Ashok D Gaur

Asst. Prof.
C.P Patel & F.H Shah Commerce College,
Anand

UGC NET Coaching Class

May 2014
Unit: 1 Business Environment
 Syllabus : Business Environment
• Meaning
• Elements of Business Environment
• Economic environment,
• Economic Policies,
• Economic Planning
• Legal environment of Business in India,
• Competition policy,
• Consumer protection,
• Environment protection
• Policy Environment: Liberalization Privatization and globalization,
• Second generation reforms,
• Industrial policy and implementation
• Industrial growth and structural changes
 Meaning
• The term ‘business environment’ connotes external forces,
factors and institutions that are beyond the control of the business
and they affect the functioning of a business enterprise.
• These include customers, competitors, suppliers, government,
and the social, political , legal and technological factors etc.
• While some of these factors or forces may have direct influence
over the business firm, others may operate indirectly.
• Thus, business environment may be defined as the total
surroundings, which have a direct or indirect bearing on the
functioning of business. It may also be defined as the set of
external factors, such as economic factors, social factors,
political and legal factors, demographic factors, technical
factors etc., which are uncontrollable in nature and affects the
business decisions of a firm
 Types of BE
• Confining business environment to uncontrollable external
factors, it may be classified as
(a) Economic environment; and
(b) Non-economic environment
• The economic environment includes economic conditions,
economic policies and economic system of the country.
• Non-economic environment comprises social, political, legal,
technological, demographic and natural environment.
• All these have a bearing on the strategies adopted by the firms
and any change in these areas is likely to have a far-reaching
impact on their operations
 Economic Environment
(a) Economic Conditions:
• The economic conditions of a nation refer to a set of economic factors that have
great influence on business organizations and their operations.
• These include gross domestic product, per capita income, markets for goods and
services, availability of capital, foreign exchange reserve, growth of foreign trade,
strength of capital market etc. All these help in improving the pace of economic
growth.
(b) Economic Policies:
• All business activities and operations are directly influenced by the economic
policies framed by the government from time to time.
• Some of the important economic policies are:
(i) Industrial policy
(ii) Fiscal policy
(iii) Monetary policy
(iv) Foreign investment policy
(v) Export –Import policy (Exim policy)
(c) Economic System: The world economy is primarily governed by three types of
economic systems, viz., (i) Capitalist economy; (ii) Socialist economy; and (iii)
Mixed economy. India has adopted the mixed economy system which implies co-
existence of public sector and private sector.
 Important Economic Policies
(i) Industrial policy: The Industrial policy of the government covers all those
principles, policies, rules, regulations and procedures, which direct and
control the industrial enterprises of the country and shape the pattern of
industrial development.
(ii) Fiscal policy: It includes government policy in respect of public
expenditure, taxation and public debt.
(iii) Monetary policy: It includes all those activities and interventions that aim
at smooth supply of credit to the business and a boost to trade and industry.
(iv) Foreign investment policy: This policy aims at regulating the inflow of
foreign investment in various sectors for speeding up industrial
development and take advantage of the modern technology.
(v) Export–Import policy (Exim policy): It aims at increasing exports and
bridge the gap between expert and import. Through this policy, the
government announces various duties/levies. The focus now-a-days lies on
removing barriers and controls and lowering the custom duties.
 Non-Economic Environment
(a) Social Environment
• The social environment of business includes social factors
like customs, traditions, values, beliefs, poverty, literacy,
life expectancy rate etc. The social structure and the values
that a society cherishes have a considerable influence on
the functioning of business firms.
• For example, during festive seasons there is an increase in
the demand for new clothes, sweets, fruits, flower, etc.
• Due to increase in literacy rate the consumers are
becoming more conscious of the quality of the products.
Due to change in family composition, more nuclear
families with single child concepts have come up. This
increases the demand for the different types of household
goods. It may be noted that the consumption patterns, the
dressing and living styles of people belonging to different
social structures and culture vary significantly
 Political Environment
• This includes the political system, the government policies and
attitude towards the business community and the unionism. All
these aspects have a bearing on the strategies adopted by the
business firms.
• The stability of the government also influences business and
related activities to a great extent. It sends a signal of strength,
confidence to various interest groups and investors. Further,
ideology of the political party also influences the business
organization and its operations.
• You may be aware that Coca-Cola, a cold drink widely used even
now, had to wind up operations in India in late seventies.
• Again the trade union activities also influence the operation of
business enterprises. Most of the labour unions in India are affiliated
to various political parties. Strikes, lockouts and labour disputes etc.
also adversely affect the business operations. However, with the
competitive business environment, trade unions are now showing
great maturity and started contributing positively to the success of
the business organization and its operations through workers
participation in management.
 Legal Environment
• This refers to set of laws, regulations, which influence the business organizations
and their operations. Every business organization has to obey, and work within the
framework of the law. The important legislations that concern the business
enterprises include:
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972
(v) Payment of Gratuity Act, 1972
(vi) Industries (Development and Regulation) Act, 1951
(vii) Prevention of Food Adulteration Act, 1954
(viii) Essential Commodities Act, 2002
(ix) The Standards of Weights and Measures Act, 1956
(x) Monopolies and Restrictive Trade Practices Act, 1969
(xi) Trade Marks Act, 1999
(xii) Bureau of Indian Standards Act, 1986
(xiii) Consumer Protection Act, 1986
(xiv) Environment Protection Act
(xv) Competition Act, 2002
 Other legal environment
(i) Provisions of the Constitution:
• The provisions of the Articles of the Indian
Constitution, particularly directive principles, rights
and duties of citizens, legislative powers of the central
and state government also influence the operation of
business enterprises.
(ii) Judicial Decisions: The judiciary has to ensure that
the legislature and the government function in the
interest of the public and act within the boundaries of
the constitution. The various judgments given by the
court in different matters relating to trade and industry
also influence the business activities.
 Technological Environment

