Political & Legal Environment

Here's 'Political & Legal Environment'- from Business Environment-Semester 2. Happy Learning!

1. POLITICAL & LEGAL ENVIRONMENT KARISHMA SHETTY

2. Business decisions are greatly influenced by the developments in the political environment. A change in the government brings about a change in the attitude, preference, objectives etc. Business firms need to keep a track of all political events, anticipate changes in government policies and frame production and marketing strategies accordingly. POLITICAL ENVIRONMENT: The political environment is one of the less predictable elements in an organisation’s business environment. It includes the effects of pressure groups who seek to change government policies. It plays a very crucial role in strategic management of the business because: Political decisions inevitably affect the economic environment. Political decisions also influence the social and cultural environment of a country. Politicians can influence the pace at which new technologies appear and are adopted.

3. POLITICAL INSTITUTIONS: Political institutions are organizations which create, enforce, and apply laws; that mediate conflict; make (governmental) policy on the economy and social systems. Egs: political parties, trade unions, and the (legal) courts. The term ‘Political Institutions’ may also refer to the recognized structure of rules and principles within which the above organizations operate, including such concepts as the right to vote, responsible government, and accountability. India is a Union of states. The structure of the government is federal in nature and has three wings. The Legislature makes laws for the country, the Executive enforces those laws and administers the Constitution and the Judiciary ensures fairness and justice to all individuals.

4. It is is the law-making body of a political unit, usually a national government, that has power to enact, amend, and even take back a public policy. Laws enacted by legislatures are known as legislation. Legislative power in India is exercised by the Parliament. It consists of the President of India, the Rajya Sabha, and the Lok Sabha. The Parliament makes laws for governance of the country. The Parliament delegates some power to other authorities to makes rules and regulations. However it does not enjoy complete sovereignty, as its laws are subject to judicial review by the Supreme Court of India. The members of cabinet, including the prime minister and the Council of Ministers, are either chosen from parliament or elected within six months of assuming office. LEGISLATURE :

5. JUDICIAL FUNCTIONS 05. CONSTITUTIONAL FUNCTIONS 06. REGULATORY FUNCTIONS 01. LEGISLATIVE FUNCTIONS 02. ELECTORAL FUNCTIONS 07. FINANCIAL POWERS 03. DELIBERATIVE FUNCTIONS 04. FUNCTIONS OF THE LEGISLATURE

6. The judiciary is also known as the judicial system or court system) It is the system of courts that interprets and applies the law in the name of the state. It provides a mechanism for the resolution of disputes. Under the doctrine of the separation of powers, the judiciary generally does not make law (that is actually the responsibility of the legislature) or enforce law (which is the responsibility of the executive), but rather interprets law and applies it to the facts of each case. This branch of the state is often tasked with ensuring equal justice under law. It usually consists of a court of final appeal (called the “Supreme court” or “Constitutional court”), together with lower courts. The Constitution of India is the supreme legal document of its jurisdiction which extends throughout the territory of the country. JUDICIARY:

7. The Indian judiciary is partly a continuation of the British legal system established by the English in the mid-nineteenth century. There are various levels of judiciary in India – different types of courts, each with varying powers depending on the tier and jurisdiction bestowed upon them. They form a strict hierarchy of importance, in line with the order of the courts in which they sit, with the Supreme Court of India at the top, followed by High Courts of respective states with district judges sitting in District Courts and Magistrates of Second Class and Civil Judge (Junior Division) at the bottom. The Indian judiciary is independent of the executive and legislative branches of government according to the Constitution. In many jurisdictions the judicial branch has the power to change laws through the process of judicial review. Courts with judicial review power may annul the laws and rules of the state when it finds them incompatible with a higher norm, such as primary legislation, the provisions of the constitution or international law.

8. FUNCTIONS OF JUDICIARY IN INDIA JUDICIAL FUNCTIONS INTERPRETS THE CONSTITUTION AND LAWS ADMINISTRATIVE FUNCTIONS GUARDIAN OF THE CONSTITUTION MAKING OF NEW LAW PROTECTION OF FUNDAMENTAL RIGHTS ADVISABLE FUNCTION

9. EXECUTIVE: It is the part of government that has sole authority and responsibility for the daily administration of the state. The executive branch executes or enforces the law. The division of power into separate branches of government is central to the idea of the separation of powers. It is made up of the Crown (represented by the Governor-General), Cabinet Ministers, and the public service, has responsibility for developing, initiating and implementing policy, as well as for the publication and administration of legislation. The separation of powers system is designed to distribute authority among several branches — an attempt to preserve individual liberty in response to tyrannical leadership throughout history.

