Business Environment Unit 2.pptx MBA R19

It consists of MBA r19 legal and business Environment unit 2

1. BUSINESS ENVIRONMENT Dr.P.V.V.Satyanrayana

2. What is Economic environment The term economic environment refers to all the external economic factors that influence buying habits of consumers and businesses and therefore affect the performance of a company. These factors are often beyond a company's control, and may be either large-scale (macro) or small-scale (micro).

3. Meaning of Economic System An economic system is a mechanism with the help of which the government plans and allocates accessible services, resources, and commodities across the country. Economic systems manage elements of production, combining wealth, labour , physical resources, and business people. An economic system incorporates many companies, agencies, objects, models, and deciding procedures.

4. Types of Economic Systems Capitalist economy:  In a capitalist system, the products manufactured are divided among people, not according to what they want but on the basis of purchasing power, which is the ability to buy products and services.  Socialist economy:  This economy system acknowledges the three inquiries in a different way. In a socialist society, the government determines what products are to be manufactured in accordance with the requirements of the society . Mixed economy:  Mixed systems have characteristics of both the command and the market economic system. For this purpose, the mixed economic systems are also known as dual economic systems.

5. economic policies India has various economic policies which are industrial policy, trade policy, monetary policy , fiscal policy, Indian agricultural policy, International trade policy in India, exchange rate management policy , EXIM policy.

6. industrial Policy is enhances economic growth and development of the country . Industrial Policy Resolution, 1948 Industrial Policy Resolution, 1956 (IPR 1956 ) Industrial Policy Statement, 1977 Industrial Policy Statement, 1980 New Industrial Policy, 1991 New industrial policy of India 2021 The proposed new industrial policy, which will replace the industrial policy of 1991, seeks to achieve One Nation-One Standard, promote startups in every district, create startup innovation zones at the level of urban local bodies, and incentivize Indian specialty products by creating premium international brands.

7. Industrial Policy Resolution, 1948 Industries were divided into 4 categories Exclusive monopoly of central government(arms and ammunitions, production of atomic energy and management of railways) New undertaking undertaken only by state(coal, iron and steel, aircraft manufacturing, ship building, telegraph, telephone etc.) Industries to be regulated by the government(Industries of basic importance) Open to private enterprise, individuals and cooperatives(remaining)

8. ndustrial Policy Resolution, 1956 (IPR 1956) t is classified into three sectors Schedule A – which covers Public Sector (17 Industries) Schedule B – covering Mixed Sector (i.e. Public & Private) (12 Industries) Schedule C – only Private Industries

9. Industrial Policy Statement, 1977 This policy was an extension of the 1956 policy. The main was employment to the poor and reduction in the concentration of wealth. This policy majorly focused on Decentralisation It gave priority to small scale Industries It created a new unit called “Tiny Unit” This policy imposed restrictions on Multinational Companies (MNC).

10. industrial Policy Statement, 1980 The Industrial Policy Statement of 1980 addressed the need for promoting competition in the domestic market, modernization, selective Liberalization, and technological up-gradation. It liberalised licensing and provided for the automatic expansion of capacity. Due to this policy, the MRTP Act (Monopolies Restrictive Trade Practices) and FERA Act ( Foreign Exchange Regulation Act , 1973) were introduced. The objective was to liberalize the industrial sector to increase industrial productivity and competitiveness of the industrial sector. The policy laid the foundation for an increasingly competitive export-based and for encouraging foreign investment in high-technology areas.

11. New Industrial Policy, 1991 L – Liberalization (Reduction of government control) P – Privatization (Increasing the role & scope of the private sector) G – Globalisation (Integration of the Indian economy with the world economy)

12. Public sector investments (Disinvestment of Public sector) De-reservations –Industries reserved exclusively for the public sector were reduced Professionalization of Management of PSUs Sick PSUs to be referred to the Board for Industrial and financial restructuring (BIFR). The scope of MoUs was strengthened ( MoU is an agreement between a PSU and concerned ministry).

13. monetary policy Monetary policy is adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply. The policy often targets inflation or interest rate to ensure price stability and generate trust in the currency.

14. Simply put the main objective of monetary policy is to maintain price stability while keeping in mind the objective of growth as price stability is a necessary precondition for sustainable economic growth.  In India, the RBI plays an important role in controlling  inflation  through the consultation process regarding inflation targeting. The current inflation-targeting framework in India is flexible.

