.o Likewise.

in order to promote modernization of manufacturing and services exports. + Income tax benefit to 100% EOUs available under Section 10B of Income Tax Act is being extended for one more year. an additional duty credit of 5% over and above the credit under 'Focus Product Scheme' is being provided.following: + Import duty under the EPCG scheme is being reduced from 5% to 3%. + To promote export of sports and toys and also to compensate disadvantages suffered by them.5% . beyond 2009. To neutralize this disadvantage. + Our export of fresh fruits and vegetables and floriculture suffers from high incidence of freight cost. an additional credit of 2.

325 crore for leather and textiles sector. o Special package of Rs. GEM & . Trade Facilitation Measures (Supplement To Foreign Trade Policy 2004-09) Announced On 26th February 2009. + DEPB scheme is being continued till May 2009. DIAMOND INDIA. o STCL. + Interest relief already granted for sectors affected adversely by the appreciation of the rupee is being extended for one more year. o DUTY CREDIT SCRIPS under DEPB scheme to be issued without waiting for realization of export proceeds.over and above the credit available under Visesh Krishi and Gram Udyog Yojana (VKGUY) is proposed. MSTC.

export obligation extended till 2009-10 for exports during 2008-09.JEWELLERY EPC and STAR TRADING HOUSES added as nominated agencies for import of precious metals. 7500 crore. . o Gem and Jewellery export: import restrictions on worked corals removed. o Bhilwara and Surat recognized as towns of export excellence for textiles and diamonds. o Under EPCG scheme. o Threshold limit for recognition as premier trading houses reduced to Rs. o DEPB/DUTY CREDIT SCRIP utilization extended for payment of duty for import of restricted items also.

2002 requiring MODVAT/CENVAT certificate dispensed with. . FPS and FMS allowed.o Procedure for claiming duty drawback refund & refund of terminal excise duty further simplified. o Value cap under DEPB revised for two products. o Gem & Jewellery units in EOU to be allowed – personal carriage of gold up to 10 kg. o Electronic message transfer facility for advance authorization and EPCG to be established. o Advance licenses issued prior to 1. o A new office of DGFT to be opened at Srinagar. o Re-credit of 4% SAD for VKGUY.4.

o Export obligation period against advance authorizations extended up to 36 months. o Early refund of service tax claims & further simplification of refund procedures on the anvil. The DGFT also issues licences to exporters and monitors their corresponding obligations through a net work of 32 regional offices located at the . a "Directorate General of Foreign Trade (DGFT)" has been set up as an attached office of the Ministry of Commerce and Industry. In accordance with the provisions of the Act. It is headed by the 'Director General of Foreign Trade' and is responsible for formulating and executing the Foreign Trade Policy/Exim Policy with the main objective of promoting Indian exports. o Reimbursement of additional duty of excise levied on fuel to be admissible for EOUS.

Kanpur. Rajkot. and Vishakhapatnam. Surat.following places:.Foreign Trade Policy. Ernakulam. Chennai. Chandigarh. Varanasi. Bhopal. Kolkata. Panipat. Bangalore. Pondicherry. Baroda (Vadodara). Jaipur. Hyderabad. Moradabad. Srinagar(Functioning at Jammu). Panaji. Shillong. Thiruvananthapuram. Coimbatore. New Delhi. Mumbai. Guwahati. Exim Policy or Foreign Trade Policy is a set of guidelines and instructions established by the DGFT in matters related . Pune. Amritsar. Madurai. Patna. Ludhiana. Cuttack.Ahmedabad. India Exim Policy .

The Foreign Trade Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Government and is regulated by the Foreign Trade Development and Regulation Act. 1992. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the development and regulation of foreign trade by facilitating imports into.to the import and export of goods in India. EXIM Policy . Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act 1947. DGFT (Directorate General of Foreign Trade) is the main governing body in matters related to Exim Policy. and augmenting exports from India.

. in general. i. aims at developing export potential. encouraging foreign trade and creating favorable balance of payments position.Indian EXIM Policy contains various policy related decisions taken by the government in the sphere of Foreign Trade. with respect to imports and exports from the country and more especially export promotion measures. Trade Policy is prepared and announced by the Central Government (Ministry of Commerce).e. improving export performance. the Government of India appointed a special Exim Policy Committee to review the government previous . India's Export Import Policy also know as Foreign Trade Policy. policies and procedures related thereto. History of Exim Policy of India In the year 1962.

2009 * Handbook of Procedures Volume I * Handbook of Procedures Volume II * ITC(HS) Classification of Export. Initially the EXIM Policy was introduced for the period of three years with main objective to boost the export business in India Exim Policy Documents The Exim Policy of India has been described in the following documents: * Interim New Exim Policy 2009 . Mr.Import Items The major information in matters related to export and . P. 1985. the then Commerce Minister and announced the Exim Policy on the 12th of April. The committee was later on approved by the Government of India.export import policies.2010 * Exim Policy: 2004. Singh. V.

Such Input output norms are applicable for the products such as electronics. For example. the agencies and the documentation required to take advantage of a certain provisions of the Indian EXIM Policy. if an exporter or importer finds out that paragraph 6.I for further details. . engineering.import is given in the document named "Exim Policy 20022007". An exporter uses the Handbook of Procedures Volume-I to know the procedures. The Handbook of Procedures Volume-II provides very crucial information in matters related to the Standard InputOutput Norms (SION).6 of the Exim Policy is important for his export business then the exporter must also check out the same paragraph in the Handbook of Procedures Volume.

exporters are provided the facility to make duty-free import of inputs required for manufacture of export products under the Duty Exemption Scheme or Duty Remission Scheme. plastic and leather products etc. Based on SION. Schedule I describe the rules and exim guidelines related to import policies where as . ITC-HS codes are divided into two schedules.chemical. food products including fish and marine products. handicraft. The Export Import Policy regarding import or export of a specific item is given in the ITC.HS Codes or better known as Indian Trade Clarification Code based on Harmonized System of Coding was adopted in India for import-export operations. Indian Custom uses an eight digit ITC-HS Codes to suit the national trade requirements.

ITC(Hs) Schedule II of the code contain 97 chapters giving all the details about the Export Import Guidelines related to the export policies. Objectives Of The Exim Policy : Government control import of non-essential items through the EXIM Policy. Thus. . Schedule I of the ITC-HS code is divided into 21 sections and each section is further divided into chapters.Export Policy Schedule II describe the rules and regulation related to export policies. At the same time. The total number of chapters in the schedule I is 98. all-out efforts are made to promote exports. The chapters are further divided into sub-heading under which different HS codes are mentioned. there are two aspects of Exim Policy.

In other words. the main objective of the Exim Policy is: * To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. exercised in respect of a limited number of items whose supply position demands that their exports should be regulated in the larger interests of the country. Export control is. The main objective of the Government's EXIM Policy is to promote exports to the maximum extent.the import policy which is concerned with regulation and management of imports and the export policy which is concerned with exports not only promotion but also regulation. * To stimulate sustained economic growth by providing . therefore. Exports should be promoted in such a manner that the economy of the country is not affected by unregulated exportable items specially needed within the country.

components. improving their competitiveness. industry and services. intermediates. The current . * To provide quality consumer products at reasonable prices.' consumables and capital goods required for augmenting production. * To enhance the techno local strength and efficiency of Indian agriculture. thereby. * To generate new employment. Governing Body of Exim Policy The Government of India notifies the Exim Policy for a period of five years (1997-2002) under Section 5 of the Foreign Trade (Development and Regulation Act).access to essential raw materials. 1992. * Opportunities and encourage the attainment of internationally accepted standards of quality.

Exim Policy 1992 -1997 In order to .Export Import Policy covers the period 2002-2007. the Directorate General of Foreign Trade and network of Dgft Regional Offices. All types of changes or modifications related to the EXIM Policy is normally announced by the Union Minister of Commerce and Industry who co-ordinates with the Ministry of Finance. The Exim Policy is updated every year on the 31st of March and the modifications. improvements and new schemes became effective from 1st April of every year.

Hence. and a New Export Import Policy was need for the smooth functioning of the Indian export import trade. the Government of India introduced a new Exim Policy for the . 1992. Such amendment shall be made by means of a Notification published in the Gazette of India. the Export Import Policy was made for the duration of 5 years. Exim Policy 1997 -2002 With time the Exim Policy 1992-1997 became old. the Central Government reserves the right in public interest to make any amendments to the trade Policy in exercise of the powers conferred by Section-5 of the Act. Export Import Policy is believed to be an important step towards the economic reforms of India. In order to bring stability and continuity.liberalize imports and boost exports. the Government of India for the first time introduced the Indian Exim Policy on April I. However.

* To motivate sustained economic growth by providing access to essential raw materials. Import has been further liberalized and better efforts have been made to promote Indian exports in international trade. intermediates. This policy has further simplified the procedures and educed the interface between exporters and the Director General of Foreign Trade (DGFT) by reducing the number of documents required for export by half. Objectives of the Exim Policy 1997 -2002 The principal objectives of the Export Import Policy 1997 -2002 are as under: * To accelerate the economy from low level of economic activities to high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. components.year 1997-2002.' .

Opportunities and encourage the attainment of internationally accepted standards of quality. thereby. improving their competitiveness. It is effective from 1st April 1997 to 31st March 2002.consumables and capital goods required for augmenting production. * To create new employment. . * To give quality consumer products at practical prices. Highlights of the Exim Policy 1997-2002 1. Period of the Exim Policy • This policy is valid for five years instead of three years as in the case of earlier policies. To improve the technological strength and efficiency of Indian agriculture. industry and services.

quantitative restrictions and other regulatory and discretionary controls.2. All goods. 3. Imports Liberalization • Of 542 items from the restricted list 150 items have been transferred to Special Import Licence (SIL) list and remaining 392 items have been transferred to Open General Licence (OGL) List. 4. may be freely imported or exported. Export Promotion Capital Goods (EPCG) Scheme • The duty on imported capital goods under . Liberalization • A very important feature of the policy is liberalization. • It has substantially eliminated licensing. except those coming under negative list.

5 crore for agricultural and allied Sectors 5.EPCG Scheme has been reduced from 15% to 10%. Duty Entitlement Pass Book (DEPB) Scheme • Under the DEPB Scheme an exporter may apply for credit. • A further extension for six months can be given on payment of 1 % of the value of unfulfilled exports. . the threshold limit has been reduced from Rs. 20 crore to Rs. the period for export obligation has been extended from 12 months to 18 months. Advance Licence Scheme • Under Advance License Scheme. as a specified percentage of FOB value of exports. made in freely convertible currency. • Under the zero duty EPCG Scheme. 6.

etc.high level of economic activities by making it a globally oriented vibrant economy and to derive maximum benefits from expanding global market opportunities. Impact of Exim Policy 1997 –2002 (a) Globalization of Indian Economy: The Exim Policy 1997-02 proposed with an aim to prepare a framework for globalizations of Indian economy. components. This is evident from the very first objective of the policy. for export purpose. which states. parts. intermediates. "To accelerate the economy from low level of economic activities to. packaging materials." .• Such credit can be can be utilized for import of raw materials.

(c) Impact on Agriculture: Many encouraging steps have been taken in the Exim Policy 1997-2002 in order to give a boost to Indian agricultural sector. a series of reform measures have been introduced in order to give boost to India's industrial growth and generate employment opportunities in non-agricultural sector. allowing EOU’s and other units in EPZs in agriculture sectors to 50% of their output in the domestic tariff area (DTA) on payment of duty. These include the reduction of duty from 15% to 10% under EPCG scheme that enables Indian firms to import capital goods and is an important step in improving the quality and productivity of the Indian industry. (d) Impact on Foreign Investment.(b) Impact on the Indian Industry: In the EXIM policy 1997-02. . These steps includes provision of additional SIL of 1 % for export of agro products.

and units set up in EPZs. (f) Impact on Self-Reliance:The Exim Policy 1997-2002 successfully fulfills one of the India’s long terms objective of Self-reliance. The Exim Policy has achieved this by encouraging domestic sourcing of raw materials. which has encouraged Indian industries to undertake research and development programmers and upgrade the quality of their products. New incentives added in the Exim Policy . the Exim Policy 1997-02 has permitted 100% foreign equity participation in the case of 100% EOUs. in order to build up a strong domestic production base. (e) Impact on Quality up gradation: The SIL entitlement of exporters holding ISO 9000 certification has been increased from 2% to 5% of the FOB value of exports.In order to encourage foreign investment in India.

2007 The main objectives of the Export Import Policy 2002-2007 are as follows: 1.2002 had accorded a status of exporter to the business firm exporting services with effect from1. consumables and capital goods required for augmenting production and providing services. Objectives of the Exim Policy: 2002 . components. .4. Such business firms are known as Service Providers. To encourage economic growth of India by providing supply of essential raw materials.2007 deals with both the export and import of merchandise and services. Exim Policy 2002 – 2007 The Exim Policy 2002 .have also added benefits to the exporters. intermediates. It is worth mentioning here that the Exim Policy: 1997 .1999.

thereby improving their competitive strength while generating new employment opportunities and encourage the attainment of internationally accepted standards of quality. industry and services.2. and 3. To provide consumers with good quality products and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers. Main Elements of Exim Policy 2004-2009 The new Exim Policy 2004-2009 has the following main elements: * Preamble * Legal Framework * Special Focus Initiatives . To improve the technological strength and efficiency of Indian agriculture.

The speech for the Exim Policy 2004-2009 was given by Kamal Nath. Legal Framework of Exim Policy 2004-2009 . on 31ST AUGUST.Electronics Hardware Technology Parks (EHTPS). 2004.* Board Of Trade * General Provisions Regarding Imports And Exports * Promotional Measures * Duty Exemption / Remission Schemes * Export Promotion Capital Goods Scheme * Export Oriented Units (EOUs). Software Technology Parks (STPs) and Bio-Technology Parks (BTPs) * Special Economic Zones * Free Trade & Warehousing Zones * Deemed Exports Permeable of Exim Policy 2004-2009: It is a speech given by the Ministry of Commerce and Industries.

2009. 1992 (No. 1. as modified. unless as otherwise specified.2 Duration In exercise of the powers conferred under Section 5 of The Foreign Trade (Development and Regulation Act).3 Amendments The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the . This Policy shall come into force with effect from 1st September. 22 of 1992).1. the Central Government hereby notifies the Exim Policy for the period 2004-2009 incorporating the Export Import Policy for the period 2002-2007.1 Preamble The Preamble spells out the broad framework and is an integral part of the Foreign Trade Policy. 1. 2004 and shall remain in force up to 31st March.

issued or done under this Policy. 1.powers conferred by Section-5 of the Act. in so far as they are not inconsistent with the provisions of this Policy. certificate or permission was issued unless otherwise stipulated. certificates and permissions issued before the commencement of this Policy shall continue to be valid for the purpose and duration for which such licence. Licenses. continue to be in force and shall be deemed to have been made.4 Transitional Arrangements Notifications made or Public Notices issued or anything done under the previous Export / Import policies and in force immediately before the commencement of this Policy shall. . Such amendment shall be made by means of a Notification published in the Gazette of India.

leather and Marine sectors.1. certain special focus initiatives have been identified for agriculture. Government of India shall make concerted efforts to promote . handlooms. especially in semi urban and rural areas. gems & jewellery. unless otherwise stipulated. Special Focus Initiative of Exim Policy 2004-2009 With a view to doubling our percentage share of global trade within 5 years and expanding employment opportunities. provided that the shipment of the export or import is made within the original validity of an irrevocable letter of credit established before the date of imposition of such restriction. handicraft. such export or import will ordinarily be permitted notwithstanding such restriction or regulation.5 Free Export Import In case an export or import that is permitted freely under Export Import Policy is subsequently subjected to any restriction or regulation.

Board of Trade of Exim Policy 2004-2009 BOT has a clear and dynamic role in advising government on relevant issues connected with foreign trade. identify constraints and suggest industry specific measures to optimize export earnings. * To examine existing institutional framework for imports and exports and suggest practical measures for further streamlining to achieve desired objectives. * To advise Government on Policy measures for preparation and implementation of both short and long term plans for increasing exports in the light of emerging national and international economic scenarios. .exports in these sectors by specific sectoral strategies that shall be notified from time to time. * To review export performance of various sectors.

* To review policy instruments and procedures for imports and exports and suggest steps to rationalize and channelize such schemes for optimum use. General Provisions Regarding Exports and Imports of Exim Policy 2004-2009 The Export Import Policy relating to the general provisions regarding exports and Imports is given in Chapter-2 of the Exim Policy. and * To commission studies for furtherance of above objectives. and to strengthen international competitiveness of Indian goods and services.Unless otherwise specifically provided. * To examine issues which are considered relevant for promotion of India’s foreign trade. Countries of Imports/Exports . . import/ export will be valid from/to any country.

be subject to all conditionality. or requirement of licence.However. The above provisions shall. as may be required under Schedule II of ITC (HS). or permission. Promotional Measures of Exim Policy 2004-2009 The Government of India has set up several institutions whose main functions are to help an exporter in his work. It would be advisable for an exporter to acquaint him with these institutions and the nature of help that they can provide so that he can initially contact them and have a clear picture of what help he can expect of the organized sources in his export effort. however. Export Promotion Councils . Some of these institution are as follows. import/exports of arms and related material from/to Iraq shall be prohibited.

Commodity Boards Marine Products Export Development Authority Agricultural & Processed Food Products Export Development Authority Indian Institute of Foreign Trade India Trade Promotion Organization (ITPO) National Centre for Trade Information (NCTI) Export Credit Guarantee Corporation (ECGC) Export-Import Bank Export Inspection Council Indian Council of Arbitration Federation of Indian Export Organizations Department of Commercial Intelligence and Statistics Directorate General of Shipping Freight Investigation Bureau .

i. Ministry of Finance.e. before removal of goods from the factory premises. Export goods are totally exempted from . Excise Duty Refund: . Excise duty is collected at source. Under Duty Drawback scheme..The Duty Drawback Scheme is administered by the Directorate of Drawback. an exporter is entitled to claim Indian Customs Duty paid on the imported goods and Central Excise Duty paid on indigenous raw materials or components.Excise Duty is a tax imposed by the Central Government on goods manufactured in India. It includes the following exemptionsDuty Drawback: .Duty Exemption / Remission Schemes of Exim Policy 20042009 The Duty Exemption Scheme enables import of inputs required for export production.

DFRC Under the Duty Free Replenishment Certificate (DFRC) . DEPB: Duty Entitlement Pass Book in short DEPB Rate is basically an export incentive scheme. The Duty Remission Scheme enables post export replenishment/ remission of duty on inputs used in the export product. However. export goods are exempted from Octroi.Octroi is a duty paid on manufactured goods.central excise duty. The objective of DEPB Scheme is to neutralize the incidence of basic custom duty on the import content of the exported products. Octroi Exemption: . when they enter the municipal limits of a city or a town.

2006 this scheme is being replaced by the Duty Free Import Authorisation (DFIA). Duty Free Import Authorisation or DFIA in short is issued to allow duty free import of inputs which are used in the manufacture of the export product (making normal allowance for wastage).2006 and from 01. . energy. DFIA: Effective from 1st May. catalyst etc.schemes.05. which are consumed or utilised in the course of their use to obtain the export product. 2006. Duty Free Import Authorisation is issued on the basis of inputs and export items given under Standard Input and Output Norms(SION).04. Duty Free Replenishment Certificate (DFRC) shall be available for exports only up to 30. and fuel. import incentives are given to the exporter for the import of inputs used in the manufacture of goods without payment of basic customs duty.

Public or Private Sector Undertakings. Export Promotion Capital Goods Scheme (EPCG) of Exim Policy 2004-2009 Introduced in the EXIM policy of 1992-97. Software Technology Park(STP)/Electronics Hardware Technology Park (EHTP) complexes can be set up by the Central Government. Export Promotion Capital Goods Scheme (EPCG) enable .Export Oriented Units (EOUs). State Government. Software Technology Parks(STPs) And Bio-Technology Parks (BTPs) of Exim Policy 2004-2009 The Export Import Policies relating to Export Oriented Units (EOUs) Electronics Hardware Technology Parks (EHTPs). Electronics Hardware Technology Parks (EHTPs). Software Technology Parks (STPs) and Bio-technology parks (BTPs) Scheme is given in Chapter 6 of the Foreign Trade Policy.

which is in multiple of total value of capital goods imported..e. the exporter is required to guarantee exports of certain minimum value. In order to ensure that the capital goods imported under EPCG Scheme. Capital goods imported under EPCG Scheme are subject to actual user condition and the same cannot be transferred /sold till the fulfillment of export obligation specified in the licence. i. This facility is subject to export obligation. the licence holder is required to produce certificate from the jurisdictional Central Excise Authority (CEA) or Chartered Engineer (CE) confirming installation of such capital goods in the declared premises. Special Economic Zone (SEZ) under the Exim Policy 2004-2009 .exporters to import machinery and other capital goods for export production at concessional or no customs duties at all.

The area under 'SEZ' covers a broad range of zone types. Falta (West Bengal) and Noida (Uttar Pradesh) in India. Kandla and Surat (Gujarat). Free Trade Zones (FTZ). Chennai (Tamil Nadu). SEZs are proposed to be specially delineated duty free enclaves for the purpose of trade. at present there are eight functional Special Economic Zones located at Santa Cruz (Maharashtra). Industrial Estates (IE). duty and tariffs. operations. Cochin (Kerala).A Special Economic Zone in short SEZ is a geographically distributed area or zones where the economic laws are more liberal as compared to other parts of the country. Further a Special . SEZs are selfcontained and integrated having their own infrastructure and support services. Visakhapatnam (Andhra Pradesh). including Export Processing Zones (EPZ). In Indian. Free Ports. Urban Enterprise Zones and others. Free Zones (FZ).

