301 Be

RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE
Business Environment
206 – BUSINESS ENVIRONMENT

Unit – I
Business Concept Mission – Business Environs and Economic Environment – Responsibility of
Business – Corporate Social Responsibility- Professionalism in India – Ethics.
Unit – II
Non Economic Environment – Political, Legal, Demographic, technological, Natural Environment -
Pollution – Trade unions
Unit – III
Social change – Wave front analysis – Third wave practices and implications in organization –
Cultural dynamics – Cultural process and lags – Secular outlook – Community development –
Consumerism.
Unit – IV
Economic systems – the Role of Government in Economic development – Indian Economic Planning
– Industrial policy – Liberalization, Privatization and Globalization – Public, Private joint sectors –
Industry Analysis- Sector Analysis- Indian Agri Sector- Industrial development & regulation.
Unit – V
Monetary and Fiscal Policies – India’s Trade Policy- Free Trade agreements with other countries -
Budget–Money and Capital markets –RBI credit policy-Mobilisation of Savings for Investment –
Industrial sickness – Exim policy – FDI in Manufacturing & Services, Role of Competition
Commission.
References:
1. Paul Justin : Business Environment (Tata McGraw Hill)
2. Fernandos. B.C., Business Environment ( Pearson)
3. Sk. Misra and Puri V K : Indian Economy(Himalaya )
4. Alvin Toffler, Third Wave
5. Francis Cherunilam : Business Environment (Himalaya)
NOTE TO THE PAPER SETTER:

(i) The questions shall cover all the units of the syllabus.
(ii) In regard to Part – A of the question paper, one question with internal choice from each
unit of the syllabus shall be set.
(iii) For Part - B of the question paper, the CASE shall be not less than 500 words.
Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 1

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UNIT – I
DEFINITION of 'Business'
1. A business firm is an economic unit which is engaged in the production or distribution, or

both the production and distribution of goods and services for the purpose of earning profits.
2. An organization or enterprising entity engaged in commercial, industrial or professional
activities. A business can be a for-profit entity, such as a publicly-traded corporation, or a
non-profit organization engaged in business activities, such as an agricultural cooperative.
3. Any commercial, industrial or professional activity undertaken by an individual or a group.
4. A reference to a specific area or type of economic activity.
Environment:
The sum total of all surroundings of a living organism, including natural forces and other
living things, which provide conditions for development and growth as well as of danger and damage.
See also environmental factors
1. According to P. Gisbert “Environment is anything immediately surrounding an object and exerting

a direct influence on it.”
2. According to E. J. Ross “Environment is an external force which influences us.”
Thus, environment refers to anything that is immediately surrounding an object and exerting a direct
influence on it. Our environment refers to those thing or agencies which though distinct from us,
affect our life or activity. The environment by which man is surrounded and affected by factors which
may be natural, artificial, social, biological and psychological.
WHAT IS BUSINESS ENVIRONMENT?
 Business Environment is a relationship between a business’s actions and its environment.

Environment is the surroundings of a business by which business influenced directly or indirectly.
Where the political, economic, social and technological factors shopping a business environment
are assessed by a business so as to devise future strategy.
Concept of Business:
Business and society are closely to each other. Business influences the various aspects of
society and the society in turn affects business. Although business activities also affect social outlook
values, attitudes, customs, way of thinking etc., yet it is basically business that has to adapt itself to
changing demands of society. It is for this reason that there has been change in the concept and
objectives of business. The concepts of business are as follows:
1) Old Concept of business

2) Modern concept of Business

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1) Old Concept of Business
In earlier days, profit maximization was the main objective of business. Social responsibilities of
the business towards customers, society and employees were totally ignored. It was possible only
because there was less competition. Following are the vies of some prominent scholars on the
meaning of old concept of business.
According to L.H. Haney, “Business may be defined as human activity directed towards
producing or acquiring wealth through buying or selling goods.”
According to Thomas, “Business is an occupation of which money gain is the principal object and
money loss is the main risk”
According to Peterson and Plowman, “Business may be defined as an activity in which different
persons exchange something of value, whether goods or services for mutual gains or profits.”
2.2 Modern Concept of Business
In modern times, the goal of profit maximization is achieved through customer satisfaction. In
today’s competitive environment, survival of business unit is not possible without customer
satisfaction. Economic function of business is to create market or finding out the favour of potential
customers. Customer is regarded as foundation of business.
Peter F. Drucker points out that there is only one definition of business, “To create customer and to
expand market share.”
Because of changing concept of business, social responsibility of business has assumed considerable
importance along with economic objective of profit maximization. The modern outlook is that the
business should not serve the interest of businessman alone, but also the interest of customers
employees, nation and society. Modern view indicates that the present society has many groups and
all of them have a stake or interest in business enterprise. Therefore, the business should take care of
all these sections of society.
An organization or economic system where goods and services are exchanged for one another
or for money. Every business requires some form of investment and enough customers to whom its
output can be sold on a consistent basis in order to make a profit.
Mission:
Mission also known as vision, value statement, principles and credo, is the pivot around which
corporate strategy revolves.
Peter Drucker who observes that “that business purpose and business mission are so rarely given
adequate thought is perhaps the most important single cause of business frustration and business
failure” concludes that “ defining the purpose and mission of the business is difficult, painful, and

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risky. But it alone enables a business to set objectives, to develop strategies, to concentrate its
resources and to go to work. It alone enables a business to be managed by performance.
A mission statement is an enduring statement of purpose that distinguishes one business form other
similar firms. A mission statement identifies the scope of a firms operation in product and market
terms.
As Fred David observes, a mission statement reveals the long term vision of an organization in terms
of what it wants to be and whom it wants to serve. It describes an organization’s purpose, customers,
products or services, markets, philosophy and basic technology. In combination these components of
a mission statement answer a key question about an enterprise. What is our business? a good answer
to this question makes strategy formulation, strategy implementation and strategy evaluation
activities much easier.
Mission, Objectives, goals and targets – sequence of formulation and achievement:
Mission
Objectives
Goals
Targets
Characteristics of Business:

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Business Environment:
We can divide business environment into two parts:
 Internal Environment
 External Environment
Influencing Business Environment

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Economic Environment:
Business fortunes and strategies are influenced by the economic characteristics and economic
policy dimensions. The economic environment includes the structure and nature of the economy the
stage of development of the economy, economic resources, the level of income, the distribution of
income and assets, global economic linkages, economic policies etc.
Nature of the economy:
The general level of development of the economy has lot of implications for business it has
significant bearing on the nature and size demand, government policies affecting business etc.
countries and even different regions within a country show great differences in the level and pattern
of economic development.
A widely used method of classification of the economies is on the basis of the per capita income.
Accordingly, countries are broadly classified as low income, middle income and high income
economies.
Low Income Economies are economies with very low level of per capita income. All economies
with per capita GNI (Gross National Income – new term for GNP) of $875 or less in 2005 are
regarded as low income economies. There were 54 low income economies in 2005.

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High Income Economies are countries with very rich income per capital. Those with a per capita
GNI of $10726 or above in 2005 fall in the category of high income economies.
Falling in between the low income economies and high income economies are the middle income
economies.
Middle Income Economies are subdivided into lower middle income (those with per capita GNI
between $875 and $ 3,465 in 2005) and upper middle income ($3,466 - $ 10,725) economies.
Low income and middle income economies are developing economies.
Structure of the Economy:
The structure of the economy - factors such as contribution of different sectors like primary (mostly
agricultural), secondary (industrial) and tertiary (secondary), sectors, large, medium, small and tiny
sectors to the economy, and their linkages, integration with the world economy etc., are important to
business because these factors indicate the prospects for different types of business, certain factors
which affect the business etc. for example: if an economy is highly integrated with the global
economy it will be quickly affected by developments in the global economy.
Economic Policies:
There are several economic policies which can have a very great impact on business.
Important economic policies are industrial policy, trade policy, foreign exchange policy, monetary
policy, fiscal policy and foreign investment and technology policy.
1. Industrial Policy:
Industrial policy can even define the scope and role of different sectors like private, public,
joint and co operative, or large, medium, small and tiny. It may influence the location of industrial
undertakings, choice of technology, scale of operation, product mix and so on.
2. Trade Policy:
The trade policy can policy can significantly affect the fortunes of firms. For example, a
restrictive import policy, or a policy of protecting the home industries, may greatly help the import
competing industries, while a liberalization of the import policy may create difficulties for such
industries.
Trade policy is often, integrated with the industrial policy. As part of the economic liberalization and
WTO compliance.
3. Foreign Exchange Policy:

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Exchange rate policy and the policy in respect of cross-border movement of capital are
important for business. The abolition/liberalization of exchange controls all around the world since
the late 1970s has encouraged cross-border movement of capital.
4. Foreign Investment and Technology Policy:
Until the late 1980s, when the world wide trend towards liberalization set in, foreign capital
and technology were under severe restrictions in many developing and socialist/communist countries.
5. Fiscal Policy:
Government’s strategy in respect of public expenditure and revenue can have significant
impact on the business. The pattern of public expenditure may affect the development of various
regions, sectors and industries differently.
6. Monetary Policy:
The central bank, by its policy towards the cost and availability of credit, can significantly
influence the saving, investments and consumer spending in the economy. Depending on the
conditions of the economy and the general economic policy of the government, the central bank
(called the reserve bank in india) may adopt an expansionary or contractionary or neutral monetary
policy.
Important Factors of Economic Environment:
Structure & Nature of

Economy Economic Conditions Economic Policies Global Linkages
> Level of development > income levels
of the economy > Distribution of income
> Sectoral composition of > GDP trends
output > Sectoral growth trends > Industrial policy > Magnitude and
> Inter - sectoral linkages > Demand and Supply > Trade Policy nature of cross -
Trends > Monetary Policy border:
> Price Trends > Fiscal Policy Trade flows
> Trade and Bop trends > Foreign Financial flows
> Foreign exchange exchange policy > Membership of
reserves position > Foreign WTO, IMF, World
> Global economic trends investment & Bank, Trade blocs
Technology policy etc.
Responsibility of Business:
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Social responsibility of business refers to its obligation to take those decision and perform
those actions which are desirable in terms of the objectives and values of our society.
Need for social responsibility:
 Need for social responsibility of business arises both because of firm’s interest of society.
There are arguments both for and against social responsibility.
Arguments of social responsibility:
 Justification for existence and growth

 Long-term interest
 Avoidance of government regulation
 Maintenance of orderly society
 Availability if resources
 Converting problems into opportunity
 Better environment for doing business
 Holding the business responsible for social problems.
Arguments against social responsibility:
 Violation of profit maximization objective

 Burdon on consumers
 Lack of social skills
 Lack of broad public support.
Kinds of social responsibility:
 Economic responsibility
 Efficient operations to satisfy economic needs of the society and generation of surplus
for rewarding the investors and further development.
 Legal responsibility
 A company is bound to obey the law of the land.
 Ethical responsibility
 The society expects the business to observe though they are not mandated by law.
 Discretionary responsibility
 The voluntary contribution of the business to the social cause, like involvement in
community development or other social programmes.
Corporate Social Responsibility:
 It takes 20 years to build a reputation and only 5 minutes to ruin it.

