FACTORS AFFECTING ECONOMIC DEVELOPMENT

BY

SEETHA M. J.
Asst. Professor, Dept. of Commerce & Management, Government First Grade College, Ranebennur.

MEANING OF BUSINESS
Business is an activity which is primarily pursued with the object of earning. It involves production, exchange of goods & services to earn profits or earn a living. Literally Business means a state of being busy.

MEANING OF ENVIRONMENT
Environment refers to all external forces which have a bearing on the functioning of business.

BUSINESS ENVIRONMENT
Business environment refers to the totality of all the relevant forces external to beyond the control of an individual business enterprise @ its management.

SCOPE OF BUSINESS

All activities connected with Production Trade Banking Insurance Finance Agency Advertising Packaging & branding, etc.

Vision - Broad explanation of why the firm exists and where it is trying to lead. Mission Outlines the fundamental purpose of the organisation.

OBJECTIVES OF BUSINESS

Profit. Growth. Power Employee satisfaction @ development Quality products @services Market leadership Challenging Joy of creation Service to society Good corporate citizenship

TYPES OF ENVIRONMENT
MICRO ENVIRONMENT

SUPPLIERS, RIVAL FIRMS, BUYERS, NEW ENTRANTS, SUBSTITUTE PRODUCTS.

 MACRO ENVIRONMENT

NATURAL ENVIRONMENT, ECONOMIC ENVIRONMENT, POLITICAL LEGAL ENVIRONMENT, TECHNOLOGICAL ENVIRONMENT, GLOBAL ENVIRONMENT AND SOCIO- CULTURAL ENVIRONMENT

IMPORTANCE OF BUSINESS ENVIRONMENT

Provide an understanding of current & potential

changes taking place. Provides inputs for strategic decision making. Facilitate & foster strategic thinking in organization. To keep oneself dynamic.

NATURAL ENVIRONMENT
Manufacturing.
Mining activities. Agriculture.

Trade.
Transportation & communication. Technology.

Impact on business.
Both employees & consumers are resentful of firms

taking more than giving to natural environment. Issues like ozone depletion, global warming, depletion of rain forests, destruction of animal habitats, waste management, etc.. Environmental affairs should not be taken as incidental or secondary function of a firm.

 Environment has brought in a category of people

called ENVIRONMENTALISTS. Lastly firms should formulate & implement strategies from environmental perspective.

ECONOMIC ENVIRONMENT
Is Indian economy a developed or under-developed ?

Features of Indian economy.

Low per capita income. Low standard of living & high poverty. In equal income distribution. Dominance of agriculture. Existence of rich resources. Inadequate capital formation. Unemployment & under employment.

 Technological backwardness.
Infrastructural inadequacies. Dualistic economy.

Factors affecting economy.

A) Economic factors

Natural resources Capital formation Technological progress Infrastructure Size of market & . investment

B ) Non- economic factors Political system Social system Luck.

LEGAL ENVIRONMENT

GENERAL CREDIT CONTROL. Bank rate Open market operations C.R.R. S.L.R. Refinance policy.

SELECTIVE CREDIT CONTROLS Specific securities Discriminatory rates of interest Moral suasion Direct action.

MONEY MARKET- The market in which short term funds are borrowed & lent.
Operations in money market.
Call/ notice money Commercial bills

Treasury bills
Certificates of deposits Commercial papers

FISCAL POLICY
BUDGETS
UNION

BUDGET STATE BUDGET

Trends in revenue Trends in expenditure

IMPACT OF FISCAL POLICY

Fiscal policy & savings & capital formation
Fiscal policy & economic inequalities Fiscal policy & inflation control

Industrial policy
Objectives of 1991 Industrial Policy.
Self reliance to build on many sided gains already

made. Encouragement of Indian entrepreneurship, promotion of productivity & employment generation.