Economic Zone at Indore ( Madhya Pradesh ) is also ready for operation. Its main objective is to provide infrastructure for growth of the economy and foreign trade. Free Trade & Warehousing Zones is a widely accepted model with a history of providing Substantial encouragement to foreign trade and warehousing activity. Free Trade & Warehousing Zones (FTWZ) plays an important role in achieving global standard warehousing facilities as free trade zones. Deemed Exports under the Exim Policy 2004-2009 Deemed Export is a special type of transaction in the Indian . Free Trade & Warehousing Zones of Exim Policy 2004-2009 Free Trade & Warehousing Zones (FTWZ) shall be a special category of Special Economic Zones with a focus on trading and warehousing. The concept of FTWZ is new and has been recently introduced in the five-year foreign trade policy 2004-09.

so the Government of India has given the benefit duty free import of inputs. The payment can be done in Indian Rupees or in Foreign Exchange. At its heart are the WTO agreements. The goal is to help producers of goods and services. As the deemed export is also a source of foreign exchange. negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. and importers conduct their business The World Trade Organization (WTO) is an international .Exim policy in which the payment is received before the goods are delivered. exporters. What is the WTO? The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations.

The organization officially commenced on January 1. and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements which are signed by representatives of member governments and ratified by their parliaments. The World Trade Organization deals with regulation of trade between participating countries. 1995 under the Marrakech Agreement. it provides a framework for negotiating and formalising trade agreements. which commenced in 1947. The organization is currently endeavouring to persist with a trade negotiation called the Doha Development Agenda (or .organization designed by its founders to supervise and liberalize international trade. replacing the General Agreement on Tariffs and Trade (GATT). especially from the Uruguay Round (1986-1994).[4][5] Most of the issues that the WTO focuses on derive from previous trade negotiations.

[7] representing more than 97% of total world trade[8] and 30 observers. who is appointed by the ministerial conference. which implements the conference's policy decisions and is responsible for day-to-day administration. meeting every two years. The WTO's headquarters is at the Centre William Rappard. most seeking membership. However. The WTO is governed by a ministerial conference. At this time. a general council. . the negotiation has been dogged by "disagreement between exporters of agricultural bulk commodities and countries with large numbers of subsistence farmers on the precise terms of a 'special safeguard measure' to protect farmers from surges in imports. the future of the Doha Round is uncertain.Doha Round)."[6] The WTO has 153 members. which was launched in 2001 to enhance equitable participation of poorer countries which represent a majority of the world's population. and a directorgeneral.

[30][31] Additionally. least-developed and low-income countries in transition to adjust to WTO rules . administration and operation of the covered agreements.[29][31] Another priority of the WTO is the assistance of developing.[28][29] * It provides a forum for negotiations and for settling disputes. these are regarded by analysts as the most important: * It oversees the implementation. it is the WTO's duty to review and propagate the national trade policies. Functions Among the various functions of the WTO.Geneva. and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. Switzerland.

negotiation and . the WTO cooperates closely with the two other components of the Bretton Woods system. [32] The WTO is also a center of economic research and analysis: regular assessments of the global trade picture in its annual publications and research reports on specific topics are produced by the organization.[33] Finally.[3 About the WTO The World Trade Organization (WTO). established on 1 January 1995. And it is the platform on which trade relations among countries evolve through collective debate. the IMF and the World Bank. is the legal and institutional foundation of the multilateral trading system. It provides the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations.and disciplines through technical cooperation and training.

adjudication. The WTO is the embodiment of the results of the Uruguay Round trade negotiations and the successor to the General Agreement on Tariffs and Trade (GATT). Objectives The Preamble of the Agreement Establishing the WTO states that members should conduct their trade and economic relations with a view to "raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their

respective needs and concerns at different levels of development." Furthermore, members recognize the "need for positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in international trade commensurate with the needs of their economic development." To contribute to the achievement of these objectives, WTO Members have agreed to enter into "reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations." Key Principles

The fundamental principles of the multilateral trading system are: - Trade without discrimination. Under the "most-favoured nation" (MFN) clause, members are bound to grant to the products of other members no less favourable treatment than that accorded to the products of any other country. The provision on "national treatment" requires that once goods have entered a market, they must be treated no less favourably than the equivalent domestically-produced good. - Predictable and growing access to markets. While quotas are generally outlawed, tariffs or customs duties are legal in the WTO. Tariff reductions made by over 120 countries in the Uruguay Round are contained in some 22,500 pages of national tariff schedules which are considered an integral part of the WTO. Tariff reductions, for the most part phased in over five years, will result in a 40 per cent cut in industrial

countries' tariffs in industrial products from an average of 6.3 per cent to 3.8 per cent. The Round also increased the percentage of bound product lines to nearly 100 per cent for developed nations and countries in transition and to 73 per cent for developing countries. Members have also undertaken an initial set of commitments covering national regulations affecting various services activities. These commitments are, like those for tariffs, contained in binding national schedules. - Promoting fair competition. The WTO extends and clarifies previous GATT rules that laid down the basis on which governments could impose compensating duties on two forms of "unfair" competition: dumping and subsidies. The WTO Agreement on agriculture is designed to provide increased fairness in farm trade. That on intellectual property will improve conditions of competition where ideas and inventions are involved, and another will do the same thing for trade in services.

- Encouraging development and economic reform. GATT provisions intended to favour developing countries are maintained in the WTO, in particular those encouraging industrial countries to assist trade of developing nations. Developing countries are given transition periods to adjust to the more difficult WTO provisions. Least-developed countries are given even more flexibility and benefit from accelerated implementation of market access concessions for their goods. Main functions The essential functions of the WTO are: - administering and implementing the multilateral and plurilateral trade agreements which together make up the WTO;

- acting as a forum for multilateral trade negotiations; - seeking to resolve trade disputes; - overseeing national trade policies; and - cooperating with other international institutions involved in global economic policy-making. Structure The highest WTO authority is the Ministerial Conference which meets every two years. The day-to-day work of the WTO, however, falls to a number of subsidiary bodies, principally the General Council, which also convenes as the Dispute Settlement Body and as the Trade Policy Review Body. The General Council delegates responsibility to three

other major bodies - namely the Councils for Trade in Goods, Trade in Services and Trade-Related Aspects of Intellectual Property Rights. Three other bodies are established by the Ministerial Conference and report to the General Council: the Committee on Trade and Development, the Committee on Balance of Payments and the Committee on Budget, Finance and Administration. The General Council formally established, in early 1995, a Committee on Trade and Environment, which will present a report on its work to the first meeting of the WTO Ministerial Conference, scheduled for December 1996 in Singapore. Each of the plurilateral agreements of the WTO - those on civil aircraft, government procurement, dairy products and bovine meat - have their own management bodies which report to the General Council.

Secretariat and budget The WTO Secretariat is located in Geneva. It has around 450 staff and is headed by its Director-General, Renato Ruggiero, and four Deputy Directors-General. Its responsibilities include the servicing of WTO delegate bodies with respect to negotiations and the implementation of agreements. It has a particular responsibility to provide technical support to developing countries, and especially the least-developed countries. WTO economists and statisticians provide trade performance and trade policy analyses while its legal staff assist in the resolution of trade disputes involving the interpretation of WTO rules and precedents. Other Secretariat work is concerned with accession negotiations for new members and providing advice to governments considering membership.

The WTO budget is around US$83 million with individual contributions calculated on the basis of shares in the total trade conducted by members. Part of the budget also goes to the International Trade Centre.

Data Preparation, Interpretation and Analysis Analyzing survey data is an important and exciting step in the survey process. It is the time that you may reveal important facts about your customers, uncover trends that you might not otherwise have known existed, or provide irrefutable facts to support your plans. By doing in-depth data comparisons, you can begin to identify relationships between various data that will help you understand more about your respondents, and guide you towards better decisions.

This article gives you a brief overview of how to analyze survey results. It does not discusses specific usage of eSurveysPro for conducting analysis as it is intended to provide a foundation upon which you can confidently conduct your own survey analysis no matter what tool you use. What objectives were you trying to accomplish when you created your survey? Did your survey instrument meet those objectives? Is the data you collected the right data? Do you have sufficient data to properly reach a conclusion? Although data analysis is the wrong time to try and rewrite your survey instrument. take a look back at the big picture. it is important to remember the . Three Common Mistakes Before you dive into analyzing your survey results.

Many people try to get around this by assigning each response a value representing the range.scope of your project and stick to it. To avoid this temptation. remember this simple rule: Rule 1: If you did not ask you do not know. a mean and median cannot be calculated. Even if the adjustment is made consistently across all responses. the resulting calculations will be wrong. For example. Similarly. trying to . Another common mistake that many first time surveyors make is to attempt to change data to compensate for poor question design. They attempt to answer questions that were not asked by making inferences and assumptions from those that were asked. Doing so amounts to nothing more than guesswork. Many first time surveyors attempt to read "between the lines" while analyzing data. if a question asked a respondent to indicate his total household income using a scale of values.

analyze a multiple-choice question as if it was a single-select question will often provide erroneous information. In order to avoid this pitfall, remember this simple rule: Rule 2: Do not alter data to compensate for bad survey design. A second mistake inexperienced surveyors make is to project the findings to an audience that was not either part of the survey population or not adequately represented. For example, if an HR manager conducts a benefits survey and invites all employees to participate, most people would assume that the results represent all employees since everyone had an opportunity to participate. Provided that enough employees participate, the data might be statistically valid, but is it really representative of all employees? The answer is, it depends. If the survey collected data about employee demographics that could be compared to what is known about the company, then the results do reflect the

company as a whole. However, if 80% of the respondents are married and 50% of the total employee base is married, the results of the survey are skewed toward married people. If married people have different benefits needs than single people, using the survey results to make conclusions about the entire employee pool would be less accurate than those conclusions about the married employees or single employees independently. To avoid this temptation, remember this simple rule: Rule 3: Do not project your data to people that did not respond. The earlier you recognize flaws in your survey design and data collection, the more time you will save during analysis. If you questions do not provided the data you need to meet your survey objectives, you'll have to start over. If your questions are vague or ambiguous, you'll have to throw them out. If you do not have an adequate number of responses,

you'll have to get more. Survey Analysis Analyzing any survey, web or traditional, consists of a number of interrelated processes that are intended to summarize, arrange, and transform data into information. If your survey objective was simply to collect data for your database or data warehouse, you do not have to do any analysis of the data. On the other hand, if your objective was to understand the characteristics of typical customers, then you must transform you raw results in to information that will enable you to paint a clear picture of your customers. Assuming you need to analyze the data collected from your survey, the process begins with a quick review of the results, followed by editing, analysis, and reporting. To ensure you have accurate data before investing significant time in analysis, it is important that you do not begin analyzing

results until you have completed the review and editing process. Quick Review Read all your results. Although, this seems like an obvious thing to do, many surveyors think that they can skip this step and dive right in to data analysis. A quick review can tell you lots about your project, including any flaws in questionnaire design or response population, before you spend hours of time in analyzing the data. During the quick review, you should look at every question and see if the results "make sense". This "gut feel" check of the data will often uncover any issues with your survey project. Most surveyors already have an idea of how they expect their data to look. A quick review of the data can help you quickly understand that tell you if the people that respond are the right people. For example, if you were

conducting a survey of all the employees in a company and you knew that 10% were in the marketing department, 20% in sales, 45% in manufacturing, 5% in management, and 5% finance, and 15% research and development, you could reasonable expect your responses to be similarly distributed. If your quick review disclosed 80% of your respondents were from the sales department, you know that your survey did not adequately capture a representative sample of all departments within the company. The quick review can also highlight any problems with the survey instrument. Are most respondents answering all questions? If not, your questionnaire could be flawed in such a way that a person cannot complete the survey. A low response rate could mean your survey invitation was not compelling enough to encourage participation, or your timing was off and a follow-up reminder is needed.

Lastly, the quick review of the survey can show you what areas to focus on for detailed analysis. As stated earlier, most surveyors already know what they expect to get, so your quick review can show you the unexpected. Editing and Cleaning Editing and cleaning data is an important step in the survey process. Special care must be taken when editing survey data so that you do not alter or throw out responses in such a way as to bias your results. Although you can begin editing and cleaning your data as soon as results are received, caution should be used since any edits can be lost if the database is rebuilt. To be safe, wait until all data is received before you begin the editing and cleaning process. To start, find and delete incomplete and duplicate responses. A response should be discarded if the respondent did not complete enough of the survey to be meaningful. For

example, if a your survey was intended to determine future buying intentions across various demographic groups and the respondent did not answer any of the demographic questions, you should delete the response. On the other hand, if the respondent answered all the demographic questions but omitted their name or email address, then you should keep the response. Duplicate responses are a unique issue for electronic surveys. Many tools, such as eSurveysPro, provide built in features to help minimize the risk of duplicate responses. Others, like the popular "infotainment" polls featured on many websites do nothing to eliminate duplicates. Without removing duplicates, your data will be skewed in favor of the duplicate response. Both the count and percentage of the whole will be affected by duplicate responses, and computed means and medians will also be thrown off. To find duplicate responses, carefully examine the answers to any open-ended questions.

When two open-ended questions have the exact same answer, a duplicate response is likely to exist. Make sure the response is indeed a duplicate by comparing the answers to all the other questions, and then delete one of the responses if a match is found. Data cleaning of web surveys usually involves categorizing answers to open-ended questions and multiple-choice questions that include an "other, please specify" response. Because of their nature, open-ended text response questions can provide significant value but they are nearly impossible to process without some form of summarization or tabulation. One of the easiest ways to summarize these questions is to build a list of themes and select the themes that apply as you read each response. Tools such as eSurveysPro allow you to add questions after a survey is run to do just this sort of thing.

A common problem in any survey that needs attention during the editing and cleaning process is when a respondent answers an "other, please specify" question by selecting "other" and then writing in an answer that was one of the listed response options. Without cleaning these answers, the "other" response will be overstated and the correct response will be understated. For example, a demographics question that asks for the respondent's role within the organization may have a response like "faculty, teacher, or student" and a respondent selects "other" and types "professor," you would want to clean the response by switching the other choice to the one for "faculty, teacher, or student". Once the data preparation is complete, it is time to start analyzing the data and turning it into actionable information. Detailed Analysis Analysis is the most important aspect of your survey research

At this point. more sophisticated users may wish to do a more . Mistakes during analysis can lead to costly decisions down the road. so extreme caution and careful review must be followed throughout the process. Carelessness during analysis can lead to disaster. For most surveyors. On the other hand.project. What you do during analysis will ultimately determine if your survey project is a successful or not. or conducting in-depth comparisons between questions sets to identify trends or relationships. you have collected a set of data that must now be turned into actionable information. Depending on what type of information you are trying to know about your audience. The process of analysis can lead to a variety of alternative courses of action. It can be as simple as reviewing the graphs that eSurveysPro automatically creates. and filters is sufficient. cross tabulations. you will have to decide what analysis makes sense. a basic analysis using charts.

rank order. Excel. Graphical Analysis Graphical analysis simply means displaying the data in a variety of visual formats that make it easy to see patterns and identify differences among the results set. single-select matrix and numerical questions. For our purposes in this article. These charts are flexible and are most commonly used to display data from multiple-select.complex statistical analysis using high powered analytical tools such as SPSS. the most common are Bar. Bar charts use solid bars on an X and Y-axis that extend to meet a specific data value indicated on the chart and can be shown either vertically or horizontally. Each response option is shown as an . and Line charts. or any number of number crunching applications. we will focus on basic analysis techniques. There are many different graphing options available to display data. Pie.

a side-by-side visual comparison can quickly be made. It is easy to interpret which answer received the most responses in a pie chart by selecting the largest potion of the pie. Pie charts. or circle graphs. this way.independent bar on the chart. Pie charts are most useful with single-select questions because the each response is represented visually as a portion of the entire pie. Pie charts are not appropriate for multiple-select questions because each . and the total percentages of the segments always add up to 100%. have colorful "slices" representing segments of your data. These charts measure values as compared to a "whole". it is important to make sure the colors used for each response option remain consistent in each chart. and the length of the bar represents the frequency the response was chosen relative to all choices. When comparing two sets of data using a pie chart. If represent the same response options in each chart.

and the percentages of respondents who selected each answer. or the differences between the percentages of each option are small. and the sum of the option percentages will exceed 100%. Frequency Tables Frequency tables are another form of basic analysis. These tables show the possible responses. However these formats are not as easy to interpret for casual users. There are other graphing options such as line charts. which are useful when displaying the same data over a period of time.respondent can answer choose more than one option. pie or bar charts are easier to work with than frequency tables. . so they should be used sparingly. In most cases. Frequency tables are useful when a large number of response options are available. area charts and scatter graphs. the total number of respondents for each part.

0% Strategic Planning 56 10. cross tabs appear as a table of data showing answers to one question as a series of rows and answers to another question as a series of columns.3% Cross Tabulation Cross tabulations.1% Product Planning 33 5.4% Providing channel support 157 28.9% Promotional Communication 243 43.7% Quantitative Analysis 150 27.8% Creating sales tools 152 27. are a good way to compare two subgroups of information. Base Question Female Male . or cross tabs. Like frequency tables.Response Count Percent Market Analysis 76 13. Cross tabs allow you to compare data from two questions to determine if there is a relationship between them.

5 times as many males had the title as compared to females.6% 14. where 2.7% 23. Filtering .2% Product Marketing Manager 24. The intersections of the various columns and rows. For analysis purposes.2% 53.8% 1.1% Program Manager 2.4% Director 12. commonly called cells. cross tabs are a great way to do comparisons.5% Technical Product Manager 2.8% 7. are the percentages of people who answered each of the responses.Product Manager 57. females and males had relatively similar distribution among various job titles.7% Total Counts 215 337 Cross tabs are used most frequently to look at answers to a question among various demographic groups. In the example above. with the exception of the tile of "Technical Product Manager".

you would set a filter that would remove all those respondents that do not meet your criteria from the results set. thus enabling you to concentrate on the target population.000. if you wanted to know the buying intentions of men. By viewing only the data from the people who responded negatively.Filtering is the most under-utilized tool used in analysis. For example. that compares two questions. Find patterns or trends that help define why a person answered the way they did. By applying filters to the date survey responses were received. Unlike a cross tab. with income of about $50. a filter will allow you to examine all questions for a particular subset of the responses. you can see how the answers change from one time . look at how they answered other questions. Filters allow you select specific subsets of data to view. over the age of 40. You can even filter on multiple questions and criteria to do a more detailed search if necessary.

by continually running a customer satisfaction survey. and your recommendations flawed. don't forget to clear them before attempting to analyze your survey responses as a whole. By looking at the same question with different filters applied. making it much easier to perform analysis. For instance. . differences between the various respondents represented by the filter can be quickly seen. they simply eliminate them from the current view of the data. Because filters remain in effect until cleared. otherwise your observations will be inaccurate. you can assess changes in customer attitudes over time by filtering on the date the survey was received.frame to the next. Filters do not permanently remove the responses of those people that do not match the specified criteria. You can also use a filter on date received to assess the impact of sales incentive programs or new product offerings by comparing survey responses before and after the change.

Simple Regression Analysis Determining what factors have lead to a particular outcome is called regression analysis. If 30% of the respondents said they had trouble navigating through the website and 40% said they would not return. This can be based on how they answered other questions as well. you could look at only those that would not return to determine if poor navigation might be the case. then this is clearly not the "reason" visitors will not return. The regression means you're working backwards from the result to find out why a person answered the way that they did. if 30% or less said they had trouble navigating. For example. After filtering to only those who would not return. By filtering out those that would return. you might believe that website visitors who had trouble navigating within your website are likely not return again. we expect the percentage to increase .

such as an HTML document or Microsoft PowerPoint presentation. it is time to create a report of your findings. In order to know if it is "the" reason.dramatically. we would need to ask a direct question. The complexity and detail need to support you conclusions. These graphical reports are best when they are light on text and heavy on graphs and charts. If it does. are best suited for simple findings. along with your intended audience. so for maximum results consider who is going to receive your report and tailor it to meet their unique needs. only that it might contribute to the respondents not returning. They are reviewed quickly . Reporting After analyzing your survey data. Visual reports. CEO's require a different level of detail than line managers. will dictate the format of your report. we still cannot conclude that navigation is "the" reason.

Ideally. and are often studied at great length and in significant detail. This side-by-side comparison allows your audience to quickly see the differences you are highlighting and will lead . and most conclusions are obvious. report findings that require significant explanation. so detailed explanations are seldom required. Often. always remember that information can be more powerfully displayed in a graphic format verses a text or tabular representation. it is best to show a chart of each group's responses side-by-side. when making comparisons one or more groups of respondents.rather than studied at length. Reports created using Word often include much more detailed information. a detailed report created in Microsoft Word or Adobe Acrobat is often required. No matter which type of report you use. For more complex topics. trends and patterns are more obvious and recommendations more effective when presented visually. are extremely text heavy.

In either case. you should include your analysis and conclusions in adequate detail to meet the needs of your audience. including who was invited to participate. Next. and enable you to avoid many questions that are outside of your original objectives. Include a table or graph for each area of interest and explain why it is noteworthy. Recommendations can be as simple as conduct further studies to a major shift in company direction. your recommendation must be within the scope of your . you should make recommendations that relate back to your survey objectives. This will help your audience understand what the survey was about. over what time frame results were collected. you should review your survey objective and sampling method. After your analysis section. At the beginning of your report. and any issues that might exist relative to your respondent pool. Your report should have a description of your sampling method.to more support for your conclusions.

representative participation. Techniques such as charting. filtering. and careful interpretation of the data. you can include a copy of your survey questions and a summary of all the data collected as an appendix to your report. and regression analysis all help you spot trends and patterns within your data while helping you meet your survey objective. cross tabulation. in order to produce actionable results. Finally. yet it is not so complex that it requires a PhD. You now have a solid foundation upon which you can confidently conduct your own survey analysis using a tool like eSurveysPro. .survey objective and supported by the data collected. In this article we have learned that good analysis begins with good questions. Conclusion Survey analysis is not as easy as downloading results and printing a chart or report.

