BUSINESS ENVIRONMENT NOTES FOR MBA

8/17/2019 BUSINESS ENVIRONMENT NOTES FOR MBA

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BALANCE OF PAYMENTS

The balance of payments, also known as balance of international payments and abbreviated BOP, of a

country is the record of all economic transactions between the residents of the country and the rest of the world

in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by

individuals, firms and overnment bodies. Thus the balance of payments includes all e!ternal visible and non"

visible transactions of a country . #t represents a summation of country$s current demand and supply of the claims

on forein currencies and of forein claims on its currency.%&'

.%' These transactions include payments for the country$s e!ports and imports of oods, services, financial

capital, and financial transfers.#t is prepared in a sinle currency, typically the domestic currency for the country

concerned. ources of funds for a nation, such as e!ports or the receipts of loans andinvestments, are recorded

as positive or surplus items. *ses of funds, such as for imports or to invest in forein countries, are recorded as

neative or deficit items.

+hen all components of the BOP accounts are included they must sum to ero with no overall surplus or deficit.

-or e!ample, if a country is importin more than it e!ports, its trade balance will be in deficit, but the shortfall will

have to be counterbalanced in other ways such as by funds earned from its forein investments, by runnin

down central bank reserves or by receivin loans from other countries.

+hile the overall BOP accounts will always balance when all types of payments are included, imbalances are

possible on individual elements of the BOP, such as the current account, the capital account e!cludin the central

bank$s reserve account, or the sum of the two. #mbalances in the latter sum can result in surplus countries

accumulatin wealth, while deficit nations become increasinly indebted. The term balance of payments often

refers to this sum/ a country$s balance of payments is said to be in surplus (equivalently, the balance of payments

is positive) by a specific amount if sources of funds (such as e!port oods sold and bonds sold) e!ceed uses of

funds (such as payin for imported oods and payin for forein bonds purchased) by that amount. There is said

to be a balance of payments deficit (the balance of payments is said to be neative) if the former are less than

the latter. 0 BOP surplus (or deficit) is accompanied by an accumulation (or decumulation) of forein e!chane

reserves by the central bank.

*nder a fi!ed e!chane rate system, the central bank accommodates those flows by buyin up any net inflow of

funds into the country or by providin forein currency funds to the forein e!chane market to match any

international outflow of funds, thus preventin the funds flows from affectin the e!chane ratebetween the

country$s currency and other currencies. Then the net chane per year in the central bank$s forein e!chane

reserves is sometimes called the balance of payments surplus or deficit. 0lternatives to a fi!ed e!chane rate

system include a manaed float where some chanes of e!chane rates are allowed, or at the other e!treme a

purely floatin e!chane rate (also known as a purely flexible e!chane rate). +ith a pure float the central bank

does not intervene at all to protect or devalue its currency, allowin the rate to be set by the market, and

the central bank$s forein e!chane reserves do not chane, and the balance of payments is always ero.

https://en.wikipedia.org/wiki/Balance_of_payments#cite_note-International_Trade_and_Finance-1https://en.wikipedia.org/wiki/Balance_of_payments#cite_note-International_Trade_and_Finance-1https://en.wikipedia.org/wiki/Balance_of_payments#cite_note-Sloman-2https://en.wikipedia.org/wiki/Balance_of_payments#cite_note-Sloman-2https://en.wikipedia.org/wiki/Balance_of_payments#cite_note-Sloman-2https://en.wikipedia.org/wiki/Exportshttps://en.wikipedia.org/wiki/Exportshttps://en.wikipedia.org/wiki/Importshttps://en.wikipedia.org/wiki/Importshttps://en.wikipedia.org/wiki/Good_(economics_and_accounting)https://en.wikipedia.org/wiki/Good_(economics_and_accounting)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/Financial_capitalhttps://en.wikipedia.org/wiki/Financial_capitalhttps://en.wikipedia.org/wiki/Financial_capitalhttps://en.wikipedia.org/wiki/Transfer_paymentshttps://en.wikipedia.org/wiki/Transfer_paymentshttps://en.wikipedia.org/wiki/Loanshttps://en.wikipedia.org/wiki/Loanshttps://en.wikipedia.org/wiki/Investmentshttps://en.wikipedia.org/wiki/Investmentshttps://en.wikipedia.org/wiki/Current_accounthttps://en.wikipedia.org/wiki/Current_accounthttps://en.wikipedia.org/wiki/Current_accounthttps://en.wikipedia.org/wiki/Capital_accounthttps://en.wikipedia.org/wiki/Capital_accounthttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Central_bankhttps://en.wikipedia.org/wiki/Fixed_exchange_ratehttps://en.wikipedia.org/wiki/Fixed_exchange_ratehttps://en.wikipedia.org/wiki/Foreign_exchange_markethttps://en.wikipedia.org/wiki/Exchange_ratehttps://en.wikipedia.org/wiki/Exchange_ratehttps://en.wikipedia.org/wiki/Managed_float_regimehttps://en.wikipedia.org/wiki/Managed_float_regimehttps://en.wikipedia.org/wiki/Floating_exchange_ratehttps://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Market_(economics)https://en.wikipedia.org/wiki/Market_(economics)https://en.wikipedia.org/wiki/Foreign-exchange_reserveshttps://en.wikipedia.org/wiki/Balance_of_payments#cite_note-Sloman-2https://en.wikipedia.org/wiki/Exportshttps://en.wikipedia.org/wiki/Importshttps://en.wikipedia.org/wiki/Good_(economics_and_accounting)https://en.wikipedia.org/wiki/Service_(economics)https://en.wikipedia.org/wiki/Financial_capitalhttps://en.wikipedia.org/wiki/Financial_capitalhttps://en.wikipedia.org/wiki/Transfer_paymentshttps://en.wikipedia.org/wiki/Loanshttps://en.wikipedia.org/wiki/Investmentshttps://en.wikipedia.org/wiki/Current_accounthttps://en.wikipedia.org/wiki/Capital_accounthttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Foreign_exchange_reserveshttps://en.wikipedia.org/wiki/Central_bankhttps://en.wikipedia.org/wiki/Fixed_exchange_ratehttps://en.wikipedia.org/wiki/Foreign_exchange_markethttps://en.wikipedia.org/wiki/Exchange_ratehttps://en.wikipedia.org/wiki/Managed_float_regimehttps://en.wikipedia.org/wiki/Floating_exchange_ratehttps://en.wikipedia.org/wiki/Currencyhttps://en.wikipedia.org/wiki/Market_(economics)https://en.wikipedia.org/wiki/Foreign-exchange_reserveshttps://en.wikipedia.org/wiki/Balance_of_payments#cite_note-International_Trade_and_Finance-1


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CONCEPT OF DISINVESTMENT

Disinvestment refers to the use of a concerted economic boycott to pressure a overnment, industry, or

company towards a chane in policy, or in the case of overnments, even reime chane. The term was first

used in the &123s, most commonly in the *nited tates, to refer to the use of a concerted economic boycott

desined to pressure the overnment of outh 0frica into abolishin its policy of apartheid. The term has also

been applied to actions taretin #ran,udan, 4orthern #reland, 5yanmar , and #srael.

O6

In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or

subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital expenditures. Some

people use the termdivestiture, orto divest when discussing disinvestment.

For example, an electric generator manufacturer might sell off its consumer generator product lines and

manufacturing facilities in order to raise money that can be used to expand its industrial generator product line.

Another example is a consumer products company selling off a profitable division that no longer meets its longrange goals. The proceeds from this disinvestment are then used to improve the company's financial position by

reducing its debt.

ROLE IN ENVIRONMENT

There is a movement to disinvest from coal, oil and as companies. #t is a social movement which ures

everyone from individual investors to lare institutions to remove their investments (to divest) from publicly listed

oil, as and coal companies, with the intention of combatin climate chane by reducin the amount of

reenhouse ases released into the atmosphere, and holdin the oil, as and coal companies responsible for

their role in climate chane.