10. The role of the executive is to enforce the law as written by the legislature and interpreted by the judicial system. The following Functions undertaken by them are: Is the commander-in-chief of the armed forces. Executes the instructions of Legislature. May veto bills passed by Legislature (but the veto may be overridden by a two-thirds majority of both houses). Executes the spending authorized by Congress. Declares states of emergency and publishes regulations and executive orders. Makes executive agreements (does not require ratification) and signs treaties (ratification requiring approval by two-thirds of the Senate). Makes appointments to the federal judiciary, federal executive departments, and other posts with the advice and consent of the Senate. Has power to make temporary appointment during the recess of the Senate . Has the power to grant “reprieves and pardons for offenses against the United States, except in cases of impeachment”.

11. ROLE OF GOVERNMENT IN BUSINESS Protecting Business Property Enforcing Business Contracts Permission Contract Enforcement Consumer Protection Environment Protection A B C D E F Employee Protection Investor Protection Setting and collecting taxes G H I

12. The government is involved in business to provide public goods; to protect public health and welfare; to stabilize the economy; to protect businesses, consumers, investors, and competition; to conserve the environment; to regulate working conditions; and to protect business property. Zoning laws vary from state to state and town to town. In some instances, zoning laws may permit businesses such as tattoo parlours to open in certain districts; however, other business owners in the district may not want this to happen. They may protest or take other actions to prevent the new business from opening. To protect business property Government continues to provide physical protection for business property and to issue trademarks, patents, and copyrights to protect products and ideas. Government has also passed zoning laws to protect the value of business property. For example, sections of a city may be zoned for certain kinds of businesses, such as office complexes or retail establishments. In this way, business owners are assured that no one can open undesirable business in the neighbourhood.

13. LEGAL FRAMEWORK IN INDIA: CONSTITUTION: India has a population of over a billion people and is the second most populated country in the world. There are numerous ethnic groups and religions. The Republic of India gained independence from the United Kingdom on 15 August 1947. It adopted its Constitution on 26 January 1950. According to the Constitution, India is a Federal Republic, consisting of 28 states and 7 union territories. The Constitution guarantees fundamental rights, such as the right to equality, freedom of expression, procedural rights, right to life and personal liberty, freedom of religion as well as cultural and education rights and the right to redress in courts.

14. The Indian judiciary has a single pyramidal structure with the lower or subordinate courts at the bottom, the High Courts of the States in the middle, and the Supreme Court at the top. The Court system is composed of courts with civil and criminal jurisdiction as well as administrative tribunals. Civil Courts are divided into City Civil Courts and Small Claims Courts at the Metropolitan City Level and District Courts at the District Level. Criminal Courts are divided into Session Courts and Magistrates Courts at both levels as well as Metropolitan Courts at the Metropolitan City Level. The High Courts and the Supreme Court have mainly appellate functions and the power to receive fundamental rights petitions. The Supreme Court, which is exclusively under the regulative powers of the Union has the power to review High Court judgments and declare legislation unconstitutional. The independence of the judiciary is not expressly guaranteed but ensured by various provisions in the Constitution.

15. The economic environment consists of external factors in a business’ market and the broader economy that can influence a business. The economic environment can be divided into the microeconomic environment, which affects business decision making - such as individual actions of firms and consumers - and the macroeconomic environment, which affects an entire economy and all of its participants. Many economic factors act as external constraints on the business, which means that business has very little or control over them. ECONOMIC ENVIRONMENT: Introduction:

16. Macroeconomic influences are broad economic factors that either directly or indirectly affect the entire economy and all of its participants, including the business. These factors include such things as: Interest rates. Taxes. Inflation. Currency exchange rates. Consumer discretionary income. Savings rates. Consumer confidence levels. Unemployment rate. Recession. Depression.

17. Microeconomic factors influence the business decisions. Unlike macroeconomic factors, these factors are narrower in scope and do not necessarily affect the entire economy as a whole. Microeconomic factors influencing a business include: Market size. Demand. Supply. Competitors. Suppliers. Distribution chain, such as retailer stores. The economic environment of business plays a pivotal role in determining the success or failure of a business. If interest rates are too high, the cost of borrowing may not permit a business to expand. On the other hand, if unemployment rate is high, businesses can obtain labour at cheaper costs. However, if unemployment is too high, this may result in a recession and less discretionary consumer spending resulting in insufficient sales to keep the business going. Tax rates take a majority of the income and currency exchange rates can either increase or decrease the export of the products to foreign markets.