6/27/2004.pdf. Schoenbach 14. Google automatically generates html versions of documents as we crawl the web.This is the html version of the file http://www. 3/29/2004. Key concepts/expectations This chapter contains a great deal of material and goes beyond what you are expected to learn for . 7/22/2004 14.epidemiolog. Data analysis and interpretation Concepts and techniques for managing.epidemiolog.net/evolving/DataAnalysis-andinterpretation. analyzing and interpreting data from epidemiologic studies.net © Victor J. Data analysis and interpretation – 451 rev. Page 1 _________________________________________________ ____________________________________________ www. editing.

Be able to recognize . What is meant by data coding and why is it carried out. categorical.this course (i. continuous. ordinal.e. So if you find that you are getting lost and begin to wonder what points you are expected to learn. discrete. nominal.. count. and you may find some of the material that follows of use as you read the literature. interval.. Options for data cleaning – range checks. for examination questions). However. statistical issues pervade epidemiologic studies. ratio. consistency checks – and what these can (and can not) accomplish.e. please refer to the following list of concepts we expect you to know: Need to edit data before serious analysis and to catch errors as soon as possible. Basic meaning of various terms used to characterize the mathematical attributes of different kinds of variables. dichotomous. i. measurement.

Fisher’s exact test. statistical “power”. 1-sided vs. confidence intervals. z-tables. What is a confidence interval and how it can be interpreted. meta-analysis. Type II error. statistical precision. power. intracluster correlation. Computation of p-values. asymptotic tests. Objectives of statistical hypothesis tests (“significance” tests). Concepts of Type I error. Bayesian versus frequentist approaches. significance level. the meaning of the outcomes from such tests.examples of different kinds of variables and advantages/disadvantages of treating them in different ways. and . or sample size will not be asked for on exams. 2-sided tests. and the relationship among these concepts and sample size. What is meant by a “derived” variable and different types of derived variables. confidence level. and how to interpret a p-value.

Data analysis and interpretation – 452 rev. Page 2 _________________________________________________ ____________________________________________ www. not for examinations. Schoenbach 14. as far as EPID 168 is concerned. that presents yet another . I encourage a nondogmatic approach to statistics (caveat: I am not a “licensed” statistician!).epidemiolog. 7/22/2004 Data analysis and interpretation Epidemiologists often find data analysis the most enjoyable part of carrying out an epidemiologic study. 6/27/2004. If the data do not provide answers.interpretation of multiple significance tests are all purely for your edification and enjoyment. In general. since after all of the hard work and waiting they get the chance to find out the answers.net © Victor J. 3/29/2004.

So when the new investigator. finds him/herself alone with the dataset and no idea how to proceed. One often-helpful strategy is to begin by imagining or even outlining the manuscript(s) to be written from the data. analysis and interpretation of the study should relate to the study objectives and research questions. the feeling may be one more of anxiety than of eager anticipation. from . The analyst then turns to address specific questions from the study aims or hypotheses. “speak for themselves”. The usual analysis approach is to begin with descriptive analyses. to explore and gain a “feel” for the data. however. Data do not.opportunity for creativity! So analyzing the data and interpreting the results are the “reward” for the work of collecting the data. As with most other aspects of a study. They reveal what the analyst can detect. attempting to collect this reward.

Assess the degree of uncertainty from random noise . nonresponse. means.g. compare the available study population with the target population) 3. Analysis . Describe the study population and its relationship to some presumed source (account for all in-scope potential subjects. and from patterns suggested by the descriptive analyses. and attrition.findings and questions from studies reported in the literature. Estimate measures of frequency and extent (prevalence. Before analysis begins in earnest. a considerable amount of preparatory work must usually be carried out. medians) 5. comparison groups) 4. Evaluate and enhance data quality 2.. Estimate measures of strength of association or effect 6. refusal. Assess potential for bias (e.major objectives 1. incidence. though.

7/22/2004 . Control and examine effects of other relevant factors 8. and forms. Seek further insight into the relationships observed or not observed 9. the data collection plan. Data analysis and interpretation – 453 rev. including procedures. is designed and pretested to maximize accuracy. 3/29/2004.net © Victor J. Evaluate impact or importance Preparatory work – Data editing In a well-executed study. 6/27/2004.(“chance”) 7. All data collection activities are monitored to ensure adherence to the data collection protocol and to prompt actions to minimize and resolve missing Page 3 _________________________________________________ ____________________________________________ www. instruments.epidemiolog. Schoenbach 14.

Codes for keying may also be needed for closed-end questions unless the response choices . there is often the need to “edit” data. Before forms are keyed (unless the data are entered into the computer at the time of collection. usually need to be coded. Open-ended questions. Nevertheless. if there are any. since the faster irregularities can be detected. both before and after they are computerized. through CATI – computer-assisted telephone interviewing) the forms are reviewed to spot irregularities and problems that escaped notice or correction during monitoring. Monitoring procedures are instituted at the outset and maintained throughout the study.g.. The first step is “manual” or “visual editing”.and questionable data. the greater the likelihood that they can be resolved in a satisfactory manner and the sooner preventive measures can be instituted. e.

(Coding will be discussed in greater detail below. written comments from the participant or data collector. and other situations that arise.. inconsistent or out of range responses) at this stage. multiple responses to a single item. Data forms will usually then be keyed.are “precoded” (i. Visual editing also provides the opportunity to get a sense for how well the forms were filled out and how often certain types of problems have arisen. typically into a personal computer or computer terminal for .g.) It is possible to detect data problems (e. but these are often more systematically handled at or following the time of computerization.e. Even forms with only closed-end questions having precoded responses choices may require coding for such situations as unclear or ambiguous responses. have numbers or letters corresponding to each response choice)..

which a programmer has designed data entry screens that match the layout of the questionnaire. For small questionnaires and data forms, however, data can be keyed directly into a spreadsheet or even a plain text file. A customized data entry program often checks each value as it is entered, in order to prevent illegal values from entering the dataset. This facility serves to reduce keying errors, but will also detect illegal responses on the form that slipped through the visual edits. Of course, there must be some procedure to handle these situations. Since most epidemiologic studies collect large amounts of data, monitoring, visual editing, data entry, and subsequent data checks are typically carried out by multiple people, often with different levels of skill, experience, and authority, over an extended period and in multiple locations. The data processing procedures need to take these differences into

account, so that when problems are detected or questions arise an efficient routing is available for their resolution and that analysis staff and/or investigators have ways of learning the information that is gained through the various steps of the editing process. Techniques such as “batching”, where forms and other materials are divided into sets (e.g., 50 forms), counted, possibly summed over one or two numeric fields, and tracked as a group, may be helpful to avoid loss of data forms. Quality control and security are always critical issues. Their achievement becomes increasingly complex as staff size and diversity of experience increase. Preparatory work – Data cleaning Once the data are computerized and verified (key-verified by double-keying or sight-verified) they are subjected to a series of computer checks to “clean” them.

Page 4 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 454 rev. 3/29/2004, 6/27/2004, 7/22/2004 Range checks Range checks compare each data item to the set of usual and permissible values for that variable. Range checks are used to: 1. Detect and correct invalid values 2. Note and investigate unusual values 3. Note outliers (even if correct their presence may have a bearing on which statistical methods to use) 4. Check reasonableness of distributions and also note their form, since that will also affect choice of statistical procedures

Consistency checks Consistency checks examine each pair (occasionally more) of related data items in relation to the set of usual and permissible values for the variables as a pair. For example, males should not have had a hysterectomy. College students are generally at least 18 years of age (though exceptions can occur, so this consistency check is “soft”, not “hard”). Consistency checks are used to: 1. Detect and correct impermissible combinations 2. Note and investigate unusual combinations 3. Check consistency of denominators and “missing” and “not applicable” values (i.e., verify that skip patterns have been followed) 4. Check reasonableness of joint distributions (e.g., in scatterplots) In situations where there are a lot of inconsistent responses, the approach used to handle

inconsistency can have a noticeable impact on estimates and can alter comparisons across groups. Authors should describe the decision rules used to deal with inconsistency and how the procedures affect the results (Bauer and Johnson, 2000). Preparatory work – Data coding Data coding means translating information into values suitable for computer entry and statistical analysis. All types of data (e.g., medical records, questionnaires, laboratory tests) must be coded, though in some cases the coding has been worked out in advance. The objective is to create variables from information, with an eye towards their analysis. The following questions underlie coding decisions: 1. What information exists? 2. What information is relevant? 3. How is it likely to be analyzed?

Page 5 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 455 rev. 3/29/2004, 6/27/2004, 7/22/2004 Examples of coding and editing decisions A typical criterion for HIV seropositivity is a repeatedlypositive ELISA (enzyme linked immunosorbent assay) for HIV antibody confirmed with a Western blot to identify the presence of particular proteins (e.g., p24, gp41, gp120/160). Thus, the data from the laboratory may include all of the following: a. An overall assessment of HIV status (positive/negative/indeterminant) b. Pairs of ELISA results expressed as: i. + + / + – / – – / indeterminate

ii. optical densities c. Western Blot results (for persons with positive ELISA results) expressed as: i. (+ / – / indeterminant) ii. specific protein bands detected, e.g., p24, gp41, gp120/160 How much of this information should be coded and keyed? How to code open-ended questionnaire items (e.g., “In what ways have you changed your smoking behavior?”, “What are your reasons for quitting smoking?”, “What barriers to changing do you anticipate?”, “What did you do in your job?”) Closed-end questions may be “self-coding” (i.e., the code to be keyed is listed next to each response choice), but there can also be: a. Multiple responses where only a single response is wanted – may be 1. Inconsistent responses (e.g., “Never” and “2 times or

more”) 2. Adjacent responses indicating a range (e.g., “two or three times” and “four or five times”, by a respondent who could not choose among 2-5 times). b. Skipped responses – should differentiate among 1. Question was not applicable for this respondent (e.g., age at menarche for male respondents) 2. Respondent declined to answer (which respondents sometimes may indicate as “N/A”!) 3. Respondent did not know or could not remember 4. Respondent skipped without apparent reason It is necessary to achieve a balance between coding the minimum and coding “everything”. Coding is much easier when done all at once. One can always subsequently ignore coded distinctions not

judged as meaningful. Page 6 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 456 rev. 3/29/2004, 6/27/2004, 7/22/2004 Information not coded will be unavailable for analysis (e.g., date questionnaire received, which questionnaires were randomly selected for 10% verification survey). More detail means more recodes for analysis means more programming means more opportunities for error. Decisions deferred have to be made sometime, so why not decide up front (e.g., When a respondent circles adjacent response choices, such as “3. Once or twice” and “4. Two to five

times”. . so that consistency can be achieved and the inevitable questions (“How did we deal with that situation?”) answered. Variables summarize and reduce data.5? a missing value code? a code to be replaced at a later date when a decision is made?) It is important to document how coding was done and how issues were resolved. what should be coded – 3?. Types of variables . Analytic techniques depend upon variable types Variables can be classified in various ways. 3. 4?. Variables (also sometimes called “factors”) have “values” or “levels”.levels or scales of measurement Constructs or factors being studied are represented by “variables”. so that for any two allowable values there are other allowable values in between. A continuous variable takes on all values within its permissible range. attempting to represent the “essential” information.

a discrete variable can take only certain values between its maximum and minimum values. Measurements such as weight. but these can be regarded as points on a continuum.g. In practice.A continuous variable (sometimes called a “measurement variable”) can be used in answer to the question “how much”.. even if there is no limit to the number of such values (e. height. be represented by continuous variables and are frequently treated as such in statistical analysis. If the values of a . Discrete variables that can take any of a large number of values are often treated as if they were continuous. in principle. the instruments used to measure these and other phenomena and the precision with which values are recorded allow only a finite number of values. the set of all rational numbers is countable though unlimited in number). and blood pressure can. of course. Mathematically.

a study identifying number) and which is not used in statistical analysis. e.g. with no inherent ordering.g. the values or the variable are completely arbitrary and could be replaced by any others without affecting the results (e.. ABO blood group. Page 7 . and the analyst’s judgment about interpretability. Identification – a variable that simply names each observation (e.g.. Nominal variables can be dichotomous (two categories. Nominal – a categorization or classification. ethnicity).variable can be placed in order. Types of discrete variables 1.. the requirements of available analytic procedures. then whether the analyst elects to treat it as discrete and/or continuous depends on the variable’s distribution. gender) or polytomous (more than two categories). 2. clinic number.

Count – the number of entities.2. 6. or some other countable phenomenon.net © Victor J.3). 6. since the coded values need only reflect the ranking they can be replaced by any others with the same relative ranking (e. 4.2. number of siblings)._________________________________________________ ____________________________________________ www. In epidemiologic data analysis. 6/27/2004. Schoenbach 14. 3/29/2004.g. Ordinal – a classification in which values can be ordered or ranked. .22.69.. Examples are injury severity and socioeconomic status.5. Data analysis and interpretation – 457 rev..4. events.g.5. to substitute other numbers for the variable’s value would change its meaning. 7/22/2004 3.2.9 could all be used in place of 1. 1.epidemiolog. for which the question “how many” is relevant (e. 3. parity.

with a mean of 40. But it is not meaningful to say that subject A’s score is “1. Types of continuous variables 1. The reason is that the zero point for the scale is arbitrary. so values of the scores have meaning only in relation to each other. Without loss of information. if the variable takes on the values 11-88.5 times the mean”. Scale scores can also be multiplied by a constant.count variables are often treated as continuous. the scale can be shifted: 11-88 could be translated into 0-77 by subtracting 11. but ratios of values are not. That is. it is meaningful to state that subject A’s score of 60 is “twice as far from the mean” as subject B’s score of 50. subject A’s score is still twice as . especially if the range is large. Interval – differences (intervals) between values are meaningful. After either transformation.

anxiety. An example from physics is temperature measured on the Fahrenheit or Celsius scale. 2. Many variables of importance in epidemiology are .. so it is meaningful to characterize a value as “x” times the mean value.. Psychological scales (e.5 times the mean score. a change of units) will distort the relationships of the values of a variable measured on the ratio scale. Ratio – both differences and ratios are meaningful. but subject A’s score is no longer 1. Physiological parameters such as blood pressure or cholesterol are ratio measures. depression) often have this level of measurement. Kelvin or absolute temperature is a ratio scale measure.g. There is a non-arbitrary zero point. Any transformation other than multiplying by a constant (e.g.far from the mean as is subject B’s.

dichotomous (i.e., nominal with two levels) – case vs. noncase, exposed vs. unexposed. For an apparently ordinal or continuous variable, the phenomenon itself may not warrant treatment as such. It is necessary to ask such question as: “Is ‘more’ really more?” and “Are thresholds or discontinuities involved?” Again, the underlying reality (or, rather, our conceptual model of it) determines the approach to quantification. Variable values are often collapsed into a small number of categories for some analyses and used in their original form for others. Preparatory work – Data reduction Data reduction seeks to reduce the number of variables for analysis by combining single variables into compound variables that better quantify the construct. Variables created during coding attempt to faithfully reflect the original data (e.g., height, weight).

Often these variables can be used directly for analysis, but it is also often necessary to create additional variables to represent constructs of interest. For example, the construct overweight is often represented by a variable derived from the values for height and weight. Data reduction includes simplifying individual variables (e.g., collapsing Page 8 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 458 rev. 3/29/2004, 6/27/2004, 7/22/2004 six possible values to a smaller number) and deriving compound variables (e.g. “socioeconomic status” derived from education and occupation). In general: Simpler is better

Avoid extraneous detail Create additional variables, rather than destroy the original ones (never overwrite the raw data!). Inspect detail before relying on summaries Verify accuracy of derived variables and recodes by examining crosstabulations between the original and derived variables. Take into account threshold effects, saturation phenomena, and other nonlinearities Categorize based on the nature of the phenomenon (e.g., a study of Down’s syndrome can collapse all age categories below 30 years; a study of pregnancy rates will require a finer breakdown below 30 years and even below 20 years). Types of derived variables Scales - In a pure scale (e.g., depression, self-esteem) all of the items are intended as individual

measures of the same construct. The scale score is usually the sum of the response values for the items, though items with negative valence (e.g., “I feel happy” in a depression scale) must be inverted. The purpose of deriving a scale score by having multiple items is to obtain a more reliable measure of the construct than is possible from a single item. Scale reliability (internal consistency) is typically assessed by using Cronbach’s coefficient alpha, which can be thought of as the average of all of the inter-item correlations. If the items did indeed measure the same construct in the same way and were indeed answered in an identical manner, then the only differences in their values should be due to random errors of measurement. Cronbach’s alpha gives the proportion of the total variation of the scale scores that is not attributable to random error. Values of 0.80 or greater are

considered adequate for a scale that will be used to analyze associations (if the scale is used as a clinical instrument for individual patients, its alpha should be at least 0.90 – see Nunally’s textbook, Psychometrics). When the scale consists of separate subscales, internal consistency may be more relevant for the individual subscales than for the scale as a whole. Analyses of relationships between individual items (inter-item correlation or agreement), between each item and the remaining items (item-remainder correlation), between each item and the total scale (item-scale correlation), and among groups of items (factor analysis) are standard methods of analyzing item performance. Indexes - An index consists of a group of items that are combined (usually summed) to give a measure of a multidimensional construct. Here, each of the items measures a different aspect or

dimension, so that internal consistency measures like Cronbach’s alpha are either not relevant or require a different interpretation. Examples of indexes derived from several variables include Page 9 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 459 rev. 3/29/2004, 6/27/2004, 7/22/2004 socioeconomic status (e.g., occupation, income, education, neighborhood), social support (e.g., marital status, number of close family members, number of close friends), sexual risk behavior (number of partners, types of partners, use of condoms, anal intercourse). Items may have different weights, depending upon their relative importance and the scale on which they were measured.

Algorithms - A procedure that uses a set of criteria according to specific rules or considerations, e.g., major depressive disorder, “effective” contraception (I have not seen this term used to designate a type of variable before, but I am not aware of any other term for this concept). Preparatory work – Exploring the data Try to get a “feel” for the data – inspect the distribution of each variable. Examine bivariate scatterplots and cross classifications. Do the patterns make sense? Are they believable? Observe shape – symmetry vs. skewness, discontinuities Select summary statistics appropriate to the distribution and variable type (nominal, ordinal, measurement) Location - mean, median, percentage above a cut-point Dispersion - standard deviation, quantiles Look for relationships in data

Look within important subgroups Note proportion of missing values Preparatory work – Missing values Missing data are a nuisance and can be a problem. For one, missing responses mean that the denominators for many analyses differ, which can be confusing and tiresome to explain. Also, analyses that involve multiple variables (e.g., coefficient alpha, crosstabulations, regression models) generally exclude an entire observation if it is missing a value for any variable in the analysis (this method is called listwise deletion). Thus, an analysis involving 10 variables, even if each has only 5% missing values, could result in excluding as much as 50% of the dataset (if there is no overlap among the missing responses)! Moreover, unless data are missing completely at random (MCAR – equivalent to a pattern of missing data that would result

from deleting data values throughout the dataset without any pattern or predilection whatever), then an analysis that makes no adjustment for the missing data will be biased, because certain subgroups will be underrepresented in the available data (a form of selection bias). Imputation for missing values - optional topic As theory, methods, and computing power have developed over the years, analytic methods for handling missing data to minimize their detrimental effects have improved. These Page 10 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J. Schoenbach 14. Data analysis and interpretation – 460 rev. 3/29/2004, 6/27/2004, 7/22/2004 methods seek to impute values for the missing item

More sophisticated methods reduce bias from missing data while minimizing distortion from imputation. Even though such practices enable all observations to be used in regression analyses. Typically. complete data cases (observations that have no missing values for the variables . now out of favor. include replacing each missing value by the mean or median for that variable.responses in ways that attempt to increase statistical efficiency (by avoiding the loss of observations which have one or a few missing values) and reduce bias. Earlier methods of imputation. these methods do not reduce bias and tend to introduce additional distortion. These methods derive imputations that make use of the values of variables for which data are present and which are related to the variable being imputed.

suppose the available data show a positive correlation between blood pressure and age. These models are then applied to the remaining observations. we impute (on average) higher blood pressures to older subjects with missing blood pressure data and lower blood pressures to younger subjects missing blood pressure data. providing predicted (“imputed”) values for their missing responses. This technique . The resulting imputations are said to be conditioned on the variables in the model. By conditioning imputations on age.of interest) serve as the raw material for the imputations. For example. Factors that are theoretically related to the variables to be imputed and with which they are associated in the complete data cases are used to develop “predictive” models for the imputed variables.