-ounder of the movement Bill 5c7ibben, a researcher and academic from *niversity of 8ictoria, and creator of

the webpae 9:3.or stated/ ;#f it is wron to wreck the climate, then it is wron to profit from the wreckae. +e

believe %


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Corporate social responsibility (CSR)

Corporate social responsibility (CSR, also called corporate conscience, corporate

citizenship or responsible business)%&' is a form of corporate self"reulation interated into a businessmodel. 6 policy functions as a self"reulatory mechanism whereby a business monitors and ensures its

active compliance with the spirit of the law, ethical standards and national or international norms. +ith

some models, a firm$s implementation of 6 oes beyond compliance and enaes in Eactions that

appear to further some social ood, beyond the interests of the firm and that which is required by law.E %'

%9' The aim is to increase lon"term profits throuh positive public relations, hih ethical standards to reduce

business and leal risk, and shareholder trust by takin responsibility for corporate actions. 6 strateies

encourae the company to make a positive impact on the environment and stakeholders includin

consumers, employees, investors, communities, and others.

https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1https://en.wikipedia.org/wiki/Industry_self-regulationhttps://en.wikipedia.org/wiki/Industry_self-regulationhttps://en.wikipedia.org/wiki/Business_modelhttps://en.wikipedia.org/wiki/Business_modelhttps://en.wikipedia.org/wiki/Norm_(sociology)https://en.wikipedia.org/wiki/Norm_(sociology)https://en.wikipedia.org/wiki/Norm_(sociology)https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-CPRtheory2001-2https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-CSRinternational2005-3https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-CSRinternational2005-3https://en.wikipedia.org/wiki/Stakeholder_(corporate)https://en.wikipedia.org/wiki/Stakeholder_(corporate)https://en.wikipedia.org/wiki/Stakeholder_(corporate)https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-1https://en.wikipedia.org/wiki/Industry_self-regulationhttps://en.wikipedia.org/wiki/Business_modelhttps://en.wikipedia.org/wiki/Business_modelhttps://en.wikipedia.org/wiki/Norm_(sociology)https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-CPRtheory2001-2https://en.wikipedia.org/wiki/Corporate_social_responsibility#cite_note-CSRinternational2005-3https://en.wikipedia.org/wiki/Stakeholder_(corporate)


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MULTINATIONAL CORPORATIONS (MNC)

0 multinational corporation or worldwide enterprise%&' is an oraniation that owns or controls

production of oods or services in one or more countries other than their home country.%' #t can

also be referred as an international corporation, a Etransnational corporationE, or a stateless

corporation.%9'

0 multinational corporation is usually a lare corporation which produces or sells oods or

services in various countries.%@'

• #mportin and e!portin oods and services

• 5akin sinificant investments in a forein country

•

Buyin and sellin licenses in forein markets

• Fnain in contract manufacturinGpermittin a local manufacturer in a forein country

to produce their products

• Openin manufacturin facilities or assembly operations in forein countries

The problem of moral and leal constraints upon the behavior of multinational corporations,

iven that they are effectively EstatelessE actors, is one of several urent lobal socioeconomic

problems that emered durin the late twentieth century.%:'

One of the first multinational business oraniations, the Fast #ndia ompany, arose in &H33.

%H' 0fter Fast #ndia ompany, came the ?utch Fast #ndia ompany, founded 5arch 3, &H3,

which would become the larest company in the world for nearly 33 years.%I'

https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-pitelis-1https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-2https://en.wikipedia.org/wiki/Corporationhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-3https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-4https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-5https://en.wikipedia.org/wiki/East_India_Companyhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-6https://en.wikipedia.org/wiki/Dutch_East_India_Companyhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-7https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-pitelis-1https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-2https://en.wikipedia.org/wiki/Corporationhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-3https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-4https://en.wikipedia.org/wiki/Multinational_corporation#cite_note-5https://en.wikipedia.org/wiki/East_India_Companyhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-6https://en.wikipedia.org/wiki/Dutch_East_India_Companyhttps://en.wikipedia.org/wiki/Multinational_corporation#cite_note-7


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EXIM POLICY

EXIM Policy or Foreign Trade Policy is a set of guidelines and instructions established by the DGFT in matters

related to the import and export of goods in India.

The Foreign Trade

Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian Goernment and is

regulated by the Foreign Trade Development and Regulation Act, 199.

DGFT !Directorate General o" Foreign Trade# is the main goerning body in matters related to Exim Policy.

The main ob!ectie of the "oreign Trade #$eelopment and %egulation& 'ct is to proide the deelopment

andregulation o" "oreign trade by facilitating imports into( and augmenting exports from India. "oreign Trade

'ct has replaced the earlier law known as the imports and Exports #)ontrol& 'ct *+,-.

EXIM Policy

Indian EXIM Policy contains arious policy related decisions taken by the goernment in the sphere of "oreign

Trade( i.e.( with respect to imports and exports from the country and more especially

e$port promotion mea%ure%( policies and procedures related thereto. Trade Policy is prepared and announced

by the )entral Goernment #Ministry of )ommerce&. Indias Export Import Policy also know as "oreign Trade

Policy( in general( aims at deeloping export potential( improing export performance( encouraging foreign

trade and creating faorable balance of payments position.

Objectives of EXIM Policy:

The principal objectives of this olicy are!

&) To facilitate sustained rowth in e!ports to attain a share of atleast & A of lobal merchandise trade.

) To stimulate sustained economic rowth by providin access to essential raw materials, intermediates,

components, consumables and capital oods required for aumentin production and providin services.

9) To enhance the technoloical strenth and efficiency of #ndian ariculture, industry and services, thereby

improvin their competitive strenth while eneratin new employment opportunities, and to encourae the

attainment of internationally accepted standards of quality.

@) To provide consumers with ood quality oods and services at internationally competitive prices while at the

same time creatin a level playin field for the domestic produce.

http://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/default.aspxhttp://www.eximguru.com/exim/default.aspxhttp://www.eximguru.com/exim/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/acts-and-rules/foreign-trade-development-and-regulation-act-1992.aspxhttp://www.eximguru.com/exim/dgft/default.aspxhttp://www.eximguru.com/exim/dgft/acts-and-rules/foreign-trade-regulation-rules-1993.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/2008/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/2008/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/2008/chapter_3_promotional_measures.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/default.aspxhttp://www.eximguru.com/exim/default.aspxhttp://www.eximguru.com/exim/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/default.aspxhttp://www.eximguru.com/exim/dgft/acts-and-rules/foreign-trade-development-and-regulation-act-1992.aspxhttp://www.eximguru.com/exim/dgft/default.aspxhttp://www.eximguru.com/exim/dgft/acts-and-rules/foreign-trade-regulation-rules-1993.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/2008/default.aspxhttp://www.eximguru.com/exim/dgft/exim-policy/2008/chapter_3_promotional_measures.aspx


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ECONOMIC POLICY

"conomic policy refers to the actions that overnments take in the economic field. #t covers the systems for

settin levels of ta!ation, overnment budets, the money supply and interest rates as well as the labor market,

national ownership, and many other areas of overnment interventions into the economy.

5ost factors of economic policy can be divided into either fiscal policy, which deals with overnment actions

reardin ta!ation and spendin, or monetary policy, which deals with central bankin actions reardin the

money supply and interest rates.

uch policies are often influenced by international institutions like the #nternational 5onetary -und or +orld Bank

as well as political beliefs and the consequent policies of parties.

Types of economic policy

0lmost every aspect of overnment has an important economic component. 0 few e!amples of the kinds of

economic policies that e!ist include/%&'

• 5acroeconomic stabiliation policy, which attempts to keep the money supply rowin at a rate that

does not result in e!cessive inflation, and attempts to smooth out the business cycle.

• Trade policy, which refers to tariffs, trade areements and the international institutions that overn them.

• Policies desined to create economic rowth

• Policies related to development economics

• Policies dealin with the redistribution of income, property andDor wealth

• 0s well as/ reulatory policy, anti"trust policy, industrial policy and technoloy"based economic

development policy

#$CR%"C%&%#IC ST$'II$TI%& %IC*

tabiliation policy attempts to stimulate an economy out of recession or constrain the money supply to prevent

e!cessive inflation.

• -iscal policy, often tied to 7eynesian economics, uses overnment spendin and ta!es to uide the

economy.

• -iscal stance/ The sie of the deficit or surplus

• Ta! policy/ The ta!es used to collect overnment income.