18. ECONOMIC FACTORS AFFECTING BUSINESS INFLATION RATE PREVAILING INTEREST RATES UNEMPLOYMENT LEVEL LABOUR COSTS LEVELS OF DISPOSABLE INCOME DISTRIBUTION TAXES TARIFFS

19. ECONOMIC SYSTEMS: Introduction: An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. It includes the combination of the various institutions, agencies, entities and consumers that comprise the economic structure of a given community. A related concept is the mode of production. The study of economic systems includes how these various agencies and institutions are linked to one another, how information flows between them, and the social relations within the system (including property rights and the structure of management). Among existing economic systems, distinctive methods of analysis have developed, such as socialist economics and Islamic economic jurisprudence. Today the dominant form of economic organization at the global level is based on market-oriented mixed economies.

20. Saturn is composed mostly of hydrogen and helium Venus is very hot and also the second planet from the Sun Despite being red, Mars is actually a cold place Mercury is the smallest planet in the Solar System 01 02 04 03 TYPES OF ECONOMIC SYSTEMS Traditional Economic System Mixed Economic System Market Economic System Command Economic System

21. A traditional economic system is the best place to start because it is, quite literally, the most traditional and ancient type of economy in the world. There are certain elements of a traditional economy that those in more advanced economies, such as Mixed, would like to see return to prominence. Traditional economies still produce products and services that are a direct result of their beliefs, customs, traditions, religions, etc. Vast portions of the world still function under a traditional economic system. These areas tend to be rural, second- or third-world, and closely tied to the land, usually through farming. However, there is an increasingly small population of nomadic peoples, and while their economies are certainly traditional, they often interact with other economies in order to sell, trade, barter, etc. Traditional economies would never, ever, in a million years see the type of profit or surplus that results from a market or mixed economy. In general, surplus is a rare thing. A third-world and/or indigenous country does not have the resources necessary (or if they do, they are controlled by wealthier economies, often by force), and in many cases any surplus is either distributed, wasted, or paid to some authority that has been given power. Traditional Economic System:

22. In terms of economic advancement, the command economic system is the next step up from a traditional economy. This by no means indicates that it is fairer or an exact improvement; there are many things fundamentally wrong with a command economy. The most notable feature of a command economy is that a large part of the economic system is controlled by a centralized power; often, a federal government. This kind of economy tends to develop when a country finds itself in possession of a very large amount of valuable resource(s). The government then steps in and regulates the resource(s). Often the government will own everything involved in the industrial process, from the equipment to the facilities. A command economy is capable of creating a healthy supply of its own resources and it generally rewards its own people with affordable prices (but because it is ultimately regulated by the government, it is ultimately priced by the government). Still, there is often no shortage of jobs as the government functions similarly to a market economy in that it wants to grow. Command Economic System:

23. A market economy is very similar to a free market. The government does not control vital resources, valuable goods or any other major segment of the economy. In this way, organizations run by the people determine how the economy runs, how supply is generated, what demands are necessary, etc. Capitalism: It is an economic system in which trade, industry, and the means of production are largely or entirely privately owned. Private firms and proprietorships usually operate in order to generate profit, but may operate as private non-profit organizations. Central characteristics of capitalism include private property, capital accumulation, wage labour and, in some situations, fully competitive markets. In a capitalist economy, the parties to a transaction typically determine the prices at which they exchange assets, goods, and services. Socialism: It is a social and economic system characterised by social ownership of the means of production and co-operative management of the economy, as well as a political theory and movement that aims at the establishment of such a system. “Social ownership” may refer to cooperative enterprises, common ownership, state ownership (achieved by nationalization), citizen ownership of equity, or any combination of these. There are various models of socialism which differ in the type of social ownership they advocate, the degree to which they rely on markets or planning, how management is to be organised within productive institutions, and the role of the state in constructing socialism. Market Economic System:

24. No truly free market economy exists in the world. For example, while America is a capitalist nation, our government still regulates (or attempts to regulate) fair trade, government programs, moral business, monopolies etc. The advantage to capitalism is an explosive economy that is very well controlled and relatively safe. This would be contrasted to socialism, in which the government (like a command economy) controls and owns the most profitable and vital industries but allows the rest of the market to operate freely; that is, price is allowed to fluctuate freely based on supply and demand. Market Economy and Politics: The biggest advantage to a market economy is the separation of the market and the government. This prevents the government from becoming too powerful, too controlling and too similar to the governments of the world that oppress their people while living lavishly on controlled resources.