 Warren Buffer
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 Business should not only be responsible morally to the stakeholders but also to the society,
environment and towards a sustainable planet at large.
What is CSR?
• CSR is an extended model of corporate governance based on the fiduciary duties owed to all
the firm’s shareholders.
• CSR is about how companies manage the business processes to produce an overall positive
impact on the society.
• CSR is the responsibility of corporations to go above and beyond what the law requires them
to do.
• CSR is the responsibility of corporations to contribute to a better society and cleaner
environment.
Corporate Citizenship Concepts:
• Corporate social responsibility – emphasizes, obligation and accountability to society
• Corporate social responsiveness – emphasizes, action, activity

• Corporate social performance – emphasizes outcomes, results
Business Criticism/ Social Response Cycle

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Carroll’s Four Part Definition
• CSR encompasses the economic, legal, ethical and discretionary (philanthropic) expectations
that society has of organizations at a given point in time
Understanding the Four Components:
Responsibility Societal Examples

Expectation
Economic Required Be profitable. Maximize sales, minimize costs,
etc.
Legal Required Obey laws and regulations.
Ethical Expected Do what is right, fair and just.
Discretionary Desired/ Be a good corporate citizen.
(Philanthropic) Expected

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Corporate Social Responsibility (CSR)
Arguments Against:
• Restricts the free market goal of profit maximization

• Business is not equipped to handle social activities
• Dilutes the primary aim of business
• Increase business power
• Limits the ability to compete in a global marketplace
Arguments For:
• Addresses social issues business caused and allows business to be part of the solution
• Protects business self-interest
• Limits future government intervention
• Addresses issues by using business resources and expertise
• Addresses issues by being proactive
Business Responsibilities in the 21 st Century:
• Demonstrate a commitment to society’s values and contribute to society’s social,

environmental, and economic goals through action.
• Insulate society from the negative impacts of company operations, products and services.
• Share benefits of company activities with key stakeholders as well as with shareholders.
• Demonstrate that the company can make more money by doing the right thing.
Professionalism in India
PROFESSIONALISM IN MANAGEMENT
We know that management is like an indicator that exits between work and results. Without a proper
indicator one would have been in disarray. Due to fast technological changes and innovations, high
competitions, spread of education and knowledge, change in the nature and attitude of customers etc,
managing an organization increasingly complex and challenging today and hence calls for
professional skills of high caliber. A professional manager has to know many things in addition to
his/her basic knowledge, qualification and experiences. It depends a great deal on how well a
professional manager intelligently act on a particular situation, develop his ideas, thoughts
imaginations, creativity, maintain discipline in every respect, communicate effectively, hold back his
personal ego for the larger interest of his/her fellow colleagues and his organization. In short he/she is
to make proper planning well in advance, organizing his task systematically with minimum cost, time
and effort, directing all individuals to make proper execution of the tasks, coordinating all facilities
and finally controlling all activities in conformance to the plans of the organization.
To become a true professional manager, one must possess sufficient knowledge, skills and
competence in the priority area, which can be acquired and developed through formal education,
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training, experiences and exposures etc. A professional manager should also constantly update his/her
knowledge by getting himself/herself associated with relevant professional associations/bodies, by
undergoing periodic training, attending and participating seminars, workshops etc and by visiting
professionally managed organization/institutions, both within and outside of their country and by
reading current management books, management journals, periodicals, research journals, case studies
etc. In addition, he/she should clearly understand the objectives and mission of the organization,
ability to analyze both short term and long term opportunities and priorities, develop a proper system
and culture, share organizational concern for developing capabilities of all categories of employees in
the organization.
Few basic qualities of professional managers are:
1. Have an insight of his/her job requirements;

2. Carry out continuous updating of all his learning to fulfill his job requirements;
3. Have a performance oriented relationship with the superiors, sub-ordinates and colleagues,
based on mutual respect to facilitate teamwork for collective contribution to the organization;
4. Have a relationship based on long term mutual benefit approach with customers, suppliers and
other members of public;
5. Have a linkage with fellow professionals to improve the standard, contribution and prestige of
the managerial profession.
Professionalism in management has brought radical changes in all walks of life, particularly in the
industrial and business world. The challenge has also assumed significance in view of high
competition and also rapid growth mainly after liberalization and globalization of the economy.
Thus we can say that professionalism in management has assumed a great important function in
modern day management world.
What is Ethics?
Ethics involves:
• Having guidelines for human behavior

• Studying moral choices and values
• Choosing between right and wrong.
Ethical behavior means:
• knowing the difference between right and wrong

• consciously choosing to do right.
What is Business Ethics?
Business ethics means applying principles of right and wrong to situations in the workplace.

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Business ethics refers to the application of ethics to business. To be more specific, business ethics is
the study of good and evil, right and wrong and just and unjust actions of business.
“Business ethics is an extension of values of personal life to business”.
Sources of Business Ethics:
Managers in every society are influences by three repositories of ethical values: religion,
culture and Law.
1. Religion:
One of the oldest sources of ethical inspiration is religion. More than 100,000 different religions
exist across the globe. But despite doctrinal differences, the major religions converge on the belief
that ethics is on expression of divine will that reveals the nature of right and wrong in business and
other areas of life. The principle of reciprocity towards one’s fellow human beings is found in all
major religion such as Hinduism, Buddhism, Christianity, Islam, Judaism and Confucianism.
2. Culture:
Culture, as was started earlier, refers to a set of values, rules and standards transmitted among
generations and acted upon to produce behaviours that fall within acceptable limits
3. Law (or) Legal System:
Laws are rules of conduct, approved by legislatures, that guide human behavior in any society.
• Legal systems are the systems of civil law, common law and religious law. Each country often
develops variations on each system and incorporates many other features into the system.
• Each nation develops and adapts a legal system that fits its own economic, political and social
goals
Why is Ethics important?
Ethics does not carry ethical ting only, it makes business sense too.
Ethics is important to business for several reasons as stated below:
1. Ethics corresponds to basic human needs.

2. Values create credibility with the public
3. Values give management credibility with employess
4. Values help better decision making
5. Ethics and profit
6. Law cannot protect society

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Ethical Dilemmas:
Several ethical dilemmas confront a manager. The ethical dilemmas stem from three sources:
1. Face – to- face Ethics.

2. Corporate Policy Ethics.
3. Functional area Ethics.
Managing Ethics:
In the past, it was assumed in most companies that ethics was a matter of individual conscience. But
the scenario has changed. Today, many companies are using managerial techniques that are designed
to encourage ethical behaviors. Some of the managerial interventions to ensure ethical conduct.
 Top management
 Code of Ethics
 Ethics Committees
 Ethics Hot lines
 Ethics training programmes
 Ethics and law

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UNIT – II
Non Economic Environment
The non-economic environment exercises a strong influence on the business. Normally the non-
economic environmental factors are the key factors for all kinds of business activities in India. We
will now discuss them one by one.
 Political Environment
 Legal Environment
 Regulatory Environment
 Demographic Environment
 Technological Environment
 Socio- Cultural Environment
 Regulatory Environment
Political Environment:
The political environment is the state, government and its institutions and legislations and the public
and private stakeholders who operate and interact with or influence that system.
Political Systems:
 What are they?

 The means by which people in any society make the rules by which they live
TYPES OF POLITICAL SYSTEMS:
 Democracy
 Totalitarianism
 Mixed
 Representative Republic
DEMOCRACY:

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 The people make the decisions

 Equal Rights
 Many Freedoms
 Representative Democracies
 Elect citizens to represent them
TOTALITARIANISM:
 Limited rights and freedoms

 Government (one or few) makes decisions
 People have no say in the laws
MIXED:
 Characteristics of both systems

 Almost all political systems are mixed
LEGAL ENVIRONMENT:
 The set of rules and regulations to be abiding by law stimulating and surrounding the business
is known as legal environment
 Each nation develops and adapts a legal system that fits its own economic, political and social
goals
 Two basic types of legal systems in global community
 Common Law
 Code Law
Common Law:
 Judges decide current cases based on how judges have decided cases in the past
 Precedents
Code Law:
 Based on statutes (rules) passed by legislative bodies

 Set specific penalties for disobeying the law
 Based on Roman model of the 6th century
 More than 70 countries use code law system
 Judges don’t interpret law
Demographic Environment:
Studies of a population based on factors such as age, race, sex, economic status, level of education,
income level and employment, among others.

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Demographics are used by governments, corporations and non-government organizations to learn

more about a population's characteristics for many purposes, including policy development and
economic market research.
 Growth of population
 Age Composition
 Life Expectancy
 Sex Ratio
 Fertility and Mortality rates
 Inter-state migration
Technological Environment:
 Sources of technology
 Technological development
 Impact of technology
Cultural Environment
 Social Customs & Rituals and practices

 Lifestyle patterns
 Family structure
 Role & position of men, women, children and aged in family & society
Regulatory Environment
 Constitutional framework
 Policies relating to pricing and foreign investment
 Policies related to the public sector, SSIs, development of backward areas and control of
environmental pollution
Natural Environment:
Natural environment means all living and non-living things that are naturally on Earth. In a narrow
sense, it is an environment that is not influenced by people. The environment that is influenced by
humans can be called "the built environment" or cultural landscape.
DEFINITION OF POLLUTION:
When Harmful Substances Contaminate the Environment, it is Called Pollution.
Pollution refers to the very bad condition of environment in terms of quantity and quality.
There are Five types of Pollution:

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Air Pollution
Water Pollution
Noise Pollution
Land Pollution
Radio Active Pollution
1. AIR POLLUTION
What is Atmosphere
 Atmosphere is the life blanket of Earth.

 It is there for essential that we know more about the atmosphere and the ways in which it is
polluted.
 Air is considered safe when it contains no harmful dust and gases.
Effects of Air Pollution:
Air Pollution affects???

 Human health.
 Animals.
 Plants.
 The atmosphere as a whole.
 Global warming.
 Ozone depletion(Ozone hole).
 Acid Rain.
 Various respiratory illnesses.
How to Avoid Air Pollution
Yes, we can avoid pollution As Follows:
 Use natural Gases, like LPG(Liquefied Petroleum Gas)autos.

 Do not Burst Crackers.
 Use less Amount of Fuel for Vehicles.
 Avoid using and use electric stoves(biogas).
WATER POLLUTION
Any physical (temperature,oxygen), chemical(mercury), or biological (disease,sewage) change to

water that adversely affects its use by alive beings.
Effects of Water Pollution:

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 Diseases like Cholera.

 Malaria.
 Typhoid(spread during the rainy season).
 Aquatic life gets destroyed
How to Avoid Water Pollution:
 Rivers should not be used for washing clothes or bathing animals in.
 Harvesting of Rain water to meet water requirements.
 Dams & embankments must be created.
 The rivers must not be contaminated.
 In Rivers the dead bodies shouldn’t throw.
NOISE POLLUTION
Noise can be simply defined as unwanted sound.

The sound is pleasant or not depends up on its loudness, duration, rhythm and the mood of the
person.
Noise pollution not only results in irritation and anger.
Noise Levels: Decibels(dB)
• Intensity
• Frequency
• Periods of exposure and
• Duration
Effects of Noise Pollution:
 Hearing Loss.
 High Blood Pressure.
 Stress.
 Sleep Disturbance.
 Colour Blindness
How to Avoid Noise Pollution:

The Government should ensure the new machines that Should be noise proof.
 Air ports must be away from residential area.
 The Sound horn symbol is to be in School Roads.
 Control noise at source by proper choice of equipment, design modification, mounting
and proper layout.
 Isolation or use of baffles.
 Use of ear protection devices.

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LAND POLLUTION:
 One fourth of area is covered by land.
 Land is a earth which is occupied by people for shelter, occupation, etc...
Effects of Land Pollution:
 The Land Cannot use to build houses.
 Man cannot be farming.
 Ground water will gets Affected.
 Death of the animals that inhabit the land.
Prevention of Land Pollution:
More and more land should be brought under farming.

 Trees should be planted everywhere.
 Waste matter should be disposed immediately.
 Avoid drilling the Land for more underground water.
 Avoid using more fertilizers and Pesticides.
 Integrated Solid Waste Management.
 Good agricultural practices.
 Remediation of polluted soils.
 Prevention of erosion and silting.
 Containment of hazardous waste and waste water treatment using land treatment techniques.
3R Principle:
 Reduce
 Reuse
 Recycle
RADIO ACTIVE POLLUTION:
Despite the Advantage of nuclear as a clean energy, the big concern is the resulted from nuclear
reaction, which is a form of pollution called Radio activity.
Radiation (Laser-Rays) will from Radioactive Pollution
Causes of Radioactive Pollution
 Nuclear power plants(Ex: Neyveli, Kalpakkam).

 Nuclear Weapons(Ex:Missiles).
 Disposal of Nuclear Waste.
 Uranium Mining.
Effects of Radioactive Pollution

 The Diseases include blood in cough.
 Ulcer.

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 Swelling of bone joints.

 Cancer.
 Lung Cancer.
 Skin Cancer.
 Bone Cancer.
 Eye Problems.
How to Prevent of Radioactive Pollution
 Avoid Constructing Nuclear Power Plants.
 Avoid Using Nuclear Weapon.
 Have Proper Treatment for Nuclear Waste.
 Avoid mining for Uranium to a minimal.
Trade Unions:
Nature of Trade Union

Trade unions are voluntary organizations of workers or employers formed to promote
and protect their interests through collective action.
According to the Trade Union Act 1926 it is a combination, whether temporary or permanent,
formed
(i) primarily for the purpose of regulating the relation between
(a) workmen and employers or
(b) between workmen and workmen, or
(c) between employers and employers, or
(ii) for imposing restrictive conditions on the conduct of any trade or business, and includes any
federation of two or more trade unions.
Meaning of Trade Union:

A trade union is an organization of workers that is formed with a view of protecting and
promoting the interests of workers.
‘A trade union is an association of employees designed primarily to maintain or improve the

conditions of employment of its members’.
‘A trade union is a continuous association of wage-earners for the purpose of maintaining or

improving the conditions of their working force’ “Beatric Webb”
‘A trade union is such an organization which is created, voluntarily on the basis of collective
strength to secure the interests of workers’.
“V.V. Giri”
“A union is a continuous association of persons in industry-whether employer or independent

workers- formed primarily for the purpose of the pursuit of the interests of its members of the trade
they represent”.

