BBA (1.4) B. Com. (1.

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Business Environment

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PAPER 1.5: BUSINESS ENVIRONMEN

Business environment Concept and significance Factors of environment and their influence on business social and cultural environment Impact of socio cultural factors on business Demographic trend- tructure and systems of Indian society-Caste and communal systems-Role of social groups in business development! Political environment and business-Relevance of political decisions to business Directive principles of state policy Center tate relations! "conomic environment and business- Role of economic systems in promoting business activities! #inds of business sectors and their places in economic systems! $ultinational corporations- %echnological environment- Impact of technology on business-Choice of appropriate technology ocial responsibilities of business! E! AN" RE#ERENCE BOO$S 1! (! +! ,! .! 0! 2! "ssentials of business environment #! &s'athappa Business and society- )o*ananthan and )a*shmi Rathan "conomic environment of business $! &di*ary! Business and -overnment - Francis cherunilam! "conomic environment of Business ampath mu*er/i! Business environment and public policy Rogene & Buchhol1 Indian "conomy Ruddar Datt and #!P!3! undaram

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&ESSONS

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Business "nvironment Concept and significance Factors of environment and their influence on business! ocial and cultural environment Demographic trend tructure and systems of Indian society! Caste and communal systems! Political environment and business Directive Principles of tate Policy Center tate relations "conomic environment and business "conomic systems and business Business sectors and economic systems $ulti-national corporations %echnologies environment and business Choice of appropriate technology ocial responsibilities of business!

&ESSON ( 1
BUSINESS EVNIRONMEN ( CONCEP AN" SI)NI#ICANCE
%he social life of man lies mainly in his interaction 'ith the environment! %he people7 the material resources7 the climatic conditions or any other things around him constitute his environment! %hese are important and un avoidable factors to him! imilarly for a business unit7 it is very much necessary to respond7 understand and react 'ith its environment for the survival in the mar*et and business gro'th! Particularly the modern business 'orld has become so dynamic and comple8 in nature! %his is because its environment is changing day by day! &ny lacuna in understanding these changes 'ill result in failure and total 'ithdra'al from the mar*et due to the stiff competition! o7 let us discuss the concept of business environment and highlight the significance of environment and its interrelation 'ith business!

MEANIN) O# BUSINESS AN" ENVIRONMEN

%he term business is usually described as the organi1ed efforts of an individual or a group in producing and 9 or e8changing goods and services to satisfy needs and 'ants of the people! But no' this term encircles :other than production and e8change of products; study on consumer behaviors7 brand positioning among competitive goods7 sales promotion techni<ues mar*et share and good'ill7 innovations through product research and so7 on! %herefore7 the environment study becomes an integral part of business! "very business organi1ation e8ists admits of its challenging competitors7 changing consumer attitudes7 technological changes7 varying economic trends7 political policies and controls and many other influencing factors! %hese surroundings are called as environment of business! In the 'ords of &rthur #! =eimer7 >Business environment encompasses the climate or set of conditions-economic7 social7 political or institutional in 'hich the business operations are on ducted? &ccording to =illliam F! -lucec*7 the environment means >the economic7 governmental or legal7 mar*et or competitive7 supplier7 technological7 geographic and social settings monitored by the business e8ecutives to determine opportunities and threats to their firms!? %he reno'ned mar*eting scholar7 Philip #otler e8plains the organi1ation@s environment as >the set of interacting institutions and forces7 that affect the organi1ation@s ability to serve its mar*ets!? From the above conceptual descriptions 'e can summari1e the follo'ing points! 1! (! +! ,! .! %he surrounding conditions or forces of business are *no'n as its environment! %he social7 political and economic settings of the society mainly constitute the business environment! %he environment is dynamic and its changes influence the business decisions! tudy on environment 'ill reveal the opportumities available to a business! %he threats or challenges could be predicted from environment7 so that the firm can be prepared to meet them!