• >overnment spendin on Just about any area of overnment

https://en.wikipedia.org/wiki/Governmenthttps://en.wikipedia.org/wiki/Governmenthttps://en.wikipedia.org/wiki/Economicshttps://en.wikipedia.org/wiki/Economicshttps://en.wikipedia.org/wiki/Taxationhttps://en.wikipedia.org/wiki/Taxationhttps://en.wikipedia.org/wiki/Government_budgetshttps://en.wikipedia.org/wiki/Government_budgetshttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Interest_rateshttps://en.wikipedia.org/wiki/Labor_markethttps://en.wikipedia.org/wiki/Labor_markethttps://en.wikipedia.org/wiki/Labor_markethttps://en.wikipedia.org/wiki/Nationalizationhttps://en.wikipedia.org/wiki/Fiscal_policyhttps://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/International_organizationhttps://en.wikipedia.org/wiki/International_organizationhttps://en.wikipedia.org/wiki/International_organizationhttps://en.wikipedia.org/wiki/International_Monetary_Fundhttps://en.wikipedia.org/wiki/International_Monetary_Fundhttps://en.wikipedia.org/wiki/World_Bankhttps://en.wikipedia.org/wiki/World_Bankhttps://en.wikipedia.org/wiki/Politicalhttps://en.wikipedia.org/wiki/Policyhttps://en.wikipedia.org/wiki/Political_partieshttps://en.wikipedia.org/wiki/Political_partieshttps://en.wikipedia.org/wiki/Political_partieshttps://en.wikipedia.org/wiki/Economic_policy#cite_note-1https://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Business_cyclehttps://en.wikipedia.org/wiki/Business_cyclehttps://en.wikipedia.org/wiki/Tradehttps://en.wikipedia.org/wiki/Tariffshttps://en.wikipedia.org/wiki/Tariffshttps://en.wikipedia.org/wiki/Trade_agreementhttps://en.wikipedia.org/wiki/Trade_agreementhttps://en.wikipedia.org/wiki/Trade_agreementhttps://en.wikipedia.org/wiki/Economic_growthhttps://en.wikipedia.org/wiki/Development_economicshttps://en.wikipedia.org/wiki/Development_economicshttps://en.wikipedia.org/wiki/Redistribution_(economics)https://en.wikipedia.org/wiki/Redistribution_(economics)https://en.wikipedia.org/wiki/Regulatoryhttps://en.wikipedia.org/wiki/Regulatoryhttps://en.wikipedia.org/wiki/Regulatoryhttps://en.wikipedia.org/wiki/Anti-trusthttps://en.wikipedia.org/wiki/Anti-trusthttps://en.wikipedia.org/wiki/Anti-trusthttps://en.wikipedia.org/wiki/Industrial_policyhttps://en.wikipedia.org/wiki/Industrial_policyhttps://en.wikipedia.org/wiki/Stabilization_policyhttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Fiscal_policyhttps://en.wikipedia.org/wiki/Keynesian_economicshttps://en.wikipedia.org/wiki/Keynesian_economicshttps://en.wikipedia.org/wiki/Keynesian_economicshttps://en.wikipedia.org/wiki/Taxhttps://en.wikipedia.org/wiki/Taxhttps://en.wikipedia.org/wiki/Government_spendinghttps://en.wikipedia.org/wiki/Government_spendinghttps://en.wikipedia.org/wiki/Governmenthttps://en.wikipedia.org/wiki/Economicshttps://en.wikipedia.org/wiki/Taxationhttps://en.wikipedia.org/wiki/Government_budgetshttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Interest_rateshttps://en.wikipedia.org/wiki/Labor_markethttps://en.wikipedia.org/wiki/Nationalizationhttps://en.wikipedia.org/wiki/Fiscal_policyhttps://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/International_organizationhttps://en.wikipedia.org/wiki/International_Monetary_Fundhttps://en.wikipedia.org/wiki/World_Bankhttps://en.wikipedia.org/wiki/Politicalhttps://en.wikipedia.org/wiki/Policyhttps://en.wikipedia.org/wiki/Political_partieshttps://en.wikipedia.org/wiki/Economic_policy#cite_note-1https://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Business_cyclehttps://en.wikipedia.org/wiki/Tradehttps://en.wikipedia.org/wiki/Tariffshttps://en.wikipedia.org/wiki/Trade_agreementhttps://en.wikipedia.org/wiki/Economic_growthhttps://en.wikipedia.org/wiki/Development_economicshttps://en.wikipedia.org/wiki/Redistribution_(economics)https://en.wikipedia.org/wiki/Regulatoryhttps://en.wikipedia.org/wiki/Anti-trusthttps://en.wikipedia.org/wiki/Industrial_policyhttps://en.wikipedia.org/wiki/Stabilization_policyhttps://en.wikipedia.org/wiki/Money_supplyhttps://en.wikipedia.org/wiki/Fiscal_policyhttps://en.wikipedia.org/wiki/Keynesian_economicshttps://en.wikipedia.org/wiki/Taxhttps://en.wikipedia.org/wiki/Government_spending


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• 5onetary policy controls the value of currency by lowerin the supply of money to control inflation and

raisin it to stimulate economic rowth. #t is concerned with the amount of money in circulation and,

consequently, interest rates and inflation.

• #nterest rates, if set by the >overnment

• #ncomes policies and price controls that aim at imposin non"monetary controls on inflation

• 6eserve requirements which affect the money multiplier

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#$+%R R%'"#S %, I&DI$& "C%&%#*

Since 1991, the Indian economy has pursued free market liberalisation, greater openness in trade and increase

investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and

economic development. However, the economy still faces various problems and challenges.

POVERTY

overty in India is widespread, and a variety of methods have been proposed to measure it. The official

measure of #ndian overnment, before 33:, was based on food security and it was defined from per capita

e!penditure for a person to consume enouh calories and be able to pay for associated essentials to survive.

ince 33:, #ndian overnment adopted the Tendulkar methodoloy which moved away from calorie anchor to a

basket of oods and used rural, urban and reional minimum e!penditure per capita necessary to survive.

%&'

%-"R %.$TI%&

0t present, the population of #ndia is around &. billion. Population is increasin at an e!plosive rate. Thanks to

the advances in medical science and other public health measures, the death rate has been reatly reduced.

The rowth of population in relation to the rowth of economy is much faster resultin in the incidence of

malnutrition, unhealthy conditions of livin and so on.

0 hih birth rate accompanied by a low death rate cannot adJust population to the means of livin. The population

rowth rate in #ndia is still quite hih compared to developed countries. -or this, the rapidly rowin population

swallows up the increased output and our country remains economically backward.

Solution

&. This necessitates rapid economic development to meet the requirements of increased population.

. reate awareness amon the people of #ndia reardin the demerits of population e!plosion.

9. Fncourae people to adopt birth control methods.

@. Fducate people. Fducated people are more likely to take steps to control population.

*4F5PKOL5F4T

https://en.wikipedia.org/wiki/Poverty_in_India#cite_note-1https://en.wikipedia.org/wiki/Poverty_in_India#cite_note-1https://en.wikipedia.org/wiki/Poverty_in_India#cite_note-1


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The #ndian economy is characteried by hue unemployment, both in rural and urban areas. *nemployment is a

maJor problem for #ndian Fconomy. #ndia is basically an aricultural country. 5ost people are enaed in

ariculture due to want of alternative occupation. 0 lare part of the population enaed in ariculture can be

removed without reducin aricultural output. This is called disuised unemployment. They should be withdrawn

from ariculture with a view to increasin their marinal productivity.

SLOWDOWN IN ECONOMIC GROWTH

2013/14 has seen a slowdown in the rate of economic growth to 4-5%. Real GDP per capita growth is even lower.

This is a cause for concern as India needs a high growth rate to see rising living standards, lower unemployment

and encouraging investment. India has fallen behind China, which is a comparable developing economy


11/34

C%#"TITI%& 'I /001

Competition law is a law that promotes or seeks to maintain market competition by reulatin anti"

competitive conduct by companies.%&'%'

ompetition law is implemented throuh public and private enforcement.%9'

ompetition law is known as antitrust law in the *nited tates and Furopean *nion,%@' and as anti"monopoly law

in hina %&'and 6ussia. #n previous years it has been known as trade practices law in the *nited

7indom and 0ustralia.

The Competition 'ill of india ,introduced in the Kok abha (lower house of the parliament) on the H th of 0uust

33&, is perhaps the most debated law in india. Mowever ,despite the intense debate that athered momentum

after the publication of the rahvan committee report in 5ay 333 certain issues remain unsolved.

Objectives

The main objectives in formulating the new law are:

(i) to prevent practices having adverse effect on competition;

(ii) to promote and sustain competition in markets;

(iii) to protect the interests of consumers; and

(iv) to ensure freedom of trade carried on by other participants in markets.

Priority is accorded to maintain and encourage competition in order to foster consumer welfare.