• Technological environment include the methods, techniques and

approaches adopted for production of goods and services and its
distribution. The varying technological environments of different
countries affect the designing of products.
• For example, in USA and many other countries electrical appliances
are designed for 110 volts. But when these are made for India, they
have to be of 220 volts.
• In the modern competitive age, the pace of technological changes is
very fast. Hence, in order to survive and grow in the market, a
business has to adopt the technological changes from time to time.
• It may be noted that scientific research for improvement and
innovation in products and services is a regular activity in most of
the big industrial organizations. Now a days infact, no firm can
afford to persist with the outdated technologies.
 Demographic Environment
• This refers to the size, density, distribution and growth rate of population.
All these factors have a direct bearing on the demand for various goods and
services.
• For example a country where population rate is high and children constitute
a large section of population, then there is more demand for baby products.
Similarly the demand of the people of cities and towns are different than
the people of rural areas. The high rise of population indicates the easy
availability of labour. These encourage the business enterprises to use
labour intensive techniques of production.
• Moreover, availability of skill labour in certain areas motivates the firms to
set up their units in such area. For example, the business units from
America, Canada, Australia, Germany, UK, are coming to India due to easy
availability of skilled manpower. Thus, a firm that keeps a watch on the
changes on the demographic front and reads them accurately will find
opportunities knocking at its doorsteps.
 Natural Environment

• The natural environment includes geographical and ecological

factors that influence the business operations. These factors
include the availability of natural resources, weather and
climatic condition, location aspect, topographical factors, etc.
Business is greatly influenced by the nature of natural
environment.
• For example, sugar factories are set up only at those places
where sugarcane can be grown. It is always considered better
to establish manufacturing unit near the sources of input.
• Further, government’s policies to maintain ecological balance,
conservation of natural resources etc. put additional
responsibility on the business sector.
 Economic Environment
• Classification of economic environment of basis
of ownership
A) Capitalistic Economy
B) Socialistic Economy
C) Mixed Economy
• Classification of economic environment of basis
level of economic development
A) Economic indicator ( GDP, GNP, Income
distribution ,inflation rate interest rate
unemployment and FER ,PPP
 ECONOMIC POLICY
• MACROECONOMIC POLICY changes from
time to time, impact business conditions more
directly.
• Its objectives is to stimulate or maintain growth,
achieve economic stability,I ncrease employment,
stabilize balance of payment and make the
economy more competitive.
• the countries which borrow heavily from multi
lateral institutions like IMF and WORLD BANK
often have to adjust their policy structure to the
lending criteria and condition imposed by these
institutions.
TYPES OF ECONOMIC POLICY
1. MONETARY POLICY
2. FISCAL POLICY
3. INDUSTRIAL POLICY
4. TRADE POLICY
 MONETARY POLICY
• IT IS FORMULATED AND EXECUTED BY RESERVE BANK OF INDIA.

• IT REFERS TO THAT POLICY BY WHICH CENTERAL BANK OF COUNTRY CONTROLS:

1. SUPPLY OF MONEY

2. COST OF MONEY OR RATE OF INTEREST WITH A VIEW TO ACHIEVE PARTICULAR

OBJECTIVES.

• ACCORDING TO D.C ROWAN “THE MONETARY POLICY IS DEFINED AS

DISCRETIONARY ACT UNDERTAKEN BY THE AUTHORITIES DESIGNED TO
INFLUENCE :

• THE SUPPLY OF MONEY

• COST OF MONEY OR RATE OF INTEREST

• THE AVAILABILITY OF MONEY

• FOR ACHIEVING SPECIFIC OBJECTIVES.”

• MAIN OBJECTIVE OF THIS POLICY IS :

• TO ACHIEVE PRICE STABILITY,

• FINANCIAL STABILITY

• ADEQUATE STABILITY OF CREDIT FOR GROWTH

 FISCAL POLICY
• IT IS RELATED TO INCOME AND EXPENDITURE OF GOVERNMENT.

• IT REFERS TO BUDGETARY POLICY OF GOVERNMENT.

• IT IS OF GREAT IMPORTANCE FOR BOTH DEVELOPED AS WELL AS DEVELOPING

COUNTRIES.

• IT IS AN INSTRUMENT FOR PROMOTING ECONOMIC GROWTH,EMPLOYMENT,

SOCIAL WELFARE ETC.

• IT HAVE A GREAT BEARING ON ECONOMIC EQUALITY AND ECONOMIC GROWTH OF THE

COUNTRY.

• ACCORDING TO ARTHUS SMITHIES,”FISCAL POLICY IS A POLICY UNDER WHICH THE

GOVERNMENT USES ITS EXPENDITURE AND REVENUE PROGRAMMES TO PRODUCE
DESIRABLE EFFECT AND AVOID UNDESIRABLE EFFECTS ON THE NATIONAL
INCOME,PRODUCTION AND EMPLOYMENT”.
 INDUSTRRIAL POLICY
• IT MEANS THOSE PRINCIPLES AND ACTIVITIES WHICH ARE PERSUED AND
PERFORMED TO HELP INDUSTIALISE A COUNTRY.