Moreover..preserves the relationship between age and blood pressure that exists in the complete data cases. if older subjects are more likely to be missing a blood pressure reading. If predicted values are simply substituted for missing values. rather than MCAR. subject’s age).g. the overall mean blood pressure for the complete data cases is biased downwards (due to underrepresentation of older subjects). then although bias . If the process that led to the missing data is uniformly random except for being positively related to identifiable factors (e. then the conditioning reduces the bias from analyzing only the complete data cases. but the overall mean based on imputations conditioned on age is not. however. then the missing data process is called missing at random (MAR). In such a situation.

blood pressure were completely determined by age.. rather than substituting the predicted values themselves for the missing data. then the imputed value would . In contrast.g. in our example. the predicted values are directly computed from the model as if. The reason is that the imputation models were created based on (imperfect) associations between the conditioning variables and the variables being imputed.will be reduced so will standard errors. To avoid this problem a source of random variability is introduced into the imputation process. In effect. the model functions as a “self-fulfilling prophecy”. the imputed values may be sampled from distributions whose means are the predicted values (e. For example.30 [where 1=”yes” and 0=“no”]. if the estimated mean for a yes-no response were 0.

by using multiple imputations (typically five).epidemiolog. 3/29/2004. Data analysis and interpretation – 461 rev. . analyzing each dataset separately. and combining the results according to certain procedures.be generated randomly from a binomial distribution with a proportion of “successes” of 0. Page 11 _________________________________________________ ____________________________________________ www. 6/27/2004. the analyst can adjust the standard errors to reflect the uncertainty introduced by the imputation process. Schoenbach 14. 7/22/2004 In addition.30). Carrying out multiple imputations means repeating the imputation process to create multiple versions of the dataset (one for each imputation).net © Victor J.

MAR. unfortunately.] Descriptive analyses Exploration of the data at some point becomes descriptive . Perversely. [I would like to thank Michael Berbaum and Ralph Folsom for their patient explanations of imputation and for reading over earlier versions of this section. Also. the available data may provide little guidance about whether the missing process is MCAR. imputation is most needed when the proportion of missing data is large. however.Imputation causes the least distortion when the proportion of missing data is small. 1997). and data are available for variables that are strongly associated with the variable being imputed. Attention to causes of missing responses during data collection can be helpful (Heitjan. or “nonignorable”.

analysis. follow-up time. etc. prevalence) and extent (means. potential alternative explanations for what has been observed. One aspect of both descriptive analysis and hypothesis testing. Here there will be a more formal evaluation of potential confounding. especially of the latter. and impact (attributable fraction. association (differences and ratios). Standardization or other adjustment procedures may be needed to take account of differences in age and other risk factor distributions. other forms of bias. survival time). These measures will be computed for important subgroups and probably for the entire study population. to examine and then to report measures of frequency (incidence. if the study has identified any. Evaluation of hypotheses After the descriptive analyses comes evaluation of the study hypotheses. is the . preventive fraction).

when we draw five cards from a freshly-shuffled. that “the Lord God doesn’t play dice with the universe”. Much of the field of statistics has grown up to deal with this aspect. Similarly. a pair is more likely than three of a kind).. to which we will now turn. Evaluating the role of chance .inference Whether or not we believe. there are many events in the world that we ascribe to “chance”. The theories of probability and statistics were born in the gaming parlors of Monte Carlo and came of . the resulting number is generally unpredictable and does not (or at least. we know that some outcomes are more or less likely than others (e. in Albert Einstein’s words. unmarked deck. but we cannot predict what cards we will draw.assessment of the likely influence of random variability (“chance”) on the data. When we roll a die. should not) follow any evident pattern.g.

age in the fields of the British countryside. Schoenbach 14. Page 12 _________________________________________________ ____________________________________________ www. 3/29/2004. The computer revolution put their power. 7/22/2004 The basis for the incorporation of the fruits of the theory of probability and statistics into medical and epidemiologic research has been recounted by Austin Bradford Hill as follows: “Between the two world wars there was a strong case for emphasizing to the clinician and other research workers the importance of not overlooking the effects of the play of chance upon their . into the hands of any of us who can click a mouse. Data analysis and interpretation – 462 rev. 6/27/2004. for good or for whatever.net © Victor J.epidemiolog.

data. and to teach the need for. Hill continues: “I wonder whether the pendulum has not swung too far – not only with the attentive pupils but . Perhaps too often generalities were based upon two men and a laboratory dog while the treatment of choice was deduced from a difference between two bedfuls of patients and might easily have no true meaning. 1965: 295-300) From this innocent and commonsensical beginning.” (pg 299 in The environment and disease: association or causation. Proceedings of the Royal Society of Medicine. tests of significance merely to serve as guides to caution before drawing a conclusion. statistical procedures have (like kudzu?? – just kidding!) virtually engulfed the thinking of researchers in many fields. before inflating the particular to the general. It was therefore a useful corrective for statisticians to stress.

” He admits that he exaggerates.even with the statisticians themselves. or because.” Hill is referring . . I am told. To decline to draw conclusions without standard errors can surely be just as silly? Fortunately I believe we have not yet gone so far as our friends in the USA where. Yet there are innumerable situations in which they are totally unnecessary . . because it is negligible. . it is too small to be of any practical importance. whether it be formally significant or not.because the difference is grotesquely obvious. some editors of journals will return an article because tests of significance have not been applied. but he suspects that the overreliance on statistical tests weakens “our capacity to interpret data and to take reasonable decisions whatever the value of P. What is worse the glitter of the t table diverts attention from the inadequacies of the fare.

from the first study to report an association between adenocarcinoma of the vagina and maternal use of diethylstilbestrol (DES). a highly unusual occurrence. which are probably the most common procedures for assessing the role of chance. At that time DES had been prescribed in the belief that it might prevent premature delivery in women who had lost .to tests of significance. a handful of cases of adenocarcinoma of the vagina were observed in young women. Illustration of a statistical test Consider the following data. or perhaps more precisely. the amount of numerical evidence that observed differences would not readily arise by chance alone. Investigation into the histories of the affected women revealed that in most cases the girl’s mother had taken diethylstilbestrol (DES) while she was carrying the girl in her uterus. During the 1960’s.

In how many patients would this history have to emerge for it before the investigators could be confident that it was not a chance observation? This question is usually answered by means of a statistical test. Schoenbach 14.net © Victor J. Data analysis and interpretation – 463 rev. 6/27/2004. Page 13 _________________________________________________ ____________________________________________ www. 3/29/2004.pregnancies.epidemiolog. 7/22/2004 Prenatal exposure to diethylstilbestrol (DES) among young women with adenocarcinoma of the vagina Exposed to diethylstilbesterol? Yes No Total Cases .

Poskanzer DC. Association of maternal stilbestrol therapy with tumor appearance in young women. Ulfelder H.7 1 8 Controls 0 32 32 Total 8 33 40 Source: Herbst AL. Oxford. 284:878-881. Case-Control Studies. New Engl J Med 1971. [From Schlesselman JJ. l982: 54] All but one of the cases had a positive history for intrauterine . Adenocarcinoma of the vagina. New York.

5 to all four cells yields a relative risk (OR) of 325. not one of 32 controls did. “How often could such a strong association arise completely by chance in an infinite number of analogous experiments with the same number of subjects and the same proportion of cases (or of exposed)?” This question is not quite the same as “How likely is it that chance produced the association in the table?” nor as “How much of the . Could these results be due to chance? A statistical test of significance is a device for evaluating the amount of numerical data on which an observed pattern is based. to answer a question like.exposure to DES. However. because of the zero cell. The relative risk from this table cannot be calculated directly. In contrast. this study has only eight cases. a stronger association than most of us will ever encounter in our data. but adding 0.

but at least it would be something other than chance. The significance test simply evaluates the strength of numerical evidence for discounting chance as a likely sufficient explanation. of course. Conversely. That factor could be bias. rather than the exposure. There’s the rub. the . But if such a strong association would arise only very infrequently by chance alone.association is due to chance?”. then it is reasonable to suppose that at least some potentially identifiable factor has contributed to the observed association. we need to operationalize the concept of “analogous experiment”. it is also possible that much stronger associations could readily arise by chance and yet the one we observed might reflect a causal process. In order to conduct a test of significance. What kind of experiment is analogous to an epidemiologic study. all the more so an observational one? For the above table.

6/27/2004.net © Victor J. How many red pairs have you packed for your trip? Page 14 _________________________________________________ ____________________________________________ www. and 33 pairs of blue socks. Schoenbach 14. You want to pack 8 pairs of socks in your travel bag.epidemiolog. 3/29/2004. so without looking you take 8 pairs at random and put them in your bag.significance test that would be used is Fisher’s Exact Test. Data analysis and interpretation – 464 rev. The analogous experiment (probability model) here is equivalent to the following: Suppose that you have 40 pairs of socks – 7 pairs of red socks. the proportion of trials . 7/22/2004 When this “analogous experiment” is repeated a sufficient number of times.

the distribution of the number of red pairs in the bag has already been worked out theoretically. This probability is the :p-value” for the significance test of the relationship between adenocarcinoma of the vagina and maternal DES in the above table. so that the exact probability can be computed without having to carry out what in this case would be a VERY large number of trials. Fortunately. The formula for the (hypergeometric) distribution is: n1 n0 Cj C (m1 – j) .in which the bag has 7 red pairs will provide the probability that chance alone would produce a situation in which you had packed 7 pairs of red socks.

n0. n1.n1!n0!m1!m0! = –––––––––––––––––––––––– = ––––––––––––––––––––––––––– Pr(A=j) n n! j! (n1 – j)! (m1 – j)! (n0 – m1 –j)! C m1 where Pr(A=j) is the probability of obtaining j red pairs of socks in the travel bag and m0. m1. and n are the row and column totals in the table: Color Red Blue Total Travel bag j m1 – j .

m1 In drawer n1 – j n0 – m1 – j m0 Total n1 n0 n Here is how the formula is applied: Red (DES) Blue Total Packed (cases) 7 1 8 .

7/22/2004 Possible outcomes (Colors of pairs of socks in travel case) Red .net © Victor J. 3/29/2004. Data analysis and interpretation – 465 rev.In drawer (controls) 0 32 32 Total 7 33 40 Page 15 _________________________________________________ ____________________________________________ www. Schoenbach 14.epidemiolog. 6/27/2004.

Blue Probability of each outcome 0 8 .389 2 6 .181 1 7 .302 3 5 .108 4 4 .019 .

0015 –––––––––––– 6 2 .00005 { 40! 5! 2! 3! 30! 7 1 4.7! 33! 8! 32! 5 3 .3 x 10-7 8 0 0 } p-value 1.0000 .

. The above model is a very simplified representation! 2. 3. The model is derived on the basis of certain constraints or assumptions (e. A model is a system or structure intended to represent the essential features of the structure or system that is the object of study.g. and 40 subjects in all – “fixed marginals” – as well as “all permutations are equally likely”).Comments on the “red socks” model: 1. in this case. 7 DES-exposed mothers. . The model underlying hypothesis testing assumes a repeatable experiment and an a priori specification of the “hypothesis” being tested – a “null” hypothesis [this is embodied in the model of “equally likely” permutations] and an “alternative hypothesis” [this deals with what results we would regard as inconsistent with the null hypothesis]. 8 cases.

The frequentist school of statistics. by reformulating the question as: “How often would an association . cannot answer this question directly. or “How likely is it that the observed association is due to chance?”. The above model is tedious to compute for large tables. the probability that the hypothesis is true given the observed results.4. significance tests and p-values attempt to provide an indirect answer. This probability is sometimes referred to as the “posterior [a posteriori] probability”. (The “prior [a priori] probability” that the hypothesis is true is our belief in the hypothesis before we have the results in question). from which significance testing derives. Instead. Concept of hypothesis testing (tests of significance) What we really want to know is: “Is the observed association due to chance?”. though computers have solved that problem.

it must be thoughtfully applied and thoughtfully interpreted. 3/29/2004.. Randomization. and causal inference). But most epidemiologic studies deviate rather markedly from the probability models on which statistical Page 16 _________________________________________________ ____________________________________________ www. A compromise version of the question that underlies a . Data analysis and interpretation – 466 rev.net © Victor J. Schoenbach 14. 6/27/2004. 7/22/2004 tests are based (e.epidemiolog. so although statistical theory is extremely precise. see Sander Greenland. chosen to represent the probability structure of the data and the study design.g. statistics. The role of chance is played by a suitable probability model.as strong as that observed occur by chance alone?”.

(Note: The statistical “null hypothesis” is rarely of interest from a substantive perspective. The result of the significance test is a probability (the p-value). it is quite difficult to demonstrate the absence of association.significance test is “How consistent are the numerical data with what would be expected ‘by chance’ – as played by a suitable probability model”. In fact. The probability model is most often one that assumes no systematic difference between groups. A study hypothesis should be stated in terms of no association only if that is indeed what the investigator hopes to demonstrate. since the evidence for no association is related to the Type II error probability (1 – statistical power) . partly because such models are easier to derive and also because it is often convenient for the hypothesis-testing framework. which provides a quantitative answer to this compromise question.

The p-value itself can be regarded as a descriptive statistic. As noted. though. the hypothesis to be tested is generally a “null hypothesis” (usually designated H0). Decision-making entails the risk of making errors. That technique is statistical hypothesis testing. H0 is the probability model that will play the role of chance (for .for the study. When a decision is called for. though. the theory of decision-making provides a technique for decision-making based on the results of a statistical test. a piece of evidence that bears on the amount of numerical evidence for the association under study. then some method of assigning an action to the result of the significance test is needed. Under broadly applicable assumptions. Ideally the loss function (the costs of errors of various types) is known explicitly. which is generally considerably greater than the significance level – see below).

that data are . Since we have a decision between two alternatives (H0 and HA) we can make two kinds of errors: Type I error: Erroneously reject H0 (i. incorrectly.example. If there is sufficient numerical evidence to lead us to reject H0. In the present context. the red socks model). and to otherwise accept H0.e. The decision-making rule is to reject H0.. if the pvalue is sufficiently small. incorrectly.. that model will be based on the premise that there is no association. that there is an association. conclude. that data are not consistent with the model) Type II error: Erroneously fail to reject H0 (i. in favor of HA. conclude. then we will decide that the converse is true. The converse is designated as the “alternate hypothesis” (HA).e.

the Type I error probability has received more attention and is referred to as the “significance level” of the test. “power”. Data analysis and interpretation – 467 rev. Schoenbach 14. 6/27/2004. 3/29/2004.net © Victor J.) However. 7/22/2004 In a strict decision-making mode. “precision”. the result of the significance test is “Reject null hypothesis” or “Fail to reject null hypothesis”.consistent with the model) (The originator of these terms must have been more prosaic than the originators of the terms “significance”. (Note that “fail to reject the null hypothesis” is not equivalent to declaring that the null hypothesis is true. and “efficiency”) Traditionally.epidemiolog. Page 17 _________________________________________________ ____________________________________________ www. rarely .

must a decision be made based on a single study. since it quantifies the degree to which the data are incompatible with “chance” (as played by the probability model). Note that the pvalue is not a direct index of the strength of an association in an epidemiologic sense nor of its biologic. so it is preferable to report the calculated pvalue (probability that the assumed probability model would produce data as extreme or more so). The . There are many methods for obtaining a p-value or conducting a test of statistical significance. clinical. The p-value simply assesses the compatibility of the observed data with the assumed probability model that serves to represent H0. or epidemiologic “significance”. allowing the reader to apply his/her tolerance for a Type I error. The p-value gives more information than the statement “results were significant at the 5% level”.

Typically.. ordinal. and the underlying probability model on which they are based tends to be more abstract. chisquare. and other factors. nominal polytomous. t-test). are asymptotic tests (e. because they are much simpler to compute. since it is based on a model that considers all possible outcomes and in how many ways each can occur.choice depends upon the level of measurement of the variables (dichotomous. Asymptotic tests are approximations whose accuracy improves as the sample size increases. Illustration of an asymptotic test More commonly-used. In an exact test. the probability model is readily apparent. the sampling design from which the data came. asymptotic tests are based on the “normal” (Gaussian) distribution. The statistical test illustrated above is an “exact” test (Fisher’s exact test).g. continuous). Why the Gaussian .

k. analogous experiment).distribution? Because it offers a number of analytic advantages and. E(a) is the expected value for “a” under the null hypothesis (a. 139 or Kleinbaum. because of the Central Limit Theorem (“one of the most remarkable theorems in the whole of mathematics”. The general form for such a test is (see Rothman. and Morgenstern.a. 1963:149). p. Modern epidemiology. Kupper. Epidemiologic research): a – E(a) Z = ––––––––– √var(a) where “a” is the observed value (e. . The Central Limit Theorem holds that if we take large enough random samples from any distribution with a finite variance. the number of exposed cases). the means of those samples will have an approximately Gaussian distribution. Mood and Graybill. most especially..g.

Page 18 _________________________________________________ ____________________________________________ www. (Z is occasionally written as Χ. (called “chi” [pronounced “KAI”]. Thus. Data analysis and interpretation – 468 rev.epidemiolog.net © Victor J. 3/29/2004. 6/27/2004.and var(a) is the variance of “a” under the null hypothesis. Schoenbach 14. 7/22/2004 The probability associated with being “Z” standard deviations away from the mean of a normal . a unit normal distribution is the same as the square root of a one-degree-of-freedom chi-square distribution). Z is the number of standard deviations by which “a” differs from what would be expected if there were no association and has an approximate unit normal distribution.

The probability associated with obtaining a value of z that is either above or .05”..645 standard deviations above the mean is shown in column B (0. look it up in a table of the normal distribution and read off the corresponding p-value.96 we say “p<.05) and is identical to the probability associated with a distance of 1. The table excerpt below shows various probabilities derived from the unit normal distribution. The value of a normally-distributed random variable is usually (i.distribution can be computed and is readily available in statistical tables (see table excerpt below).e.645 standard deviations below the mean (since the normal distribution is symmetrical). or more precisely. so if Z exceeds 1. the probability associated with a distance of 1. we take the value we have calculated for Z. For example. probability 95%) less than two standard deviations from its mean.

3989 0.9920 0.0040 0.0000 1.10.0000 0. then the p-value is either 0.0080 0. Excerpt from a table of the Normal Distribution z h A B C D E 0. So if using the formula above (or one of those below) we obtain a value of Z equal to 1.4960 0.645.05 or 0.0000 0.10). depending upon the alternative hypothesis.5040 .645 standard deviations from the mean is shown in column D (0.5000 0.below a distance of 1.3989 0.00 0.5000 0.01 0.

........9840 0. . .8416 0.60 0.5080 .40 0.4920 0..0160 0.30 0. ..2800 0.. .20 0.... ....3989 0.. .0..0080 0.80 . . .. 0.02 0. .

...1031 .. .... 1..........282 0. .20 0. .. .645 0.. 1. . .80 0... .1755 0.. ...40 0.90 ..10 0.

95 0..960 0. ..45 0...10 0.. ..05 0.0.025 0...975 .... . . ..95 .90 0.. .. ..0585 0..475 0.05 0. 1.

.. 2.995 .495 0. . ... ....0145 0........ .99 0.....01 0.... . . ....005 0....576 0. . . .. .

999 ...3.998 0. .... ...001 0. .090 0.499 0.. Legend: z = number of standard deviations to the right of the mean h = height of the normal curve for that number of standard deviations from the mean A = area between the mean and z . . .... .002 0.0034 0....

D.S. 1970. Anthony Schork.B = area to the right of z (or to the left of -z) Page 19 _________________________________________________ ____________________________________________ www.e. Washington. Data analysis and interpretation – 469 rev. 3/29/2004. Government Printing Office..] One-sided versus two-sided p-values . Remington and M. U.epidemiolog. 1953. 6/27/2004. to the left of -z and the right of +z) E = area to the left of z (Source: National Bureau of Standards – Applied Mathematics Series–23. NY. as abstracted in Table A-4 in Richard D.C. Statistics with applications to the biological and health sciences. 7/22/2004 C = area between -z and +z D = area beyond |z| (i. Englewood Cliffs..net © Victor J. Schoenbach 14.

then the corresponding p-value is “one-sided” (or “onetailed”).5 and larger).4”. [Only one-sided p-values can be interpreted as the “probability of observing an association as strong . i.e..Recall that the p-value is the probability of obtaining an association as strong as (or stronger than) the association that was observed. does “as strong” mean only relative risks of 2. It turns out. that the phrase “as strong as (or stronger than)” is ambiguous. In contrast. or does it also mean relative risks of 0.5 or larger. because it does not specify whether or not it is intended to include inverse associations. if we observe a 2.5 or [inclusive] less than or equal to 0.5 relative risk. For example. then a two-sided p-value is indicated.4 or smaller? If the former (only 2. associations in the opposite direction from the putative association that motivated the study. though. if HA is “either greater than or equal to 2.

the one-sided p-value is exactly half of the twosided p-value. a posting on the EPIDEMIOL-L listserv asking for situations of this sort produced very few persuasive examples. Proponents of two-sided p-values argue that a one-sided p-value provides an inflated measure of the statistical significance (low probability of obtaining results by chance) of an association.185). Appropriate situations for using one-sided p-values are sometimes characterized as ones where the investigator has no interest in finding an association in the opposite direction and would ignore it even it occurred.or stronger under the chance model” (Rothman and Greenland. Here is a dramatical presentation of some of the issues in . For a given calculated value of Z. However.] The issue of one-sided versus two-sided p-values can arouse strong emotions.

choosing between 1-sided and 2-sided p-values: The wife of a good friend of yours has tragically died from lung cancer. Knowing that he cannot afford expert consultation. In preparation for the trial. your friend turns to you and prevails upon you to assist him with the lawsuit. your friend used to smoke quite heavily. Inc.J. She explains that for the court to find for the plaintiff (your side) it must Page 20 . the manufacturer of the cigarette brand your friend used to smoke. Before her death she had become an anti-smoking activist. the judge reviews with both sides the standard of evidence for this civil proceeding. Although she was a life-long nonsmoker. Morris. and her last wishes were that your friend bring suit against R..