The CCI would deal with agreements that cause or are likely to cause an appreciable adverse

effect on competition within India.

https://en.wikipedia.org/wiki/Lawhttps://en.wikipedia.org/wiki/Market_competitionhttps://en.wikipedia.org/wiki/Market_competitionhttps://en.wikipedia.org/wiki/Market_competitionhttps://en.wikipedia.org/wiki/Anti-competitivehttps://en.wikipedia.org/wiki/Anti-competitivehttps://en.wikipedia.org/wiki/Anti-competitivehttps://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Competition_law#cite_note-Taylor_2006_1-2https://en.wikipedia.org/wiki/Competition_law#cite_note-3https://en.wikipedia.org/wiki/Competition_law#cite_note-3https://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/European_Unionhttps://en.wikipedia.org/wiki/European_Unionhttps://en.wikipedia.org/wiki/European_Unionhttps://en.wikipedia.org/wiki/Competition_law#cite_note-4https://en.wikipedia.org/wiki/Monopolyhttps://en.wikipedia.org/wiki/Monopolyhttps://en.wikipedia.org/wiki/Chinahttps://en.wikipedia.org/wiki/Chinahttps://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Russiahttps://en.wikipedia.org/wiki/Russiahttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/Australiahttps://en.wikipedia.org/wiki/Australiahttps://en.wikipedia.org/wiki/Lawhttps://en.wikipedia.org/wiki/Market_competitionhttps://en.wikipedia.org/wiki/Anti-competitivehttps://en.wikipedia.org/wiki/Anti-competitivehttps://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Competition_law#cite_note-Taylor_2006_1-2https://en.wikipedia.org/wiki/Competition_law#cite_note-3https://en.wikipedia.org/wiki/United_Stateshttps://en.wikipedia.org/wiki/European_Unionhttps://en.wikipedia.org/wiki/Competition_law#cite_note-4https://en.wikipedia.org/wiki/Monopolyhttps://en.wikipedia.org/wiki/Chinahttps://en.wikipedia.org/wiki/Competition_law#cite_note-papers.ssrn.com-1https://en.wikipedia.org/wiki/Russiahttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/United_Kingdomhttps://en.wikipedia.org/wiki/Australia


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R%" %, "C%&%#IC $&&I&2

Fconomic Plannin is the makin of maJor economic decisions. +hat and how is to be produced and to whom it

is to be allocated by the conscious decision of a determinate authority, on the basis of a comprehensive survey

of the economic system as a whole.

#n an economy like #ndia, the basis socioeconomic problems like poverty, unemployment, stanation in

aricultural and industrial production and inequality in the distribution of income and wealth can hardly be solved

within the framework of an unplanned economy plannin is required to remove these basic maladies.

+e can identify the followin characteristic features of economic plannin/

• -i!ation of definite socio"economic taretsN

• Prudent efforts to achieve these tarets within a iven time periodN

• F!istence of a central plannin authorityN

• omplete knowlede about the economic resources of the countryN

• Ffficient utiliation of limited resources to et ma!imum output and welfare.

R%"S

(a) 6apid Fconomic ?evelopment

(b) uick #mprovement in the tandard of Kivin

(c) 6emoval of Poverty

(d) 6ational 0llocation and Ffficient *tiliation of 6esources

(e) Increasin3 the Rate of Capital ,ormation

(f) Reduction in .ne4ual Distribution of Income and 5ealth

(3) Reduction of .nemployment and Increase in "mployment %pportunities

Since 1947, the Indian economy has been premised on the concept of planning. This has

been carried through the Five!ear "lans , developed, e#ecuted, and monitored by

the "lanning $ommission %&ITI 'ayog after ()14*. +ith the "rime inister as the e#

officio $hairman, the commission has a nominated -eputy $hairman, ho holds the ran/

of a $abinet inister. onte/ Singh 'hlualia is the last -eputy $hairman of the

$ommission %resigned on (0 ay ()14*. The leventh "lan completed its term in arch

https://en.wikipedia.org/wiki/Indian_economyhttps://en.wikipedia.org/wiki/Planninghttps://en.wikipedia.org/wiki/Planning_Commission_(India)https://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttps://en.wikipedia.org/wiki/Montek_Singh_Ahluwaliahttps://en.wikipedia.org/wiki/Indian_economyhttps://en.wikipedia.org/wiki/Planninghttps://en.wikipedia.org/wiki/Planning_Commission_(India)https://en.wikipedia.org/wiki/Prime_Minister_of_Indiahttps://en.wikipedia.org/wiki/Montek_Singh_Ahluwalia


13/34

()1( and the Telfth "lan is currently underay. 213 "rior to the Fourth "lan, the allocation

of state resources as based on schematic patterns rather than a transparent and

obective mechanism, hich led to the adoption of the 5adgil formula in 1909. 6evised

versions of the formula have been used since then to determine the allocation of central

assistance for state plans. 2(3 The ne government led by&arendra odi , elected in ()14,

has announced the dissolution of the "lanning $ommission, and its replacement by a

thin/ tan/ called the &ITI 'ayog %an acronym for &ational Institution for Transforming

India*.

,ISC$ %IC*

-iscal policy means the use of ta!ation and public e!penditure by the overnment for stabilisation or rowth.

0ccordin to ulbarston, ;By fiscal policy we refer to overnment actions affectin its receipts and e!penditures

which we ordinarily taken as measured by the overnmentCs receipts, its surplus or deficit.= The overnment may

offset undesirable variations in private consumption and investment by compensatory variations of public

e!penditures and ta!es.

0rthur mithies defines fiscal policy as ;a policy under which the overnment uses its e!penditure and revenue

prorammes to produce desirable effects and avoid undesirable effects on the national income, production and

employment.= Thouh the ultimate aim of fiscal policy in the lon"run stabilisation of the economy, yet it can be

achieved by moderatin short"run economic fluctuations. #n this conte!t, Otto Fckstein defines fiscal policy as

;chanes in ta!es and e!penditures which aim at short"run oals of full employment and price"level stability.=

2. Objectives of Fiscal Policy

The followin3 are the objectives of fiscal policy!

&. To maintain and achieve full employment.

. To stabilise the price level.

9. To stabilise the rowth rate of the economy.

https://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-1https://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-1https://en.wikipedia.org/wiki/Gadgil_formulahttps://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-2https://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-2https://en.wikipedia.org/wiki/Narendra_Modihttps://en.wikipedia.org/wiki/Narendra_Modihttps://en.wikipedia.org/wiki/NITI_Aayoghttps://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-1https://en.wikipedia.org/wiki/Gadgil_formulahttps://en.wikipedia.org/wiki/Five-Year_Plans_of_India#cite_note-2https://en.wikipedia.org/wiki/Narendra_Modihttps://en.wikipedia.org/wiki/NITI_Aayog


14/34

@. To maintain equilibrium in the balance of payments.

:. To promote the economic development of underdeveloped countries.


15/34

#%&"T$R* %IC*

5onetary policy is the process by which monetary authority of a country, enerally a central bankcontrols the supply of money in the economy by its control over interest rates in order to maintain

price stability and achieve hih economic rowth.%&' #n #ndia, the central monetary authority is

the 6eserve Bank of #ndia(6B#). #t is so desined as to maintain the price stability in the

economy. Other obJectives of the monetary policy of #ndia, as stated by 6B#, are/"

rice Stability

Price tability implies promotin economic development with considerable emphasis on price

stability. The centre of focus is to facilitate the environment which is favourable to the architecture

that enables the developmental proJects to run swiftly while also maintainin reasonable pricestability.

Controlled "6pansion %f 'an7 Credit

One of the important functions of 6B# is the controlled e!pansion of bank credit and money

supply with special attention to seasonal requirement for credit without affectin the output.

romotion of ,i6ed Investment

The aim here is to increase the productivity of investment by restrainin non essential fi!ed

investment.

Restriction of Inventories and stoc7s

Overfillin of stocks and products becomin outdated due to e!cess of stock often results in

sickness of the unit. To avoid this problem the central monetary authority carries out this

essential function of restrictin the ors of the economy and all social and economic class of

people

To romote "fficiency

#t is another essential aspect where the central banks pay a lot of attention. #t tries to increase the

efficiency in the financial system and tries to incorporate structural chanes such as dereulatin

interest rates, ease operational constraints in the credit delivery system, to introduce new money

market instruments etc.Reducin3 the Ri3idity

6B# tries to brin about the fle!ibilities in the operations which provide a considerable autonomy.