• IT INCLUDES RULES, REGULATION, PRINCIPLES AND PROCEDURES TO

REGULATE THE INDUSTRIAL UNDERTAKING OF A COUNTRY IN THE DESIRED
DIRECTION TO ACHIEVE BROADER OBJECTIVES LIKE:

INDUSTRIAL DEVELOPMENT

ECONOMIC DEVELOPMENT

BALANCED REGIONAL DEVELOPMENT

INCREASE IN EMPLOYMENT ETC

• INDUSTRIAL POLICY IS AN INSTRUMENT WITH THE HELP OF WHICH THE STATE

PARTICIPATES IN THE GROWTH PROCESS.”

• IT INCLUDES POLICY REGARDING LABOUR AND CAPITAL ,COTTAGE AND SMALL

SCALE INDUSTRIES, FOREIGN CAPITAL AND PROTECTION ETC.

• IT IS FULLY CONTROLLED AND REGULATED BY THE GOVERNMENT.

 TRADE POLICY

• BASIC OBJECTIVE OF TRADE POLICY IS TO

PROMOTE EXPORTS,REGULATE
IMPORTS,IMPROVE TERMS OF
TRADE,ENHANCE EXPORT COMPETITIVENESS
AND CREATE CONDITIONS OF EXPORT -LED
GROWTH.
• THIS POLICY IS OF UTMOST IMPORTANCE
TO EXPORTERS AS IT HAS A MAJOR IMPACT
ON TRANACTION COSTS AND EFFICIENCY
OF TRADE TRANSACTIONS
 Planning
• The Planning Commission was set up in March 1950.
• The main objective of the Government to promote a rapid rise in the
standard of living of the people by
– efficient exploitation of the resources of the country
– increasing production and
– offering opportunities to all for employment in the service of the
community
• The Planning Commission was charged with the responsibility of
making assessment of all resources of the country, augmenting
deficient resources, formulating plans for the most effective and
balanced utilisation of resources and determining priorities.
• Jawaharlal Nehru was the first Chairman of the Planning
Commission.
 Plan Targe Actual
t
First Plan (1951 – 56) 2.9% 3.6%

Second Plan (1956 – 61) 4.5% 4.3%

Third Plan (1961 – 66) 5.6% 2.8%

Plan Holiday
Fourth Plan (1969 – 1974) 5.7% 3.3%

Fifth Plan (1974 – 79) 4.4% 4.8%

Sixth Plan (1980 – 85) 5.2% 6.0%

Seventh Plan (1985 – 90) 5.0% 6.0%

Eighth Plan (1992 – 97) 5.6% 6.8%

Ninth Plan (1997 – 2002) 6.5% 5.4%

Tenth Plan (2002 – 2007) 8.0% --

 First Five Year Plan
(1951-55)
Total budget: 206.8 billion (INR) or USD$23.6 billion.

Objectives ACHIEVEMENTS
 the standard of living
 GDP 3.6% per year
 Community and agriculture
development  Evolution of good irrigation
system
 Energy and irrigation
 Communications and transport
 improvement in
 roads
 Industry
 civil aviation
 Land rehabilitation
 railways
 Social services
 Telegraphs
 Target of GDP growth 2.1 per  posts
year
 manufacture of fertilizers
 Achieved had been 3.6% per  electrical equipment
year
 Disadvantages
• development of only a few industries
• private industry had not developed
 Second Five Year Plan
(1956-1961)
OBJECTIVES ACHIEVEMENTS
 To increase by 25% the national
income  5 steel plants
 To make the country more
industrialized
 To increase employment  a hydro-electric power project
opportunities so that every citizen
gets a job  production of coal increased
Development of  more railway lines
 Mining and industry
 Community and agriculture
development  Land reform measures
 Power and irrigation
 Social services  improved the living standards of the
 Communications and transport people
 Miscellaneous  The large enterprises in seventeen
industries were nationalized
 Disadvantages
 eliminate the importation of consumer goods
 high tariffs
 Low quotas or banning some items
altogether
 License were required for starting new
companies
 This is when India got its License Raj, the
bureaucratic control over the economy
 When a business was losing money the
Government would prevent them from
shutting down
 Third Five Year Plan
(1961-1966)
ACHIEVEMENTS
OBJECTIVES  Decentralization
 More stress to agriculture  Organizations formed
 subsidies Panchayat
 Sufficient help Zila Parishads

 Effective use of country's resources

 Laid emphasis on
oil conservation
 To increase the national income by 5%  irrigation
per year Afforestation
 To increase the production of agriculture dry farming
so that the nation is self sufficient in food
grains
 Many fertilizer and cement plants were
built
 To provide employment opportunities for
every citizen of the country  Green Revolution
 To establish equality among all the people PMs
of the country Jawaharlal Nehru
Gulzarilal Nanda
Lal Bahadur Shastri
 Problems faced
• Sino Indian War, India witnessed increase in
price of products. The resulting inflation
 4th Five Year Plan
(1969 to 1974)