25. A mixed economic system (also known as a Dual Economy) is just like it sounds (a combination of economic systems), but it primarily refers to a mixture of a market and command economy (for obvious reasons, a traditional economy does not typically mix well). One can imagine, many variations exist, with some mixed economies being primarily free markets and others being strongly controlled by the government. Benefits of a Mixed Economy: In the most common types of mixed economies, the market is more or less free of government ownership except for a few key areas. These areas are usually not the resources that a command economy controls. Instead, as in America, they are the government programs such as education, transportation, USPS, etc. While all of these industries also exist in the private sector in America, this is not always the case for a mixed economy. Disadvantages of a Mixed Economy: While a mixed economy can lead to incredible results (America being the obvious example), it can also suffer from similar downfalls found in other economies. For example, the last hundred years in America has seen a rise in government power. Not just in imposing laws and regulations, but in actually gaining control, becoming more difficult to access while simultaneously becoming less flexible. This is a common tendency of mixed economies. Mixed Economic System:

26. ECONOMIC POLICY Economic policy refers to the actions that governments take in the economic field. It covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the economy. Most factors of economic policy can be divided into either fiscal policy, which deals with government actions regarding taxation and spending, or monetary policy, which deals with central banking actions regarding the money supply and interest rates. Such policies are often influenced by international institutions like the International Monetary Fund or World Bank as well as political beliefs and the consequent policies of parties. TYPES OF ECONOMIC POLICIES FISCAL POLICY MONETARY POLICY TRADE/COMMERCIAL POLICY

27. FISCAL POLICY Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. Its main objective was to reduce fiscal deficit to achieve certain objectives like – increase in taxes, control over through fiscal policy, regulators attempt to improve unemployment rates, control inflation, stabilize business cycles and influence interest rates in an effort to control the economy. Functions of Fiscal Policy: Determine allocation of funds Distribution Stabilization Development Types of Fiscal Measures: Taxes Public Expenditure Public Borrowing

28. Another way the government can impact the economy is through monetary policy. Monetary policy is instigated by the central bank of a nation (the Federal Reserve in the US) to control the supply of money within the economy. By impacting the effective cost of money, the Federal Reserve can affect the amount of money that is spent by consumers and businesses. MONETARY POLICY

29. A commercial policy (also referred to as a trade policy or international trade policy) is a set of rules and regulations that are intended to change international trade flows, particularly to restrict imports. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. Their aim is to boost the nation’s international trade. The purpose of trade policy is to help a nation’s international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies. Trade policy can involve various complex types of actions, such as the elimination of quantitative restrictions or the reduction of tariffs. According to a geographic dimension, there is unilateral, bilateral, regional, and multilateral liberalization. TRADE OR COMMERCIAL POLICY

30. PUBLIC SECTOR The public sector is the part of the economy concerned with providing various government services. The composition of the public sector varies by country, but in most countries the public sector includes such services as the military, police, public transit and care of public roads, public education, along with healthcare and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as street lighting), services which benefit all of society rather than just the individual who uses the service. Businesses and organizations that are not part of the public sector are part of the private sector. The private sector is composed of the business sector, which is intended to earn a profit for the owners of the enterprise, and the voluntary sector, which includes charitable organizations. The organisation of the public sector (public ownership) can take several forms, including: Direct administration funded through taxation; the delivering organisation generally has no specific requirement to meet commercial success criteria, and production decisions are determined by government. Publicly owned corporations (in some contexts, especially manufacturing, “state-owned enterprises”); which differ from direct administration in that they have greater commercial freedoms and are expected to operate according to commercial criteria, and production decisions are not generally taken by government (although goals may be set for them by government).