Data analysis and interpretation – 470 rev. Schoenbach 14.J. declaring that.epidemiolog.J. 3/29/2004.net © Victor J. which she characterizes as “equivalent to a 90% probability that R. Morris’ cigarettes caused the disease”. Morris attorney raises her second objection: since the plaintiff is basing his case on scientific evidence. 6/27/2004. only the probability that cigarettes can cause disease can be estimated. the R. The R._________________________________________________ ____________________________________________ www. the plaintiff’s case should be held to the . Morris attorney objects. 7/22/2004 conclude that the association is supported by “a preponderance of the evidence”. As the judge is about to say that the judicial interpretation of probability permits such a conclusion. first of all.J. not the probability that cigarettes did cause the disease.

which in this case would mean finding the company responsible even though your friend’s lung cancer was really due to chance. Morris’ insistence on a 5% significance level. you pass a note to your friend. even though the company’s cigarettes did cause the cancer. who passes it on to his attorney. that would be or a Type II error.” Beginning to regret that she introduced the probability metaphor. my client is prepared to accept the R.] Seeing an opportunity.conventional standard of evidence in science. his attorney says to the judge “Your Honor. Upon reading it. [Recall that the significance level is the probability of a Type I error. which requires a significance level of 5%. provided that it is based on a one-sided alternative hypothesis. the .J. If the court were to fail to find the tobacco company responsible.

she charges. since everyone knows that two-tailed tests are more appropriate. This .judge turns to the R. whether their cigarettes did or did not cause the cancer. After a quick consultation.J. Morris attorney. your friend’s attorney replies that a twotailed test is warranted only when the appropriate alternative hypothesis (HA) is two-sided. With your coaching. A 5% one-tailed significance level.. i. Your friend’s attorney senses that this charge will be a telling point with the judge and anxiously looks back to you for advice on how to respond. the R. Morris is or is not liable. who is now hastily conferring with her biostatistician.J.e. through deception. Morris attorney charges indignantly that plaintiff’s attorney is trying. to obtain a lower standard of evidence.J. The question in this case is whether R. is actually a 10% significance level.

which is closer to the standard for a criminal.question corresponds to a one-sided HA.5%. trial”.J. the court can (1) reject H0 (no causation) in favor of the alternative that R. i. Morris is liable or (2) fail to reject H0.J.” she continues. rather than a civil.e.J. as far as the R. the R. With the benefit of further consultation. Therefore a finding that . Morris Company is concerned the relationship between smoking and cancer has not been proved. Morris attorney “strenuously objects”. but notwithstanding the tobacco settlement. so requiring a two-tailed alternative hypothesis is tantamount to imposing a significance level of 2. if the court finds the evidence insufficient. “May it please the court. “Plaintiff may see this case as involving a one-sided HA.. “there is no issue here that the cigarette smoke could have acted to prevent the cancer from occurring.

but you have to put that aside as your friend’s lawyer asks you is it not correct that the significance level is simply a mechanism for deciding how many standard deviations away from the mean are required to exclude chance as an explanation. which corresponds to a Page 21 _________________________________________________ ____________________________________________ .96 standard deviations. Morris lawyer’s assertion that the relationship between smoking and cancer is not proved.cigarette smoking can in fact prevent cancer is just as relevant as plaintiff’s contention that the cigarettes were responsible.” You are naturally outraged by the R. people exclude chance when the statistical test comes out two standard deviations from the center of a normal distribution (actually.J. 1. Usually.

epidemiolog. Schoenbach 14. Meanwhile you’re trying to sort through the issues.www. and you aren’t yet sure . If the judge does accept the one-tailed 5% significance level. Data analysis and interpretation – 471 rev. 6/27/2004. You’ve only just received your epidemiology degree. would it be better to agree to the two-tailed test? The judge looks at her watch. 7/22/2004 two-tailed 5% significance level). even with a good argument that because the appropriate HA is one-sided so that the Type I error probability is really only 5%. 3/29/2004.65 standard deviations from the mean (corresponding to a one-tailed 5% significance level) may be vulnerable on appeal. a decision that meets the test of being only 1. Since the scientific evidence is firm.net © Victor J. and you see beads of perspiration breaking out on your friend’s attorney’s forehead.

J. Morris has concocted evidence that will somehow make it appear that your friend is responsible for his wife’s death from lung cancer? You know that that is outlandish. Morris will certainly appeal an adverse judgment. you cry out … and then suddenly you wake with a start. and R.J. thereby destroying him financially and emotionally. But then a dark thought jumps into your mind. As you emerge from your daydream you hope that you have not . It’s true that an appeals court might reject the idea of a one-tailed test. the court could reject H0 and find your friend responsible. What if R. “One-sided!”. The professor and your fellow students are looking at you with puzzlement.that it works. since appellate judges tend to be conservative. wondering what question you thought that you were responding to. but what if they could? With a two-sided HA.

but more easily remembered computation formula. so that E(a) is the value expected for “a” under the null hypothesis (n1m1/n).slept through too much of the lesson and vow to go to bed earlier in the future. based on the hypergeometric distribution. conventionally the “a” (upper left corner) cell. The test statistic is then simply: a – n1m1/n Z = ––––––––––––––––––––––– √{ (n1 n0m1 m0) /[ n2 (n – 1)]} An equivalent. the formula can be more easily expressed for computational purposes by defining “a” as the contents of a single cell in the table. and Var(a) is the variance of “a” under the null hypothesis {(n1n0m1m0)/ [n2(n-1)]. is: (ad – bc)2 (n – 1) . Significance testing in a two-by-two table For a two-by-two table.

p.g. The reason is that the above formula gives a Mantel-Haenszel chisquare statistic (based on the hypergeometric distribution) instead of the Pearson chi-square statistic (based on the normal distribution).net © Victor J.. For large samples the two are essentially equivalent. instead of (n-1) [e. Hennekins and Buring.Z = √ Χ2 = –––––––––––––– √ n1 n0m1 m0 [Note: you may also see the above formula with n. 251 uses T instead of (n-1)]. There are parallel formulas for person-time data.epidemiolog.] Page 22 _________________________________________________ ____________________________________________ www. Schoenbach 14. Data analysis and interpretation – 472 .

rev. 3/29/2004. 7/22/2004 Exposed to diethylstilbesterol? Yes No Total Cases a b m1 Controls c d m0 Total n1 n0 n Whatever misgivings we may have about the statistical . 6/27/2004.

and the problems of interpretation that arise in more equivocal circumstances.): 1. etc. let us analyze what underlies a small pvalue.e. But to appreciate the dynamics of this procedure. Therefore.model and its application. .. when the p-value is not small. the observed association or difference is not strong. A small p-value (i. inappropriate statistical model. results with as small a p-value as that obtained in this study will be very satisfying to practically any investigator who obtains them. there are two possibilities (ignoring the possibilities of systematic error. low probability that results similar to those observed would be produced by “chance” [as played by a given statistical model]) reflects: a strong observed association (or a large observed difference) or a large sample size (roughly speaking).

” How we interpret a failure to obtain a low p-value depends upon our judgment of the magnitude of the observed association and of the statistical power of the study to detect an important real difference.g. or one percent [for the demanding or rich in data]). biological or psychosocial processes related to the factors under study.). If the p-value is small (e. less than five percent [typical].. the observed association is of a respectable size but the study size was too small to judge it “significant. systematic influences from the way the study was designed or conducted.g. etc. the observed results are somewhat inconsistent with an explanation based on chance alone. ten percent [less common]. so we are inclined to view them as having some origin worth inquiring about (e. If the observed .2..

the results are “not significant”). was an association observed? If no association was observed. we will not care to pursue the matter regardless of the p-value. Page 23 _________________________________________________ ____________________________________________ www. Schoenbach 14. then the appropriate characterization of the finding is “no association was observed” (but see below).epidemiolog. Data analysis and interpretation – 473 rev. 7/22/2004 If the p-value is not small (i. 6/27/2004. then we can say “an association was observed but the data were insufficient to discount chance as an explanation” [not “there was no .difference or association is too small to be scientifically or clinically significant (as opposed to statistically significant). 3/29/2004. If an association was observed..e.net © Victor J.

then we cannot say much. always. If statistical power was high. then we can say the data provide evidence (assuming. If no association was observed. then the only conclusion we can draw is that the data do not provide sufficient evidence to discount an explanation of chance alone – this is not equivalent to a conclusion that “an association was not observed” [since one was] or that “the observed association is due to chance” [which no one knows]. Other characterizations often stated are also unfortunate: . that bias is not present) against the existence of a strong association. If the observed association is strong enough to be important if it is not due to chance.association”!]. then we also need to ask what were our chances of detecting a meaningful association if one exists? If statistical power was low.

. but the data were too few to discount an explanation based on chance” or some similar expression. If the power was low. Here our conclusion depends upon the size of the study. if the study’s ability to detect a difference we would regard as .e.] An alternate possibility is that the observed association was too weak to be meaningful even if it had been associated with a small p-value. its statistical power to detect an association of some particular magnitude.“The observed association is not significant” [which tends to impugn it] “The association did not reach statistical significance” [which implies that the association should have been stronger – it may be as strong as it should be but be based on too few subjects.] Better to say “an association of ____ was observed. [Note: Any result can become “nonsignificant” if we stratify enough. i.

then there really is not much we can say or conclude.. . but that through the workings of chance our studies will observe the association to be weaker or stronger.e. then we are in a better position to interpret our results as evidence against the existence of a real association. In order to be reasonably certain that our study will detect the association. Suppose that there is a true association of a certain type and degree. we may well have made a “Type II error”). Statistical power and sample size Statistical power refers to the ability to detect an association of interest in the face of sampling error. except that our failure to find an association could well be due to chance (i. This inability is one of the reasons for discouraging researchers from conducting small studies except as a pilot study to develop procedures and instruments.important is low. If the power was high.

Page 24 _________________________________________________ ____________________________________________ www.net © Victor J. so that we .e. suppose that we are comparing a group of Alzheimer’s disease cases to a group of controls to see whether the cases are different in respect to presence of a specific gene.the study has to be large enough so that sampling error can be contained.epidemiolog. unbiased case-control study would be 2. we may well find 4 cases with the gene and 2 controls with the gene. 3/29/2004.25). If we study 20 cases and 20 controls. 6/27/2004. Schoenbach 14.. 7/22/2004 For example. Suppose that this gene is actually present in 20% of cases and in 10% of the population from which the cases arose (i. Data analysis and interpretation – 474 rev. the OR in a large.

e. completely failing to detect the difference in prevalence (OR = 1. That means that we will discount any association that we regard as within chance expectation. In fact. we could very easily get only 3 cases with the gene and 3 controls with the gene. so we will test whatever result we observe to make sure that it is greater than is expected to occur by chance alone (i. With such few subjects. we would not want to react to a difference or an OR that may readily be due to chance. not merely suspicion.0). Of course.”significant”).) Therefore.44). (Or recalling our courtroom fantasy. we might even get 4 controls with the gene and only 2 cases with the gene. a “preponderance of the evidence”. in order to detect an association.correctly estimate the prevalence of the gene in cases and in the population and the OR.. so that the gene appear to be protective (OR = 0. however. we must both (1) .

Statistical power to detect an OR ≠ 1. We need at least some minimum number of subjects so that (1) we have a reasonable expectation of observing an association if one exists (i..e.0 with a one-tailed significance test Distribution of test statistic if true OR =1. (alpha) → zα→ ←zβ ← Type II error probability (beta) z=0 z=1 (HA) .0 (H0) z=–1 z=0 z=1 Type I error prob. Each of these requirements places a demand on the size of the study. and (2) we will think it unlikely that chance could produce an association of that size.observe it in our study and (2) decide that chance would not likely have created it. that we will not make a type II error).

true OR is 1. Z) and compare it to its distribution under the H0 (the upper of the two distributions in the diagram). true OR is 2. i...0). Z) expected under the null hypothesis (e..g.g. alpha). then we will conclude that the data we observed came from the upper distribution (the one for no association.0) and alternate hypothesis (e. it falls to the left of the cutpoint we have set (defined by the Type I error probability. true OR=1. If the calculated value of Z is smaller than zα..25 This diagram illustrates the overlap between the central portions of the distributions of a test statistic (e. When we obtain the results from the study we will compute the test statistic (e.25).. Even if the Page 25 _________________________________________________ ____________________________________________ ..g. 2..g.Distribution of test statistic if OR is.e. e.g.

then our conclusion is correct. then our conclusion represents a Type II error.0 (which implies that Z was greater than 0).net © Victor J.25.e. The area to the left of the cutpoint on the lower distribution represents the probability of making a Type II error. Data analysis and interpretation – 475 rev. If instead the true OR is really 2. 6/27/2004. 1 . if we observe a value of Z to the right of the cutpoint. 3/29/2004.beta).. If the unseen truth is that there really is no association.www. “beta”. we will conclude that the data we . so that the data we observed really came from the lower distribution. Schoenbach 14. Statistical power – the probability of detecting a true difference – is equal to one minus beta (i.0.epidemiolog. 7/22/2004 OR we observed was greater than 1. Conversely. because Z was not greater than our cutpoint we regard the observed OR as a chance deviation from 1.

0. The area to the right of the cutpoint on the upper distribution represents the probability of making a Type I error. If we abhor making a Type I error. The width of the distribution is controlled by the sample size. . If we prefer to reduce beta. “alpha”. which reduces alpha – but increases beta. symbolizing greater precision of estimation).observed did not come from the upper distribution and that therefore the true OR is greater than 1. we can move the cutpoint to the right. If we are incorrect – if the association we observed was in fact simply a chance finding – then our conclusion represents a Type I error. What we would really like to do is to reduce both alpha and beta. we can move the cutpoint to the left – but that increases alpha. by making the distributions narrower (so that more of the shading is located at the center of the each distribution.

or the low amount of the budget. but the only way to reduce our chance of error is to get a more powerful light.. then our study estimates will be imprecise – the distributions in the above diagram will be wide.With a powerful light we can easily distinguish between. 0.e. corresponds to a stronger association. small alpha and beta) . respectively. intolerance for error (i. for example.25 only when the lower distribution is farther to the right. If the study size is limited due to the low incidence of the disease.80).05 and 0. we cannot be certain what we are seeing. But with a weak light. In essence. the low prevalence of the exposure. Commonly used values for alpha and beta are. for a total probability of error of 0.e. i..20 (power=0. We can elect to err on one side or the other. a snake and a stick. The total error probability will be below 0.25.

J. Morris can persuade the judge to raise the standard of evidence (the significance level).] The Appendix contains a section that translates these concepts into estimated sample sizes.and desire to detect weak associations must be paid for with sample size. The concept of “small studies bias” illustrates the importance of having an understanding of statistical power when interpreting epidemiologic studies. In our courtroom daydream. the better the chance we want of winning the case against R. big studies are powerful. small studies are weak. the higher the price we will have to pay for our legal representation (more study subjects). Small studies bias In crude terms. Page 26 _________________________________________________ .J. Morris (our power) and/or the more R.

Small studies that do not find a “significant” result are often not published. the investigators may not even write up the results – why not just conduct another study. 6/27/2004.epidemiolog. 3/29/2004. Br J Cancer 34:585-612.. since as explained above. 1976) is that since small studies are easier to carry out than large studies. Data analysis and interpretation – 476 rev. large studies are expensive and involve many investigators. In fact.net © Victor J. Whatever the results from a large study. Malcolm Pike. Schoenbach 14. . there is not much information in a negative study that had low power. there is more interest on everyone’s part to publish it. 7/22/2004 The idea behind small studies bias (Richard Peto. In contrast. many more are carried out. The journals tend not to be interested. et al.____________________________________________ www.

The large trials have statistical power of 95%. et al. and 20 large and 200 small trials of treatments which are really different. the body of published studies contains primarily small studies with “significant” results and large studies with “significant” and “nonsignificant” results. easy. The following example. Pike. many of the small studies that appear in the literature are reporting Type I errors rather than real associations. the small trials have . then a 5% probability of making a Type I error translates into a large number of positive findings and resultant publications. However. inexpensive) studies going on. Thus. comes from the article by Peto.000 small trials of treatments that are not really different. if there are many small (i. based on randomized trials of new treatments..e. Assume that there are 100 large and 1.To the extent that this scenario describes reality.

and only trials reporting significant results are published.05 250 50% . assumptions lead to the following hypothetical scenario for the number of treatment trials in progress that will be “statistically significant” (p<0. The significance level is 5%. These somewhat pessimistic.05 p<0. but perhaps very realistic.05): True death rate in Expected number to find Planned trial size Control Treatment Postulated # of trials p>0.statistical power of 25%.

000 950 (TN) 50 (FP) 25 50% .50% 100 95 (TN)* 5 (FP)* 250 50% 33% 20 1 (FN) 19 (TP) 25 50% 50% 1.

but only half of them will reflect a real difference between treatments. particularly ones that are large enough to be published even if they do not find a significant difference in treatments. . Peto. specificity. These results can be thought of in terms of the concepts of sensitivity. FP. Pike et al. 25% for small trials). TP are for analogy with sensitivity and specificity (see below). In this scenario. and predictive value. sensitivity corresponds to the statistical power to detect a true difference (95% for large trials.33% 1.’s conclusion is to pay attention only to large trials. 100 small trials with “significant” results will be published.000 150 (FN) 50 (TP) * TN. In this conceptualization. FN.

250 deaths) True death rate in treatment group (assuming 50% death rate in control group) P < 0.. and positive predictive value is the probability that a “significant” result in fact reflects a true difference in treatment effectiveness.net © Victor J.specificity corresponds to one minus the significance level – the probability of correctly identifying a chance result (95% specificity for a 5% significance level). 7/22/2004 Large trials (e.epidemiolog. 3/29/2004. Schoenbach 14. 6/27/2004. Data analysis and interpretation – 477 rev. Page 27 _________________________________________________ ____________________________________________ www.g.05 .

05 = 19/24 = 79% Small trials (e.g..33% 50% Total Yes 19 5 24 No 1 95 96 Total 20 100 120 Thus. 25 deaths) True death rate in . the predictive value of a p < 0.

000 .treatment group (assuming 50% death rate in control group) P < 0.05 33% 50% Total Yes 50 50 100 No 150 950 1.100 Total 200 1.

of a measure of effect) rather than significance testing.200 Predictive value of a P<. there is still a need to quantify the role of chance. has fallen somewhat out of favor for reporting data from epidemiologic investigations. with its decision-making orientation. Of course. but not for the computations] Statistical significance testing.g.interval estimation [EPID 168 students are responsible for these concepts. Confidence limits quantify the amount of uncertainty in an estimate by defining .05 = 50/100 = 50% Evaluating the role of chance . but in an estimation framework chance is quanitified by a confidence interval or confidence limits about the point estimate. it is argued that the more appropriate statistical approach is one of estimation (e.1. On the premise that an epidemiologic study is essentially a measurement process (see Rothman)..

6/27/2004. Data analysis and interpretation – 478 rev. when distorted by haphazard . Page 28 _________________________________________________ ____________________________________________ www..net © Victor J. 3/29/2004.an interval which should cover the population parameter being estimated (e.g.g. measure of effect) a known percentage of the time. Schoenbach 14. incidence density ratio) are consistent with the observed results?” Stated another way. 7/22/2004 Confidence intervals address the question.epidemiolog.. Various authors have argued that confidence intervals are superior to p-values as a means of quantifying the degree of random error underlying an association. “what possible values for a population parameter (e. “what is the range of true values which.

influences. could well have produced the observed results?” Confidence intervals provide a statement about the precision of an estimate or estimates based on the amount of data available for the estimate. however. not be observed. due to the luck of the draw. The frequentist view is that a “95% confidence interval” is an interval obtained from a procedure that 95% of the time yields an interval containing the true parameter. a 95% confidence . If a “significant” association was not observed. then the confidence interval can give some idea of how strong an association might nevertheless exist but. Ideally. is a little tricky (judging from a discussion of confidence intervals on the STAT-L internet listserv that continued for weeks and drew a host of responses and counterresponses). The nature of a confidence interval and what it does and does not provide.

a 95% confidence interval is like a student who typically scores 95% – the probability that he/she will give the correct answer to a question is 95%. There is no probability about it. All that can be said is that 95% of the time the procedure will yield an interval that embraces the value of the parameter (and therefore 5% of the time the procedure will yield an interval that does not). In this view. but the answer he/she gave to any particular question was either correct or incorrect. Page 29 _________________________________________________ ____________________________________________ .interval would be one that “contains the parameter with 95% probability”. But frequentists argue that the interval is set by the data. and the population parameter already exists in nature. The parameter is either in the interval or it is not.

3/29/2004. 7/22/2004 Possible true values Possible true values Observed result Observed result Confidence interval The concept behind the confidence interval Page 30 _________________________________________________ ____________________________________________ www. Schoenbach 14.www.net © Victor J. Schoenbach 14. 6/27/2004. 3/29/2004. 6/27/2004.epidemiolog. 7/22/2004 Computing a confidence interval for a ratio measure of effect .net © Victor J. Data analysis and interpretation – 480 rev. Data analysis and interpretation – 479 rev.epidemiolog.

then the confidence limits are: p ± 1. var(p) is the variance of the estimate of p (so √var (p) is the standard error). Since ratio measures of effect have a highly skewed distribution (most of the possible values lie to the right of the null value of 1.96 √ [var(p)] p ± 1. var(p) equals p(1 – p)/n.g. however. are ratios (e. the usual approach is .96 √[p(1 – p)/n] where p is the observed proportion. If the sample is large enough so that np > 5 and n(1-p) > 5. and OR). and n is the number of observations. IDR. and other simple proportions. CIR. cumulative incidence.0)..Introductory biostatistics courses cover the method for obtaining a 95% confidence interval for the estimate of a population proportion p. This method can be used to estimate confidence intervals for prevalence. For a proportion. Many epidemiologic measures.