OBJECTIVES ACHIEVEMENTS
• to reform and restructure • Great advancement has
govts expenditure been made with regard to
agenda( defense became India's national income
one major expense) • considered as one of the
• To facilitated growth in emerging powers
exports • served as a stepping stone
• to alter the socio for the economic growth
economic structure of the • Food grains production
society increased
 problems
• a gap was created between the people of the
rural areas and those of the urban areas.
• Due to recession, famine and drought, India
did not pay much heed to long term goals
 Fifth Five Year Plan
1974 to1979
OBJECTIVES
 To reduce social, regional, and
economic disparities
 To enhance agricultural
productivity
 To check rural and urban
unemployment
 To encourage self-employment
 Production support policies in the
cottage industry sector
 To develop labor intensive
technological improvements
PROBLEMS
 The international economy was
in a trouble
 Food, oil, and fertilizers where
prices sky-rocketed
 Several inflationary pressures
ACHIEVEMENTS
 Food grain production was above
118 million tons due to the
improvement of infrastructural
facilities
 Bombay High had shot up the
commercial production of oil in
India
 Problems faced
• The world economy was in a troublesome state
• This had a negative impact on the Indian
economy
• Prices in the energy and food sector
skyrocketed and as a consequence inflation
became inevitable
 Sixth Five Year Plan
1980 to1985
OBJECTIVES
 To improve productivity level
 To initiate modernization for
achieving economic and
technological self-reliance
 To control poverty and
unemployment
 To develop indigenous energy
sources and efficient energy usage
 To promote improved quality of life
of the citizens
 To introduce Minimum Needs
Program for the poor
 To initiate Family Planning
ACHIEVEMENTS
 Speedy industrial development
 Emphasis on the information
technology sector
 self sufficiency in food
 science and technology also made
a significant advance
 several successful programs on
improvement of public health
 government in the Indian
healthcare sector
 Government investments in the
Indian healthcare sector
 Problems faced
• During this time the Prime Minister was Rajiv
Gandhi and hence industrial development was the
emphasis of this plan some opposed it specially the
communist groups, this slowed down the pace of
progress.
 Seventh Five Year Plan
1985 to 1989
OBJECTIVES
 Anti-poverty program
 Improved facilities for education
to girls
 The government undertook to increase
productivity of
Oilseeds,Fruits,Vegetables
Pulses,cereals,Fish
Egg,Meat,milk.
 Communications
 Emergence of informatics, and
hooking up of
telecommunications with
computers
 Transport
 inland waterways, product
pipelines, civil aviation, coastal
shipping
ACHIEVEMENTS
 Social Justice
 Removal of oppression of
the week
 Using modern technology
 Agricultural development
 Anti-poverty programs
 Full supply of food,
clothing, and shelter
 Increasing productivity of
small and large scale
farmers
 Making India an
Independent Economy
 Problems
• 1989-91 was a period of political instability in
India and hence no five year plan was
implemented
• In 1991, India faced a crisis in foreign
exchange(Forex) reserves
 Eighth Five Year Plan
1992 to1997
OBJECTIVES ACHIEVEMENTS
• Prioritize the specific sectors which
• Rise in the employment level
requires immediate investment • Poverty reduction
• To generate full scale employment • Self-reliance on domestic resources
• Promote social welfare measures like
improved healthcare, sanitation, • Self-sufficiency in
communication and provision for agricultural production
extensive education facilities at all
levels • GDP Growth Per Annum
• To check the increasing population 5.6
growth by creating mass awareness
programs
• To encourage growth and diversification
of agriculture
• To strengthen the infrastructural
facilities
• To place greater emphasis on role of
private initiative in the development of
the industrial sector
 Ninth Five Year Plan
1997 to 2002
OBJECTIVES ACHIEVEMENTS
 to prioritize rural development • A combined effort of public,
 to generate adequate employment private, and all levels of
opportunities government
 to stabilize the prices • ensured the growth of India's
 to ensure food and nutritional economy.
security
 to provide for the basic • Service sector showed fast growth
infrastructural facilities like rate
education for all, safe drinking
water, primary health care,
transport, energy
 to check the growing population
increase
 to encourage social issues like
women empowerment
 to create a liberal market for
increase in private investments
 Tenth Five Year Plan
(2002-2007)
OBJECTIVES
 To transform the country into the fastest growing economy of the world
 targets an annual economic growth of 10%
 Human and social development
 The social net
 Industry and services:
Industry,Minerals,Energy,Information technology,Tourism,Real
estate,Construction,Internal trade
 Forests and environment
 Science and technology
 Special area programs

schooling to be compulsory for children

 Eleventh Five-Year Plan (2007–2012)

INCOME AND POVERTY

Accelerate growth rate of GDP from 8% to
10% and then maintain at 10% in the 12th plan
in order to double per capita income by 2016-
17.
Increase agricultural GDP growth rate to 4%
per year.
Reduce educated unemployment to below 5%.
Raise real wage rate of unskilled workers by
20%
 Eleventh five year plan

OBJECTIVES
• Income & Poverty
• Education
• Health
• Women and Children
• Infrastructure
• Environment
 Twelfth Plan Strategy
• There are Short Term and Medium Term Challenges

• Short Term : Reverse the current growth slowdown :