#t encouraes more competitive environment and diversification. #t maintains its control over

financial system whenever and wherever necessary to maintain the discipline and prudence in

operations of the financial system.

https://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/Monetary_policy_of_India#cite_note-1https://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttps://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttps://en.wikipedia.org/wiki/Monetary_policyhttps://en.wikipedia.org/wiki/Monetary_policy_of_India#cite_note-1https://en.wikipedia.org/wiki/Reserve_Bank_of_India


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.&I%& '.D2"T

The .nion 'ud3et of India, also referred to as the Annual financial statement in the 0rticle &&

of the onstitution of #ndia,%&' is the annual budet of the6epublic of #ndia. #t is presented each

year on the last workin day of -ebruary by the -inance 5inister of #ndia in Parliament. The

budet, which is presented by means of the -inancial bill and the 0ppropriation bill has to be

passed by the Mouses before it can come into effect on 0pril &, the start of #ndia$s financial year .

%'+"CTI-"S %, .&I%& '.D2"T

Fconomic rowth

6eduction of poverty and unemployment

PriceDFconomic tability

6eallocation of resources etc

R%" %, .'IC S"CT%R "&T"RRIS"S I& I&DI$& "C%&%#*

Since 1948, when for the first time the importance of the pblic sector in the !n"ian economy was

reco#ni$e", the pblic sector has e%perience" a phenomenal #rowth both in terms of nmber an"

volme of investment. &he 'overnment has ma"e sstaine" efforts to brea( the vicios circle of

poverty an" n"evelopment by settin# p pblic sector enterprises or by nationali$in# certain (ey

in"stries. &he most recent instances are the nationali$ation of the bi##er commercial ban(s an" that

of coal mines.

)ole of Pblic Sector enterprises in !n"ia

*e may enmerate below the varios ar#ments pt forth in spport of the pblic

sector in !n"ia.

1. Maximizing the rate of economic growth :

Ori#inally, the activity of the pblic sector enterprises was to be limite" to a "efinite fiel" of basic an" (ey in"stries of strate#ic importance. &here were certain fiel"s

where the private enterprise was shy to operate as they involve" h#e investment or ris(. !t was the pblic sector alone which col" bil" the economic overhea"s sch as

power, transport, etc. Since then the i"eolo#ical objective of captrin# the +comman"in# hei#hts by the pblic-vector bas been "ly flfille", it sccee"e" in creatin# the

necessary infrastrctral base for sstaine" in"strial #rowth. !t has tremen"osly booste" the technolo#ical capabilities.

https://en.wikipedia.org/wiki/Constitution_of_Indiahttps://en.wikipedia.org/wiki/Constitution_of_Indiahttps://en.wikipedia.org/wiki/Constitution_of_Indiahttps://en.wikipedia.org/wiki/Union_budget_of_India#cite_note-Constitution-1https://en.wikipedia.org/wiki/Republic_of_Indiahttps://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttps://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttps://en.wikipedia.org/wiki/Parliament_of_Indiahttps://en.wikipedia.org/wiki/Financial_yearhttps://en.wikipedia.org/wiki/Constitution_of_Indiahttps://en.wikipedia.org/wiki/Union_budget_of_India#cite_note-Constitution-1https://en.wikipedia.org/wiki/Republic_of_Indiahttps://en.wikipedia.org/wiki/Finance_Minister_of_Indiahttps://en.wikipedia.org/wiki/Parliament_of_Indiahttps://en.wikipedia.org/wiki/Financial_year


17/34

2. Development of capital-intensive sector :

!n"strial "evelopment of a contry necessitates the fon"ation of an infrastrctre base. &his fon"ation is provi"e" by the "evelopment of capital-intensive in"stries

an" the basic infrastrctre. &he private sector neither has the $eal nor the capacity to invest in sch infrastrctral pro#rammes. From this point of view, the pblic

sector has a ma#nificent recor". &he State has sccessflly implemente" varios schemes of mlti-prpose river projects,, hy"roelectric projects, transport an"

commnication, atomic power,, steel, etc. !t has vastly contribte" in the fiel"s sch as nclear or steel technolo#y, aeronatics, "efense materials, ship-bil"in# an" so

on. !t has lai" "own a #oo" networ( of transport an" commnications.

3. Development of agricltre :

&he pblic sector has an important role in the fiel" of a#ricltre as well. &he pblic sector assists in the manfactre of fertili$ers, pestici"es, insectici"es an" mechanical

implements se" in a#ricltre. &hro#h the varios research instittes the pblic sector has a#mente" a#ricltral pro"ctivity by intro"cin# new hi#h-yiel"in#

variety of see"s, preventin# crop "iseases an" innovatin# new a#ricltral practices.

!. "alance# regional #evelopment :

!n the pre-in"epen"ence perio" a major problem was re#ional economic "isparities. &here were certain areas where there was a heavy concentration of in"strial activity.

On the other han", there were certain bac(war" areas which went withot in"stries. !n"strial "evelopment was hi#hly lopsi"e". &hs /aharashtra, *est 0en#al,

'jarat an" &amil a", etc., were hi#hly "evelope" in"strially. States li(e Orissa, ssam, 0ihar, /a"hya Pra"esh etc. were hi#hly bac(war". 0esi"es, in"stries se" to

be #ravitate" towar"s the metropolitan areas, rather than the smaller towns. 0t imbalance" economic "evelopment is as ba" as n"er"evelopment.

$. Development of ancillary in#stries :

3stablishment of a few bi# pblic enterprises is not eno#h to nleash forces of in"strial "evelopment in an area. &here are states li(e 0ihar where in spite of lavish

pblic sector investment, in"strial "evelopment has not been satisfactory. On the other han". States li(e Pnjab have ma"e a vast pro#ress becase of the "evelopment of

small an" ancillary nits. &his reali$ation ma"e the pblic sector ta(e a close interest in the "evelopment of small an" ancillary nits. !t is e%pecte" that the "evelopment

of ancillaries wol" have the way for rapi" in"strial #rowth of a re#ion an" lea" to balance" economic "evelopment. &he nmber of sch ancillary nits was 42 in 1954-

56 an" the nmber rose to 888 in 1959-87 with prchases from them increasin# from )s. 29 crores to )s. 127 crores. !t is e%pecte" that in ftre, ancillary "evelopment

wol" receive more attention from the 'overnment.

%. Increasing employment opportnities :

&he #rowth of the pblic sector has le" to the e%pression of #ainfl employment opportnities. !n a""ition to the primary effect of the pblic sector in creatin#

employment opportnities, pblic sector investments also have a mltiplier effect on other sectors of the economy. &his has a beneficial effect on the total employment

position. !n 19-1, the nmber of people employe" in pblic enterprises was only 1.82 la(hs. &his fi#re rose to 14.78 la(hs in 1954 56 involvin# an increase of 51 per

cent. Similarly the total amont of salaries an" wa#es increase" from )s. 4791 crores to )s. 1,76 6 crores, involvin# an increase of 2,454.8 per cent, "rin# the same

perio", !n 198-85 the nmber of wor(in# poplation in these in"stries stoo" at 22 la(hs.


18/34

&. Mo#el employer :

:r. ).;. 'pta has observe" that in !n"ia +the State has ina#rate" the era of the mo"el employer in contrast to the employer with a fe"al otloo(. !t has lai" "own

#i"elines for employer-employee relations an" for "evelopin# #oo" an" efficient personnel. &he pblic sector has been the pacesetter in the fiel" of labor welfare an"

social secrity. &he State aims at establishin# an in"strial "emocracy which will provi"e a fair "eal to the wor(ers. &he pblic enterprises have been investin# liberally on

matters pertainin# to labor welfare an" social secrity. ot only the wa#es have been sbstantially increase", con"itions of service have vastly improve". For instance,

wa#es in the coal in"stry have nearly treble" since nationali$ation an" many other amenities also are bein# provi"e".

'. Preventing concentration of economic po(er :

Preventin# private monopolies an" concentration of economic power is the avowe" objective of or economic policy. ationali$ation is consi"ere" as an anti"ote for the

concentration of economic power in private han"s. !n !n"ia the pblic sector enterprises have #rown both in nmber an" in stren#th. &o"ay, the pblic sector not only

occpies the comman"in# hei#hts in the economy, it has also penetrate" into the pro"ction of essential consmer #oo"s. &he share of the pblic sector in the overall

in"strial pro"ction, has sbstantially #one p. &his has effectively crbe" the concentration of economic power. !t has create" a contervailin# force a#ainst the #rowth

of lar#er in"strial hoses.