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S.D.Punekar
Principles of Trade Unionism:
Trade unions function on the basis of three fundamental principles.
 Unity is strength.
 Equal pay for equal work or for the same job.
 Security of service.
Functions of Trade Union:

The basic functions of trade unions are to protect and promote the interest of the workers and
conditions of their employment.
1. Militant Functions
2. Fraternal Function
3. Social Functions
4. Political Functions
5. Ancillary Functions
Militant/Protective Functions:
 Ensuring adequate wages, better working conditions and better treatment from employers
fight with the management in the form of strikes, boycotts, gheraos etc.
(i) Achieve higher wages and better working conditions.
(ii) Raise the status of workers as a part of industry and
(iii) Protect labour against victimization and injustice.
Fraternal Functions:
 Providing financial and non-financial assistance to workers
 Extension of medical facilities during sickness and casualties,
 Provision of education, recreation, and housing facilities,
 Provision of religious and social benefits.
 To encourage sincerity and discipline among workers.
 To provide opportunities for promotion and growth.
Social Functions :-
 carrying out social service activities
discharging social responsibilities through various sections of the society like educating the customers.
Political Functions :-
Affiliating a union to a political party
Helping the political party in enrolling members
Collecting donations
Seeking the help of political parties during the strikes and lockouts.
Ancillary Functions:

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(i) Communication : trade union communicates its activities, programmes, decisions achievements etc,
through publication of news letter.
(i) Welfare Activities : acquiring of house sites, construction of houses, establishment of co-
operative housing societies, organizing training activities etc.
(ii) Education : educational facilities to its members and their family members.
(iii) Research : arrange to conduct research programme.
Collect and analysis data and information for collective bargaining, preparing notes for union officials.
Trade Union Act, 1926:
 Provide for registration of T.U.

 Confers certain protection and privileges.
1- Formation and Registration:- 7 members can form a trade union and may apply to the registrar of
Trade Unions for registration.
2- Application accompanied by Schedule:- I, II and bye law and a resolution authorizing 7 members of the
union to make an application for registration of the union
Registration Fees Rs. 500/
Principal Trade Unions in India
All India Trade Union Congress (AITUC) 1920

Indian National Trade Union Congress (INTUC)
Hind Mazdoor Sabha (HMS) 1948
Centre of Indian Trade Unions (CITU)
Unit – III
Social Change
Social Change:
Social change as a sociological term is defined as, alterations in basic structures of a social group or
society social change is an ever present phenomenon in social life, but has become especially intense
in the modern era. An example of this is globalization. Social changes cause and affected by
technological changes, change in economic and political conditions, population composition,
urbanization, change in educational and occupational structure and the phenomenon such as
globalization. The concept of social change implies measurement of some of the characteristics of a
group of individuals. While the term is usually applied to changes that are beneficial to society, it
may also result in negative side- effects and consequences that undermine or eliminate existing ways
of life that are considered positive.
According to sociologist, Ann Swidler, culture is like a “ tool kit” from which people select
different understandings and behaviors. Because people participate in so many different and often
conflicting, cultures this “ tool kit” can be quite large and the contents vary. Social changes come
about when individuals or groups choose to go against social norms. Social changes have profound
implications for business. The degree of change determines the pace of globalization, life styles,

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occupational preferences, workforce composition, motivational needs, spending habits and patters on
various goods and services and the patterns on various goods and services and the like.
Technology influx in recent years such as email, cell phone, online social network has drastically
changed the communication and relationships. The rapid development of the Internet and
E-Business has created not only lucrative economic opportunities but also significant social
challenge, with profound implications for individuals, communities and for our society as a whole.
Social Implications and Challenges of E- Business explores the profound social implications and
challenges of E-Business, investigates how the rapid shapes, and is shaped by various social forces:
and highlights the enormous difficulties and challenges involved in applying E- Business
technologies and principles in public services and other non- business activities.
Wave Front Analysis:
Civilization can be divided into three major phases:
1. First Wave: the agricultural revolution

2. Second Wave: the industrial revolution
the information age
3. Third Wave:
(just now beginning)
Each wave, or civilization phase, develops its own "super- ideology," or Zeitgeist, with which it
explains reality and justifies its own existence. This ideology impacts all the spheres which make up a
civilization phase:
 technology
 social patterns
 information patterns
 "power" patterns
Timing:
"...the agricultural revolution.. took thousands of years to play itself out. [The industrial revolution]
took a mere three hundred years. Today history is even more accelerative, and it is likely that the
Third Wave will sweep across history and complete itself in a few decades" (Toffler 1980, 10).
A powerful new approach to historical analysis: ""Social Wave-Front Analysis".. looks at history
as a sucession of rolling waves of change and asks where the leading edge of each wave is carrying
us. It focuses our attention not so much on the continuities of history (important as they are) as on the
discontinuities--the innovations and breakpoints. It identifies key change patterns as they emerge, so
that we can influence them" (Toffler 1980, 13).
THE FIRST WAVE

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 The agricultural revolution took thousands of years to play out.

 Extent of spread: "Today the First Wave has virtually subsided. Only a few tiny tribal
populations, in South America or Papua New Guinea, for example, remain to be reached by
agriculture" (Toffler 1980, 13).
 "..land was the basis of economy, life, culture, family structure, and politics" (Toffler 1980,
21).
 "..life was organized around the village."
 "..a simple division of labor prevailed and a few clearly defined castes and classes: a nobility,
a priesthood, warriors, helots, slaves or serfs. In all of them, power was rigidly authoritarian.
In all of them, birth determined one's position in life."
 ".. the economy was decentralized, so that each community produced most of its own
necessities" (Toffler 1980, 21).
 The First Wave was dominant until around 1650-1750.
The production of wheat has produced the best results in fueling self-sufficiency of India. Along with
high yielding seeds and irrigation facilities, the enthusiasm of farmers mobilised the idea of
agricultural revolution. Due to the rise in use of chemical pesticides and fertilizers there were
negative effects on the soil and the land such as land degradation.
 Use of High Yielding Varieties (HYV) of seeds

 Irrigation
 Use of insecticides
 Use of pesticides
 consolidation of holdings
 Land reforms
 Improved rural infrastructure
 Supply of agricultural credit
 Use of chemical fertilizers
 Use of sprinklers or drip irrigation
 Use of advanced machinery
THE SECOND WAVE
 The industrial revolution took three hundred years to mature.

 "Industrialism was more than smokestacks and assembly lines. It was a rich, many-sided
social system that touched every aspect of human life and attacked every feature of the First Wave past...
it put the tractor on the farm, the typewriter in the office, the refrigerator in the kitchen. It produced the
daily newspaper and the cinema, the subway and the DC-3... It gave us Bauhaus buildings and Barcelona
chairs, sit-down strikes, vitamin pills, and lengthened life spans. It universalized the wristwatch and the
ballot box" The Civil War was fought over who would rule the continent: farmers or industrialists.
 Major changes wrought by the Second Wave:

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o A shift to NONRENEWABLE ENERGY SOURCES -- coal, gas, and oil -- made

mass production possible.
o A radically better distribution system--MASS DISTRIBUTION instead of custom
distribution--using railroads, highways, and canals, and "complex networks of jobbers, wholesalers,
commission agents, and manufacturers' representatives." This led to MASS MERCHANDISING.
o Industrialization required mobility from people. This resulted in the end of the large
multigenerational, extended family rooted to the soil. "The so-called NUCLEAR FAMILY--father,
mother, and a few children, with no encumbering relatives--became the standard, socially approved,
"modern" model in all industrial societies" (Toffler 1980, 28).
o "To free workers for factory labor, key functions of the family were parceled out to
new, specialized institutions. EDUCATION of the child was turned over to schools. CARE OF THE
AGED was turned over to poor-houses or old-age homes or nursing homes" (Toffler 1980, 28).
o "As work shifted out of the fields and the home.. children had to be prepared for
factory life. The early mine, mill, and factory owners of industrializing England discovered, as Andrew
Ure wrote in 1835, that it was 'nearly impossible to convert persons past the age of puberty.. into useful
factory hands.'... Built on the factory model, MASS EDUCATION taught basic reading, writing, and
arithmetic... Beneath [this overt curriculum, however] lay an invisible or "covert curriculum" that was
far more basic. It consisted--and still does in most industrial nations--of three courses: one in
punctuality, one in obedience, and one in rote, repetitive work. Factory labor demanded workers who
showed up on time.. It demanded workers who would take orders from a management hierarchy
without questioning. And it demanded men and women prepared to slave away at machines or in
offices, performing brutally repetitious operations" (Toffler 1980, 29).
o Mass production required giant pools of capital. To encourage investors, the "concept
of limited liability was introduced" and THE CORPORATION was created.
o "In one Second Wave country after another, social inventors, believing the factory to
be the most advanced and efficient agency for production, tried to embody its principles in other
organizations as well. Schools, hospitals, prisons, government bureaucracies, and other organizations
thus took on many of the characteristics of the factory--its division of labor, its hierarchical structurel
and its metallic impersonality" (Toffler 1980, 31)--in other words, BUREAUCRACY.
"Music provides a striking example. As the Second Wave arrived, concert halls began to
crop up in London, Vienna, Paris, and elsewhere. With them came the box office and the impresario--
the businessman who financed the production and then sold tickets to culture consumers.
"The more tickets he could sell, naturally, the more money he could make. Hence, more
and more seats were added. In turn, however, larger concert halls required louder sounds--music that
could be clearly heard in the very last tier. The result was a shift from chamber music to symphonic
forms" (Toffler 1980, 32).
o In an agricultural society, information was simple and usually conveyed orally.

Industrialization, however, "required the tight coordination of work done at many locations" (Toffler
1980, 33). Hence, huge amounts of INFORMATION had to be written down and then accurately and
efficiently distributed. This gave rise to the postal service, to memos, to the telephone, telegraph, and
two- way radio.

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o There also arose a demand for the distribution of information from one source to
millions of people. Hence, MASS MEDIA and mass advertising arose. The mass circulation newspaper
and magazine became a standard part of life.
o HUMAN LIFE WAS SPLIT into two halves: PRODUCTION AND
CONSUMPTION.
THE THIRD WAVE -- THE NEW SYNTHESIS
The new technologies of the Third Wave will bring:
 Diversified, renewable, energy sources. (Ex. -- bio-electronics, piezo-electronics, new

computer systems which shut everything down for nano-seconds between actual activity.)
 Methods of production which make factories and assembly lines obsolete.
This change will driven by two factors:
 the rise of dynamic new industries based on scientific breakthroughs: quantum electronics,
information theory, molecular biology, oceanic, nucleonics, ecology, and the space sciences
 Enhanced manipulative abilities via computers, data processing, aerospace, sophisticated
petrochemicals, semiconductors, advanced communications, solid-state physics, systems
engineering, artificial intelligence, fuzzy logic, polymer chemistry.
1. Electronics and computers...