5.5 percent in 2012-13,
Aim for 6.5 to 7 percent in 2013-14

• Longer Term : Get back to high growth. This requires

accelerating from 5.5% in 2012-13 to over 9% in last
two years

• This is very difficult, especially given the global

situation
43
 Growth must not only be rapid, but also
more inclusive
• Inclusiveness is a multi-dimensional concept :
 Reduce poverty
 Improve regional equality across states and within
states
 Improve conditions for SCs, STs, OBCs, Minorities
 Generate attractive employment opportunities for
youth
 Close gender gaps
• Twelfth
44
Plan lists 25 monitorable indicators
 25 Monitorable Targets, e.g.
• Average GDP Growth of 8 percent
• Agriculture Growth of 4 percent
• Reducing head-count poverty by 10 percentage point
• Generating 50 million work opportunities
• Eliminating gender and social gap in education
• Reducing IMR to 25, MMR to 100 and TFR to 2.1
• Enhance infrastructure investment to 9% of GDP
• Achieve universal road connectivity and access to power for
all villages
• Access to banking services for 90 percent households
• Major welfare benefits and subsidies via Aadhaar
45
 Effectiveness of Plan Programmes
• Twelfth Plan sets ambitious targets for Flagship Programmes
in areas of Health, Education, Rural infrastructure,
Livelihood Development etc.
• Too much focus on the level of expenditure in these
programmes. Not enough on effectiveness in terms of end
results
• Implementation in the field is the responsibility of State
Government agencies. However, programme guidelines are
set by the Central Government
• There are demands for greater flexibility from states. We are
responding as follows :
 Guidelines are being made more flexible to meet the
requirements of individual States
 10% flexi-fund within each scheme for innovations
CONSUMER PROTECTION
ACT
 Consumer Protection Act
• Enacted by the Parliament in 1986
• To provide for better protection of interest of
consumers.
• To make provisions for the establishment of
Consumer Councils and other authorities for
the settlement of consumer disputes.
 Who is a Consumer?
• Consumer is one who
– Buys any goods for a consideration and includes a
hire-purchaser;
– Any user of such goods for consideration but
excludes one, who obtains for re-sale or for
commercial purposes;
– Hires a service for consideration and includes a
beneficiary of such service, if availed of with the
approval of the hirer.
 Deficiency - Service
• ‘Deficiency’ means
– a fault, imperfection, shortcoming or inadequacy in quality,
nature, or manner of performance than is required.
• ‘Service’ includes
– service in connection with banking, financing, insurance,
transport, processing, supply of electrical and other energy,
boarding or lodging, housing construction, entertainment,
amusement or purveying of news and other information
– but does not include any service free of charge or under a
personal contract.
 What is a Complaint?
• An allegation in writing by a complainant that:
– An unfair or restrictive trade practice is practised by trader
or service provider
– Goods bought or to be bought or services hired or to be
hired suffered from any deficiency
– Trader or service provider has charged excess price
– Goods and services are hazardous or are likely to be
hazardous to life and safety.
 Who is a complainant?
• A consumer
• Any voluntary consumer association registered under
the Companies Act or any other law
• Central or State Government, if it makes a complaint
• One or more consumers having same interest
• In case of death of a consumer, his legal heir or
representative.

A Consumer Dispute arises when a complaint

is denied or disputed.
 Machinery under the Act

• Central Consumer Protection Council

– to be established by Central Government
• State Consumer Protection Council
– to be established by State Government
• District Consumer Protection Council
– to be established by State Government for every
district
 Consumer Dispute Redressal
Machinery
• There are Consumer Fora at the District, State
and National level
– District Forum – At the District level
– State Commission – At the State level
– National Commission – At the National level
 Pecuniary Jurisdiction
• Forum where complaints can be entertained
– Depends on value of goods and service and compensation claimed
• Limits are :
– District Forum
• not exceeding Rs.20 lakhs
– State Commission
• exceeds Rs.20 lakhs but does not exceed Rs.1 Crore
– National Commission
• exceeds Rs.1 Crore.
• Territorial Jurisdiction lies in the court of the place
– Where the opposite party resides or carries on business or
personally works for gain
– Where the cause of action wholly or partly arose
 Disposal of disputes
• District Forum may
– ask the opposite party to remove the defect,
– replace the goods with new goods and free from defect
– to return to the complainant the price of goods or
– to pay any amount as compensation
• Appeals to be preferred within thirty days
– from the order of the District Forum to the State Commission and
– from the order of the State Commission to the National Commission
• Can entertain appeals beyond thirty days
– on sufficient cause shown for the delay
It has to be disposed within ninety days from its
admission.
What are the rights of a ‘consumer’?

– Protection from hazardous goods and services

– Information about the quality, quantity, purity,
standard and price
– Access to a variety of goods and services at
competitive prices.
– Assurance that his interest will be considered at
appropriate fora
– The right to consumer education
 Policy Environment: Liberalization
Privatization and globalization
THE NEW INDUSTRIAL POLICY- 1991
• July 1991,India has taken a series of measures to structure
the economy and improve the BOP position. The new
economic policy introduced changes in several areas.
The policy have salient feature which are: -
1.Liberlisation (internal and external)
2.Extending Privatization
3.Globalisation of the economy
Which are known as “LPG”. (liberalization privatization
globalization)
 Reasons for implementing LPG
 Excess of consumption and expenditure over revenue
resulting in heavy govt. borrowings.
 Growing inefficiency on the use of resources.
 Over protection to industries.
 Mismanagement of the firm and the economy.
 Increase in losses for public sector enterprises.
 Various distortion like poor technological
development, shortage of foreign exchange and
borrowing from abroad.
 Low foreign exchange reserves.
 Inflation
59
 Liberalization
Liberalization is a very broad term that usually refers to fewer government
regulations and restrictions in the economy.
Liberalization refers to the relaxation of the previous government
restriction usually in area of social and economic policies. When
government liberalized trade , it means it has removed the tariff
,subsidies and other restriction on the flow of goods and services
between the countries.
The Path of liberalization
• Relief for foreign investors
• Devaluation of Indian rupees
• New industrial Policy
• New trade policy
• Removal of import Restrictions
• Liberalization of NRI remittances
• Freedom to import technology
• Encouraging foreign tie-ups
• MRTP relaxation
• Privatization of public sector
 Advantages & Disadvantages of liberalization