15. instruments of monetary policy Open Market Operations   Cash Reserve Ratio (CRR ) Statutory Liquidity Ratio (SLR ) Bank Rate Policy Credit Ceiling repo rate Revers repo rates

16. Fiscal policy Fiscal Policy deals with the revenue and expenditure policy of the Govt. The word fiscal has been derived from the word ‘ fisk ’ which means public treasury or Govt funds . The Union Budget 2021 has signalled the emphasis on the  Development Financial Institutions (DFIs)  in the pursuit of long-term infrastructure creation for the revival of the economy. The establishment of the Dispute Resolution Committee (DRC) has been proposed in the  Union Budget 2021  that can help provide quick relief to taxpayers in tax disputes .

17. Objectives of Fiscal Policy Higher Economic Growth Price Stability Reduction in Inequality The above objectives are met in the following ways: Consumption Control – This way, the ratio of savings to income is raised. Raising the rate of investment. Taxation, infrastructure development. Imposition of progressive taxes. Exemption from the taxes provided to the vulnerable classes. Heavy taxation on luxury goods. Discouraging unearned income.

18. components of Fiscal Policy Government Receipts Government Expenditure Public Debt Aspirants should note that all the receipts and expenditures of the government are credited and debited from the following: Consolidated Fund of India Contingency Fund of India Public Account of India

19. components of Fiscal Policy Revenue Receipt Tax Revenue Direct Tax Indirect Tax Non Tax Revenue Fees License and Permits Fines and Penalties, etc Capital Receipt Loans Recovery Disinvestments Borrowing and other liabilities Revenue Expenditure – It is a recurring expenditure: Interest Payments Defence Expenses Salaries to Central Government employees, etc are examples of  revenue expenditure Capital Expenditure – It is a non-recurring expenditure Loans repayments Loans to public enterprises, etc.

20. Structure of Indian EconomyNature and significance. India is a developing nation and economy, including a blended economy on the planet. The significant attributes of a developing economy are overpopulation, the most extreme populace underneath the destitute or poverty line, a poor infrastructure, an agro-based economy, a slower pace of capital development, and low per capita income.

21. Low Per Capita Real Income: High Rate of Population Growth: The Endless Loop of Poverty: Agro-Based Economy: Incongruities in Income: Destruction in Capital Formation: Poor Infrastructural Development: Imperfect Market: Obsolete Technology: Backward Society: Low Per Capita Income:

22. economic planning in india The  main objective of economic planning in India is to achieve balanced and sustainable economic growth that benefits all sections of society . The process involves the allocation of resources, the formulation of policies, and the implementation of programs to achieve the desired economic outcomes.

23. Economic planning  involves developing strategies and policies to achieve economic goals. This is done by setting objectives, prioritizing them, allocating resources, and implementing measures. Planning can be done at different levels, such as national, regional, or local. Once goals and priorities are identified, policies and strategies are developed, such as focusing on infrastructure, promoting exports, or improving access to education and healthcare. These policies are then implemented through programs and schemes.

24. Merits, Limitations The biggest limitations of economic planning in India include faulty implementation, lack of a pragmatic approach, and administrative incompetence. Faulty implementation can lead to ineffective policies, while a lack of a pragmatic approach can result in unrealistic goals and strategies.

25. Political Environment. The political environment is related to the business environment including all the rules and regulations, laws and the role of government in the day-to-day operations of organizations. The business political environment refers to the political or governmental actions that affect business operations.

26. Political environment Political Stability: The political scenario of a country greatly impacts the operations of a business. If there is a lack of political stability, there are always  disruptions, and uneven working patterns  are observed. The government keeps on imposing restrictions in different sectors which in turn affects the business on a large scale.

27. Taxation and Economic Policies: The tax regime of a country directly impacts the operations of a business. The tax rates vary from business to business and activity to activity. Therefore, the role of government as a regulator here becomes very vital. The economic policies of the government like monetary policy controls the money supply in an economy which in turn affects the working capital requirements of the business on a day to day basis. Various components like  fiscal policy, monetary policy, tax laws, rules and notifications  are used by the government to affect the business activities directly and indirectly.

28. Foreign Trade Regulations : The expansionary policies of the management of the companies enable the firm to operate on a global scale where the role of the government comes into the picture. Government sets various rules and regulations  (EXIM Policy, Forex Policy, etc.)  in order to enable the firm to function in the international market and so as to keep up the competitiveness in the global market. The Government of India follows the model code of conduct based on  UNCITRAL MODEL  in order to resolve the disputes that occur while operating businesses globally.

29. promotive or restrictive. In the case of  promotive policies , the government brings out various schemes to promote small businesses and enterprises. It lowers down the interest on loans taken by small farmers, so as to boost the agriculture sector and small enterprises. In case of  restrictive policies , the government imposes a ban on the practices of various players in the market, which may be detrimental to the society as a whole like a ban on plastic bags, etc.