2. The space industry...
3. Pushing into the depths of the sea...
4. De-massification of the media
5. An intelligent environment.
6. A new social memory...
7. Development of the "electronic cottage"
8. The home-centered society
9. Families will become non-nuclear.
10. Radically changed corporations.
11. New code of behavior
12. Rise of the Prosumer
13. Radically changed schools.
14. Breakup of the nation state.
Cultural dynamics:
Culture is an integrated system of learned behavior patterns that are characteristic of the
members of any given society.
The Original Definition:
• E.B. Tylor, anthropology’s founder, gave a definition to start with:

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• “That complex whole which includes

• Knowledge, beliefs, arts, morals, law, custom
• And any other capabilities and habits
• Acquired by man [both genders]
• As a member of society”
• “Arts” Everyone in a culture has skills, whether hunting, gathering plants, cultivating crops,
constructing shelter, and much else
• “Morals” Every culture has its morality.
• “Law” Every culture has its own means of social control
• “Custom” Every culture has its own way of doing things, from family values to norms of
behavior
Characteristics of Culture:
• Learned – Culture is not inherited or biologically based, it is acquired by learning and
experience.
• Shared – People as members of a group, organization or society share culture. It is not
specific individuals.
• Trans generational – Culture is passed on form one generation to the next.
• Symbolic – Culture is based on the human capacity to symbolize or use one thing to represent
another
• Adaptive – Culture is based on the human capacity to change or adapt, as opposed to the
more genetically driven adaptive process of animals.
CROSS CULTURAL DYNAMICS
• Cross cultural dynamics means when in any organization more than one cultured people are
working together and there is any clashes due to this.
• In order to solve this the firm is required to develop system and processes for managers to
handle cultural diversities
PROCESS/MAINTAINING CULTURE:
• Selection of employees
• Actions of top management
• Socialization
Selection of employees:
 Careful selection-right person at the right job
 Interviewer should be trained enough to value for company culture
 Selecting only those who match with the culture
Actions of top management:
 Culture is depending on them
 Their ideas are to be expressed through culture
 It make them understand how much
a) Risk can be taken for
b) Freedom should be given to subordinates
c) Wages or promotions or rewards should be raised

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Socialization:
 The adaptation of culture by the new entrants is called socialization
 Important to make people aware about culture
 The process refers
a) Pre-arrival Stage :
b) Encounter Stage :
c) Transformation Stage:
CULTURAL LAG:
Cultural lag refers to the fact that culture takes time to catch up with technological innovations,
resulting in social problems.
• Cultural lag is not only a concept, as it also relates to a theory and explanation in sociology.
• It helps identify and explain social problems and also predict future problems.
Terms:
• material culture
• In the social sciences, material culture is a term, developed in the late 19th and early 20th
century, that refers to the relationship between artifacts and social relations.
• non-material culture
• In contrast to material culture, non-material culture does not include any physical objects or
artifacts. Examples of non-material culture include any ideas, beliefs, values, and norms that
may help shape our society.
• innovation
• The act of innovating; the introduction of something new, in customs, rites, and so on.
Examples:
· Cultural lag can occur when technological innovation outpaces cultural adaptation. For example,
when cars were first invented, there were not yet any laws to govern driving: no speed limits, no
guidelines for who had the right of way at intersections, no lane markers, no stop signs, and so on. As
you can imagine, the result was chaos. City streets became incredibly dangerous. Laws soon were
written to address this problem, closing the gap.
Secular Outlook
Secularism is the principle of the separation of government institutions and persons mandated to
represent the state from religious institutions and religious dignitaries.
 Equality of all citizens meaning a uniform civil code.
 No Polygamy shall be allowed, One man One wife is the rule for all
 Followers of every religion are allowed to manage their religious and Charitable institutions
with no state control.
 Followers of every religion are to follow family planning.
 Every citizen can freely practice is religion but fraudulent conversions are banned.

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Community development:
 People live in communities. Some people live close to each other. They are called neighbors.
 A community is a term for groups of people living in somewhat close area, and usually under
common rules.
 Community development is a process where community members come together to take
collective action and generate solutions to common problems
Effective community development should be:
 a long-term Endeavour (attempt to achieve a goal)
 well-planned
 inclusive and equitable
 initiated and supported by community members
 of benefit to the community
 grounded in experience that leads to best practices
Community development is a grassroots process by which communities:
 become more responsible
 organize and plan together
 develop healthy lifestyle options
 empower themselves
 reduce poverty and suffering
 create employment and economic opportunities
 achieve social, economic, cultural and environmental goals
Six aspects of community development
 helping people find common cause
 helping people work together
 building organizations’ strength and independence
 building equity, inclusiveness, participation and cohesion
 empowering people to influence and transform
 advising and informing public authorities
What is Consumerism?
Consumerism is an organized movement of citizens and government to strengthen the rights and
power of buyers in relation to sellers.
Why is this happening?

 Low literacy levels and lack of awareness of rights encourages businessmen to be indifferent
to consumers
 Backwardness
 Ignorance
 Lack of education and information
 Indian consumers get carried away by clever advertising
 Imbalance in demand and supply of commodities leading to hoarding, black marketing,
profiteering.
CONSUMER PROTECTION ACT,1986

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OBJECTIVES
 The main objective of the act is to provide for the better protection of consumers.
 The act is intended to provide simple, speedy and inexpensive redressal to the consumers'
grievances, and relief of a specific nature and award of compensation wherever appropriate to
the consumer.
As Under section-6 of Consumer Protection Act, consumer has the following rights:
• Right to safety.
• Right to information.
• Right to choose.
• Right to be heard.
• Right to redressed .
• Right to consumer education.
• Right to healthy environment .
• Right to basic needs.

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Unit – IV
Economic systems
• An economy, or economic system, is the way a nation makes economic choices about how the
nation will use its resources to produce and distribute goods and services.
• Also called factors of production, are all the things used in producing goods and services.
They fall into four categories:
• Land
• Labor
• Capital
• Entrepreneurship
•
1. Land refers to everything on Earth that is in its natural state, or Earth's natural resources.
2. Labor refers to all the people who work in the economy.
3. Capital includes money needed to start and operate a business. At a national level, capital
includes infrastructure, such as roads, ports, sanitation facilities, and utilities.
4. Entrepreneurship refers to the skills of people who are willing to risk their time and money
to run a business.
Scarcity:
• The difference between wants and needs and available resources.
• Example: Most underdeveloped nations have natural resources, but do not have capital or
skilled labor to develop them.
Choices:
 Every day, in our country and countries around the world, business owners, consumers,
workers, and governments must make choices about using scarce resources.
 Together these choices create an economy.
 These choices fall into three groups:
Basic Economic Choices:
 WHAT goods and services should be produced?
 HOW should the goods and services be produced?
 WHO receives and consumes these goods and services.
Types of Economic Systems:
 These questions are answered by the type of economic system a nation has. There are four
types of economies:
1. Pure Market Economy
2. Pure Command Economy
3. Traditional Economy
4. Mixed Economy

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Let’s review each of these types of economies.
Pure Market Economy:
 No government involvement in economic decisions. Private firms account for all production.
 Consumers decide WHAT should be produced. They do this through the purchases they
make.
 Businesses determine HOW the products will be produced. They must be competitive.
 WHO buys the products? The people with the most money are able to buy more goods and
services.
Problems:
 Difficulty enforcing property rights - no laws.
 Some people have few resources to sell - no minimum income.
 Some firms try to monopolize markets - conspiring and price fixing.
 No public goods. - national defense?
Pure Command Economy:
 All resources are government-owned.

 One person (dictator) or a group of officials decide WHAT products are needed.
 The government runs all businesses, controls all employment, and decides HOW goods and
services will be produced.
 The government decides WHO receives the products that are produced.
Problems:
 Consumers get low priority.
 Little freedom of choice – few products.
 Resources owned by the state are often wasted – individuals don’t care if they don’t own it.
Traditional Economy:
 Economy is shaped largely by custom or religion.
 Customs and religion determine the WHO, WHAT, and HOW.
 Example: India has a caste system which restricts occupational choice. (A social class
separated from others by distinctions of hereditary rank, profession, or wealth.)
Mixed Economy:
 Most economies in the world today are mixed.
 Classification is based on how much government intervention there is.
 In the U.S. the government accounts for about 1/3 of all U.S. economic activity.
Government Philosophies:
 Countries also have different philosophies of government which reflect not only the laws and
rules, but how individuals are treated.
 There are three political philosophies:
1. Capitalism
2. Socialism

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3. Communism
Capitalism:
 Capitalism features private ownership of businesses and marketplace competition.
 It is the same as a free enterprise system.
 The political system most frequently associated with capitalism is democracy.
Socialism:
• The main goal of socialism is to keep prices low for all people and to provide
employment for many.
• The government runs key industries, generally in telecommunications, mining,
transportation, and banking.
• Socialist countries tend to have more social services.
Communism:
 Have a totalitarian form of government; this means that the government runs
everything and makes all decisions.
 Theoretically, there is no unemployment in communist countries.
 The government decides the type of schooling people will receive and also tells them
where to live.
Economies in Transition:
 Many countries are in transition from either communism or socialism to capitalism.
 Privatization is a common aspect of transition from a command economy to free
enterprise system. Privatization means state-owned industries are sold to private
individuals and companies.
ECONOMIC PLANNING IN INDIA
 Economic Planning is to make decision with respect to the use of resources.

 Economic Planning is a term used to describe the long term plans of government to co-
ordinate and develop the economy.
 Economic planning in India was stared in 1950 is necessary for economic development and
economic growth.
NEED FOR ECONOMIC PLANNING:
 Mess Poverty And Low Per Capita Income

 High Rate of Growth of Population
 Low Level of Literacy
 Backward Technology
 Social And Economic Problem Created By Partition Of Country
OBJECTIVES OF ECONOMIC PLANNING
 Economic Growth.
 Reduction Of Economic Inequalities.
 Balanced Regional Development.
 Modernization.
 Reduction Of Unemployment.

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FIVE YEAR PLANS:
The economy of India is based in part on planning through its five year plans which are developed,
executed and monitored by planning commission .
The tenth plan completed its terms in march 2007 and the eleventh plan is currently underway .
1. First five year plan(1951-1956)
2. Second five year plan (1956-1961)
3. Third five year plan (1961-1966)
4. Fourth five year plan (1969-1974)
5. Fifth five year plan (1974-1979)
6. Sixth five year plan (1980-1985)
7. Seventh five year plan(1985-1990)
8. Eighth five year plan(1992-1997)
9. Ninth five year plan(1997-2002)
10. Tenth five year plan (2002-2007)
11. Eleventh five year plan (2007-2012)
First five year plan(1951-1956)- The first Indian Prime Minister, Jawaharlal Nehru presented the
first five-year plan to the Parliament of India on 8 December 1951.
• The plan addressed, mainly, the agrarian sector, including investments in dams and irrigation.
• The most important feature of this phase was active role of state in all economic sectors. after
independence, India was facing basic problems—deficiency of capital and low capacity to
save.
• At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started
as major technical institutions.
Second five year plan(1956-61) - The second five-year plan focused on industry, especially heavy
industry.
• Hydroelectric power projects and five steel mills at Bhilai, Durgapur, and Rourkela were
established. Coal production was increased. More railway lines were added in the north east.
• Atomic energy was also formed in second five year plan.
• The total amount allocated under the second five year plan in India was Rs. 4,800 crore. This
amount was allocated among various sectors:
• Mining and industry
• Community and agriculture development
• Power and irrigation
• Social services
• Communications and transport
Third five year plan(1961-66) -The third plan stressed on agriculture and improving production of
wheat, it is also shifted the focus towards the Defense industry.
• Many primary schools were started in rural areas. Panchayat elections were started.
• State electricity boards and state secondary education boards were formed.
Fourth five year plan(1969-74) - At this time Indira Gandhi was the Prime Minister. The Indira
Gandhi government nationalized 14 major Indian banks and the Green Revolution in India advanced
agriculture.

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Fifth five year plan(1974-79) - Stress was laid on employment, poverty, alleviation, and justice. The
plan also focused on self-reliance in agricultural production and defense.
• The Indian national highway system was introduced for the first time.
Sixth five year plan(1980-85) - The sixth plan also marked the beginning of economic liberalization.
This led to an increase in food prices and an increase in the cost of living.
• Family planning was also expanded in order to prevent overpopulation.
Seventh five year plan(1985-90) -The Seventh Plan marked the comeback of the Congress Party to
power.
• The main objectives of the 7th five year plans were to establish growth in areas of increasing
economic productivity, production of food grains, and generating employment opportunities.
• The thrust areas of the 7th Five year plan have been enlisted below:
• Social Justice
• Using modern technology
• Agricultural development
• Full supply of food, clothing, and shelter
• Increasing productivity of small and large scale farmers
• Making India an Independent Economy
Eighth five year plan(1992-97) -Between 1990 and 1992, there were only Annual Plans.
• It was the beginning of privatization and liberalization in India.
• Modernization of industries was a major highlight of the Eighth Plan.
• India became a member of the World Trade Organization on 1 January 1995.
• The major objectives included, controlling population growth, poverty reduction, employment
generation, strengthening the infrastructure, Institutional building, tourism management,
Human Resource development, Involvement of Panchayat raj, Nagar Palikas, N.G.O'S and
Decentralization and people's participation.
Ninth five year plan(1997-2002) -The main objectives of the Ninth Five Year Plan of India are:
• to develop the rural & agricultural sector
• to generate employment opportunities and promote poverty reduction.
• to provide for the basic infrastructural facilities like education for all, safe drinking water,
primary health care, transport, energy.
Tenth five year plan(2002-07) -
• Attain 8% GDP growth per year.
• Reduction of poverty ratio by 5 percentage points by 2007. Providing gainful and high-quality
employment at least to the addition to the labor force Reduction in gender gaps in literacy and
wage rates by at least 50%.
11 th Five Year Plan Target:
Income & 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 percent.
 Increase forest and tree cover by 5 percentage points.

 Attain WHO standards of air quality in all major cities by 2011-12.

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 Treat all urban waste water by 2011-12 to clean river waters.

 Increase energy efficiency by 20 percentage points by 2016-17.
INDUSTRIAL POLICY:
Industry:
 Industry comes from the Latin industria, which means "diligence, hard work,".
 An industry is a group of manufacturers or businesses that produce a particular kind of goods
or services.