 Development of indigenous technology through

greater investment in R&D. Removing the regulatory system and other weakness. Increasing the competitiveness of industries for the benefit of the common man. Incentives for the industrialization of backward areas. Enhanced support to the small scale industries.

 Ensure running of public sector undertakings on

business lines & cut their losses. Protect the interest of workers. Abolish the monopoly of any sector in any field of manufacture expect on strategic or security grounds. To link Indian market to Global market.

EXIM POLICY 2002-2007

Service exports
Agro exports Status holders

Hardware & software

Gem & jewellery sector Export clusters Rehabilitation of sick units

 Removal of quantitative restrictions

Special economic zones scheme EQU scheme

EPCG scheme
Advance license Reduction of transaction cost

TECHNOLOGICAL ENVIRONMENT
Technology and society Technology reaches people through business. High expectations of consumers. System complexity. Social change. Technological phases and social system they create.

Technology and Economy

Increase productivity.
Need to spend on R&D. Jobs tend to become more intelluctual. Problem of techno structure. Need for bio profession and multi professional managers. Increased regulation and stiff opposition. Rise and decline of products and organisation.

Business boundaries redefined.

PLANT LEVEL IMPLICATION

Technology and organization structure. Fear of risk. Resistance to change. Total quality management. Business process re-engineering. Flexible manufacturing system.

GLOBAL ENVIRONMENT
Meaning of Globalization :It means several things to several people. The company commits itself with several manufacturing locations around the world. The ability to compete in domestic markets with foreign competitors.

Features of Globalization
Configuring anywhere in the world
Interlinked and independent economies Lowering of trade and tariff barriers

Effect on related industries & ancillaries

Infrastructural resources In creating trend towards privatization Entrepreneurs unit have a central economic role.

 Mobility of skilled resources

Market side efficiency Formation of regional blocks

CHALLENGES:Maintaining competitiveness Govt. & trade regulations Developing an international perspective Managing diversity

STRATEGIES IN GLOBALISATION
Deciding whether to go global
Deciding which markets to enter Deciding how to enter the market

Learning to handle differences

Adjusting the management process Selecting a managerial approach Deciding organization structure

WTO WORLD TRADE ORGANIZATION

Establishment year 1st January 1995
No. of members 150 India in WTO Founder member

Successor of GATT

Basic principles of WTO

Non discrimination
Transparency Binding & enforceable commitments

Reciprocity
Safety valves

Functions of WTO
Administering & implementing the multilateral &

pluri lateral trade agreements which together make up the WTO Acting as a forum for multilateral trade negotiations Seeking to resolve trade disputes Overseeing national trade policies & Co-operating with other international institutions involved in global economic policy making

Arguments for joining WTO

The value to development of pursuing open market

policies, based on WTO principles, is widely recognized & appreciated. As long as India needs to export & import, it makes far more sense to be part of the multilateral trading system than stay out of it. It provides information & advise on export markets & marketing techniques, 7 assists in establishing export promotion & marketing services & training personnel require for these services.

 Since Indias existing & potential export

competitiveness lies in clothing, agriculture, forestry & fisheries product groups, it is logical to believe that India will obtain large gains in these sectors. Another advantage of WTO membership stems from the fact that India is saved from entering into multiple bilateral trade on negotiations with other countries.

 WTO provides for a multilateral set of rules which are

beneficial to a country like ours. Indias position in all these sectors is advantageous to her & provisions are favorable to the countries.

Arguments against membership

Removal of trade barriers will not guarantee expansion

in world trade. WTO will not ensure open trade for goods produced by developing countries. It ensures necessary climate for domination & hegemonisation by the consortium of the capitalist countries.

 Removal of quotas could easily be lost because of the

new rules & disciplines & potential for trade harassment. The worst fears expressed about the WTO agreement relate to the steep hike in prices of drugs & agricultural inputs.

TRADING BLOCKS
Trade creation & trade diversion
Prices & competition Economies of scale

Dynamic effects of integration.

THANK YOU