96 √([var([ln(OR)])} To obtain the variance of the ln(OR). ln(IDR). b.96 √ (1/a + 1/b + 1/c + 1/d) .96 √([var[ln(OR)])} = OR exp{± 1. d are all at least 5.96 √ (1/a + 1/b + 1/c + 1/d)} or OR e+ 1.96 √{var[ln(OR)]} 95% CI for OR = exp{ln(OR) ± 1.to first estimate the confidence interval for the natural logarithm [ln(CIR). or ln(OR)] and then take the anti-log (exponent) of the confidence limits: 95% CI for ln(OR) = ln(OR) ± 1.96 √[(1/a + 1/b + 1/c + 1/d)] and the 95% confidence interval for the OR is: OR exp{+ 1. The 95% confidence interval for the ln(OR) is therefore: ln(OR) + 1. c. we use a simple formula (that has been derived by means of a Taylor series approximation to the ln[OR]): var{[ln(OR)] = 1/a + 1/b + 1/c + 1/d} which works well if a.

Anything other than an unbiased simple random sample and any error in measurement will invalidate the above at least to some . if the study population is highly-selected (i. independent) sampling and measurement. 7/22/2004 Formulas for confidence intervals for the CIR and IDR can be found in Kleinbaum. of course.. unrepresentative of any other population of interest). has been based on the assumption of perfect (unbiased.net © Victor J. 6/27/2004. Schoenbach 14. Data analysis and interpretation – 481 rev.epidemiolog.e. how useful is the value of the estimate? IMPORTANT CAVEAT: Everything in this section. Of course.Page 31 _________________________________________________ ____________________________________________ www. 3/29/2004. Kupper and Morgenstern and Rothman and Greenland.

it is argued. Meta-analysis proceeds from the recognition that the failure to find “significant results” can be due as much to the limited statistical power of individual studies as to the absence of a relationship. 2) identifying the studies (published and unpublished). Combining the information from multiple studies can yield a more precise and definitive assessment of the existence and strength of a relationship than is available from any one study or. and 4) statistical analysis. from a nonquantitative distillation of the literature.extent. Meta-analysis Meta-analysis is a quantitative approach to summarizing and synthesizing the findings from different studies of a particular relationship of interest. . 3) coding and evaluating the studies. There are four steps in carrying out a meta-analysis: 1) formulating the problem.

meta-analysis is predicated on the . In its pure form. The strategy for statistical analysis can be similar to that for stratified analysis.Steps 2) and 3) are critical for the validity of the metaanalysis. regarding each study as a separate “stratum”. so that the weighting scheme needs to take into account inter-study variability as well as intra-study variability (as in the random-effects model of analysis of variance). More refined approaches recognize that the studies themselves can be regarded as a sample from some universe of possible studies. since the judgments from the metaanalysis will depend upon the adequacy with which the evidence about the relationship is represented by the studies that are finally analyzed (the possibility of publication bias against “negative” studies implies that some effort should be made to locate unpublished studies).

In actual practice. measurements taken. since they often differ in the population(s) studied. so that the differences across the studies can be regarded as random (sampling) variability. a summary constructed by combining the studies gives a more precise estimate of the true association. “unmatched population-based case-control studies with a physiologic measure of exposure and control for the same set of potential confounders”) will differ in less obvious ways: the populations likely differ in unknown and unmeasured ways. epidemiologic studies are rarely equivalent. and analysis approaches.g. Hence.. Even studies that appear to be equivalent (e. however. response factors in the selection of .assumption that the collection of studies represents a random sample of equivalently-obtained observations of an association. the disease ascertainment systems may differ across populations.

g. 3/29/2004. collection processes and laboratory analysis of the exposure may differ in subtle ways that can nevertheless affect the results (e.net © Victor J. Page 32 _________________________________________________ ____________________________________________ www. 2001) illustrates some of these issues. 6/27/2004.. An exploration of heterogeneity in the meta-analysis of studies of SIDS and sleeping positions (Dwyer et al. and collection of data and analytic handling of potential confounders can differ. 7/22/2004 Interpretation of results Key questions . Schoenbach 14.epidemiolog.controls may differ. see examples involving HIV tests and homocysteine analyses in J Clin Epidemiol 2001(5)). Data analysis and interpretation – 482 rev.

Florida. 1994).1. Lesis Publishers. Schoenbach 14. What new hypotheses are suggested? 6.. 214 pp. Could chance or bias explain the results? 3. April 15. Biostatistics for epidemiologists. What are the next research steps? 7. . Boca Raton. Data analysis and interpretation – 483 rev. What are the clinical and policy implications? Page 33 _________________________________________________ ____________________________________________ www.epidemiolog.net © Victor J.00 (reviewed in Am J Epidemiol. What theories or mechanisms might account for findings? 5. Anders. How do the results compare with those from other studies? 4. How good are the data? 2. 3/29/2004. 1993. $45. 7/22/2004 Bibliography General Ahlbom. 6/27/2004.

40:189-192. Walter. Dwyer. The fragility of an altered proportion: a simple method for explaining standard errors. . John C. The Lancet 28 February 1987: 494-497. Bulpitt.J. Am J Epidemiol 2000151:921-6. III. Editing data: what difference do consistency checks make. Philip W. C. X and iprr: An improved summary for scientific communication.54:440-447. Alvan R. David Couper. Feinstein. Thomas A. J Chron Dis 2001. Alvan R. Terence. Bauer UE. J Chron Dis 1987.. Louis. Studies without internal controls. 40:283-288. Stephen D. Feinstein.Bailar. Lavori. Johnson TM. Marcia Polansky. J Chron Dis 1987. Sources of heterogeneity in the meta-analysis of observational studies: The example of SIDS and sleeping position. 311:156-62. N Engl J Med 1984. Confidence intervals.

Comparing means of several groups.87(7):1092-1095. 1981. A defence of the small . J Clin Epidemiol 1988. Parkins RA. Stanton A. Zachary B.313:1450-6. Gerbarg. 41:503-509. Horwitz. Lennard-Jones JE.Frank.10:778-783. Godfrey.. Hertz-Picciotto. Irva. Am J Public Hlth 1997.. John W. Epidemiology 1999. Primer of biostatistics. Healy MJR. Causation revisited. McGraw-Hill. confidence. J Clin Epidemiol 1988. Glantz. N Engl J Med 1985. Manning Feinleib. 41:425-426. What you should have learned about epidemiologic data analysis. Katherine. Northridge. MacRae KD. NY. Mervyn W. and all that. Bruce Levin. Mary E. Resolving conflicting clinical trials: guidlines for metaanalysis. Statistics in the journal– significance. Ralph I. Editorial. Powell-Tuck J. Susser.

Page 34 _________________________________________________ ____________________________________________ www.Modern Epidemiology. 3/29/2004. Dichotomizing continuous outcome variables: dependence of the magnitude of association and statistical power on the cutpoint. Br Med J 1986. Data analysis and interpretation – 484 rev. Battista RN. David R. Chapters 9. 14. 292:599-602. Chapters 7-8. 6/27/2004. Assessing the clinical effectiveness of .net © Victor J.3:434-440 Rothman . et al.clinical trial: evaluation of three gastroenterological studies. 10. Woolf SH. Logan AG. (Especially the first few pages of each of these chapters). Schlesselman . Schoenbach 14. Anderson GM. Epidemiology 1992.Case-control studies.epidemiolog. 7/22/2004 Ragland.

Significance tests have a role in epidemiologic research: reactions to A.3:449-452 Browner. Warren S. Statistical reasoning in epidemiology. Thomas B.M. Epidemiology 1992. Are all significant P values created equal? JAMA 1987. Am J Epidemiol 1991. 43:891-905. confidence intervals. Newman. Zeger. 257:2459-2463. and other summary measures of statistical significance and precision of estimates Allan H. 134(10):1062-1066.preventive maneuvers: analytic principles and systematic methods in reviewing evidence and developing clinical practice recommendations. Confidence limit analyses should replace power calculations in the interpretation of epidemiologic studies. The role of statistical hypothesis tests. Smith and Michael N. Scott L. Walker . J Clin Epidemiol 1990. Bates. Joseph L. Fleiss..

(Am J Public Health 1986. McGrawHill. Peace. Sander. statistics. Oakes. Maclure. Greenland. See also correspondence (587-588 and 1033). Am J Epidemiol 1992. NY. Karl E. Chestnut Hill. Mass. Tests for trend and dose response: misinterpretations and alternatives. 93:385-394 Greenland. 76:559-560). Forrester. Statistical inference. Randomization. Graybill. Introduction to the theory of statistics. George A. Clinical trials and statistical verdicts: probable grounds for appeal.1:421-429. Annals of Internal Medicine 1983. and Franklin A. Alexander M. Malcome. Michael. 2ed. Diamond and James S..135:96-104. 42(5):473477. Epidemiology Resources. and causal inference. . The alternative hypothesis: one-sided or twosided? J Clin Epidemiol 1989. Sander. Mood. 1986. 1963. Epidemiology 1990.

Poole C. Thompson. Douglas.Page 35 _________________________________________________ ____________________________________________ www. On the comparison of effects Am J Public . Tolo KA. Statistical criteria in the interpretation of epidemiologic data Am J Public Health 1987.D. 6/27/2004. 7/22/2004 Poole. 77:195-199. Beyond the confidence interval Am J Public Health 1987. Schoenbach 14. 77:191-194. Confidence intervals exclude nothing Am J Public Health 1987. W. 1970-1990. Savitz DA. 77:237)). Poole. Data analysis and interpretation – 485 rev. 3/29/2004. Statistical significance testing in the American Journal of Epidemiology. Thompson. W.net © Victor J. Am J Epidemiol 1994. C. (Additional correspondence (1987. Charles. 77:492-493.139:1047-.epidemiolog.

Imputation Heitjan. Sample size estimation Donner A. Robert F. 1980 (7th ed) see pages 102-105. Statistical Methods. Kleinman. Walker. 76:556-558. Woolson.Health 1987. 77:491-492. Alexander M. Daniel F. Am J Public Hlth 1987. Reporting the results of epidemiologic studies Am J Public Health 1986. 114:706 Snedecor GW. .. Annual Review of Public Health 1989(10). Am J Epidemiol 1981.87(4):548-550. Cochran WG. and Joel C. 129-130 (Table A is from page 104). Randomization by Cluster: sample size requirements and analysis. Birkett N. Perspectives on statistical significance testing. Annotation: what can be done about missing data? Approaches to imputation. and Burk C.

. Stephen D. L. Subgroup analysis.net © Victor J. Statistical analysis with missing data. Multiple testing of hypotheses in comparing two groups. Simultaneous interval estimates of the odds ratio in studies with two or more comparisons.31-34. Theodore Coulton. Cupples. 100:122-129. Adrienne. Arthur Schatzkin. Christopher J. J Clin Epidemiol 1989. Holford. Lancet 1988 (July 2). 1987. Charles W.Little RJA. 42(5):427-434.epidemiolog. Schoenbach 14. Theodore R. Wiley. Page 36 _________________________________________________ ____________________________________________ www. Annals of Internal Medicine 1984. Dunnett. Rubin DB. NY. Data analysis and interpretation – 486 . Timothy Heeren. Walter. Interpretation of multiple tests of statistical significance Bulpitt.

Circulation 61:508-515. Preventive Medicine 1987. Reuel A. Jennie A. Frederick McNeer.11:276-282. The use and abuse of subgroup analysis in epidemiological research. the Type II error and sample size in the design and interpretation of the randomized control . Chalmers. 16:183-194 (from Workshop on Guidelines to the Epidemiology of Weak Associations) See also Rothman. et al. Interpretation of “negative” studies Freiman. Jr. Int J Epidemiol 1982. Frank Starmer. Lee. Harry Smith. David R. Lessons from a simulated randomized trial in coronary artery disease. Simultaneous inference in epidemiological studies... 3/29/2004. 7/22/2004 Jones. Modern Epidemiology. 1980.. Thomas C. Kuebler. Stallones. Kerry L. 6/27/2004.rev. and Roy R. The importance of beta. and Lesley Rushton.

Cambridge MA. JAMA 260(5):652-656. Harvard University Press.B.trial. 1984. Sage.A. 112:564-569. 1986. When is the evidence for ‘no association’ sufficient? Editorial.J. Meta-analysis Light. A meta-analysis of alcohol consumption in relation to risk of breast cancer.299:690-694. CA. Sander. Pillemer.. (very readable) Longnecker M. Orza. The effect of misclassification in the presence of covariates. Meta-Analysis: quantitative methods for research synthesis.P. Beverly Hills. J. 252:81-82. Chalmers. T. JAMA 1984. (example) Wolf.M. F. Barbara S. . Hulka.J. Berlin.C. Bias Greenland. R.. Am J Epidemiol 1980. D. N Engl J Med 1978. M. Summing up: the science of reviewing research.

June 1984) Let N be the number of subjects (observational units) required in each of two groups to be compared.Walter.117:598-604. Page 37 _________________________________________________ ____________________________________________ www.epidemiolog. UNC Department of Biostatistics. 6/27/2004. confounding and observational error on attributable risk estimation. 7/22/2004 Appendix Estimating sample size to compare two proportions or means (Adapted from a summary provided by of Dana Quade. Am J Epidemiol 1983.net © Victor J. 3/29/2004. Stephen D. Data analysis and interpretation – 487 rev. Then N=IxDxC . Schoenbach 14. Effects of interaction.

two-sided) b. the critical values corresponding to alpha and beta from the normal distribution (see Table A on next page) D = Difference to detect..Where: I = Intolerance for error. respectively.10 – same as 1 . which depends on the narrowness of the difference between the true proportions or means. the more subjects needed “noise” .g. 5%. which depends on: a. Alpha = Desired significance level that we want to use for our hypothesis test (e.. D can be regarded as the inverse of the “signal-to-noise ratio” – the softer the signal or the louder the noise.. Beta = Type II error (e.g.power) Formula: I = (Zalpha + Zbeta)2 Zalpha and Zbeta are. in relation to the standard deviation of that difference.

p1 (1 – p1) + p2 (1 – p2) 2(σ2) D = ––––––– OR ––––––––––––––––––––– OR –––––––– “signal” (p1 – p2)2 (μ1 – μ2)2 (for differences in proportions. where μ1 and μ2 are the two means. where (p1 and p2 are the two proportions – see table on next page) (for differences in means. and σ2 is the variance of the difference) Page 38 .

If all observations are sampled independently. worksites. If rho is the intracluster correlation among observations within clusters.net © Victor J. etc.epidemiolog. by households.Clustered observations. Schoenbach 14. C = 1._________________________________________________ ____________________________________________ www. Data analysis and interpretation – 488 rev.g. 7/22/2004 C . then: C = 1 + (m-1) rho .). 3/29/2004. census tracts. which depends on whether observations are selected independently or in clusters. then sample size must be increased to offset the fact that observations within a cluster are more similar to each other than to observations in other clusters.. If observations are sampled in clusters (e. schools. 6/27/2004.

where m is the average cluster size (i. you will learn more from each one.e. n = km. C is often referred to as the design effect.01 0. If you choose “independent thinkers”. where k is the number of clusters). Table A: Intolerance for error Two-Tailed Tests One-Tailed Tests Significance Level Significance Level Desired power 0. then individual subjects contribute little information and you therefore need to study a very large number of them.05 .. If the clusters are large or if the people in them tend to be very similar.

6 6.5 8.2 10.9 10.90 14.80 11.01 0.7 7.0 6.0.9 6.10 0.10 0.2 4.5 .0 8.6 .05 0.6 13.

95 17.epidemiolog. 3/29/2004.20 . Data analysis and interpretation – 489 rev. 6/27/2004.8 13.10 .6 Page 39 _________________________________________________ ____________________________________________ www.8 15.30 .8 8.0. 7/22/2004 Table B: Difference to be detected p2 .0 10. Schoenbach 14.8 10.net © Victor J.

15 87 115 .2 4.5 1.3 p1 .7 2.4 1.05 55 9.40 .5 3.60 .50 .1 2.10 – 25 7..1 1.0 .

15 5.9 3.25 12.1 1.5 Complications 1) Unequal sample sizes Let n be the average sample size = (n1+n2)/2 .8 .3 139 159 19 7.6 2.5 .0 3.20 25 – 37 10 4.

lambda2 = n2/2n (lambda1 + lambda2 = 1) p1 (1 – p1) p2 (1 – p2) σ2 1 σ2 2 ––––––––– + ––––––––– ––––––––– + ––––––––– 2 lambda1 2 lambda2 2 lambda1 2 lambda2 D = –––––––––––––––––––––––––– OR –––––––––––––––––––––––– (p1 – p2)2 (μ1 – μ2)2 2) Covariables .Let lambda1 = n1/2n.

6/27/2004. 3/29/2004.net © Victor J. 7/22/2004 Note: more “precise” formulas can be found in the literature. but make a modest overall increase in n. If results for different strata are to be tested only for an overall average association. it is probably best not to try to allow for them in the sample size formulas explicitly.If statistical tests are to be conducted separately within each stratum then n as determined above is required for each stratum. Page 40 _________________________________________________ ____________________________________________ www. but the parameters needed for factors D and C are never really known. Data analysis and interpretation – 490 rev.epidemiolog. Schoenbach 14. Sample size for interval estimation .

As noted above.5 + 1.5 + 1.96 –––– √n .5) 0. Suppose. if p is 0.96 √[p(1 – p)/ n] For example. then a 95% confidence interval for p is : p + 1.5)/n] = 0. that an investigator wishes to estimate the proportion (p) of condom use in a clinic population. then the confidence interval is: (0. If the investigator can obtain a simple random sample of that population. where u is the number of users in the sample and n is the size of her sample. for example. then her estimate of the proportion of condom users would be p = u/n.50.The tolerable width for a confidence interval can be used as the target for estimating the required sample size for a study population. if np > 5 and n(1-p) > 5.96 √[ (0.5)(0.

5 – 1/√ n .1) = (0.e. so that the confidence limits are (0.5 + 0. the sample size. is 100.5 is: (0. i. for practical purposes this expression is equivalent to: 0.5 + 1/√ 100 ) = (0.96 × 0. suppose that n.5 + 1/√ n ) For example. 0.[The square root of (0. 0. 0. Then the 95% confidence interval around the point estimate of 0. 0.6) Imprecision is often quantified in terms of the half-width of the interval.5)(0.5) is. 0.1.4. 0. of course..5 + 1/10) = (0. .5 is approximately 1.5 + 1/√ n .5 – 1/10 .5] Since 1. the distance between the point estimate and the interval’s upper (or lower) limit.5 – 1/√ 100 .5 – 0.

7/22/2004 Since the above expressions involve the square root of the sample size. progressive narrowing of the interval width involves substantially greater increases in sample size.epidemiolog.05 absolute or 10% relative margin of error.e. 6/27/2004.net © Victor J. 3/29/2004. sample size must be quadrupled.5) in relative terms. Schoenbach 14. to 400: . The half-width of the above interval is 0. For example. Page 41 _________________________________________________ ____________________________________________ www. A 0.which we will refer to here as the “margin of error”. but not much more. to obtain a 0.1 (i.1/0. Data analysis and interpretation – 491 rev.1 absolute or 20% relative margin of error is adequate for a “ballpark” estimate of a proportion. the square root of n) in absolute terms or 20% (0..

500 yields limits one-fourth as wide as for n=100.5 + 1/√ 400 ) = (0. etc. which produces the widest error margin in absolute terms.5 – 1/20 .5 + 1/20) = (0. on the other hand.(0. The relative margin of error. A smaller or greater point estimate will have a narrower (in absolute terms) interval. a sample of 2. a sample size of 900 yields confidence limits onethird as wide as from a sample of 100. because the square root of p(1 – p) cannot exceed 0. 0.5 + 0. 0.5 – 1/√ 400 .05) = (0. These numbers apply to a point estimate of 0.45.5. 0.05.5 – 0.55) Similarly.5 (try it! – or use calculus). 0. is inversely related to the size of the point .

06*** 60*** 0.3 100 .2 100 0.estimate.1 100 0.080 40 0. Examine the following table: Margin of error (rounded) Point estimate Sample size Absolute * Relative ** (%) 0.

4 100 0.090 12 .100 20 0.5 100 0.090 30 0.096 24 0.096 16 0.0.6 100 0.7 100 0.

060 6.9 100 0.8 100 0.8 0.040 20 0.5 0.030 30 0.1 400 0.3 400 .0.080 9.2 400 0.

050 10 0.0 0.7 400 0.4 400 0.048 12 0.048 8.0.4 .6 400 0.045 15 0.045 6.5 400 0.

9 0.8 400 0.2 * Approximate half-width of 95% confidence interval in absolute terms ** Approximate half-width of 95% confidence interval in absolute terms. relative to the size of the point estimate Page 42 _________________________________________________ ____________________________________________ www.9 400 0. Schoenbach 14.0.epidemiolog.030 3.net © Victor J.040 4. Data analysis and interpretation – 492 .

Even a sample size of 2.01) / 100] = 1. relative error margin is inversely – and very strongly – related to the size of the point estimate For very small point estimates. 6/27/2004.05. 2.06 absolute error margin This table illustrates that: 1.96 (0.01)(1– 0. Margin of error (rounded) Point . quadrupling sample size halves the margin of error. 7/22/2004 *** Calculation: 1.rev. very large samples are required to obtain a small relative margin of error. 3/29/2004.96 √[(0.0588 ≈ 0.03) = 0. as illustrated in the following table.500 still produces a relative error margin of 17% for a proportion of 0.5 3. absolute error margin decreases as the point estimate moves away from 0.

5 900 0.033 6.05 10 0.6 .10 20 0.5 400 0.5 100 0.estimate Sample size Absolute * Relative * (%) 0.