). E*port promotion :

&he pblic sector enterprises are sbstantially contribtin# to the contrys e%port earnin#s. &he pblic sector has-bilt p a reptation abroa" in sellin# plants, heavy

e an" 1984-86, the percenta#e share of pblic sector enterprises in !n"ias e%port tra"e went p from 27.76 to 8.1 per cent. Pblic

sector e%ports increase" from )s. 252 crores in 198-9 to )s. 4,622 crores in 1984-86. !n 195-55 the pblic enterprises earne" )s. 2,248 crores in forei#n e%chan#e. &he

pblic enterprises ths ba" a splen"i" performance.

+,. Import sbstittion :

&he pblic sector enterprises have also-sccee"e" in their efforts in import sbstittion. &o"ay many commo"ities startin# from basic "r#s to hi#hly a"vance"

e


19/34


20/34

INDUSTRIAL POLI!

The industrial policy of a country, sometimes denoted I, is its official strateic effort to

encourae the development and rowth of part or all of the manufacturin sector as well as other

sectors of the economy.%&'%'%9'The overnment takes measures Eaimed at improvin the

competitiveness and capabilities of domestic firms and promotin structural transformation.E%@' 0

country$s infrastructure (transportation, telecommunications and enery industry) is a maJor part

of the manufacturin sector that often has a key role in #P.

0t the time of independence, #ndia had an e!tremely underdeveloped and unbalanced industrial structure. #ndustries

contributed less than one si!th part of national income.

The country did have some industries like cotton te!tiles, Jute and suar, but there were virtually no basic, heavy and capital

oods industries on which prorammes of future industrialisation could be based.

+hatever maJor industries were there, they were larely concentrated in a few areas such as Bombay. urat, 0hmedabad.

ameshedpur, alcutta, ?elhi etc. +hile the rest of the country remained industrially nelected.

Thus after independence, the overnment of #ndia had to undertake effective measures to increase the tempo of

industrialisation. orrect reional imbalances in industrial development and rectify the distorted industrial structure throuh

rapid development of capital oods industries.

ObjectivesC

The maJor obJectives of industrial policy are/

0i1 api# In#strial Development:

The industrial policy of the >overnment of #ndia is aimed at increasin the tempo of industrial development. #t seeks to create a

favourable investment climate for the private sector as well as mobilise resources for the investment in public sector. #n its way

the overnment seeks to promote rapid industrial development in the country.

https://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEGraham1994.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DMy9sL1iKQm8C.26pg.3DPA3_3.5D-1https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEGraham1994.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DMy9sL1iKQm8C.26pg.3DPA3_3.5D-1https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEBingham1998.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DnyF0zNh68ooC.26pg.3DPA21_21.5D-2https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEBingham1998.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DnyF0zNh68ooC.26pg.3DPA21_21.5D-2https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTERodrik20042._Rodrik_uses_the_term_in_a_more_extended_fashion.2C_such_as_to_encompass_.22non-traditional_activities_in_agriculture_or_services._There_is_no_evidence_that_the_types_of_market_failures_that_call_for_industrial_policy_are_located_predominantly_in_industry.22-3https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEUNCTADUNIDO201134-4https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEUNCTADUNIDO201134-4https://en.wikipedia.org/wiki/Infrastructurehttps://en.wikipedia.org/wiki/Infrastructurehttps://en.wikipedia.org/wiki/Energy_industryhttps://en.wikipedia.org/wiki/Energy_industryhttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEGraham1994.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DMy9sL1iKQm8C.26pg.3DPA3_3.5D-1https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEBingham1998.5Bhttp:.2F.2Fbooks.google.com.2Fbooks.3Fid.3DnyF0zNh68ooC.26pg.3DPA21_21.5D-2https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTERodrik20042._Rodrik_uses_the_term_in_a_more_extended_fashion.2C_such_as_to_encompass_.22non-traditional_activities_in_agriculture_or_services._There_is_no_evidence_that_the_types_of_market_failures_that_call_for_industrial_policy_are_located_predominantly_in_industry.22-3https://en.wikipedia.org/wiki/Industrial_policy#cite_note-FOOTNOTEUNCTADUNIDO201134-4https://en.wikipedia.org/wiki/Infrastructurehttps://en.wikipedia.org/wiki/Energy_industry


21/34

0ii1 "alance# in#strial trctre:

The industrial policy is desined to correct the prevailin lopsided industrial structure. Thus, for e!ample, before independence,

#ndia had some fairly developed consumer oods industries. But the capital oods sector was not developed at all and basic

and heavy industries were by and lare absent.

o the industrial policy had to be framed in such a manner that these imbalances in the industrial structure are corrected. Thus

by layin emphasis on heavy industries and development of capital oods sector, industrial policy seeks to brin a balance in

industrial structure.

0iii1 Prevention of oncentration of Economic Po(er:

The industrial policy seeks to provide a framework of rules, reulations and reservation of spheres of activity for the public and

the private sectors. This is aimed at reducin the monopolistic tendencies and preventin concentration of economic power in

the hands of a few bi industrial houses.

0iv1 "alance# egional 4ro(t/:

#ndustrial policy also aims at correctin reional imbalances in industrial development. #t is quite well"known that some reions

in the country are industrially quite advanced e.., 5aharashtra and >uJarat while others are industrially backward, like Bihar,

Orissa. #t is the task of industrial policy to work out prorammes and policies which lead to industrial development or industrial

rowth.

The #ndustrial policy of &1@2, which was the first industrial policy statement of the >overnment of #ndia, was chaned in &1:H in

a public sector dominated industrial development policy that remained in force til l &11& with some minor modifications and

amendments in &1II and &123. #n &11&, far reachin chanes were made in the &1:H industrial policy. The new #ndustrial

Policy of uly &11& heralded the framework for industrial development at present.

IMPAT O" LP#

#mpact%edit'

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• The low annual rowth rate of the economy of #ndia before &123, which stanated around

9.:A from &1:3s to &123s, while per capita income averaed &.9A. %&:' 0t the same

time, Pakistan rew by :A, #ndonesia by 1A, Thailand by 1A, outh 7orea by &3A

and Taiwan by &A.%&H'

• Only four or five licences would be iven for steel, electrical power and communications.

Kicence owners built up hue powerful empires.%&&'

• 0 hue private sector emered. tate"owned enterprises made lare losses.%&&'

• #ncome Ta! ?epartment and ustoms ?epartment became efficient in checkin ta!

evasion.%citation needed '

• #nfrastructure investment was poor because of the public sector monopoly.%&&'

• Kicence 6aJ established the Eirresponsible, self"perpetuatin bureaucracy that still e!ists

throuhout much of the countryE%&I' and corruption flourished under this system. %&2'

The fruits of liberalisation reached their peak in 33H, when #ndia recorded its hihest >?P

rowth rate of 1.HA.%&1' +ith this, #ndia became the second fastest rowin maJor economy in the

world, ne!t only to hina.%&2' The rowth rate has slowed sinificantly in the first half of 3&.

%3' 0n Oranisation for Fconomic o"operation and ?evelopment (OF?) report states that the

averae rowth rate I.:A will double the averae income in a decade, and more reforms would

speed up the pace. %&' The economy then rebounded to I.9A rowth in 3&@"&:.

$ONOMI R$"ORMS

The term microeconomic reform (or often Just economic reform) refers to policies directed to

achieve improvements in economic efficiency, either by eliminatin or reducin distortions in

individual sectors of the economy or by reformin economy"wide policies such as ta!

policy and competition policy with an emphasis on economic efficiency, rather than other oals

such as equity or employment rowth.