 Economic activity concerned with the processing of raw materials and manufacture of goods
in factories.
POLICY:
 A course or principle of action adopted or proposed by an organization or individual.
(plans, strategy, proposed action, blueprint, schedule, system, guidelines)
INDUSTRIAL POLICY
The Industrial Policy plan of a country, sometimes shortened IP, is its official strategic effort to
encourage the development and growth of the manufacturing sector of the economy.
The World Bank (1992) has provided a working definition of industrial policy as “government
efforts to alter industrial structure to promote productivity based growth.”
Industrial policy is probably the most important document, which indicates the relationship
between government and business.
RESOLUTION OF INDUSTRIAL POLICY OF INDIA:
1. INDUSTRIAL POLICY RESOLUTION 1948 (6 April, 1948)
2. INDUSTRIAL POLICY RESOLUTION (30th April, 1956)

3. INDUSTRIAL POLICY FEB 2, 1973
4. INDUSTRIAL POLICY DEC 23, 1977
5. INDUSTRIAL POLICY STATEMENT OF JULY, 1980
6. INDUSTRIAL POLICY, JULY 24, 1991
1. INDUSTRIAL POLICY RESOLUTION 1948 (6 April, 1948)

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Industrial Policy Resolution of April, 1948 classified industries into four categories, which are as
follows:
1. Classification:
(i) Defense and strategic industries such as manufacture of arms and ammunition, production and
control of atomic energy and ownership and management of railways were to be the exclusive
monopoly of Central Government.
(ii) In the case of basic and key industries such as coal, iron and steel, aircraft manufacture, ship
building etc. all new units were to be set-up by the state while the old units were to continue to be run
by the private entrepreneurs for the next ten years when the question of their nationalization was to be
decided.
(iii) Some industries were to remain in private ownership but subject to overall regulation and control
by the government. Such industries included automobiles and tractors, sugar, cement, cotton and
woolen textiles etc.
(iv) Rest of the industries were to remain with the private sector where government were to exercise
only an overall general control.
2. Policy towards Foreign Capital:
The Industrial Policy 1948 made it clear that the Government will welcome foreign capital in India
provided such capital comes without any strings or conditions attached to such foreign investments. It
also emphasized that foreign capital will be allowed in joint participation with Indian capital and that
majority in management and control will remain in Indian hands.
3. Role of Cottage and Small Scale Industries:
The Industrial Policy 1948 emphasised the role of cottage and small scale industries in economic
development. It sought to provide encouragement to these industries in India’s industrial development
programmes because these industries make use of local resources and provide larger employment
opportunities.
The Industrial Policy of 1948 thus laid down the foundation of a mixed economy wherein the public
sector (the state) and the private sector were to co-exist and work in their demarcated areas.
2. INDUSTRIAL POLICY RESOLUTION (30th April, 1956)
Industrial Policy Resolution of 1956 (IPR 1956) is the resolution adopted by the Indian Parliament in
April 1956. It was first comprehensive statement on industrial development of India. It laid down
three categories of industries which were clearly defined. The 1956 policy continued to constitute the
basic economic policy for a long time. This fact has been confirmed in all the Five-Year Plans of
India. According to this Resolution the objective of the social and economic policy in India was the

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establishment of a socialistic pattern of society. It provided more powers to the governmental

machinery. It laid down three categories of industries which were more sharply defined. These
categories were:
(a) Schedule a-those industries which were to be an exclusive responsibility of the state.
(b) Schedule B-those which were to be progressively state-owned and in which the state would
generally set up new enterprises, but in which private enterprise would be expected only to
supplement the effort of the state; and
(c) Schedule C-all the remaining industries and their future development would, in general be left to
the initiative and enterprise of the private sector.
3. INDUSTRIAL POLICY FEBRUARY 2, 1973:
1. It provided for a closer interaction between the agricultural and industrial sectors .
2. An exhaustive analysis of industrial products was made to identify products which are capable
of being produced in the small scale sector.
3. The list of industries exclusively reserved for the small scale sector was expanded from 180
items to more than 500 items.
4. Within the small scale sector, a tiny sector was also defined with
investment in machinery and equipment upto Rs.1 lakh and situated in towns with a population of
less than 50,000 according to 1971 census figures, and in villages.
5. Special legislation to protect cottage and household industries was
also proposed to be introduced.
6. In the areas of price control of agricultural and industrial products, the prices would be regulated to
ensure an adequate return to the investor.
4. INDUSTRIAL POLICY DECEMBER 23, 1977:

1. Industrial Policy Highlights on producing inputs needed by a large number of smaller units
and making adequate marketing arrangements.
2. The nucleus plant would also work for upgrading the technology of small units .
3. To boost the development of small scale industries, the investment limit in the case of tiny
units was enhanced to Rs.2 lakh, of a small scale units to Rs.20 lakh and of ancillaries to
Rs.25 lakh.
4. A scheme for building buffer stocks of essential raw materials for the Small Scale Industries
was introduced for operation through the Small Industries Development Corporations in the
States and the National Small Industries Corporation in the Centre
Limitations:

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 The policy statement of 1977 can be said as old wine in new bottle . It means that 1977 policy
was just a mere continuation of 1956 policy.
 The policy of encouraging SSI was not carried out to the fullest extent but only on half
hearted manner as only 807 items reserved for SSI out of 2000 articles.
 No radical changes were noticed in respect to foreign collaborations, MNC’s and import of
sophisticated techniques from abroad.
5. THE INDUSTRIAL POLICY STATEMENT OF JULY, 1980:
It was based on the Industrial Policy Resolution of 1956:

(i) Optimum utilisation of installed capacity;
(ii) Maximum production and achieving higher productivity;
(iii) Higher employment generation;
(iv) Correction of regional imbalances;
(v) Strengthening of the agricultural base through agro base industries and promotion of
optimum inter-sectoral relationship;
(vi) Promotion of export-oriented industries;
vii) Promotion of economic federalism through equitable spread of investment and dispersal
of returns;
(viii) Consumer protection against high prices and bad quality
Limitations:
• Non-increase in the investment limit of large scale industry adversely hit the morale of
infrastructure industry.
• Rate of gross domestic production falls down from 7.5 to 4.5.
6. INDUSTRIAL POLICY, JULY 24, 1991
1. Government is pledged to launching a reinvigorated struggle for social and economic

justice, to end poverty and unemployment and to build a modern, democratic, socialist,
prosperous and forward-looking India.
2. Such a society can be built if India grows as part of the world economy and not in isolation . .
3. The spread of industrialisation to backward areas of the country will be actively promoted
through appropriate incentives, institutions and infrastructure investments
4. Government will provide enhanced support to the small-scale sector so that it flourishes in
an environment of economic efficiency and continuous technological upgradation.
5. Foreign investment and technology collaboration will be welcomed to obtain higher

technology, to increase exports and to expand the production base.
6. Government will endeavour to abolish the monopoly of any sector or any individual
enterprise in any field of manufacture, except on strategic or military considerations and open all
manufacturing activity to competition.
7. The Government will ensure that the public sector plays its rightful role in the evolving
socioeconomic scenario of the country. Government will ensure that the public sector is run on

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business lines as envisaged in the Industrial Policy Resolution of 1956 and would continue to
innovate and lead in strategic areas of national importance.
8. Labour will be made an equal partner in progress and prosperity.
9.Government will fully protect the interests of labour, enhance their welfare and equip them in
all respects to deal with the inevitability of technological change
10. The major objectives of the new industrial policy package will be to build on the gains
already made, correct the distortions or weaknesses that may have crept in, maintain a sustained
growth in productivity and gainful employment and attain international competitiveness
11. Need to preserve the environment and ensure the efficient use of available resources
12. In pursuit of the above objectives, Government
have decided to take a series of initiatives in respect of the policies relating to the following
areas:
A. Industrial Licensing
B. Foreign Investment
C. Foreign Technology Agreements
D. Public Sector Policy
E. MRTP Act(Monopolies and restrictive trade practices act)
THE NEW INDUSTRIAL POLICY- 1991:
LIBERALISATION, PRIVATISATION, GLOBALISATION
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, globalisation)
Liberalization:
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

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• New trade policy

• Removal of import Restrictions
• Liberalization of NRI remittances
• Freedom to import technology
• Encouraging foreign tie-ups
• MRTP relaxation (The Monopolistic and Restrictive Trade Practices Act)
• Privatization of public sector
Advantages of liberalization:
• Industrial licensing
• Increase the foreign investment.
• Increase the foreign exchange reserve.
• Increase in consumption and Control over price.
• Check on corruption.
• Reduction in dependence on external commercial borrowings
Disadvantages of Liberalization:
• Increase in unemployment.
• Loss to domestic units.
• Increase dependence on foreign nations
• Unbalanced development
Privatization:
Privatization means transfer of ownership and/or management of an enterprise from the public
sector to the private sector.
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.
Benefits of privatization:
1. Improved efficiency
2. Lack of political interference
3. Short term view
4. Increased competition
Improved efficiency:
• Private company have a profit incentives to cut costs and be more efficient.
• government run industry, managers do not usually share in any profits, however, a private
firm is interested in making profit and so it is more likely to cut costs and be efficient.

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Lack of political interference:

• Government companies can be motivated by political pressures rather than sound economic
and business sense.
Example:
a state enterprise may employ surplus workers which is inefficient.
Short term view:
• A government many think only in terms of next election.
• they may be unwilling to invest in infrastructure improvements which will benefit the firm in
the long term because they are more concerned about projects that give a benefit before the
election.
Increased competition:
• policies to allow more firms to enter the industry and increase the competitiveness of the
market.
• increase in competition that can be the greatest spur to improvements in efficiency
• For example, there is now more competition in telecoms and distribution of gas and
electricity.
Disadvantages of Privatization:
• Industrial sickness.
• Lack of welfare.
• Class struggle.
• Increase in inequality
• Opposition by employees.
• Problem of financing.
• Increase in unemployment.
• Ignores the weaker sections.
• Ignores the national importance
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.”
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.

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• Global orientation of organizational structure and management culture
Benefits of Globalisation:
Globalization have several benefits ,these are: -

 Free flow of capital and increase in the total capital employed.
 Free flow of technology.
 Increase in industrialization.
 Spread of production facilities throughout the globe.
 Balanced development of world economies.
 Increase in production and consumption.
 Commodities at lower price with high quality.
 Increase in jobs and income.
 Higher Standard of living.
 Balanced human development
Negative effects of Globalization
• Loss of domestic industries

• Exploits Human resource
• Decline in income
• Transfer of natural resources
• Lead to commercial and political colonism
• Widening gap between rich and poor
• Dominance of foreign institutions
Public, Private joint sectors:

PUBLIC SECTOR
A public enterprise is an organization which is
i) Owned by public authorities including central state or local authorities to an extent of
50% or more
ii) It is established for achievement of a defined set of public purpose ,which may be
multidimensional
Objective:
1. To help in rapid growth and industrialization and create necessary infrastructure for economic
development.
2. Promote redistribution of income & wealth
3.Create employment opportunities

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4.Promote regional balance development

5. Promote import substitution save and earn foreign exchange for country.
6. Basic Infrastructure (STC, Railways, SAIL)
Organization of Public Sector

• Ministry ( Railway,Finance etc)
• Departmental Undertaking (Defence,Post & Telegraph,Defence production unit)
• Statutory Corporation( LIC, AIR India, IFC,RBI,ONGC,NTC etc..)
• Central Board (Bhakra Nangal, Hira Kund ,Nagarjun Sagar dam)
• Government Companies ( Ashok Hotels, ITI, HMT Hindustan shipyard etc)
Private Sector:
 Privatization: Transfer of ownership and control of an existing public sector enterprise
,activity or service to the private sector. Privatization may be full or partial. It may be
selective ie. Some function are transformed to the private sector, which other are retained in
public sector.
The entry of new private sector could introduce competition where PSU’s enjoy
monopoly The existing PSU’s will be forced to go commercial and respond to the
market discipline.
History of Privatisation:
 The history of privatisation is very short, just 10 to 15 years old to be precise.
 Though the real disinvestment started in 1980’s, the word ‘privatisation’ first made its
appearance way back in the late 60’s.
 The credit for inventing the word goes to Peter F. Drucker, who used the term first in his
famous book, The Age of Discontinuity in 1969.
 Ten years later, Margaret Thatcher gave practical shape to privatisation.
The Privatization movement

The move towards privatization has gained momentum since 70’s. The following are usually
mentioned reasons
1 The emergence of conservative government in principal industrial countries
2 The emergence of multinational entities
3 Technological changes
4 Emergence of local capital market and entrepreneurship
5 Dissatisfaction with performance of public sector
( 1960’s &1970’s saw emergence of literature pointing out the inefficiency of Import substitution
policies and gave rise to question that why government Should intervene in the market place when it
does not have any information about market players)
Emergence of Joint Sector:

 The joint sector is an extension of the concept of mixed economy. The Industrial Policy
Resolution 1956, sowed the seeds of the joint sector by advocating Government participation

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in the equity capital of private sector enterprises to promote socially determined pattern of
industrial growth.
 Simply stated, the joint sector is a form of partnership between the public sector an the private
sector. In a memorandum submitted to the Government of India, J.R.D. Tata observed that 'a
joint sector enterprise is intended to form a partnership between the private sector an the
government in which the government participation of capital will not be less than 26 per cent,
the day-to-day management will normally be in the hands of the private sector partners, and
control and supervision will be exercised by a board of directors on which governments,
special financial institutions such as IDBI, IFCI, and other institutions like LIC and UTI and
State financial and Industrial development corporations. Private sector consists of both Indian
and foreign investing public and business houses.
Examples of Joint Sector:
 Air India International provides another notable example. The company was established by
the Tatas in 1948. The Government of India provided 49% share in its equity.
 The Government subsequently acquired an additional 2 per cent equity from the Tata Sons
Ltd to convert it into a government company.
 In spite of the government holding 51 per cent of the equity the Air India continued to be
under the management of the Tatas until it was fully taken over by the Government of India
in 1953.
 There were twelve other undertakings in 1966-67, in which the Central Government had a
substantial stake in equity capital without having direct managerial control In a few cases
equity participation by foreign enterprises in the public sector enterprises was also allowed.
Industry Analysis:
An industry analysis is a business function completed by business owners and other individuals to
assess the current business environment. This analysis helps businesses understand various economic
pieces of the marketplace and how these various pieces may be used to gain a competitive advantage.
The Need for Industry Analysis
Industry analysis is an essential responsibility for an equity research analyst.
As an equity research analyst, you need to analyze a particular industry, see its past trends, demand-
supply mechanics and future outlook.
The industry analysis report sheds light on the economic health of the company, underlining the
understanding whether it will be beneficial for the stakeholders to invest in such a company and
offering recommendations and/or corrective actions to take in case of any untoward developments in
the company.
As an equity research analyst, you might work on industries like Oil and Gas, Metal, Information
Technology, Automobile, Financial Services, Infrastructure, Pharmaceuticals and Consumer durables.

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In some companies, there is a dedicated industry analyst who will work on the assigned industry and
provide the analysis.
However, as an analyst you should be aware of industry dynamics and hence, it is important to know
how to do industry analysis.
How to do Industry Analysis?
An industry analysis is a complicated and time consuming process. If any of the dimensions are
missed, the whole analysis becomes faulty. Therefore, in this section, I have highlighted all the
necessary steps telling you how to do industry analysis. Use these steps and apply it in your analysis.
What are the steps? Here you go:
1. Review available reports
Read all the available but relevant industry reports and statistics to see whether it makes sense to dig
deeper.
Some of the reports you will find already contain in-depth information that the need for new industry
analysis is eliminated.
However, it is unwise to depend on existing industry analysis reports as the market is always volatile
and industry factors change constantly.
Therefore, pick up a current report and envisage its relevancy in the current market.
2. Approach the correct industry
An industry has sub-parts. For example, if you look at the chemical industry, you will find sub-
industries like Fertilizers, Pesticides, Paints and Varnishes, Organic chemicals.
Therefore, it is important to focus on the relevant industry. Without this, it will be impossible to draw
an accurate industry analysis report. So, take up an industry and find out the sub-industries. Select the
one which suits the company’s purpose. Moreover, it is worthwhile to look at the different market
segments in a particular industry.
3. Demand & supply scenario
As any economist will know, demand and supply are the primary factors governing any market.
Hence, it becomes relevant to look into the demand-supply scenario for a particular product or
industry by studying its past trends and forecasting future outlook.
You can do comparative analysis with other companyies competing in the same manner to find out
the economic health of the company under consideration.
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Future demand and supply forecasting helps investors understand the viability of future investments
in terms of profits and losses.
4. Competitive scenario
This is the most important step of any industry analysis. In this, you need to study the competitive
scenario using Porter’s Five Forces Model.
The model acts as the framework of industry analysis. Michael Porter, a famous strategist and author,
first came up with this model. In this model, five parameters are analyzed to see the competitive
landscape.
They are:
1. Barriers to Entry
2. Supplier Power
3. Threat of Substitutes
4. Buyer Power
5. Degree of Rivalry
The Porter’s model is extensively used while analyzing any industry.
5. Recent developments
Any industry analysis report isn’t just about studying the particular industry on a micro-level.
The analyst needs to incorporate influencing factors at the macro-level. These macro-level factors
include recent industrial developments, innovation in your industry analysis report, sector valuations
and global comparative valuation.
6. Focus on industry dynamics
The industry analysis should be specific to a particular industry and thus, it is important to focus and
understand the industry dynamics. Your industry analysis should be in-depth and to-the-point.
For example, if you are tracking the aluminum industry, you should know the per capita consumption
in the country.
In India, the per capita consumption of aluminum is 1 Kg, in USA, it is 25 to 30 Kgs, in Japan, it is
15 Kgs and in Taiwan, it is 10 Kgs. Apart from the consumption, you should also know the
production of aluminum worldwide.
The above six steps are important and you, as an analyst, should follow them.

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The analysts in private equity, investments banks, equity research firms, investment research firms
need this skill and if you know how to do industry analysis, you are ahead of 80% of the aspirants as
this will not only impress your interviewer, but also add immense value to you and the company
hiring you.
How to Write an Industry Analysis?
In the last section, we learned how to do industry analysis and in this, we will see how to write one.
Writing is also a required skill as you need to present all the findings within a written report in a
concise and clear manner.
Begin by writing a concise overview of the industry.
Mention historical data and the nature of the industry, including its growth potential.
State the influencing economical factors and most importantly, don’t forget mentioning the purpose
of your industry analysis.
The concise overview of the industry should include its competitors and their operations.
You can write this in the next section. Write about similar products and services.
Now, with the overview aside, move on the detailed analytical presentation of the specific industry.
Highlight factors like geographical growth, consumer base, price fluctuations, past performances and
income projections.
Use existing financial data and industry understanding to forecast industry growth for the next five or
ten years. You can use statistical graph in this section.
The next sections should be about using Porter’s Five Forces model and a detailed write-up about its
five factors, its use and repercussions in the industry. Don’t forget mentioning governmental
regulations relevant to the industry.
Lastly, give long-term and short-term valuations impacting the industry such as any foreseeable
problems impacting the business in a negative fashion and potential corrective measures. Wind up the
industry analysis report with a very three or four line summarization.
Sector Analysis:
Sectoral analysis, also known as sectorial analysis, is a statistical analysis of the size, demographic,
pricing, competitive, and other economic dimensions of a sector of the economy. The analysis can be
done by industry or by customer designation.
Types of Sector Analysis:
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 Consumer Sector
 Service Sector
 Health Sector
 Energy Sector
 Financial Sector
 Technology Sector
 Industrial Sector
 Material Sector
 Utilities Sector
Indian Agri Sector:
The science and art of cultivation on the soil, raising, crops and rearing livestock, it is called Farming.
Farm System:
Agriculture or farming can be looked at as a system. The important input are seeds, fertilisers,
machinery and labour. Some of the operations involved are ploughing, sowing, irrigation, weeding
and harvesting. The outputs from the system include crops, wool, diary and poultry products.
Types Of Farming:
1. Primitive Subsistence Farming

This type of farming is still practised in few pockets of India. Primitive subsistence agriculture is
practised on small patches of land with the help of primitive tools like hoe, dao and digging sticks,
and family/community labour. This type of farming depends upon monsoon, natural fertility of the
soil and suitability of other environmental conditions to the crops grown. It is a ‘slash and burn’
agriculture. Farmers clear a patch of land and produce cereals and other food crops to sustain their
family. When the soil fertility decreases, the farmers shift and clear a fresh patch of land for
cultivation. This type of shifting allows Nature to replenish the fertility of the soil through
natural processes; land productivity in this type of agriculture is low as the farmer does not use
fertilisers or other modern inputs. It is known by different names in different parts of the country.
Intensive Subsistence Farming

This type of farming is practised in areas of high population pressure on land. It is labour intensive
farming, where high doses of biochemical inputs and irrigation are used for obtaining higher
production.
Though the ‘right of inheritance’ leading to the division of land among successive generations has
rendered land-holding size uneconomical, the farmers continue to take maximum output from the
limited land in the absence of alternative source of livelihood. Thus, there is enormous pressure on
agricultural land.
Commercial Farming
The main characteristic of this type of farming is the use of higher doses of modern inputs, e.g.
high yielding variety (HYV) seeds, chemical fertilisers, insecticides and pesticides in order to
obtain higher productivity. The degree of commercialisation of agriculture varies from one region
to another. For example, rice is a commercial crop in Haryana and Punjab, but in Orissa, it is a
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subsistence crop.
Plantation :
Plantation is also a type of commercial farming. In this type of farming, a single crop is grown on
a large area. The plantation has an interface of agriculture and industry. Plantations cover large
tracts of land, using capital intensive inputs, with the help of migrant labourers. All the produce is
used as raw material in respective industries. In India, tea, coffee, rubber, sugarcane, banana,
etc.. are important plantation crops. Tea in Assam and North Bengal coffee in Karnataka are some
of the important plantation crops grown in these states. Since the production is mainly for market,
a well developed network of transport and communication connecting the plantation areas,
processing industries and markets plays an important role in the development of plantations.
Industrial Development & Regulation:
Industrial Development Regulation Act 1951.
• Passed in 1951 to implement the IPR,1948 (Industrial Policy Resolution)

• for this the Govt. must have the power to direct, regulate, and control industrial investment,
location, expansion, management, growth, etc.
Objectives:
• To implement the industrial policy

• To look after the regulation and development of important industries
• To plan the future development of new undertakings
ACT CAN BE DEVIDED IN TO FOLLOWING MAJOR HEADS :

1) Licensing and Registration (sec/1 to 18)
2) Control and Management of industries (sec/18a to 18fh,18g)
3) Powers and Directions by Central Government.(sec 19 to 32)
When Registration is not Necessary:
• Small Scale Industry

• otherwise exempt from the license
• not cover in definition of Factory
• 100%EOU/SEZ
When is Licence Required:
• Licence for manufacturing of New Articles

• Licence for carrying on Business without Registration
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• Licence of New undertaking

• Licence for carrying on business after the revocation of certificate of registration
• Licence for change in location
This Act empowered the Govt.:
 To make rules for registration of existing industries

 License all new undertakings
 Rules for regulating production & development of industries in the ‘Schedule’
 Act provided for constitution of a Central Advisory Council & Development Councils.
CENTRAL ADVISORY COUNCIL & DEVELOPMENT COUNCILS

CAC:
o By GOI to advise on matters of development and regulation of Schedule industries.
o Chairman and all members to be appointed by GOI
o Max.number of members = 30
o To represent interests of owners, employees, consumers, primary suppliers etc., of the
sch.industries
o Also sub committees of the CAC
DEVELOPMENT COUNCIL: May perform any of the following:

o Recommending targets for production, co-ordinating production programmes, and reviewing
progress
o Suggesting efficiency norms
o Measures for max.utilization of installed capacity
o Better marketing and distribution
o Standardization of products
o Distribution of controlled materials
o Work study, O&M study etc.
o Training and re-training of workers
o Scientific and industrial research .
o Standardization of accounting and costing methods
o Statistics
o Decentralization and subcontracting for SSIs

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Unit – V
Monetary and Fiscal Policies
Monetary policy
Definition: Monetary policy is the macroeconomic policy laid down by the central bank. It involves
management of money supply and interest rate and is the demand side economic policy used by the
government of a country to achieve macroeconomic objectives like inflation, consumption, growth
and liquidity.
Importance of Monetary Policy
Gross National Product (GNP) = C + I + G + X

Where: C = Private Consumption expenditure
I = Private Investment Expenditure
G = Government Expenditure
X = Net Exports
C, I, X can be influenced by the monetary policy which can also influence the private consumption
and investment spending and exports and imports.
OBJECTIVES OF MONETARY POLICY:
 Price stability
 Credit availability
 Stability of exchange rate
 Full employment
 High rate of economics growth
 Distribution of money
MEASURE OF MONEY STOCK:
• The RBI employs four measures of money stock, namely M1, M2, M3 and M4.
• M1 : This is the money supply i.e. the currency with the public and demand deposits with the
bank and other deposits with RBI. In developed countries demand deposits form a major part
of the money supply. Demand deposits are primarily savings and current account deposits
where your are able to "demand" your money at any time, unlike a term deposit, which cannot
be accessed for a predetermined period.
• M2: M1+Post Office Savings
• M3 or aggregate money supply : M2 Time Deposits with the banks.