500 0.0.5 2.020 4.05 900 .025 5.0 0.0 0.05 400 0.600 0.043 85 0.021 ** 43 ** 0.05 100 0.5 1.

96 × 0.600 0.05)(0.0214 / 0.05 and n=100.011 21 0.96 × √[(0.021 absolute error margin Relative = 0. How large a sample is large enough? If the objective is to set .0214 ≈ 0.0109 = 0.05 2.500 0.7% (approximately 43%) Recall that this formula requires that nP > 5.014 28 0.427 = 42.05 = 0.009 17 * See previous table ** Calculation: 1.05 1.95)/400] = 1. which is just met for P=0.0.

If when we carry out the study we obtain a point . then a sample Page 43 _________________________________________________ ____________________________________________ www.033. 7/22/2004 size of 900 will produce an interval with an absolute error margin no wider than 0. Since we expect the seroprevalence to be very small.5 – see above table) and more likely 0. then the 0. Schoenbach 14.011 is much more relevant than the 0.net © Victor J.011 (for a point estimate of 0.epidemiolog.033 (for a point estimate of 0. 3/29/2004.an upper or lower bound on a proportion. then a small absolute margin of error may suffice.05) or smaller. if one is testing for hepatitis C antibody and wants to be reassured that the seroprevalence is below 5%. For example. 6/27/2004. Data analysis and interpretation – 493 rev.

0. If the point estimate is below 0. then the 95% confidence interval will be (0. Note that the above is all based on the assumption of perfect (unbiased) simple random sampling and measurement. Meditations on hypothesis testing and statistical significance The statistical theory of hypothesis testing and assessment of statistical “significance” proceeds from an analysis of decision-making with respect to two competing hypothesis: a “null” hypothesis and .05. then the upper confidence limit will be below 5% and we are reassured that the seroprevalence is no greater than that value. Anything other than an unbiased simple random sample and any error in measurement will invalidate the above at least to some extent.039.04.061) which will tell us that the true value is at least not likely to be greater than 6%.estimate of exactly 0.

e. Two types of errors are possible: Type I: Erroneously reject the “null hypothesis” (H0). The Type I error presumably owes its prominence to the scientific community’s desire to avoid false alarms. to avoid reacting to results that may readily have been chance fluctuations. i. erroneously accept chance as an explanation. [A parallel dichotomy will be seen later in the course when we discuss sensitivity and specificity. since the Type II error probability depends on stating the size of true difference that . i.. Also the Type I error probability is easier to estimate.e. i. Type II: Erroneously fail to reject H0..] Traditionally.e.an alternative hypothesis. in favor of the alternate hypothesis (HA). erroneously reject chance as a sufficient explanation for the observed results. the Type I error probability has received more attention and is referred to as the “significance level” of the test..

10 would result from a chance process in only one in ten trials.one seeks to detect. since the p-value reflects the number of subjects as well as the size of the observed difference. Should such a finding be dismissed? Moreover. a significant (!) number of people refuse to pay any attention to results that have p-values greater than . a small study will have very small pvalues only for large (and perhaps unrealistic?) observed differences. Such a stance is a considerable labor-giving device. the calculation and presentation of “p-values” (which give information about the Type I error probability) have become de rigueur in the empirical scientific literature. Indeed. a result with a p-value of . After all.05 (5% probability of a Type I error). but is perhaps a bit brutal. If the size of the observed difference is unreasonably large. then . During recent decades.

6/27/2004.we may be suspicious of the finding despite a small p-value. 7/22/2004 Another reason for a reflective. 3/29/2004.net © Victor J. Not only may the mathematical models not adequately capture the real situation. rather than a reflexive. but the context in which they are used clouds the issue. If the observed difference is plausible. but because the study is small the p-value is “not significant”.epidemiolog. approach to p-values (and statistical inference generally) is that the probability estimates themselves are accurate only with respect to the models that underlie them. Data analysis and interpretation – 494 rev. Page 44 _________________________________________________ ____________________________________________ www. Schoenbach 14. One . we may nevertheless want to pay some attention.

A prolific investigator who conducts 200 studies in his/her professional life can . statistics. and causal inference Epidemiology 1990. But that means that 20 independent studies of two identical phenomena would observe. Randomization. one difference that was “significant” at the five percent level.critical assumption is that of random sampling or randomization (as in a randomized controlled trial). on the average. For example. Even in randomized trials problems of interpretation exist.1:421-249). the p-value for a single result in a single study may be 5 percent. it is rarely met in observational studies and the limitations that it imposes on the interpretation of statistical tests are often underappreciated (Greenland S. Although this assumption is the basis for virtually all of the statistical theory of hypothesis testing and confidence intervals.

Such “multiple comparisons” increase the likelihood of chance differences being called “significant”. and (3) will not perform any further . a study will often examine multiple outcomes. etc. Moreover.expect to have ten that are “significant” by chance alone. to produce recession or even depression [of study findings]. including the procedures for defining and manipulating all variables. like measures to suppress price inflation or grade inflation. what factors to control. (2) proceeded directly to the prespecified statistical test without looking at any other data. including multiple ways of defining the variables involved. decisions about all relationships to examine. Should an investigator be required to take an oath that he/she had (1) fully specified an a priori hypothesis. But the statistical procedures for dealing with this “significance inflation” tend.

Poole) assert that no adjustment is required – that once the data are in.. Rothman. but an energetic investigator can easily perform enough tests so that the adjusted significance level is impossible to satisfy.) What about so called “fishing expeditions” in which an investigator (or her computer) pores over a dataset to find “significant” relationships.statistical tests with the same data? (See Modern Epidemiology for more on these points. the number of tests is irrelevant. Is such a procedure better characterized as “seek and ye shall find” or as “search and destroy”? Some analysts recommend adjusting the significance level to take account of such “multiple comparisons”.. Other writers (e. a randomized . Greenland) have proposed more sophisticated approaches to adjustment. for example. Others (e.g. Perhaps the best course at this time is twofold: (1) If you are conducting a study.g.

epidemiolog. (2) If you are conducting an inquiry with few of the above characteristics. Page 45 _________________________________________________ ____________________________________________ www. especially one that may lead to some decision.net © Victor J. or have already completed the a priori hypothesis test. Then readers can interpret as they judge most appropriate. This approach ensures maximum impact for your results. in which you have a good chance of satisfying the assumptions for a statistical hypothesis test and are hoping to test a specific hypothesis.trial. then it is probably better to adhere to the Neyman-Pearson hypothesis testing format as much as possible. analyze all that you like but be candid in describing how you proceeded. Schoenbach .

Louis Guttman has written that estimation and approximation. What is not what in statistics. A study with advertised power of 90% could well have much less probability of detecting a given true difference because of dilution by information bias. The Statistician 25(2):81-107. Similarly we can in principle improve the effective power of a study if we can increase the precision with which important variables are measured. never forgetting replication. Data analysis and interpretation – 495 rev. 6/27/2004.14. 7/22/2004 Apparent (calculated) power is rarely achieved because it often assumes no errors in classification of subjects. [Louis Guttman. 3/29/2004. may be more fruitful than significance testing in developing science.] Independent replication is the cornerstone of scientific knowledge. .

and predictive value to interpreting statistical hypothesis tests suggests an analogy between statistical tests and diagnostic tests (see Browner and Newman. Just as the interpretation of a diagnostic test depends upon disease prevalence (the “a priori likelihood that the patient has the disease”). Clinical Biostatistics). Diamond and Forrester. 1983. 1987. The p-value provides instead the probability of observing an extreme result under a null ..e. specificity. i.Bayesian approach to p-value interpretation The application of the concepts of sensitivity. we would like statistical inference to provide an estimate of the probability that a hypothesis of interest (H) is true given the observed results. on the reasonableness of the hypothesis. the interpretation of statistical tests can be regarded as dependent upon “truth prevalence”. and Feinstein. As noted earlier.

In the Bayesian approach. the probability that H is true based only on previous information.. Let T mean that a statistical test is “significant”. we begin with a prior probability for the truth of the hypothesis and then adjust that probability based on the results of a study. The Bayesian approach to interpreting p-values tries to provide an answer that comes closer to the original objective. According to Bayes Theorem. then the a posteriori probability of H (the probability that H is true based on previous information and the current test result) is: . i. The effect that the study results have on our assessment of the credibility of the hypothesis depends on our original assessment of its credibility. to obtain a posterior probability. if Pr(H) is the “a priori” probability of H.hypothesis (typically the inverse of the hypothesis of interest).e.

Schoenbach 14.Pr(H) Pr(T|H) Pr(H|T) = –––––––––––––––––––––––––––– Pr(H) Pr(T|H) + Pr(h) Pr(T|h) [where Pr(T|h) means the probability of a positive test given that the hypothesis is not true] which can be written: Page 46 _________________________________________________ ____________________________________________ www.net © Victor J. 7/22/2004 Pr(H) Pr(T|H) Pr(H|T) = ––––––––––––––––––––––––––––––– Pr(H) Pr(T|H) + [1 – Pr(H)] Pr(T|h) Since Pr(T|H) is the statistical power (the probability of a positive test given that the hypothesis is true) and Pr(T|h) is the p-value (the probability of a positive .epidemiolog. Data analysis and interpretation – 496 rev. 3/29/2004. 6/27/2004.

the statistical power. Therefore the p-value has more impact on Pr(H|T) when Pr(H) is small (i. when a hypothesis is not supported by prior research or laboratory data) (see Diamond and Forrester). the posterior probability can be written: Pr(H) (power) Pr(H|T) = ––––––––––––––––––––––––––––––– Pr(H) (power) + [1 – Pr(H)] (p-value) Pr(H|T) is therefore a function of the “a priori” probability of the hypothesis. take a look at the following table: Page 47 _________________________________________________ ____________________________________________ www.test given that the hypothesis is not true).net © Victor J.epidemiolog. and the p-value. To get an idea of how these formulas work with typical values for the various elements..e. Schoenbach .

6/27/2004. statistical power. 7/22/2004 Evaluation of posterior probability based on prior probability. Data analysis and interpretation – 497 rev. 3/29/2004.14. and p-value Prior probability (Before the study) Statistical power of the study P-value (Findings of the study) Posterior probability .

8 0.(After the study) Pr(H) Pr(T|H) Pr(T|h) Pr(H|T) Credible 0.60 0.96 High power 0.8 0.92 hypotheses 0.100 0.60 0.60 .050 0.

5 0.050 0.05 .60 0.88 0.001 1.60 0.5 0.00 Long shot 0.0.8 0.60 0.100 0.5 0.94 Low power 0.001 1.00 0.

30 hypotheses 0.8 0.100 0.98 0.8 0.0.050 0.46 High power 0.05 .100 0.05 0.8 0.05 0.5 0.05 0.21 0.001 0.

however. a very strong p-value (e. so in the Bayesian framework a p-value of 0. Even a “nonsignificant” p-value (e. 0.10 would not . A p-value that is “just significant”.34 Low power 0. 0..001) gives high credibility (posterior probability) even for a long shot hypothesis examined in a study of low statistical power. for example.5 0.g..10) provides some increase in credibility of the hypothesis.g.050 0. does not make a hypothesis highly credible unless it was judged more likely than not before the study.5 0.0.001 0.05 0.96 In this table.

however. We can also use these concepts to show why the frequent temptation to interpret a small p-value as the probability that the result was due to chance is mistaken. also takes into account evidence for the association from studies that observed an association but had a p-value greater than 0.g. When confronted with a p-value of. in which results are combined across studies to obtain a quantitative assessment of an association from the full body of evidence.05. Formal use of Bayesian methods in everyday work. 0..be regarded as a “negative” result casting doubt on the existence of an association. which is .05. Meta-analysis. many statistical novices are tempted to interpret the result as meaning that “the probability that the finding was due to chance is only 5%”. is somewhat constrained by the absence of an obvious method for obtaining a prior probability. e.

epidemiolog. From the above table. Page 48 _________________________________________________ ____________________________________________ www. Schoenbach 14. For long shot hypotheses. 3/29/2004.05 corresponds to a posterior probability of much less than 95%.60).equivalent to a posterior probability that the hypothesis is true of 1 – 0.95 = 95%. a p-value of 0. 7/22/2004 More meditations on interpreting statistical significance tests Some of the concepts in the interpretation of statistical tests of significance can perhaps be illustrated through an example based on one glorious origin . 6/27/2004. Data analysis and interpretation – 498 rev. we see that the only situations in which the posterior probability is close to one minus the pvalue occur when the hypothesis is more likely than not to be true (a priori probability of 0.net © Victor J.05 = 0.

predict where the ball will land within a very small margin. and you wait to see how he does. your friend says he can predict the numbers where the ball will land. the wheel has numbers 1-100 on it. You give your friend $5 to prove his prowess at the local gambling casino. he claims. By watching the operator spin the wheel. your friend can. The null hypothesis for your statistical test is that your friend has no special ability. To verify your friend’s claim. Suppose that our friend tells you that he has an intuition about roulette wheels. If. for simplicity. you undertake a statistical test. He wants you to put up some money to send him to Monte Carlo to make our fortunes.of probability theory – games of chance. so that his chances of predicting the resting place of the ball on any one . Naturally you’re excited by the prospect of instant riches but also a bit skeptical.

try are simply 1 out of 100 (.01 level”! Do you underwrite his trip to Monte Carlo? How do you interpret his correct prediction? Is it correct to say that there is only a 1% chance that his accurate prediction was due to “luck”? Not quite. the prediction was made and the roulette . According to the frequentist interpretation. your are impressed.01). His performance was “significant at the . The 1-sided alternate hypothesis is that your friend does have this ability and can predict the correct number more often than 1 out of 100 times. [The 2-sided alternate hypothesis is that your friend will predict the resting place of the ball either more than would be expected by chance or less than would be expected. Knowing that the probability of his being correct on a given try by chance alone was only 1%.] Your friend returns with $400.

e. you might figure that it would be worth underwriting his trip to Monte Carlo. your friend can predict) or one (your friend cannot predict). but you would be aware that his correct prediction could have been due to chance because there was .. If you have to decide that day. So the probability that his correct prediction was due to chance is either zero (i. but only one of these was actually responsible that time.wheel has already been spun. you don’t know which! You can say (before the wheel was spun and assuming it was a balanced wheel) that if your friend had no special ability there was only a one percent probability of his making a correct prediction and that therefore his winning is evidence against the null hypothesis (of no ability) and in favor of the alternate hypothesis (ability to predict). The accuracy was due either to “chance” (“luck”) or your friend’s ability. The only trouble is.

a .epidemiolog. Page 49 _________________________________________________ ____________________________________________ www. Certainly you would not have been so impressed if he had told you he could make a correct prediction in 30 tries.e.net © Victor J. Data analysis and interpretation – 499 rev. Schoenbach 14..000. tells you that it actually took him 30 tries to make a correct prediction – he borrowed the money for the other 29 tries. If the probability of a correct prediction (i. 6/27/2004. 3/29/2004. So you give your friend $2. 7/22/2004 That information gives you pause.a one percent probability that in the absence of any clairvoyance his prediction would have been correct (not quite the same as a one percent probability that his correct prediction was due to chance). He thanks you profusely. and in parting.

i. The evidence against the null hypothesis is now not nearly so strong. if your friend .0 minus the quantity 0. the probability of winning a coin flip.e. But there are various practical problems in applying such procedures.99 raised to the 30th power). using statistical theory.01. It is possible.. For example.correct guess) in the absence of any special ability is 0. to adjust significance levels and p-values to take into account the fact that multiple independent significance tests have been done.26 (1. but not so impressively. Twenty-six percent is still less than 50 percent. then the probability of one or more correct guesses in 30 tries is 0. one of which is the lack of independence among multiple tests in a particular set of data. This change in your interpretation illustrates the issue that arises in connection with multiple significance tests and small studies bias.

explained that he so rarely makes an incorrect prediction that when he did he became so upset that it took him a whole hour (and 29 more predictions) to regain his predictive ability. in a given dataset. percent above ideal weight. obesity as indexed by weight/height2 [Quetelet’s index]. and you takes your choice. Similarly. and body density) weaken the findings for each test? If she also looked at blood pressure differences. does the fact that an investigator tested the same difference in various ways (e. weight/height3 [ponderal index]. then even if you remained skeptical you would be hard-put to calculate an adjusted p-value for your test if you thought he was telling the truth. skinfold thickness.g. would that weaken the credibility of statistical significance of differences in obesity? “You pays your money..” DATA INTERPRETATION .

1 Measuring scales * Nominal measurement . Scales of measurement per se have to do with the allocation of numerical values to characteristics according to certain rules. internal and ratio levels of measurement. knowledge regarding scales of measurement is a prerequisite. Measurement can thus either be quantitative or qualitative. The quantitative level of measurement includes among other things. Before choosing a statistical method for your own research project. aspects such as interpretation and paragraph analysis. ordinal. whilst the quantitative level of measurement focuses on measures such as nominal.The application of statistics in research is well documented. The latter are basic scales of measurement and will be briefly outlined.

and the numerical value 2 for a pass in the standard grade and so forth. The different matriculation subjects would then be listed i. To each subject passed on the higher grade a numerical value 1 will be allocated. Mathematics. Tr~is type of measurement is the most basic form of measurement.Nominal measurement includes the awarding of a numeral value to a specific characteristic. LG) his students passed during their matriculation examination. The following serves as an example of nominal measurement: A researcher wants to determine the profile of the academic background of his students. The numerical value 1 does not mean half of 2. it merely indicates a difference. because it measures the lowest level that can be measured and is therefore considered a scale of measurement with limitations. This scale of measurement is used mainly for the compiling . Geography etc. For this he/she might need information regarding the specific level (HG. English.e. SD.

The following serves as an example of measurement on ordinal level: A school wants to select the best student of the year. greater (more) or lesser (less) without specifying the size of the intervals (Leedy 1993: 38). The numerical 1 can be the highest. In this case the numeral 1 . The ordinal scale implies that the entity being measured is quantified in terms of either higher or lower. the finalists should be placed in rank order according to the set criteria in order to determine the best student. After the evaluators (in this case the teachers) have nominated the best students.of frequency tables (Smit 1983: 208). * Ordinal measurement Ordinal measurement is applicable in cases where a criterion/characteristic is awarded to numeral value in terms of a specific order (thus the name of the scale). whilst 3 could be the lowest.

* Interval measurement The interval scale of measurement is characterized by two features. correlations and percentile (Smith 1983: 209). and .a zero point which has been established arbitrarily (Leedy 1993: 38). and therefore the winner.equal units of measurement (equal intervals). rank order. percentage. The ordinal scale of measurement can be applied to determine the median. namely: . The latter indicates that there is not an absolute zero point.is an indication of the best student. There is therefore a specific: relationship between the distance (interval) of the numerical value and the different .

As an example of this type of measurement the following is given: an individual intelligence score is 110 whilst another is 100. provided that the . The difference between these scores is exactly 10. An increase or decrease of the one characteristic goes hand in hand with an increase or decrease of the other. The interval level of measurement enables the researcher to compromise between aspects and to indicate clearly how much more the one has of a characteristic than the other. do standard deviations and determine correlation studies. The interval scale of measurement is therefore suitable to calculate arithmetic mean averages. A second example of interval measurement is the Lickert attitude scale.sizes of a characteristic. this measure scale is considered to be a more advanced type of measuring scale. It should also be remembered that intelligence measurement has no zero point. Because of the before mentioned characteristics.

when ration levels are measured. that it represents. are abided by. because "no weight" can be determined. What should be mentioned is that. * Ration measurement This is considered the highest order of measurement that exist. because of the fixed proportions (ratio) between the number (numerical) and the amount of the characteristic. a fixed (absolute) zero point exists. the average weight of a rugby player is 75 kilograms. The following can serve as example of ration level of measurement: The average weight of a gymnast is 55 kilograms.researcher takes care that the preconditions set for each scale of measurement. Ration level of measurement thus enables researchers to determine whether aspects possess something of a characteristic or not. Kilograms are expressed in constant units. On the other hand. and a zero point does exist. Because scores on .

this type of measuring scale possess absolute values. 2 Characteristics of measuring scales With any type of measurement. Further refining of the term reliable is that. any type of arithmetical calculations are allowed. two considerations are important . when a test is repeated by the same researcher i. with a different group representing the original group. .e. A scale measurement is considered reliable if it measures that which it is supposed to measure. the same results should be obtained . * Reliability Reliability is the term used to deal with accuracy.validity on the one hand and reliability on the other hand.

and . From the literature consulted four types of validity stands out.prognostic validity. namely: .* Validity Validity on the other hand is concerned with the soundness and the effectiveness of the measuring instrument (Leedy 1 993: 40).content validity.simultaneous validity. Content validity deals with the accuracy with which an . .construct validity. .

checks the accuracy of the first measure and sets a standard against which to measure the results. Simultaneous validity is tested by comparing one measuring instrument to another one that measures the same characteristic and which is available immediately. The data of the measuring instrument should correlate with equivalent data of the criterion. as a criteria. under study. Consider the following as an example: it can be predicted from the matriculation results of a prospective student that he would be a successful medical student. The judgement is future orientated.instrument measures the factors or content of the course or situations. The second. Prognostic validity on the other hand relies basically upon the possibility to make judgements by virtue of results obtained by the instrument. .

3 Classification of statistical methods Before a researcher can use a statistical method for his research. * Descriptive statistics . Because of the circumference of statistical methods. an in-depth discussion cannot take place for the purpose of this element. he should be familiarized with the various statistical methods as well as the prerequisites for the implementation thereof. Statistical methods in the broadest sense are classified into two main groups namely descriptive and inferential statistics. It will suffice to highlight the basic statistical methods.Construct validity is interested in the degree to which the construct is actually measured.