SI)NI#ICANCE O# BUSINESS ENVIRONMEN

%he business environment can be divided into internal and e8ternal environment or as the micro and macro environment! %hese classifications are not final and airtight! It is divided into many types as convenient to the analysts! %he internal environment is the organi1ation@s internal climate such climate such as machineries7 technical *no'-ho'7 s*ills of 'or*ers7 supplies of ra' material etc! o7 they are controllable factors! =hereas the e8ternal environment is uncontrollable! %his includes political decisions7 economic trend7 socio-cultural factors7 technological changes7 competitive strategies and so on! %hese uncontrollable factors ma*e the business so turbulent and multidimensional! %herefore failure to understand them may result in un-repairable losses! o7 the e8ternal environment plays a significant role business decisions! M+,ro environment PA)I%IC&) B )"-&) 3&%CR&) B "CA)A-IC&) =AR#"R BC I3" I3E" %AR CPP)I"R ACIA CC)%CR&) I3%"R-$"DI&RI" CA$P"%I%AR MICRO ENVIRONMEN I3%"R3&%IA3&) %he significance of the environmental factors can be clearly understood from the follo'ing advantages7 'hich are the results of environmental analysis! D"$A-R&PDIC "CA3A$IC

CC %A$"R %"CD3A)A-IC&)

1.

"EMAN" #ORECAS IN)

& businessman can estimate the future demand for a product by analy1ing demographic features7 competitor@s mar*et share7 consumer behaviour and their purchasing po'er and the general economic and political conditions! %his is the basic function before producing a product!

*.

PRO"UC #EA URE

%he attitude and preferences of consumers differ based on their socio-cultural bac* ground! By studying this7 the desired features in a product can be finali1ed! =ithout such product research the consumers may not be satisfied by that product!

-.

BRAN" POSI IONIN)

"very competing brand is placed in a particular position in the mar*et! %his is done through pricing policy and distinct product features or <uality! %his position for a product is strategically planned to gain a particular mar*et share after considering the competitor@s strategies! For e8ample7 >3IR$&? 'as priced one-forth price or > CRF? at the time of introduction and gained a ma/or share!

4.

PROMO ION S RA E).

For the sales promotion techni<ues the *no'ledge of cultural environment is essential! %he advertisement themes7 personal selling strategies and special campaigns re<uire good response from the audience! Anly if the attitudes and values of the people are understood the promotion efforts 'ill e successful! $any mar*eters have corrected their strategies after *no'ing the response from consumers7 and made effective! =e can <uote the e8amples of ad themes based on family relations7 that is 'hy they are popular among people of Indian social set-up!

5.

MEE IN) OU

/E COMPE I ION

%he manufacturer of a product of any nature has to *eenly 'atch the ma/or changes in science and technology! %here are many avenues to improve the performance of his product and to reduce cost through ne' methods of production! De must at-least follo' the competitors in this respect7 failing 'hich they 'ill over ta*e his product! "ven a popular brand is often modified or improved to meet out the tastes of consumers! Csually innovations7 that are the ne' concepts7 ne' products or ne' methods of offering goods7 gain greater preferences of consumers! %echnology helps to create innovative products!

0.

#U&#I&&IN) &E)A& RE1UIREMEN

%here are many legislations passed in our country related to business units7 and they should be observed! For e8ample the &cts regarding Factory 'or*ers7 consumer protection7 social security7 public 'elfare etc! are to be follo'ed by businessmen! %oday@s business is encircled by a massive 'eb of la's! %hat is 'hy large firms employ legal e8perts as advisers! %he failure to adhere legal provisions 'ill be met 'ith penalty!

2.

P&ANNIN) /E INVES MEN "ECISION

%he planning and policies of -overnment affect business in general! ome measures or programs of -overnment are directly related to specified sectors of industries! %he industrial policy7 ta8 policy7 foreign trade policy and many controls on private business units are the important interventions of -overnment to business decisions! %he public spending of the government also provides facilities for industrial and business development! By understanding all these aspects a businessman has to carefully decide the investment of the future production!

3.