EFconomic reformE usually refers to dereulation, or at times to reduction in the sie of

overnment, to remove distortions caused by reulations or the presence of overnment, rather

than new or increased reulations or overnment prorams to reduce distortions caused

by market failure. 0s such, these reform policies are in the tradition of laisse faire, emphasiin

the distortions caused by overnment, rather than in ordoliberalism, which emphasies the need

for state reulation to ma!imie efficiency.

https://en.wikipedia.org/wiki/Economy_of_Indiahttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-15https://en.wikipedia.org/wiki/Pakistanhttps://en.wikipedia.org/wiki/Pakistanhttps://en.wikipedia.org/wiki/Indonesiahttps://en.wikipedia.org/wiki/Indonesiahttps://en.wikipedia.org/wiki/Thailandhttps://en.wikipedia.org/wiki/South_Koreahttps://en.wikipedia.org/wiki/South_Koreahttps://en.wikipedia.org/wiki/Taiwanhttps://en.wikipedia.org/wiki/Taiwanhttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-16https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttps://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttps://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-makar-17https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-astaire-18https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-19https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-astaire-18https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-20https://en.wikipedia.org/wiki/Organisation_for_Economic_Co-operation_and_Developmenthttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-oecdindia2007-21https://en.wikipedia.org/wiki/Economic_efficiencyhttps://en.wikipedia.org/wiki/Market_distortionhttps://en.wikipedia.org/wiki/Tax_policyhttps://en.wikipedia.org/wiki/Tax_policyhttps://en.wikipedia.org/wiki/Tax_policyhttps://en.wikipedia.org/wiki/Competition_policyhttps://en.wikipedia.org/wiki/Equity_(economics)https://en.wikipedia.org/wiki/Employmenthttps://en.wikipedia.org/wiki/Deregulationhttps://en.wikipedia.org/wiki/Market_failurehttps://en.wikipedia.org/wiki/Laissez_fairehttps://en.wikipedia.org/wiki/Laissez_fairehttps://en.wikipedia.org/wiki/Ordoliberalismhttps://en.wikipedia.org/wiki/Economy_of_Indiahttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-15https://en.wikipedia.org/wiki/Pakistanhttps://en.wikipedia.org/wiki/Indonesiahttps://en.wikipedia.org/wiki/Thailandhttps://en.wikipedia.org/wiki/South_Koreahttps://en.wikipedia.org/wiki/Taiwanhttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-16https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-bbc1998-11https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-makar-17https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-astaire-18https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-19https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-astaire-18https://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-20https://en.wikipedia.org/wiki/Organisation_for_Economic_Co-operation_and_Developmenthttps://en.wikipedia.org/wiki/Economic_liberalisation_in_India#cite_note-oecdindia2007-21https://en.wikipedia.org/wiki/Economic_efficiencyhttps://en.wikipedia.org/wiki/Market_distortionhttps://en.wikipedia.org/wiki/Tax_policyhttps://en.wikipedia.org/wiki/Tax_policyhttps://en.wikipedia.org/wiki/Competition_policyhttps://en.wikipedia.org/wiki/Equity_(economics)https://en.wikipedia.org/wiki/Employmenthttps://en.wikipedia.org/wiki/Deregulationhttps://en.wikipedia.org/wiki/Market_failurehttps://en.wikipedia.org/wiki/Laissez_fairehttps://en.wikipedia.org/wiki/Ordoliberalism


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"C%&%#IC R",%R#S '* I&DI$& 2%-T

(i) $bolition of icensin3!

Before the advent of the 4ew #ndustrial Policy, the #ndian industries were operatin under strict licensin system. 4ow, most industries have been

freed from licensin and other restrictions.

(ii) ,reedom to Import Technolo3y!

The use of latest technoloy has been iven prominence in the 4ew #ndustrial Policy. Therefore, forein technoloical collaboration has been

allowed.

(iii) Contraction of ublic Sector!

0 policy of not e!pandin unprofitable industrial units in the public sector has been adopted. 0part from this, the overnment is followin the

course of disinvestment in such public sector undertakin. (ellin some shares of public sector enterprises to private sector entrepreneurs is

called disinvestment. This is a medium of privatisation.)

(iv) ,ree "ntry of ,orei3n Investment!

5any steps have been taken to attract forein investment. ome of these are as follows/

(a) #n &11&, :&A of forein investment in 9@ hih priority industries was allowed without seekin overnment permission.

(b) 4on"6esident #ndians (46#s) were allowed to invest &33A in the e!port houses, hospitals, hotels, etc.

(c) -orein #nvestment Promotion Board (-#PB) was established with a view to speedily clear forein investment proposals.

(d) 6estrictions which were previously in operation to reulate dividends repatriation by the forein investors have been removed. They can now

take dividends to their native countries.

(v) #RT Restrictions Removed!


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5onopolies and 6estrictive Trade Practices 0ct has been done away with. 4ow the companies do not need to seek overnment permission to

issue shares, e!tend their area of operation and establish a new unit.

(vi) ,"R$ Restrictions Removed!

-orein F!chane 6eulation 0ct (-F60) has been replaced by -orein F!chane 5anaement 0ct (-F50). #t reulates the forein

transactions. These transactions have now become simpler.

(vii) Increase in the Importance of Small Industries!

Ffforts have been made to ive importance to the small industries in the economic development of the country.

(/) &ew Trade olicy

Trade policy means the policy throuh which the forein trade is controlled and reulated. 0s a result of liberalisation, trade policy has underone

tremendous chanes. Fspecially the forein trade has been freed from the unnecessary controls.

The ae"old restrictions have been eliminated at one o. ome of the chief characteristics of the 4ew Trade Policy are as follows/

(i) Reduction in Restrictions of "6port8Import!

6estrictions on the e!ports"imports have almost disappeared leavin only a few items.

(ii) Reduction in "6port8Import Ta6!

F!port"import ta! on some items has been completely abolished and on some other items it has been reduced to the minimum level.

(iii) "asy rocedure of "6port8Import!

#mport"e!port procedure has been simplified.

(iv) "stablishment of ,orei3n Capital #ar7et!

-orein capital market has been established for sale and purchase of forein e!chane in the open market.


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(v) ,ull Convertibility on Current $ccount!

#n &11@"1:, full convertibility became applicable on current account.

Mere it is important to clarify the meanin of current account and full convertibility. Therefore, this has been done as follows/

Current $ccount!

Transactions with the forein countries are placed in two cateories/ (i) transaction with current account, for e!ample, import"e!port, (ii) apital

account transactions, like investment.

,ull Convertibility!

#n short, full convertibility means unrestricted sale and purchase of forein e!chane in the forein e!chane market for the purpose of payments

and receipts on the items connected with current account. #t means that there is no overnment restriction on the sale and purchase of forein

e!chane connected with current account.

On the other hand, sale and purchase of forein e!chane connected with capital account can be carried on under the rates determined by the

6eserve Bank of #ndia (6B#),

(vi) rovidin3 Incentive for "6port!

5any incentives have been allowed to F!port" oriented *nits (FO*) and F!port Processin Qones (FPQ) for increasin e!port trade.

(9) ,iscal Reforms

The policy of the overnment connected with the income and e!penditure is called fiscal policy. The reatest problem confrontin the #ndian

overnment is e!cessive fiscal deficit. #n &113"1&, the fiscal deficit was 2A of the >?P. (#t is important to understand the meanin of fiscal deficit

and >?P.)

(i) ,iscal Deficit!

0 fiscal deficit means that the country is spendin more than its income,


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(ii) 2ross Domestic roduct (2D)!

The >?P is the sum total of the financial value of all the produced oods and services durin a year in a country. >enerally, the financial deficit is

calculated in the form of >?PCs percentae. Presently, the overnment of #ndia is makin efforts to take it to @A.

Solutions of ,iscal Deficit

#n order to handle the problem of fiscal deficit, basic chanes were made in the ta! system. The followin are the maJor steps taken in this

direction/

(i) The rate of the individual and corporate ta! has been reduced in order to brin more people in the ta! net.

(ii) Ta! procedure has been simplified.

(iii) Meavy reduction in the import duties has been implemented.

(:) #onetary Reforms

5onetary policy is a sort of control policy throuh which the central bank controls the supply of money with a view to achievin the obJectives of

the eneral economic policy. 6eforms in this policy are called monetary reforms. The maJor points with reard to the monetary reforms are iven

below/

(i) tatutory Kiquidity 6atio (K6) has been lowered. (0 commercial bank has to maintain a definite percentae of liquid funds in relation to its net

demand and time liabilities. This is called K6. #n liquid funds, cash investment in permitted securities and balance in current account with

nationalised banks are included.)

(ii) The banks have been allowed freedom to decide the rate of interest on the amount deposited.

(iii) 4ew standards have been laid down for the income reconition for the banks. (By reconition of income, we mean what is to be considered as

the income of the bank. -or e!ample, should the interest on the bad debt be considered as the income of the bank directions have been issued in

this conte!t.

(iv) Permission to collect money by issuin shares in the capital market has been ranted to nationalised banks.


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(v) Permission to open banks in the private sector has also been ranted.

(;) Capital #ar7et Reforms

The market in which securities are sold and bouht is known as the capital market. The reforms connected with it are known as capital market

reforms. This market is the pivot of the economy of a country. The overnment has taken the followin steps for the development of this market/

(i) *nder the Portfolio #nvestment cheme, the limit for investment by the 46#s and forein companies in the shares and debentures of the #ndian

companies has been raised. (Portfolio #nvestment cheme means investin in securities.)