Advantages of liberalization Disadvantages of Liberalization

• Increase in
• Industrial licensing unemployment.
• Increase the foreign
investment. • Loss to domestic units.
• Increase the foreign • Increase dependence on
exchange reserve. foreign nations
• Increase in consumption
and Control over price. • Unbalanced development
• Check on corruption.
• Reduction in dependence on
external commercial
borrowings

61
 Privatization
Privatization means transfer of ownership and/or management of an
enterprise from the public sector to the private sector .It also means the
withdrawal of the state from an industry or sector partially or fully.
Privatization is opening up of an industry that has been reserved for
public sector to the private sector.
Privatization means replacing government monopolies with the
competitive pressures of the marketplace to encourage efficiency,
quality and innovation in the delivery of goods and services.
NEED
Though the PSUs have contributed heavily to develop the industrial base of the
country, they continue, even today, to suffer from a number of shortcomings which
are identified below very briefly :-
• A sizable number of PSUs have been incurring and reporting losses on a continual
basis. Consequently, a large number of PSUs have already been referred of loss
giving units;
• Multiplicity of authorities to whom the PSUs are accountable;
• Delay in implementation of projects leading to cost escalation and other
consequences; 62
• Ineffective and widespread inefficiency on management;
• With a view to provide opportunities for more and more
unemployed youths, more number of people, than required, were
recruited and therefore, many PSUs are over-staffed resulting in
lower labour productivity, bad industrial relations, etc.;
• A number of sick companies (40 companies) which were in the
private sector was taken over by public sector mainly to protect the
employees. These sick units are causing a big drain on the resources
of the state; etc.
Different Ways in privatization
• Liberalization Approach
• Relative Share Enlargement Approach
• Association of Private Sector Management Approach
• Transfer of Minority Equity Ownership Approach
• Transfer of Complete Ownership Approach

63
 Advantages and disadvantages

• Privatization helps to reduce the burden on Govt.

• Industrial sickness.
• It will help profit making public sector unit to
modernize and diversify their business. • Lack of welfare.
• It will help in making public sector unit more
• Class struggle.
competitive.

• It will help to improving the quality of decision • Increase in inequality

making, because the decisions are free from any
• Opposition by employees.
political interference.

• Privatization may help in reviving sick units • Problem of financing.

which are the liability of the public sector.
• Increase in unemployment.
• Industrial growth.

• Increase the foreign investment. • Ignores the weaker sections.

• Increase in efficiency.
• Ignores the national importance
Examples of privatization in India

• Lagan Jute Machinery Company Limited (LJMC)

• Videsh Sanchar Nigam Limited (VSNL)
• Hindustan Zinc Limited (HZL)
• Hotel Corporation Limited of India (HCL)
• Bharat Aluminum Company limited (BALCO)

65
 Globalization
Globalization implies integration of the economy of the
country with the rest of the world economy and opening
up of the economy for foreign direct investment by
liberalizing the rules and regulations and by creating
favorable socio-economic and political climate for global
business.
According to IMF: -”The growing economic interdependence
of countries worldwide through increasing volume and
variety of cross border transaction in goods and services
and of international capital cash flows, and through the
more rapid and widespread diffusion of technology.”

66
 Features of Globalization
• Opening and planning to expand business throughout the
world.
• Erasing the difference between domestic market and foreign
market.
• Buying and selling goods and services from/to any
countries in the world.
• Locating the production and other physical facilities on a
consideration of the global business dynamics ,irrespective
of national consideration.
• Basing product development and production planning on the
global market consideration.
• Global sourcing of factor of production i.e. raw-material,
components , machinery, technology,finance etc. are
obtained from the best source anywhere in the world.
• Global orientation of organizational structure .and
management culture

67
 Foreign market entry strategies
 Exporting
 Licensing/Franchising
 Contract manufacturing
 Management contract
 Assembly operations
 Fully owned manufacturing facilities
 Joint venturing
 Merger and acquisition
 Strategic alliance
 Countertrade
Negative effects of Globalization
• Loss of domestic industries
• Exploits Human resource
• Decline in income
• Unemployment
• Transfer of natural resources
• Lead to commercial and political colonism
• Widening gap between rich and poor
• Dominance of foreign institutions
Conclusion
Economic liberalization has increased the responsibility and role
of the private sector. At the same time, it has reduced the control
of the government on economy affairs. It is expected that the
reforms would liberalize the Indian economy enough to create a
conducive environment for rapid economic development.

69
 LEGAL ENVIRONMENT OF BUSINESS
Law is an instrument of social justice of
the state that seeks to provide justice,
stability and security in the
society. .It assures uniform application of
the laws by regulating the behavior and
interactions of individuals against each
other. Law is the command of the
sovereign.. and it’s body of rules
recognized and enforced by courts of law.
Law is a rule relating to the actions of
human beings. .
 Purpose of Law
• To maintain status quo in society ensuring
stability and security of social order, enable
individuals , maximum of freedom to assert
themselves and determine the sphere within
which the existence and activity of each
individual will be secure and free
 Sources of Law
• Formal sources- law derives its force and validity from
the time immemorial
Legal sources- statues , precedents, legislation
•
Historical sources- juristic writings, literary works,
commandments of the god
•
Legislations- Parliament, state assemblies
Negative effects of Globalization
• Loss of domestic industries
• Exploits Human resource
• Decline in income
• Unemployment
• Transfer of natural resources
• Lead to commercial and political colonism
• Widening gap between rich and poor
• Dominance of foreign institutions
Conclusion
Economic liberalization has increased the responsibility and role
of the private sector. At the same time, it has reduced the control
of the government on economy affairs. It is expected that the
reforms would liberalize the Indian economy enough to create a
conducive environment for rapid economic development.