• M4: M3+total Post office deposits

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Fiscal policy:
• The fiscal policy is concerned with the raising of government revenue and incurring of
government expenditure. To generate revenue and to incur expenditure,
• To generate revenue and to incur expenditure, the government frames a policy called
budgetary policy or fiscal policy. So, the fiscal policy is concerned with government
expenditure and government revenue.
Main Objectives of Fiscal Policy In India:
• Development by effective Mobilisation of Resources

• Efficient allocation of Financial Resources
• Reduction in inequalities of Income and Wealth
• Price Stability and Control of Inflation
• Employment Generation
• Balanced Regional Development
• Reducing the Deficit in the Balance of Payment
• Increasing National Income
• Foreign Exchange Earnings
Measures of fiscal policy:
• Fiscal policy is the policy under which the government of a country uses fiscal measures (or
instruments) to correct excess demand and deficient demand and to achieve other desirable
objectives. There are mainly three types of fiscal measures, viz.
• Taxes
• Public expenditure
• public borrowing
Trade Policy:
• 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.
Types of Trade Policy:
• National trade policy: Every country formulates this policy to safeguard the best interest of
its trade and citizens. This policy is always in consonance with the national foreign policy.
• Bilateral trade policy: This policy is formed between two nations to regulate the trade and
business relations with each other. The national trade policies of both the nations and their
negotiations under the trade agreement are considered while formulating bilateral trade policy.
• International trade policy: International economic organizations, such as Organization for
Economic Co-operation and Development (OECD), World Trade Organization (WTO) and

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International Monetary Fund (IMF), define the international trade policy under their charter.
The policies uphold the best interests of both developed and developing nations. The best
example is the Doha Development Agenda which was formulated by the WTO.
Pre 1991 Trade Policy:
In eighties,
Export
In 1960’s and promotion
70’s, imports schemes were
Second Year were partly implemented-
Plan- Highly liberalised with Export
Inward Restrictive several Promotion
Looking Policy. conditions. Council, The
Development trade Fair
Strategy- Authority of
Import India, cash
Substitution compensatory
Strategy schemes etc.
1991 Crisis
• National Income growing at 0.8 %.

• Inflation reached the height of 16.8 %.
• BoP crisis to the extent of 10,000 crores.
• India was paying 30,000 crores interest charges.
• Fiscal deficit more than 7.5 %.
• Deficit Financing was 3 %
The 1991 Trade policy:
Liberalisation of imports and exports
Liberal Exchange Rate Management
Rationalisation of tariff structure.
Changes in the system of export incentives.

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Free Trade Agreements (FTAs) have proved to be one of the best ways to open up foreign markets
to U.S. exporters. Trade Agreements reduce barriers to U.S. exports, and protect U.S. interests and
enhance the rule of law in the FTA partner country.
FTAs
are arrangements between two or more countries or trading blocs that
primarily agree to reduce or eliminate customs tariff and non tariff barriers on
substantial trade between them. FTAs, normally cover trade in goods (such as
Agricultural or industrial products) or trade in services (such as banking, construction, trading etc.).
FTAs can also cover other areas such as intellectual property rights (IPRs), investment, government
procurement and competition policy, etc
The countries signing Free Trade Agreements:
Countries negotiate Free trade Agreements for a number of reasons.
 By eliminating tariffs and some non-tariff barriers FTA partners get easier market access into one
another's markets.
.
• Exporters prefer FTAs to multilateral trade liberalization because they get preferential treatment
over non-FTA member country competitors. For example in the case of ASEAN, ASEAN has an
FTA with India but not with Canada. ASEAN's custom duty on leather shoes is 20% but under the
FTA with India it reduced duties to zero. Now assuming other costs being equal, an Indian exporter,
because of this duty preference, will be more competitive than a Canadian exporter of shoes.
Secondly, FTAs may also protect local exporters from losing out to foreign companies that might
receive preferential treatment under other FTAs.
• Possibility of increased foreign investment from outside the FTA. Consider 2 countries A and B
having an FTA. Country A has high tariff and large domestic market. The firms based in country C
may decide to invest in country A to cater to A's domestic market. However, once A and B sign an
FTA and B offers better business environment, C may decide to locate its plant in B to supply its
products to A.
• Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures.
Especially when a Mutual Recognition Agreement (MRA) is reached between countries A and B.
Some experts are of the view that slow progress in multilateral negotiations due to complexities
arising from large number of countries to reach a consensus on polarising issues, may have provided
the impetus for FTAs.
• Exporters prefer FTAs to multilateral trade liberalization because they get preferential treatment
over non-FTA member country competitors. For example in the case of ASEAN, ASEAN has an
FTA with India but not with Canada. ASEAN's custom duty on leather shoes is 20% but under the
FTA with India it reduced duties to zero. Now assuming other costs being equal, an Indian exporter,
because of this duty preference, will be more competitive than a Canadian exporter of shoes.

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Secondly, FTAs may also protect local exporters from losing out to foreign companies that might
receive preferential treatment under other FTAs.
• Possibility of increased foreign investment from outside the FTA. Consider 2 countries A and B
having an FTA. Country A has high tariff and large domestic market. The firms based in country C
may decide to invest in country A to cater to A's domestic market. However, once A and B sign an
FTA and B offers better business environment, C may decide to locate its plant in B to supply its
products to A.
• Such occurrences are not limited to tariffs alone but it is also true in the case of non-tariff measures.
Especially when a Mutual Recognition Agreement (MRA) is reached between countries A and B.
Some experts are of the view that slow progress in multilateral negotiations due to complexities
arising from large number of countries to reach a consensus on polarising issues, may have provided
the impetus for FTAs.
Budget:
An estimate of income and expenditure for a set period of time.
An estimation of the revenue and expenses over a specified future period of time. A budget can be
made for a person, family, group of people, business, government, country, multinational
organization or just about anything else that makes and spends money. A budget is a microeconomic
concept that shows the tradeoff made when one good is exchanged for another.
Money and Capital markets:

Financial Market:
It is the market for sale and purchase of stocks (shares), bonds, bills of exchange, commodities,
foreign currency etc which works as liquid assets.
Financial market is of two types:
Money Market

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 Money market is a mechanism that deals with the lending of short term funds (less than one
year)
 A segment of the financial market in which financial instrument with high liquidity and very
short maturities are traded.
The Money Market can be classified in to
1. Call Money Market
2. Commercial Bill Market
3. Treasury Bill Market
4. Short term Loan Market.
CAPITAL MARKET :
Capital markets are financial markets for the buying and selling of long-term debt or equity-backed
securities. These markets channel the wealth of savers to those who can put it to long-term productive
use, such as companies or governments making long-term investments.
The Capital Market can be classified in to
1. Industrial Securities Market

a. Primary Market
b. Secondary Market
2. Govt. Securities Market (like Stock Certificates , Promissory note, & Bearer Bonds)
3. Long Term Loan Market (like Term Market, Mortgages Market & financial guaranties
market)
RBI credit policy:

Establishment:
 The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions
of the Reserve Bank of India Act, 1934.
 The Central Office of the Reserve Bank was initially established in Calcutta but was
permanently moved to Mumbai in 1937. The Central Office is where the Governor sits and
where policies are formulated.
 Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully
owned by the Government of India.
Preamble:

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The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as:
 To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of the country to its
advantage."
WHO Controls RBI?
 The Reserve Bank's affairs are governed by a central board of directors. The board is
appointed by the Government of India in keeping with the Reserve Bank of India Act.
 Appointed/nominated for a period of four years
 Constitution:
 Official Directors
 Full-time : Governor and not more than four Deputy Governors
 Non-Official Directors
 Nominated by Government: ten Directors from various fields and one
government Official
 Others: four Directors - one each from four local boards
Objective of RBI:
 The Reserve Bank of India performs this function under the guidance of the Board for
Financial Supervision (BFS). The Board was constituted in November 1994 as a committee of
the Central Board of Directors of the Reserve Bank of India.
Objective:
 Primary objective of BFS is to undertake consolidated supervision of the financial sector
comprising commercial banks, financial institutions and non-banking finance companies.
Constitution
 The Board is constituted by co-opting four Directors from the Central Board as members for a
term of two years and is chaired by the Governor. The Deputy Governors of the Reserve Bank
are ex-officio members. One Deputy Governor, usually, the Deputy Governor in charge of
banking regulation and supervision, is nominated as the Vice-Chairman of the Board.
Main Features of RBI.
 Monetary Authority:
Formulates, implements and monitors the monetary policy.

 Regulator and supervisor of the financial system:
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Maintain public confidence in the system, protect depositors' interest and provide
cost-effective banking services to the public.
 Manager of Foreign Exchange:
To facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.
 Issuer of currency:
To give the public adequate quantity of supplies of currency notes and coins and in
good quality.
Subsidiaries of RBI:
 Fully owned: National Housing Bank(NHB), Deposit Insurance and Credit Guarantee
Corporation of India(DICGC), Bharatiya Reserve Bank Note Mudran Private
Limited(BRBNMPL).
 Majority stake: National Bank for Agriculture and Rural Development (NABARD)
The Reserve Bank of India has recently divested its stake in State Bank of India to the
Government of India.
INFLATION:
 Inflation can be defined as a sustained upward movement in the aggregate price level that is
shared by most products.
 It can also be viewed as a fall in the purchasing power of money.
 The opposite of inflation is deflation.
Types of Inflation:
 The expected rate of inflation is the level of inflation people expect to occur in future.
 There are 3 main types of inflation.
 Demand-pull inflation-due to high GDP & low unemployment.
 Supply shock inflation-due to adverse changes in price of raw materials(e.g oil)
 Built in inflation-induced by expectations based on previous inflation levels.
Mobilization of Savings for Investment:
Introduction:

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In the "Handbook for Generating Wealth," you saw that wealth can be consumed, stored (saved) or
invested. In the creation or generation of wealth, the key is a method to transform "savings" into
"investment." This document looks at the nature of saving, and how you, as mobilizer, can encourage
and guide it among your target group (beneficiaries).
"Savings" are cash or physical products set aside for future use. People in rural and other low-income
communities, although poor, can save when they are guided and encouraged. In rural communities,
savings are made through traditional credit rotation groups, or purchase of domestic animals (goats,
pigs, chickens or cows).
Every micro-enterprise needs injection of capital or funds which may be owner's money or a loan.
When a loan is used, it is someone else who has done the saving. Micro enterprises, like other
businesses, convert savings (of the owners and of others) into investment, in the generation of wealth.
Why Save?
People save for different reasons (economic, social, political, cultural).

People's ability to save depends on:
 Earnings;
 Consumption habits;
 Socio-cultural obligations;
 Personal ambitions; and
 Surrounding conditions.
People will want to save for some of the following reasons:
 to start a business enterprise or expand on an existing one;

 to provide for a growing family's health, education (school fees) and housing (build a house);
 to buy new equipment;
 to provide for old age;
 to provide for unforeseeable circumstances (eg drought leading to crop failure);
 to buy physical assets like land; and
 to develop a relationship with lending institutions that will provide credit.
The Nature of Savings:
In low-income communities, the ability to save is low and often is in cash or kind. Saving in cash is
cheap and convenient.
Savings in kind (i.e keeping preserved items in storage) include:

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 grains (maize, millet, simsim [sesame], beans, groundnuts);

 livestock (cows, goats, sheep, chicken); and
 processed food (millet flour, smoked fish, smoked beef.).
Where to Save:
In low-income communities, most people prefer to save in undisclosed places. This may be in the
roof, pot, walls, underground or under a bed. Savings cannot be converted to investment when it is
under a bed.
Your job as mobilizer is to encourage them to save in a credit rotation group (one that has been
modified from traditional patterns so as to contribute to the creation and development of micro
enterprise activities and therefore the creation of wealth and reduction of poverty).
Mobilization of Savings:
No matter how poor a person may seem s/he should be persuaded and encouraged to save as the
income rises for reasons earlier mentioned.
Members should periodically (weekly, monthly, on the periodic market day) save accordingly with
their groups.
Group savings can effectively be mobilized using the following simple procedure:
 The group must determine the amount to be saved by each member;

 A specific day should be agreed for payment of savings to ensure regular savings;
 Each group member should be given a savings book into which amounts saved are recorded
by group officials;
 The group should open a groups savings account into which all members' savings will be
deposited;
 The group should keep a general savings register to record monies collected from each
member before sending to the bank. Information in the register should agree with what is in
the individual savings books;
 All savings should be collected at the group's meeting days to ensure accountability and
transparency; and
 The total amount collected at a meeting should be announced to all present and recorded into
their minutes book and then handed over to the treasurer to be paid to the bank.
Industrial sickness:
Definition of Industrial Sickness-

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• Sick Industrial Companies Act, 1985
A unit is defined as sick industrial company where:

• a company is registered for not less than seven years
• It incurred cash losses for the current and preceding financial year.
• Its net worth was eroded.
• Even 50% or more of the net worth of the past 5 financial years is eroded because of
accumulated losses
Definition For Small Scale Sick Units:
• Incurred losses in previous and current year
• Due to cumulative losses 50% or more of its peak net worth during past 5 years should be
eroded.
• They must have continuously defaulted 4 consecutive installment of interest or 2 half yearly
installment of principal.
• Large small scale unit – all 3 criteria should be fulfilled

• small scale unit - any 1 of the criteria should be fulfilled
Definition According to companies (2 nd Amendment) Act, 2002:
“Sick Industrial Company” means an unit which has
• accumulated losses in any financial year which are equal to 50% or more of its average net
worth during 4 years immediately preceding such financial years ; or
• Failed to repay its debts within any 3 consecutive quarters on demand made in writing for its
repayment by a creditor or creditors of such company.
Magnitude of industrial sickness in India:
• Industrial sickness is growing at an annual rate of about 28% and 13% respectively in terms of
No. of units and out standing number of bank credit.
• It is estimated that as of today there are more than 2 lakhs sick units
• with an outstanding bank credit of over Rs7000crore
• nearly 29000 units are added to sick list every year.