31. It is the part of the economy that is not state controlled, and is run by individuals and companies for profit. This sector encompasses all for-profit businesses that are not owned or operated by the government. Companies and corporations that are government run are part of what is known as the public sector. The private sector is the part of a country’s economic system that is run by individuals and companies, rather than the government. Most private sector organizations are run with the intention of making profit. The segment of the economy under control of the government is known as the public sector. Charities and non-profit organizations are sometimes considered to make up a third segment, known as the volunteer sector. However, such organizations are more commonly considered part of the private sector. The private sector is larger in free enterprise economies, such as the United States, in which the government imposes relatively few restrictions on businesses. In countries with more government control, such as China, the public sector makes up the larger part of the economy. In many countries, there is considerable overlap between public and private sector industries. Examples of enterprises that are often run cooperatively include waste management, water management, health care and security services. The act of turning a publicly-run enterprise over to private citizens is known as privatization . The opposite movement, from private to public, is known by various names, including nationalization or municipalisation, depending on the level of government involved. PRIVATE SECTOR

32. IMPACT OF BUSINESS ON PRIVATE SECTOR: With an Annual GDP growth rate of 7-8 percent India is the one of the fastest growing economies in the world. This stable annual GDP growth rate that India is witnessing is mostly due to the rise of the major private sector companies in the country. Private sector companies play a very important role in the Indian economy. Over the last 15 years or so the major Private companies in India have contributed more than significantly to the growth of the Indian economy. After the liberalization policies in the 1990s India started receiving huge amounts of foreign direct investment (FDI) which was one of the most important reasons behind the success of the private companies in the country. Prior to this the Indian economy was ruled mostly by the public sector enterprises which were known for their strict rules and regulations and bureaucratization. The liberalization policies proved to be a boon for the Indian economy. The economy witnessed huge amounts of foreign funds and along with it came in cutting edge technology and new ideas which started changing the functioning of India business. Slowly and steadily more and more private sector companies started coming up and establishing themselves in this part of the globe.

33. Since the 1990s most of the Foreign Direct Investment that India received was in favour of the private sector. The total amount of investment increased from 56 percent in the first five years of the decade to almost 71 percent in the other five years of 1990. This became the investment trend and is continuing till today. Investments in private sector generally cover sectors like transport, manufacturing, infrastructure, financial services, social services, agriculture, telecommunication and Information technology. However the present investment trends show that sectors like pharmaceutical, contract research semiconductor, biotechnology and product research and development are also gaining immense importance. The Major Private companies of India prioritized customer’s need and speedy service, which further fuelled competition amongst same industry players. This healthy competition has benefited the end consumers, since the cost of service or products has come down substantially. Over the last few years India has witnessed tremendous change in its economy and this is mostly due to some of the finest private sector like the BPOs, software companies, private banks and financial companies. India’s manufacturing sector is also flooded with a number of private Indian companies that dominate the Indian industry and have also made a mark in the global forefront. The manufacturing companies in the country encompass sectors such as chemicals, textiles, petrochemical products, automobile, agri-foods, telecommunication equipment, and computer hardware.

34. FOOD PROCESSING RETAIL TELECOM INFRASTRUCTURE INFORMATION TECHNOLOGY SUNRISE SECTORS OF INDIAN ECONOMY:

35. (1) Information Technology (IT): The IT sector has been India’s sunshine sector for quite some time now. The industry has contributed considerably to changing India’s image from a slow developing economy to a global player in providing world class technology solutions. According to the IBEF (India Brand Equity Foundation) figures, the Indian IT industry is set to touch $225 billion by 2020. Industry experts and NASSCOM say the Indian IT workforce will touch 30 million by 2020, becoming the highest sector employer. This will be coupled with steady increase in pay in a sector already offering a high base. The outsourcing industry too is looking towards India and is expected to be a $2.5 billion industry in the near future.

36. (2) FOOD PROCESSING: The Indian food processing industry is a high priority sector that is growing in India. The demand from consumers and their willingness to pay that extra for convenience are the main reasons behind the roaring business in the food sector, especially in the processed food arena. Today, the Indian food processing industry is recognized as a sunrise industry. According to reports, during 2009-13, India’s exports of processed food and related products increased at a compounded annual growth rate of 21.9% to $36.1 billion. Further, the Indian food industry is estimated to grow to about $200 billion by 2015. Thus, it could lead to significant economic development, apart from providing employment opportunities. A recent example could be of The Food Park recently inaugurated by Prime Minister Narendra Modi at Tumkur in Karnataka. This has set a great precedent for public-private partnerships where the private sector invests in infrastructure, while the government brings in technology and knowledge to help farmers earn reasonably, without suffering losses. This leads to income generation, employment opportunities, besides reducing wastage. Processed food in India will continue to stay so long as we see changing lifestyles, increasing numbers of working women, disposable incomes and trendy attitudes. Besides, the government is keen on encouraging this industry by promoting joint ventures, giving industrial licences, introducing schemes for technology upgrade, and establishing and modernizing processing industries. In conclusion, the future of the food processing industry is dazzling, with food safety, quality assurance and hygiene norms gaining importance. The stringent rules laid by the government are sure to take this industry to global standards. Also, the allocation of Rs. 2,000 crore for the food processing industry in the budget is sure to provide an impetus to this sector in India.