73
Legal environment of business
1. Indian contract act 1872
2. Indian sale of goods act 1930
3. Indian partnership act 1932
4. Industrial dispute Act 1947
5. Minimum wages act 1948
6. Indian companies act 1956
7. Foreign exchange regulation act
(FERA ) 1973
8. Foreign exchange management act
1999
9. Monopolies and restrictive trade
practice act 1969
10. Consumer protection act 1986
11. Indian income tax act 961
12. Central excise act 1944
13. Security exchange board of India
act 1992
14. Banking regulation act 1949
15. Chartered accountant act 1949
16. Information technology act 2000
17. competition act 2002
18. right to information act 2005
19. Micro, Small and Medium
Enterprises Development Act,2006
20. Commissions for Protection of
Child Rights Act,2005
 LEGAL ENVIRONMENT
• It refers to the legal systems obtaining in the country. It
refers to the rules and laws that regulate behavior of
individuals & organization.
• There are four basic legal systems prevailing around the
world:
1. Islamic law: It is derived from the interpretation of the
Quran and practiced in Muslim majority countries.
2. Common law: It is prevalent in countries which are
under British influence.
3. Civil or code law: It is derived from roman law,
practiced in German, non Marxist &non Islamic
countries.
4. Marxists law: It has takers in communists countries.
THE CONSTITUTION OF INDIA
• Right to Equality
Right to Freedom
Right against Exploitation
Right to Freedom of Religion
Cultural and Educational Rights
Right to Constitutional Remedies
--1.habeas corpus, 2.mandamus,
3.prohibition, 4.quo warranto and 5.certiorari,
 FUNDAMENTAL DUTIES
• Fundamental duties.—It shall be the duty of every citizen of India—
• (a) to abide by the Constitution and respect its ideals and institutions, the
National Flag and the National Anthem;
• (b) to cherish and follow the noble ideals which inspired our national struggle for
freedom;
• (c) to uphold and protect the sovereignty, unity and integrity of India;
• (d) to defend the country and render national service when called upon to do so;
• (e) to promote harmony and the spirit of common brotherhood amongst all the
people of India transcending religious, linguistic and regional or sectional
diversities; to renounce practices derogatory to the dignity of women;
• (f) to value and preserve the rich heritage of our composite culture;
• (g) to protect and improve the natural environment including forests, lakes, rivers
and wild life, and to have compassion for living creatures;
• (h) to develop the scientific temper, humanism and the spirit of inquiry and
reform;
• (i) to safeguard public property and to abjure violence;
• (j) to strive towards excellence in all spheres of individual and collective activity
so that the nation constantly rises to higher levels of Endeavour and achievement.
• National law is the law of the land. The constitution of India is the
supreme law of the nation. It provides the rights, duties, and the
liberties of the citizens. The laws made by the state exercising their
legislative powers under the constitution have to be in consonance
with those of the supreme law
• International law
While the national law is the law of a nation ,also known as municipal
law, International law is the law of nations. Where as International law
is the body of rules which are legally binding on states in their
intercourse with each other. International law is considered to be a
weak law because it is not founded on the sovereign authority
• International law has witnessed a great impetus in the present
scenario than ever before.1.Human rights and their violation2.filing of
pleadings, adducing evidence, oral arguments before International
court of justice, Hague (The de facto (de jure) capital of the
Netherlands) 3.contracts entered by transnational companies,
Intellectual property rights,4. issues like nuclear deals, poverty,
maritime, air, space laws, refugees problem, border disputes, bilateral
agreements, extradition treaties, UNO, Amnesty international,
UNESCO,WTO,W.B,IMF, Curbing terrorism, global peace. etc.,
 Mercantile law
• Merchants have their separate courts called – courts
of piepoudrous (courts of Speedy justice) and the courts
were incident to fairs and market places.
The common law courts in England envying the
jurisdiction exercised by these non-official courts,
grappled it.
The source of mercantile law is LEX
MERCATORIA, (an unwritten law) consisted of only
the customs and usages or practices of the trade
 Justice delivery system in India
• Supreme court
High court
Subordinate courts-----
• Civil courts-Metropolitan, City civil courts, Court of
small causes
Criminal courts-District, Sessions, Magistrate courts
Justice delivery system in India
Tribunals
Central administrative Tribunals
Industrial Tribunals
Labor Tribunals.
Consumer dispute redressal Tribunals
 Civil Law & Criminal law
• It governs the litigation arising between individuals
over properties, monetary affairs, partnership, accident
cases etc,
The Nature of penalty is civil in nature. Liability to
compensate the affected party will be in the monetary
form
• In criminal cases, the government for violation or
injury to public rights files suits. The State takes
initiative to file the case. Criminal law governs cases
arising out of theft ,murder, cheating etc., The nature of
punishment is monetary and imprisonment, and capital
punishment in rare cases.
 Competition Act 2002:
1) Post 1991 policy of Liberalization, Privatization and
Globalization introduced.
2) MRTP Act was found inadequate to meet the
challenges of a modern globalize economy.
3) Government of India in October 1999 appointed a
high level Committee on Competition Policy and Law
(the Raghavan Committee) to advise on the
competition law in consonance with international
developments.
 COMPETITION ACT
2) The broad objectives of the Competition Act, as laid down in its preamble
are:
• "to prevent practices having adverse effect on competition, to promote
and sustain competition in markets, to protect the interest of the
consumers and to ensure freedom of trade carried on by other
participants in markets in India“