ECONOMIC CON"I ION AN" COS ES IMA ES

%he tandard of living of the people determines their purchasing po'er and consumption pattern! An the other side the cost of factors of production 'ill determine prices of goods! %herefore7 by 0

understanding the price trend and economic climate7 a businessman can estimate his cost and fi8 prices! 3o' the international trade and global mar*ets are also 'idening the business opportunities7 and also opening up for global competition! o cost-'ise and <uality 'ise efficiency is the need of the hour! %hus by the above analysis 'e can conclude that the business units survive and gro' by studying its environment! It interacts 'ith its surroundings by utili1ing various sections of people ad favorable conditions in the society! &lso they contribute in turn7 to the society by means of increasing the economic activities7 and offering public 'elfare measures to sho' their social responsibility! o both are inter-dependent and 'e can say that Fbusiness 'ithout society has no roots and society 'ithout business units has no fruits@!

&esson ( * #AC ORS O# ENVIRONMEN AN" /EIR IN#&UENCE ON BUSINESS

%he environment of business is classified in different 'ays! Philip #otler divides it into $icro environment and macro environment as diagrammatically represented in the previous chapter! Dere is another classification given in the follo'ing figure! AR-&3IG&%IA3 "3EIRA3$"3% :$&3CF&C%CRI3-7 FI3&3C"7 $&R#"%I3- "%C! ; %& # "3EIRA3$"3% : CPP)I"R 7 CA3 C$"R 7 I3%"R$"DI&RI" "%C! ; CA$P"%I%IE" "3EIRA3$"3% :$&R#"% D&R"7 PRICI3- %R&%"-I" 7 I33AE&%IA3 "%C!; PCB)IC "3EIRA3$"3% :$"DI& PCB)IC7 I3E" %AR 7 -AE%! )AC&) PCB)IC B A%D"R ; $&CRA "3EIRA3$"3% :3&%CR&) R" ACRC" 7 "CA3A$IC %R"3D7 I3%"R3&%IA3&)7 %R&D"7 ACI&) "HP"C%&%IA3 "%C; %hese environmental factors can simply be grouped into sicio-cultural environment7 economic environment7 political and legal environments7 demographic7 technological geographical or natural7 competitive and international environments! %his 'ill help to discuss these factors one by one!

1.

SOCIO4CU& URA& ENVIRONMEN

& business can not e8ist 'ithout the contributions of society! %o interact efficiently 'ith the society7 'e have to *no' its cultural bac*ground and social practices! Because the behaviour and e8pectations of the surrounding people are determined by this environment! Aur country follo's traditional culture! It is transmitted through numerous generations to us! o 'e have different set of social systems and practices! %he customs7 habits7 ceremonies7 attitudes7 values7 beliefs7 tastes and preferences etc!7 of or people are to be understood to ta*e the right business decisions! %he reactions of people 'hile playing the roles of 'or*ers7 consumers7 suppliers and others are to be studied! %hen only the positive relations 'ith them could be developed by businessmen!

*.

ECONOMIC ENVIRONMEN .

It means the total climate that affect the human activities related to production of 'ealth! =e *no' that the basic economic activity is producing and e8changing commodities to satisfy the people! %he business process involves some inputs namely the factors of production! %he cost and their availability are the important economic factors7 'hich 'ill finally determine price of commodities! 4

An the other side the output of business is the goods or services that reach consumers! Dere also the economic phenomenon namely the purchasing po'er of people 'ill determine the demand level! %here are also some general economic conditions that affect volume of trade domestically and in foreign mar*ets! Dence a businessman should analy1e carefully the trend and changes in the economy7 to *no' his opportunities and challenges!

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PO&I ICA& AN" &E)A& ENVIRONMEN

%his means and includes the various controls7 programs and activities of the government! In the mi8ed economy li*e India the role of government is considerable in promoting industries and controlling private business enterprises! In the economic planning the sources of funds and its allocation to various sectors are decided by the govt! In the fiscal policy7 government d+ecides the ta8 revenue7 public e8penditure and public debt! %hat is7 it reallocates the funds of the society! $oreover7 the industrial development7 assistance for agriculture7 employment generation7 public 'elfare measures etc! are made by the government! &ll these activities affect business units directly or indirectly! %he government as the regulatory organ of the society7 ta*es a number of control measures on the business units! uch regulations include registration under the &cts7 licensing7 control on investment and location7 control on prices and trade practices and so7 on! $uch legislation for the 'elfare of 'or*ers7 consumers and the public! %he government@s policies on foreign e8changes7 international trade7 public sector industries7 ban*ing regulations public utility services etc! indicate that the political climate has numerous influences on business sector!