(ii) #n order to control the capital market, the ecurities and F!chane Board of #ndia (FB#) has been established.

(iii) The restriction in respect of interest on debentures has been lifted. 4ow, it is decided on the basis of demand and supply.

(iv) The office of the ontroller of apital #ssue which used to determine the price of shares to be issued has been dispensed with. 4ow, the

companies are free to determine the price of the shares.

(v) Private sector has been permitted to establish 5utual -und.

(vi) The reistration of the sub broker has been made mandatory.

(


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The overnment has taken steps to remove price control in case of many products. (Price ontrol means that the companies will sell oods at the

prices determined by the overnment.) The efforts to remove price control were mostly in respect of fertiliers, steel and iron and petro products.

6estrictions on the import of these products have also been removed.

"C%&%#IC "&-I%"&T

conomic nvironment refers to all those economic factors! which have a bearing on the

functioning of a business. "usiness depends on the economic environment for all the

needed inputs. It also depends on the economic environment to sell the finished goods.

#aturally! the dependence of business on the economic environment is total and is not

surprising because! as it is rightly said! business is one unit of the total economy.

conomic environment influences the business to a great e$tent. It refers to all those

economic factors which affect the functioning of a business unit. %ependence of business

on economic environment is total & i.e. for input and also to sell the finished goods.

Trained economists supplying the 'acro economic forecast and research are found in

maor companies in manufacturing! commerce and finance which prove the importance

of economic environment in business. The following factors constitute economic

environment of business

(a) conomic system

(b) conomic planning

(c) Industry

(d) *griculture

(e) Infrastructure

(f) +inancial , fiscal sectors

(g) -emoval of regional imbalances

(h) Price , distribution controls

(i) conomic reforms

() uman resource and

(k) Per capita income and national income

The state became the encourager of savings and also an important investor and the

owner of capital. /ince the state was to be the primary agent of economic change! it

followed that private sector activities had to be strictly regulated and controlled to

conform to the obectives of state policy.


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&USIN$SS $N'IRONM$NT

The combination of internal and external factors that influence a company's operating situation. The

business environment can include factors such as: clients and suppliers ;

its competition and owners ; improvements in technology ; laws and government activities ; and market ,

social and economic trends.

5atre of "siness Environment:

The nature of Business Fnvironment is simply and better e!plained by the followin approaches/

(i) System $pproach!

#n oriinal, business is a system by which it produces oods and services for the satisfaction of wants, by

usin several inputs, such as, raw material, capital, labour etc. from the environment.

(ii) Social Responsibility $pproach!

#n this approach business should fulfill its responsibility towards several cateories of the society such as

consumers, stockholders, employees, overnment etc.

(iii) Creative $pproach!

0s per this approach, business ives shape to the environment by facin the challenes and availin the

opportunities in time. The business brins about chanes in the society by ivin attention to the needs of

the people.

http://www.businessdictionary.com/definition/combination.htmlhttp://www.businessdictionary.com/definition/external-factors.htmlhttp://www.businessdictionary.com/definition/external-factors.htmlhttp://www.businessdictionary.com/definition/influence.htmlhttp://www.businessdictionary.com/definition/influence.htmlhttp://www.businessdictionary.com/definition/influence.htmlhttp://www.businessdictionary.com/definition/company.htmlhttp://www.businessdictionary.com/definition/company.htmlhttp://www.businessdictionary.com/definition/company.htmlhttp://www.businessdictionary.com/definition/operate.htmlhttp://www.businessdictionary.com/definition/operate.htmlhttp://www.businessdictionary.com/definition/factor.htmlhttp://www.businessdictionary.com/definition/factor.htmlhttp://www.businessdictionary.com/definition/client.htmlhttp://www.businessdictionary.com/definition/supplier.htmlhttp://www.businessdictionary.com/definition/supplier.htmlhttp://www.businessdictionary.com/definition/competition.htmlhttp://www.businessdictionary.com/definition/owner.htmlhttp://www.businessdictionary.com/definition/improvements.htmlhttp://www.businessdictionary.com/definition/improvements.htmlhttp://www.businessdictionary.com/definition/technology.htmlhttp://www.businessdictionary.com/definition/law.htmlhttp://www.businessdictionary.com/definition/law.htmlhttp://www.businessdictionary.com/definition/government.htmlhttp://www.businessdictionary.com/definition/government.htmlhttp://www.businessdictionary.com/definition/activity.htmlhttp://www.businessdictionary.com/definition/market.htmlhttp://www.businessdictionary.com/definition/economic-trend.htmlhttp://www.businessdictionary.com/definition/economic-trend.htmlhttp://www.businessdictionary.com/definition/combination.htmlhttp://www.businessdictionary.com/definition/external-factors.htmlhttp://www.businessdictionary.com/definition/influence.htmlhttp://www.businessdictionary.com/definition/company.htmlhttp://www.businessdictionary.com/definition/operate.htmlhttp://www.businessdictionary.com/definition/factor.htmlhttp://www.businessdictionary.com/definition/client.htmlhttp://www.businessdictionary.com/definition/supplier.htmlhttp://www.businessdictionary.com/definition/competition.htmlhttp://www.businessdictionary.com/definition/owner.htmlhttp://www.businessdictionary.com/definition/improvements.htmlhttp://www.businessdictionary.com/definition/technology.htmlhttp://www.businessdictionary.com/definition/law.htmlhttp://www.businessdictionary.com/definition/government.htmlhttp://www.businessdictionary.com/definition/activity.htmlhttp://www.businessdictionary.com/definition/market.htmlhttp://www.businessdictionary.com/definition/economic-trend.html


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C%#%&"&TS

$> Internal environment

#nternal environment includes all those factors which influence business and which are present within

the business itself. These factors are usually under the control of business. The study of internal factors

is really important for the study of internal environment. These factors are/

(i) ObJectives of Business, (ii) Policies of Business, (iii) Production apacity, (iv) Production 5ethods, (v) 5anaement

#nformation ystem, (vi) Participation in 5anaement, (vii) omposition of Board of ?irectors, (viii) 5anaerial 0ttitude,

(i!) Oranisational tructure, (!) -eatures of Muman 6esource, etc.

&ote!

0ll the above factors do influence the decisions of business, but since all these factors are usually under the control of

business, they cannot be wholly included in the business environment.

'> "6ternal "nvironment

F!ternal environment includes all those factors which influence business and e!ist outside the business. Business has

no control over these factors. The information about these factors is important for the study of the e!ternal environment.

ome of these factors are those with which a particular company has very close relationship. Mowever, there are some

other factors which influence the entire business community.

5icro environment means that environment which includes those factors with which business is closely related. These

factors influence every industrial unit differently. These factors are as under/

(i) ustomers (ii) uppliers (iii) ompetitors (iv) Public (v) 5arketin #ntermediaries.

(i) Customers!

ustomers of an industrial unit can be of different types. They include household, overnment, industry, commercial

enterprises, etc. The number of different types of customers hihly influences a firm.


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-or e!ample, suppose a firm supplies oods only to the overnment. #t means that firm has only one customer. #f

because of some reason their relations et soured, the supply of oods will stop and in that case the closure of that firm

is certain.

This clearly indicates that the customers do influence business. Therefore, a firm should make efforts to have different

kinds of customers,

(ii) Suppliers!

Kike the customers, the suppliers also influence business. #f a business has only one supplier and he ets annoyed

because of some reason, the supply of oods can be stopped and the very e!istence of the business can be threatened

or endanered. Mence, efforts should be made to have various suppliers.

(iii) Competitors!

The competin firms can influence business in a number of ways. They can do so by brinin new and cheap products

in the market, by launchin some sale promotion scheme or other similar methods.

(iv) ublic!

Public has different constituents like the local public, press or media, etc. The attitude or behaviour of these constituents

can affect business units. -or e!ample, the local population can oppose some established firm whose business is

e!cessively noisy.

imilarly, if the media ives some favourable report about a particular company the price of its share can reister an

increase on this count.

(v) #ar7etin3 Intermediaries!

The marketin intermediaries play a sinificant role in developin any business unit. They are those persons who

reduce the distance between the producers and aents.


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-or e!ample, a company sells its oods with the help of aents and if because of some reason all the aents et

annoyed with the company and refuse to sell its oods, there can be a crisis for the company.

Documents

BUSINESS ENVIRONMENT NOTES FOR MBA