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Causes of Industrial Sickness-
External Causes Internal Causes
1) Govt. policy 1) Out dated Technology

2) Erratic Supply of Inputs 2) Financial Problem
3) Demand & credit restraints 3) Management problems
4) Technological Factors 4) Labour Problem
5) Power Cuts 5) Marketing & Sickness
Consequences of industrial sickness

• set-back to employment
• Fear to industrial unrest
• Wastage of resources
• Adverse impact on related units
• Adverse effect on investors &entrepreneurs
• Losses to banks and financial institutions
• Loss of revenue to government
Remedial Measures
• Steps taken by commercial banks:
 provide working capital assistance
 Recovery of interest at reduced rates
 Suitable moratorium on payment of interest
 Freezing a portion of outstanding in the accounts
 No. of organizations or agencies were set up:
- sick industrial undertaking cell
- state level inter-institutional committees
- standing coordination committee
- special cell – rehabilitation finance division of IDBI

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POLICY FRAME WORK OF THE GOVT. :

REMEDIAL MEASURES
 Ministry were given more responsibility
 They were responsible in detection of sickness at the early stage
 Policy frame work was framed in 1981 & reviewed in 1982
• Concessions by the govt. :

 No. of concessions was given by the govt.
 Margin money scheme was introduced
 Excise loan were provided
REMEDIAL MEASURES
• THE INDUSTRIAL Investment BANK OF INDIA:
- Establishment of Reconstruction Corporation of India
- to provide all kinds of assistance
- IRCI converted to IRBI (industrial reconstruction bank of India)
• BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION

- Rehabilitation package
- Operating agencies will designed the scheme
What is Exim policy?

 The Union Commerce Ministry, Government of India announces the integrated Foreign Trade
Policy (FTP) in every five year. This is also called EXIM policy.
This policy is updated every year with some modifications and new schemes. New schemes come
into effect on the first day of financial year i.e. April 1, every year. The Foreign trade Policy which
was announced on August 28, 2009 is an integrated policy for the period 2009-14.
Objectives:
 To arrest and reverse declining trend of exports is the main aim of the policy. This aim will
be reviewed after two years.

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 To Double India's exports of goods and services by 2014.

 To double India's share in global merchandise trade by 2020 as a long term aim of this policy.
India's share in Global merchandise exports was 1.45% in 2008.
 Simplification of the application procedure for availing various benefits
 To set in motion the strategies and policy measures which catalyze the growth of exports
 To encourage exports through a "mix of measures including fiscal incentives, institutional
changes, procedural rationalization and efforts for enhance market access across the world
and diversification of export markets.
Aim:
 The policy aims at developing export potential, improving export performance, boosting
foreign trade and earning valuable foreign exchange. FTP assumes great significance this
year as India's exports have been battered by the global recession. A fall in exports has led to
the closure of several small- and medium-scale export-oriented units, resulting in large-scale
unemployment
Target & EPCG schemes:
Target-:
1. Export Target : $ 200 Billion for 2010-11
2. Export Growth Target : 15 % for next two year and 25 % there after.
EPCG schemes-:
1. Obligation under EPCG scheme relaxed.
2. To aid technological up gradation of export sector, EPCG Scheme at Zero Duty has been
introduced.
3. Export obligation on import of spares, moulds etc. under EPCG Scheme has been reduced by 50%.
Announcement for FPS, FMS, MLFPS

 26 new markets added in this scheme.
 Incentives under FMS raised from 2.5 % to 3 %
 Incentive available under Focus Product Scheme (FPS) raised from 1.25% to 2%.
 Extra products included in the scope of benefits under FPS

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 Market Linked Focus Product Scheme (MLFPS) expanded by inclusion of products like
pharmaceuticals, textile fabrics, rubber products, glass products , auto components, motor
cars, bicycle and its parts.etc. (However , benefits to these products will be provided, if
exports are made to 13 identified markets (Algeria, Egypt, Kenya, Nigeria , South Africa,
Tanzania, Brazil, Mexico, Ukraine, Vietnam, Cambodia, Australia and New Zealand).
 Focus Product Scheme benefit extended for export of ‘green products ’ and some products
from the North East.
 A common simplified application form has been introduced to apply for the benefits under
FPS, FMS, MLFPS and VKGUY.
 announcement for mda & mai
 towns of export excellence
 scheme for status holder
 Extension of income tax exemption to EOU and STPI
Foreign Direct Investment:

Meaning of FDI
FDI is direct investment into production in a country by a company located in another
country, either by buying a company in the target country or by expanding operations of an existing
business in that country.
Any country abroad is the net inflow of investment (capital or other), in order to acquire
management control and profit sharing (10% or more voting stock) or the whole ownership of an
accredited company operating in the country receiving investment.
FDI offers an exclusive opportunity to enter into the international or global business, new
markets and marketing channels, elusive access to new technology and expertise, expansion of
company with new or more products or services, and cheaper production facilities.
Facts:
 At least 10% shares of company need to quality as FDI.
 Mauritian has been the largest direct investor.
 New Delhi And Mumbai are two major cities where FDI inflows is heavily concentrated.
 Retailing is the single largest component of the services sector in terms of contribution of
GDP.
Advantages of FDI:

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 Inflow of equipment and technology

 Competitive advantages and innovation
 Finance resource for expansive
 Employment generation
 Contribution to export growth
 Improved consumer welfare through reduced cost, wider choice & improved quality.
 Provide access to global markets for Indian producer.

Disadvantages of FDI:
 Crowing of local industry
 Conflict of laws
 Loss of control
 Effect on notional environment
 Effect on culture
FDI IN MANUFACTURING SECTOR
 Foreign Direct Investment (FDI) up to 100% is permitted on the automatic route in all
manufacturing activities except:-
 (i) Defence Industry (where there is an equity cap of 26% and entry route restriction);
 (ii) Cigars & Cigarette manufacturing (where there is an entry route restriction);
 (iii) Where provisions of Press Note 1(2005 series) are attracted i.e. where the foreign
investor has an existing joint venture in India in the same field(where there is an entry route
restriction);
 (iv) Where more than 24% foreign equity is proposed to be inducted for manufacture of
items reserved for Small Scale sector(where there is an entry route restriction).
This was stated by the Minister of State for Industry, Shri Ashwani Kumar in a written reply
to a question in Lok Sabha today.
To promote investments in the manufacturing sector and make the country a hub for both domestic
and international markets
To increase the sectoral share of manufacturing in GDP to 25 percent by 2022
To double the current employment level in the sector
To enhance global competitiveness of the
Role of Competition Commission:

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 Competition Commission of India is a body of the Government of India responsible for

enforcing The Competition Act, 2002 throughout India and to prevent activities that have an
adverse effect on competition in India.
 It was established on 14 October 2003.
 It became fully functional in May 2009 in India.
The Commission comprises a Chairperson and not less than two and more than six members
appointed by the central government.
 Ashok Chawla is the current Chairperson of the CCI.
 The members of the Competition Commission of India are:
- H.C. Gupta
- R. Prasad
- S.N. Dhingra
- Geeta Gouri
- Anurag Goel
- M.L. Tayal
 The Chairperson and every other Member shall be a person of ability, integrity and standing
and who has special knowledge of, and such professional experience of not less than fifteen
years in, international trade, economics, business, commerce, law, finance, accountancy,
management, industry, public affairs or competition matters, including competition law and
policy, which in the opinion of the Central Government, may be useful to the Commission.
Objectives:
Preamble to the Competition Act
An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to promote
and sustain competition in markets, to protect the interests of consumers and to ensure freedom of
trade carried on by other participants in markets, in India, and for matters connected therewith or
incidental thereto.
To achieve its objectives, the Competition Commission of India endeavours to do the following:
 Make the markets work for the benefit and welfare of consumers.
 Ensure fair and healthy competition in economic activities in the country for faster and
inclusive growth and development of economy.
 Implement competition policies with an aim to effectuate the most efficient utilization of
economic resources.
 Develop and nurture effective relations and interactions with sectoral regulators to ensure
smooth alignment of sectoral regulatory laws in tandem with the competition law.

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 Effectively carry out competition advocacy and spread the information on benefits of
competition among all stakeholders to establish and nurture competition culture in Indian
economy.
DUTIES:
 To eliminate practices having adverse effect on competition.
 To promote and sustain competition.
 To protect the interests of consumers and ensure freedom of trade in the markets of India.
 To encourage creation of entities which can deliver faster and better goods and services.
 The Commission is also required to give opinion on competition issues on a reference
received from a statutory authority established under any law.
 To undertake competition advocacy, create public awareness and impart training on
competition issues.
POWERS:
 The commission shall have the powers to regulate its own procedure.
 The Commission may call upon experts, from the field of economics, commerce,
accountancy, international trade or from any other discipline as it deems necessary to assist
the body in the conduct of any inquiry it undertakes.

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RAMARAJA INSTITUTE OF TECHNOLOGY & SCIENCE

206 – BUSINESS ENVIRONMENT

NOTE TO THE PAPER SETTER:

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 1

1. A business firm is an economic unit which is engaged in the production or distribution, or

1. According to P. Gisbert “Environment is anything immediately surrounding an object and exerting

2. According to E. J. Ross “Environment is an external force which influences us.”

WHAT IS BUSINESS ENVIRONMENT?

 Business Environment is a relationship between a business’s actions and its environment.

1) Old Concept of business

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 2

1) Old Concept of Business

2.2 Modern Concept of Business

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 3

Mission, Objectives, goals and targets – sequence of formulation and achievement:

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 4

We can divide business environment into two parts:

Influencing Business Environment

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 5

Nature of the economy:

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 6

Low income and middle income economies are developing economies.

Structure of the Economy:

3. Foreign Exchange Policy:

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 7

4. Foreign Investment and Technology Policy:

Important Factors of Economic Environment:

Structure & Nature of

Need for social responsibility:

Arguments of social responsibility:

 Justification for existence and growth

Arguments against social responsibility:

 Violation of profit maximization objective

Kinds of social responsibility:

Corporate Social Responsibility:

 It takes 20 years to build a reputation and only 5 minutes to ruin it.

Corporate Citizenship Concepts:

• Corporate social responsibility – emphasizes, obligation and accountability to society

• Corporate social responsiveness – emphasizes, action, activity

Business Criticism/ Social Response Cycle

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 10

Carroll’s Four Part Definition

Understanding the Four Components:

Responsibility Societal Examples

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 11

Corporate Social Responsibility (CSR)

• Restricts the free market goal of profit maximization

Business Responsibilities in the 21 st Century:

• Demonstrate a commitment to society’s values and contribute to society’s social,

Few basic qualities of professional managers are:

1. Have an insight of his/her job requirements;

• Having guidelines for human behavior

Ethical behavior means:

• knowing the difference between right and wrong

What is Business Ethics?

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 13

“Business ethics is an extension of values of personal life to business”.

Sources of Business Ethics:

3. Law (or) Legal System:

Why is Ethics important?

Ethics is important to business for several reasons as stated below:

1. Ethics corresponds to basic human needs.

Prepared By, M. Subramanyiam Reddy, MBA., Ph.D., Associate Professor, RITS. 14