4.

EC/NO&O)ICA& ENVIRONMEN

%his factor may be considered as a part of economic environment! But its impact on business and industries is <uite large! %he technological changes helps business to gro' by means of ne' and improved goods7 reduction in cost and variety in goods! %he term technology indicates macro level improvements in the method of production! & technological change in a country results in a total change of atmosphere in industry! For e8ample7 electronic industry7 computer industry7 space research and satellites7 resulted in mushroom gro'th of industries and 'ide application of these facilities for the development of business! %herefore7 every unit tries to cope up 'ith the technological changes7 other 'ise it can not produce improved goods to compete in the mar*et! %he consumer@s tastes and preferences are also changing fast! o7 the scientific inventions7 and the results of industrial research and development : R B D ; are converted into innovative products and services! =e have to remember here7 that some countries that could impIrove the technologies more effectively7 have become economic giants in the 'orld!

5.

NA URA& ENVIRONMEN

%he natural resources are the gifts to a country by 'hich economic activities could be developed! %he minerals7 materials and also the climate7 coil conditions7 rainfall etc!7 help in this progress! An the 6

other side7 the people7 especially the businessmen7 should ta*e care I preserving natural and ecological balance of the earth! %here are many challenges to the natural environment7 'hich 'ill affect the society in the long run! For e8ample7 air7 'ater and atmospheric pollution7 soil erosion7 holes in o1one layer7 >green house effect@ on sea levels7 climatic disorders7 acid-rains and so on! Finding solutions is not only the moral duty of the businessmen but also for their future business gro'th!

0.

COMPE I IVE AN" )&OBA& ENVIRONMEN

%o meet out the competition is the routine tas* for business! %his is because the producers of goods and services become unlimited! Dence close 'atch on the competitive strategies on prices7 improved products and promotion appeals 'ill help a businessman to ta*e right decisions! %his is so important7 as it is a <uestion of survival and gro'th in the mar*et! %he globali1ation concept has opened up the mar*et for international competition as 'ell as opportunities! 3o'7 our businessmen have to face the challenges from the multinational corporations :$3C@s; and trans national corporations7 other than the local competitors! %he technology and resources of $3C@s are very much improved and our businessmen should increase their ability up-to the international standard! %he merit claimed for globali1ation is that our share in the 'orld trade 'ould increase due to multilateral agreements! For this7 'e have to increase our productivity! &lso there is a danger of e8cess reliance of developing nations on the developed countries! %hus leading the competitors or follo'ing them is unavoidable for business7 challenging 'ith international standards 'ill also become a part of this game in the near future!

15

&ESSON ( SOCIA& AN" CU& URA& ENVIRONMEN

%he social environment means the forces arising out of the structure and characteristics of the society! %hese forces vary from society to society! %hey are the results of interactions of the people! &ncient people started living as groups and they transmitted their e8periences7 beliefs and habits to their generations! %his process resulted as culture! Particularly traditional countries has rich cultural heritage! It is reflected in the attitudes and behaviour of people! Dence the social forces arise out of the particular cultural bac*ground of the society and that is 'hy they are called as socio cultural environment! %he term Fculture@ is defined as Fthe art of living applicable to a group of people@! It is also described as Fthe intellectual development made or the physical and mental training received in the course of ages@! %hat is7 culture is composed of teachings of our forefathers7 passed through so many generations! "!B! %aylor defines culture as >%he comple8 'hole of civilasation that includes *no'ledge7 beliefs7 art7 morals7 la'7 custom and other capabilities and habits ac<uired by man as a member of society?! &ccording to Francis $erill7 it is >the characteristically human product of social interaction and the total repertoire of human action7 'hich is socially transmitted!? %hus culture is not developed by an individual but by social inheritance! It is not static! It progresses or declines 'ith or 'ithout contact 'ith other cultures! By Ftrial and error@ method the society earns e8periences and better practices of other cultures are also adopted in the process of civili1ation7 so culture becomes a composite pac*age of e8periences! ome countries li*e "gypt have been converted into a society of entirely ne' culture foregetting their ancient civili1ations! In case of countries li*e India and China the cultural lin* continues 'ithout brea*! &s 'e have discussed7 socio-cultural forces of India are traditional and distinct! )et us see some of their characteristic features!