• Competition Act, 2002 notified in Gazette in January, 2003. Preamble's

stated objectives is to establish the commission which has the duty to:

1) Eliminate practices having adverse effect on competition

2) Promote and sustain competition
3) Protect consumers interests
4) Ensure freedom of trade carried on by other participants in markets, in
India.
 THE COMPETITION ACT,2002

1) Acting on the report of the Committee, the

Government of India passed the Competition
Act in the year 2002; to which the president
accorded assent in 2003.
• It was subsequently amended by the
Competition (Amendment) Act,2007.
 COMPETITION ACT, 2002
1) It prohibits Anti-Competitive Agreements
(Sec 3)
2) It regulates Acquisitions, Mergers and
Combinations (Sec 5 & 6)
3) It prohibits Abuse of Dominant Position (Sec
4)
4) It mandates Competition Advocacy (Sec 49)
 Salient Features Of New Competition Policy
1) The Industries (Development and Regulation) Act, 1951 may
no longer be necessary except for location (avoidance of
urban-centric location), for environmental protection and for
monuments and national heritage protection considerations,
etc.

2) The Industrial Disputes Act, 1947 and the connected statutes

need to be amended to provide for an easy exit to the non-
viable, ill-managed and inefficient units subject to their legal
obligations in respect of their liabilities.

3) The Board for Industrial Finance & Restructuring (BIFR)

formulated under the provisions of Sick Industrial Companies
(Special Provisions) Act, 1985 should be abolished.
 Contd..
3) World Trade Organizations (WTO)

• There should be necessary provision and teeth to examine

and adjudicate upon anti-competition practices that may
accompany or follow developments arising out of the
implementation of WTO Agreements.
• Particularly, agreements relating to foreign investment,
intellectual property rights, subsidies, countervailing
duties, anti-dumping measures, sanitary and psytosanitary
measures, technical barriers to trade and Government
procurement need to be reckoned in the Competition
Policy/Law with a view to dealing with anti-competition
practices. The competition law should be made extra
territorial.
 Contd..
4) MRTP Act

• The MRTP Act extends to the whole of India except the state of
Jammu and Kashmir. This law was enacted:

• Brief on The MRTP Act, 1969

• Post independence, many new and big firms have entered the Indian
market. They had little competition and they were trying to
monopolize the market. The Government of India understood the
intentions of such firms. In order to safeguard the rights of
consumers, Government of India passed the MRTP bill. The bill was
passed and the Monopolies and Restrictive Trade Practices Act,
1969, came into existence. Through this law, the MRTP commission
has the power to stop all businesses that create barrier for the scope
of competition in Indian economy.
 Competition Policy
• Monitoring business activity to act in the consumer’s interest:
– Competition Commission – investigates mergers, takeovers, anti-
competitive behaviour
– Office of Fair Trading (OFT) – ensuring efficient operation of markets
within the law
– Regulation of former nationalised industries – OFTEL, OFWAT, OFRR,
OFGEM, etc.
– Advertising Standards Authority (ASA) – legal, decent, honest
• Forms of anti-competitive behaviour
– Price fixing
– Cartels
– Collusion
– Predatory or destroyer pricing
– Distribution agreements
– Insider dealing/trading
 Self Regulation
• Where business/industry monitors its own
behaviour – often through an agreed code of
practice. e.g.
– PCC – Press Complaints Commission
– Portman Group – alcoholic drinks industry
– FSA – Financial Services Authority
– BMA – British Medical Association
• Media Association
 The
Environment
(Protection)
Act – 1986.
 An Act to provide for the protection and improvement of
environment and formatters connected therewith.

Whereas the decisions were taken at the United Nations

Conference on the Human Environment held at Stockholm in June,
1972, in which India participated, to take appropriate steps for the
protection and improvement of human environment.
The Environment (Protection) Act 1986 was introduced after the
Bhopal gas tragedy during Rajiv Gandhi was the Prime
Minister of our country
(sec.2a):-
Environment it includes water, air and land and the inter
relationship which exists between water, air and land and human
being, other living creatures, plants, micro organisms and property.
 Law for Environmental
Protection
• International concern for environmental protection

– International concern for Sustainable Development

– UN conference on Human Environment and Development-Stockholm-1972

– Result-Stockholm Declaration on the Human Environment

• Report of the world commission on Environment and Development-1987-

Brundtland Commission

• Sustainable Development Concept

• Cocoyoc Declaration on Environment and Development-1970

– Indian constitution Article 51 (c ) provides that India shall respect

International treaties

– Devolves duty on the citizen also to preserve the nature

– Article 48 A puts duty on the state regarding the protection of

Environment
 laws
• The wildlife(Protection) Act, 1972
• The National environment tribunal Act, 1995
• The Environmental Protection Act, 1986
• The Bio-Diversity Act, 2002
• Are the other related environmental
legislations.

RTI, MUMBAI / DAY 1 / Slide 1.4.1

 Measures by Central Government

 Power of entry and inspection (sec--10).

 Establishment of environmental laboratories (sec-12).
 Preventing emissions in excess of standards (sec-7).
 Report of analysis (sec-14).
 Procedure for handling hazardous substance (sec-8).
 Power to take sample and procedure (sec-11).
 Appointment of government analyst (sec-13).
 Penalty (sec-15).
 Duties of persons creating environmental pollution (sec-9).
continue