37. (3) TELECOM The Indian telecommunications industry is one of the fastest growing in the world. Government policies and regulatory framework implemented by Telecom Regulatory Authority of India (TRAI) have provided a conducive environment for service providers. This has made the sector more competitive, while enhancing the accessibility of telecommunication services at affordable tariffs to the consumers. In the last two decades, the Indian Telecom Sector and mobile telephony in particular has revolutionized the way we communicate, share information and stay connected. Telecommunication services are globally recognized as one of the driving forces for overall economic development in a nation. It is also one of the prime support services needed for rapid growth and modernization of various sectors of the economy. The Government of India has taken several major initiatives to provide a business friendly environment for companies in this sector. With daily increasing subscriber base, there have been a lot of investments and developments in the sector. The Department of Information Technology intends to set up over one million internet-enabled common service centres across India as per the National e-Governance Plan. The government has also revised the M&A guidelines for the telecom sector; it raised the limit on the market share of a merged entity in a circle to 50 per cent from 35 percent earlier. The mobile application (app) market is expected to expand at a CAGR of 70.4 per cent to US$ 100 billion during 2012-15. The segment’s growth is expected to be driven by increasing mobile connections and availability of low-range smart phones. India will emerge as a leading player in the virtual world by having 700 million internet users of the 4.7 billion global users by 2025. With the government’s favourable regulation policies and also foreign direct investment limit in telecom services (upto 74 per cent subject to the following conditions), rapid growth is expected in the Indian telecommunication sector in the next few years.

38. (4) INFRASTRUCTURE: India’s infrastructure growth has been exponential over the past decade. Today, we are the fourth largest and probably the second-fastest growing economy, with infrastructure being one of the cornerstones. The infrastructure industry in India is highly fragmented and hence difficult to gauge its exact size and the jobs it generates each year in absolute terms. India is witnessing significant interest from international investors in the infrastructure space. Many Spanish companies are keen on collaborating with India on infrastructure, high speed trains, renewable energy and developing smart cities. However, be it roads and highways, railways, aviation, shipping, energy, power or oil & gas, the Indian government and the various state governments seem to making rapid progress. This has led to significant employment generation, though a majority of it is still in the unorganised sector. Over the next 10 years, the infrastructure sector in India will need to continue its growth momentum and is likely to maintain a growth rate anywhere between 7-10%, a very healthy sign. The Reserve Bank of India (RBI) has notified 100 per cent foreign direct investment (FDI) under automatic route in the construction development sector. The new limit is effective 2 December 2014, RBI said in a notification on its website. Recently, the Government has relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and liberalised the exit norms. The Cabinet has also approved the proposal to amend the FDI policy. India and the US have signed a Memorandum of Understanding (MoU) in order to establish Infrastructure Collaboration Platform. The document showcases the relationship between both the Governments which intend to facilitate US industry participation in Indian infrastructure projects to improve the bilateral commercial relationship and benefit both the Participants’ economies.

39. (5) RETAIL: The Indian retail industry is one of the fastest growing markets in the world due to economic growth. India is the fifth largest preferred retail destination globally. The sector is experiencing exponential growth, with retail development taking place throughout the country. India had the highest number of retail outlets in the world at over 13 million retail outlets in 2014. The Government has introduced reforms to attract foreign direct investment (FDI) and to boost investor sentiment. Government has approved 51 per cent FDI in multi-brand retail and increased FDI limit to 100 per cent (from 51 per cent) in single brand retail. Today, only a small part of retail in India is organised. Despite this, it is estimated that the sector in India is worth more than $400 billion, with domestic and international players planning to expand across the country. Industry leaders predict that the next phase of growth will emerge from rural markets. There are projections of the workforce doubling by 2015, from the current five lakhs in both organised and unorganised sector. The future of the Indian retail industry in India looks promising.

40. Challenges before Indian Economy Inflation Poor Education Standards Poor Infrastructure Balance of Payments Deterioration High levels of private debt Inequality has risen rather than decreased Large budget deficit Rigid Labour Laws Inefficient Agriculture Slowdown in Growth

41. End of M odule 2