. Percentages.Smit (1983: 212) sees descriptive statistics as the formulation of rules and procedures according to which data can be placed in useful and significant order. This indicates the relative frequency of the various variables to one another. Percentages (%) are calculated by multiplying a ratio with 100. variability (variation) and relationships (correlations) in data that are readily at hand. Landman (1988: 94) states that descriptive statistics deals with the central tendency. The most important and general methods used are: Ratios. The basic principle for using descriptive statistics is the requirement for absolute representation of data. In other words it is a ratio that represents a standard unit of 100. for example 1.

If the distribution tendency is large. It is a means to tabulate the rate of recurrence of a specific measurement. Characteristic is a vertical line (the y axis/ordinate) at the left sideline of the figure and the horizontal line (x axis) at the bottom.Frequency tables. The two lines meet at a 90 grade angle. for example a specific achievement in a test. you are referred to Huysamen (1976: 24). * The histogram. In order to understand and interpret a frequency table. The histogram is a graphic representation of frequency distribution and is being used to represent simple frequency distribution. Data arranged in such a manner is known as distribution. larger class intervals are used in order to acquire a more systematic and orderly system. Because frequencies should be divided into class .

In other words. the frequency polygon is formed. Usually an additional class is added to the end of the line in order to form an anchor. starting from the bottom of the class interval. the benefit of graphic presentation is that data can be observed immediately. The cumulative frequency in a specific class interval can then clearly indicate how many persons/ measurements perform below or above the class intervals. but is only used for continual data. from cumulative frequency tables a curve can be drawn. a dot indicating the highest score is placed in the middle of the class interval. Instead of drafting bars for the complete histogram. * Cumulative frequency curve. When the dots are linked up. to reflect data in a . The frequency polygon does not differ basically from the histogram. * Frequency polygon. The frequency on the frequency table is added. and adding class by class.intervals.

From such a table. (Smit 1983: 213). with regards to a certain point on the scale. wpe4. one could read certain percentages or promotions of persons or cases. wpe3. is regarded as the P10 (10 percentile). The cumulative frequency can also be converted into percentages or proportions of distribution.jpg (15279 bytes) * Line graphic. Those in which 25% of the score falls is the first quarter of P25 etc. whilst the vertical line (Y axis) indicated .graphic manner (Smit 1983: 213). The scale value in which 10% of the score in a distribution falls. During the previous graphic presentations the historical line (X axis) indicated the scale of measurement.jpg (18580 bytes) * Percentile curve.

jpg (13539 bytes) 4 Central tendency Central tendency is defined as the central point around which data revolve. For example: 375864595 . both axes (X and Y) are used to indicate the scale of measurement with the aim of indicating a comparison between two comparable variables (Smit 1983: 214). wpe5. The following techniques can be employed: * The mode The mode is defined as the score (value or category) of the variable which is observed most frequently. In the case of a line graphic.the frequency.

From the above mentioned. 10 13 14 15 18 19 22 25 25 The median in the above-mentioned is the fifth score. * Median The median indicates the middle value of a series of sequentially ordered scores. that is 18. . it can also be described as being the fiftieth percentile. Because the median divides frequencies into two equal parts. the mode equals 5 because 5 appears to be the most frequent score amongst all the numbers (occurred 3X). There are 4 counts on both sides of the numerical value 18.

By dividing the result by 2. The median for the above mentioned scores is therefore 18 + 19 ) 2 = 18. Because 18.5. the median can be determined. * Arithmetic mean The arithmetic mean refers to a measure of central tendencies found by adding all scores and dividing them by the number . Huysamen (1983: 50) states that one should in cases of these rather refer to the 18.In cases where you have. for instance: 10 13 14 15 18 19 22 25 26 29 there are 2 numerical values indicating the median.5 percentile. The fifth score with a numerical value of 18 and the sixth score with the numerical value of 19 are in the middle of the sequentially ordered scores.5 does not occur in the sequentially ordered scores.

The following is an example: 5 2 6 1 6 = (Sum total of scores wpe7. and the sum total of the scores (20) is divided by 5. The deviation of each score from the mean is squared. * Standard deviation The standard deviation is a measure of the spread of dispersion of a distribution of scores. . and the square root taken (Landman 1988: 94).jpg (788 bytes)) N Thus 5 + 2 + 6 + 1 + 6 = 20. N = 5. the result divided by N-1. the squared deviations are then summed. because there are 5 scores.of scores.

For more details on statistical calculations you are referred to Huysamen (1976). hypothesis testing and so forth. These methods. predictions. This is to say to make deductions or statements regarding the broad population as the samples from which the 'known' data are drawn. statistical methods enabling researchers to go from the known to the unknown data also exist. These methods includes estimation. . In conclusion the role of statistical methods in research is to enable the researcher to accurately utilize the gathered information and to be more specific in describing his findings.* Inference statistics Apart from descriptive statistics that deal with central tendencies. according to literature are called inferential or inductive statistics (Landman 1988: 95).

5 Self-test a) The following marks were allocated to students during a test they wrote: 33 44 62 60 44 61 81 86 69 80 75 54 66 73 50 80 72 42 71 87 46 73 56 63 69 88 86 49 Compile the following on the scores presented to you: frequency distribution histogram .

mode and median of the following: 8 7 3 21 16 34 22 18 19. WA 1988 Navorsingsmetodologiese .- frequency polygon. c) Determine the mode and median of the following: 8 6 11 12 3 31 12 8 9 12 10 5. GK 1976 Beskrywende Statistiek vir Sosiale Wetenskappe. SOURCE LIST Huysamen. Pretoria: Academica. Landman. b) Calculate the arithmetic mean.

Pretoria: HAUM.Grondbegrippe. PD 1985 Practical Research: Planning and Design. Smit.jpg (788 bytes) Modus Median c Modus = = = 21 16 12 = 15 . GJ 1983 Navorsingsmetodes in die geesteswetenskappe. Pretoria: Serva. New Tork: McMillan Publishing Co. 7 b ANSWERS TO SELF TEST wpe6. Leedy. Third Edition.

and so many businesses are able to use computerised accounting system. One of the most important factors of computerised accounting system is that it provides the same functions as a manual accounting system. There care many accounting packages available.Median = 12 Use of Computers in Accounting Introduction Computers play an important part in the recording of finical information. Main body .

Most business use computer systems instead rather then manual systems to record finical information.working out the costs of products sold. · Working out budgets for future expenditure. · Working out sales figures for different products or areas. Tasks that can be performed using computers are spreadsheets. because it is a lot faster file can be shared more easily and changes can be made easily. calculating and adding VAT and producing sales total. . which are used for a variety of functions: · Producing invoices .

Businesses. The aim of marketing is to acquire. retailing and merchandising. Computers play a significant role in inventory control. "THE ROLE OF COMPUTERS IN MARKETING" Marketing is the process by which goods are sold and purchased. sales. ledger accounts. rely a great deal on the use of computers. communication between . mail-order business. public relations. (double entry). tri. and pricing of goods. processing and handling orders. retain.Most accounting packages will provide the basis for daybooks. Modern marketing has evolved into a complex and diverse field. This field includes a wide variety of special functions such as advertising. and satisfy customers. market research. and particularly the marketing aspect of businesses.

and in some cases. producing the company newsletter. An important program has aided companies all over the world. They are the innovative software products of CAD/CAM and. As competition becomes more intense the formula for success becomes more difficult. the World Wide Web. complete control of company operations. Two particular things have greatly aided companies in their quests to accomplish these goals. design and production of goods. last but not least. In today's extremely competitive business environment businesses are searching for ways to improve profitability and to maintain their position in the marketplace. Computer-aided design and computer-aided manufacturing (CAD/CAM) is the integration of two . product and market analysis.satelite companies in an organization. advertising. manufacturing.

designers and engineers use computers for planning manufacturing processes. Computer-aided mechanical design is usually done with automated drafting programs that use . The major applications of CAD/CAM are mechanical design and electronic design. engineers and designers use specialized computer software to create models that represent characteristics of objects. This allows companies needed flexibility in studying different and daring designs without the high costs of building and testing actual models. CAM is linked to CAD through a database that is shared by design and manufacturing engineers.technologies. and managing entire plants. It has often been called the new industrial revolution. testing finished parts. In CAD. In CAM. saving millions of dollars. These models are analyzed by computer and redesigned as necessary. controlling manufacturing operations.

Computerized drafting is quicker and more accurate than manual drafting. Information is entered into the computer to create basic elements such as circles. More and more manufacturing businesses are integrating CAD/CAM with other aspects of production. mirrored. and points. These software programs help designers to consider both function and manufacturing consequences at early stages. and marketing. adds to effective materials .interactive computer graphics. scheduling. known as computer-integrated manufacturing (CIM). speeds processing of orders. lines. and scaled. Desktop manufacturing enables a designer to construct a model directly from data which is stored in computer memory. when designs are easily modified. It makes modifications much easier. This idea. moved. and users can zoom in on details. including inventory tracking. Elements can be rotated.

This media usually follows passive one-to-many communication where a firm reaches many current and potential customers through marketing efforts that allow limited forms of feedback on the part of the customer. For several years a revolution has been developing that is dramatically changing the traditional form of advertising and communication media. inexpensively and simply on the World Wide Web. a massive global network of interconnected . maybe millions of potential clients and partners? You can.management. a company must be effectively able to advertise. market. What if you could passout your business card to thousands. In addition to designing and manufacturing a product. twenty four hours a day. This revolution is the Internet. and sell its product. Firms communicate with their customers through various types of media. and creates considerable cost savings. Much of what passes for business is nothing more than making connections with other people.

and databases. complex documents.computer networks which has the potential to drastically change the way firms do business with their customers. cost-effective document transfers. It provides access to multimedia. wide scale information dissemination. recruiting new . rapid communication. The recent growth of the world wide web (WWW) has opened up new markets and shattered boundaries to selling to a worldwide audience. expert advise and help. It can be used as a complete presentation media for a company's corporate information or information on all of its products and services. The Web is one of the most effective vehicles to provide information because of its visual impact and advanced features. The World Wide Web is a hypertext based information service. rapid information access. for product and market analysis. For marketers the world wide web can be used to creat a client base.

peer communi. or distributor. Making business information available is one of the most inportant ways to serve your customers. If you could keep your customer informed of every reason why they should do business with you. retailer.cations. provided that your presence on the internet is known. This process involves a careful market analysis. Lets examine these in more detail. your business would definitely increase.employees. product marketing and consumer base testing. There are different benefits depending upon the type of business and whether you are a supplier. The usefullness of the Internet or WWW depends directly on the products or services of each business. The Internet is a ready base of several million people from all walks of life. Before people decide to become customers. One can easily find new customers and clients from this massive group. Finding new clients and new client bases is not always an easy task. they . and new business opportunities.

These surveys can reach millions of people and potential clients with very little effort on the part of the surveyors.want to know about your company. A company can get first hand reports on the functionality of such products before spending a great deal of money. Many users also do product analyses and comparisons and report their findings via the World Wide Web. Once a product is already marketed. Getting customer feedback can lead to new and improved products. Feedback will let you know what . the large base of Internet users is a principle area for the distribution of surveys for an analysis of the market for a new product of service ideas. what you do and what you can do for them. you can examine the level of satisfaction that users have received from the product. This can be accomplished easily and inexpensively on the World Wide Web. Also. Quite frequently one can find others who may be familiar with a product that you are currently testing.

Accessing information over the Internet is much faster on most occasions than transmissions and transfers via fax or postal courier services. you can have a crystal ball into where to position your product or service in the marketplace. easier and much less expensively than any other market you may reach. yet still provides the advantages of postal mail. For the cost of a page or two of Web programming.customers think of your product faster. Email can be sent from just about anywhere that there is an Internet service or access so that businessmen or . You can access information and data from countries around the world and make interactive connections to remote computer systems just about anywhere in the world. Contacting others through email has provided a unique method of communication which has the speed of telephone conversations. Electronic mail has also proved to be an effective solution to the problem of telephone tag.

travelers can keep in touch with up to the minute details of the office. phone system and regulation systems in all of your potential international markets. You can place documents on the Internet and instantly make them accessible to millions of users around the world. . clients or the general public. than the circulation of many major newspapers and/or television medias. Another benefit of the World Wide Web is wide scale information circulation. You may not be able to use the mail. Hypertext documents provide an effective technique by which to present information to subscribers. you can open up a dialogue with international markets as easily as with the company accross the street. With the World Wide Web. and cheaper. however. Creating World Wide Web documents and registering your site with larger Web sites improves the availability of the documents to a client base larger.

Current or potential clients are not lost due to late or absent documents. losses or damage. and other periodicals. there are a great number of experts on the Internet who make their presence widely known and easily accessable. Transferring on.The Web is also more cost-effective than conventional advertising. If a document transfer fails on the Internet. Beyond product and market analysis. saving a great deal of money over postal or courier services which can also suffer late deliveries. magazines.line documents via the Internet takes a minimal amount of time. Quite often you can get free advice and help with problems you might have from the same people you may otherwise pay highly for their consulting services to large organizations. you can always try again since the cost of the transfer is exactly the same. Researchers and business executives alike have attested to the fact that much of their communications .

Many businessmen and conpanies are continuously on the look-out for new and innovative ideas as viable business ventures.over the Internet are with others in their line of research or field of work. the Internet has many job lists and resumes online for prospective employers. New resumes are constantly posted to the Web to inform companies of the availability of new skills. Communicating with peers allows the sharing of ideas. Internet users are continuously coming up with such new ideas because of the available research the Internet offers and also because of the cooperative atmosphere that surrounds the internet. Often people find that others in their field have already created solutions for problems similar to their own. In addition. . problems and solutions among themselves. They are able to obtain advice on their own situations and create a solution based upon this shared knowledge.

inventory control . advertising and sales.As competition intensifies in the business world. and even total company operations Role Of Computers In Marketing THE ROLE OF COMPUTERS IN MARKETING Marketing is the process by which goods are sold and . from product design and manufacturing. consumers are faced with more and more products and services to choose from. Computers play a significant role in every aspect of a company's survival. market analysis. Computer technology is by far the most important and impressive means by which to insure a company's success. The successful business and marketing approach utilizes everything possible to insure that the choice the customer makes is to choose their product or service. creating client databases. The future of business is being decided right now in the minds and wallets of customers.

purchased. and particularly the marketing aspect of businesses. manufacturing. and satisfy customers. The aim of marketing is to acquire. processing and handling orders. mail-order business. Computers play a significant role in inventory control. advertising. producing the company newsletter. rely a great deal on the use of computers. product and market analysis. Businesses. public relations. retain. Modern marketing has evolved into a complex and diverse field. and in some cases. In today's extremely competitive business environment businesses are searching for ways to improve profitability . sales. market research. complete control of company operations. retailing and merchandising. and pricing of goods. communication between satellite companies in an organization. design and production of goods. This field includes a wide variety of special functions such as advertising.

Computer-aided design and computer-aided manufacturing (CAD/CAM) is the integration of two technologies. They are the innovative software products of CAD/CAM and. These models are analyzed by computer and redesigned as necessary. Two particular things have greatly aided companies in their quests to accomplish these goals. It has often been called the new industrial revolution. An important program has aided companies all over the world. last but not least. As competition becomes more intense the formula for success becomes more difficult. In CAD. engineers and designers use specialized computer software to create models that represent characteristics of objects.and to maintain their position in the marketplace. This allows companies needed flexibility in . the World Wide Web.

designers and engineers use computers for planning manufacturing processes.. (June 03) Computers are probably the only tool available that can help us in storage and organization of data and information. saving millions of dollars. testing. In CAM. The computers became popular because of the following features: * Speed * Reliability * Diligence * Versatility * Large memory.. . Today computer industry is the biggest industry worldwide and has a great impact on the society.studying different and daring designs without the high costs of building and testing actual models. Narrate the role of computers in accounting.

Help in Controlling: With the help of computers.Role of computers in accounting & Business organizations Help in Operations: Computers help in various accounting operations like invoicing. etc. A computer can process almost any type of information required by a business. a business concern can have better control over its operation. Some areas where computers are most popular are listed below: * Inventory control * System analysis * Inventory control . maintaining ledger. calculation of wages. credit control. They help in budgetary control. sales analysis. etc.

* Sales accounting * Market research * Purchase accounting * Planning & control * Quality control * Management accounting Q. computers track inventories with bar codes and scanners. In business. Put forth your suggestions for an ideal computerized system of accounting & finance. and transfer . (June 03) The modern age is called the "Computer Age" or "Information Age" because computers are becoming very popular. check the credit status of customers. People use computers in a wide variety of ways. Examine the utility of available software for performing accounting and finance functions.

display complicated data. Computers in automobiles regulate the flow of fuel. thereby increasing gas mileage. In homes. and animation to their lectures. or model systems that are too costly or impractical to build. Computers also entertain. exist to aid every level of education. Computers are used extensively in scientific research to solve mathematical problems. operate home security systems. The military employs . with computercontrolled projection units. creating digitized sound on stereo systems or computer-animated features from a digitally encoded laser disc. Educators use computers to track grades and prepare notes. tiny computers embedded in the electronic circuitry of most appliances control the indoor temperature. such as testing the air flow around the next generation of space shuttles.funds electronically. they can add graphics. or applications. Computer programs. from programs that teach simple addition or sentence construction to programs that teach advanced calculus. tell the time. sound. and turn videocassette recorders on and off.

computers in sophisticated communications to encode and unscramble messages. BUSSY. and to keep track of personnel and supplies. etc. The computers have become popular because of: * Speed * Reliability * Diligence * Versatility * Large memory. TALLY provides the following functions for accounting procedure: . The most widely accepted is the TALLY. Account Manager. There are many softwares available in the market for the purpose of maintaining accounts such as TALLY.

* Maintaining ledger & journals * Preparing balance sheet. profit & loss a/c. * Ratio Analysis * Maintaining funds & cash flow statement * Preparing reports Ideal computerized system of accounting & finance must be able to perform following functions: * Generating reports * Fast access of accounts * Comparison of records * Easy maintenance * Flexible * Cheap * Should have some artificial intelligence * Secure * Forecasting should be allowed .

viz.* Record processing should be easy Q. shall be of only two kinds. Preference share capital and equity share capital. Explain the latest and other important sources of longterm and short-term financing. . (June 02) Following are some long-term & short-term sources of financing for a business: Long-term sources Shares: It is the most important source for raising permanent or long-term capital. 1956 or the share capital issued after that date. 1956 provides that share capital of a company formed after April 1. Section 86 of Companies Act.

a preference share is one. Equity shares entitle to whole of the profits earned by the company. 1956. 2. Equity Shares: According to Section 85 of The Companies Act. A preference share has a preferential right to dividend to be paid either as a fixed amount or an amount calculated by a fixed rate which may be either free of or subject to income tax. after a fixed dividend on preference shares that has . an equity share is a share which is not a preference share.Preference shares: According to Section 85 of The Companies Act. which fulfills the following conditions: 1. A preference share has the right to the repayment of capital before any thing is paid to equity shareholders on the winding up of the company. 1956.

are equity shares. This source of raising short-term & medium finance was .been paid by it. it invites the general public to subscribe to its debentures. Redeemable Debentures. A debenture is a certificate issued by the company acknowledging the debt due by it to its holders and is issued by means of a prospectus in the same manner as shares. Perpetual or Irredeemable Debentures. Debentures: When a company desires to borrow a considerable sum of money for its expansion. The following are the various types of debentures issued by a company: Simple or naked Debentures. Public Deposits: Public deposits are the fixed deposits accepted by a business enterprise directly from the public. Convertible Debentures. Non-Convertible Debentures. Secured and Mortgage Debentures. Equity shares have no right to either a fixed dividend or repayment of a pre-determined amount of capital in the event of winding of the company.

very popular in absence of banking facilities. It is an internal source of finance & is suitable for an established firm for its expansion. Industrial Development bank. Ploughing back of profits: It means reinvestment by concern of its surplus earnings in the business. replacement. trading on equity. Short-term Sources . This source is more suitable for medium term demands of working capital. Public deposits have several advantages such as simple & convenient source of finance taxation benefits. etc. State Finance Corporation. etc. Interest is charged at fixed rate on these loans. Loans from Financial Institutions: Several financial institutions like LIC. no need of securities and an inexpensive source of finance. also provide loans.

In India only large companies enjoy high credit rating & can issue commercial paper to raise short-term funds. Advance payment: Some business houses get advances from their customers and agents. . Installment Credit: In this method assets are purchased and the possession of goods is taken immediately but the payment is made in installments. Generally. The credit-worthiness of the firm and the confidence of its suppliers are the main basis of securing trade-credit. It is an important source of short-term finance. interest is charged on the unpaid amount. It is a cheap source of finance.Trade Credit: It is the credit extended by the suppliers of goods in the normal course of business. Commercial Paper: It represents unsecured promissory notes issued by firms to raise short-term funds.

Most computer manufacturers offer free. written information on the inventory management systems available for their . Often the justification for such a computer-based system is enhanced by the fact that company accounting and billing procedures can also be handled on the computer.Deferred Income: These are incomes received in advance before supplying goods or providing service Using Computers in Inventory Management Today. both through the widespread existence of computer services organizations (listed in the yellow pages of many telephone directories) and the decreasing cost of micro computers. the use of computer systems to control inventory is far more feasible for small business than ever before.

are used properly to produce a profit. These companies provide a good source of information on general descriptions of particular inventory management techniques. when to order and what price to pay. In addition. the second is making sure that the items.computers. as well as help on specific inventory management problems. but closely related elements: the first is knowing what and how much to order. Whether a manual or computerized inventory management system is used. once brought into inventory. the important thing to remember is that inventory management involves two separate. . computer service companies often have material readily available describing the use of their particular computer "software" programs for inventory management.

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