#EA URES O# IN"IAN CU& URE

1! Indian cultural history is very ancient! & great civili1ation flourished in India 'hen Rome and -reece did not e8ist7 and 'hen people in "urope 'ere still in the hunting stage! %he history of India dates bac* to many centuries before the birth of Christ! o our society has a traditional culture consuming the essence of good value from foreign cultures7 'hen they migrated to India or invaded our lands! &s descried by Ja'aharlal 3ehru this absorption and synthesis made India a uni<ue Fmosaic of cultures@! Aur culture is remar*able for its spirit of tolerance! %he geographical features7 'hich helped the evolution of the composite culture of our country7 also helped the development of sprit of tolerance! %he e8istence of various types of people in the country created a spirit of tolerance of differences among them! o 'e uphold the noble principle of FCnity in diversity@ 'e all are integrated in-spite of the varied physical features7 different climates7 and diversified racial7 religious and linguistic differences! Role of Dindu religion in he development of our culture in note'orthy! $a8 $uller pointed out the feature of Indian ociety as that >there is an unbro*en continuity bet'een the most modern and the most ancient phases of Dindu thought e8tending over more than thousand years!? In strict sense7 the Dindu religion is the collection of cultural values of 11

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+!

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.!

0!

the society! It is not evolved by anyone as that of all other religions! Dence the Dindu religious principles and our cultural set-up 'ere developed side by side! In Indian culture7 there are plenty of moral and spiritual values! %hey spea* the values of simple and self-contented life! %hey 'ere preached through Eedas and epics7 by the *ings and saints and in the centers of learning li*e 3alanda7 Banaras7 %a8ila7 $adhura7 #anchi etc! %here is an cultural uniformity found in the lives of different sects of people in our country! %he philosophies7 literatures7 conventions7 ceremonies7 festivals of various parts of India reflect the same basic principles! Idols 'orship is common but in different forms! %he moral and cultural values taught thro@ the stories and epics prevalent in our society are almost the same! %he structure and characteristics of or social groups and family system are uni<ue! %he &ryan society 'as divided originally on the basis of division of labor such as Brahamnas7 #shatriyas7 Eishyas and udras! )ater it 'as made as Fby birth@ by selfish people and called as castes! East differences including untouchability 'ere created among the caste groups subse<uently! In the course of time many superstitious beliefs erupt into our culture! %he /oint family system7 restrictions to 'omen and male-domination7 importance to marriages and ritual ceremonies7 etc!7 become the distinct features of our socio-cultural system!

IN#&UENCE O# SOCIO4CU& URA& #AC ORS ON BUSINESS

%hrough the social and cultural aspects do not influence the business directlyK many business policies and decisions are ta*en by thoroughly understanding the socio-cultural bac*ground of the people! %his is becauseK based on the culture a particular group of people behave and react in a particular 'ay! Dere are some instances! a; In estimating the demand for a product the consumer behaviour and their consumption pattern are to be understood apart from their purchasing po'er! ome latent needs of people7 if understood properly7 can be converted into demand! For e8ample some products sold in sachets get good response due to the convenience and lo' cost! %he product features are designed by understanding the cultural bac*ground of consumers! %he tastes and preference differ due to this aspect! For instances7 products containing vegetable fats than animal fats are preferred by some groups7 natural ingredients than chemical or artifical goods7 are preferred by somebody7 the foodstuffs also vary consumed by different groups! %he sales promotion techni<ues based on the understanding of cultural values of people usually become successful! %he appeals are selected best suited to the attitude of people! =e could see a number or advertisements based on the affection and importance of family relationships! In developing human relations 'ith 'or*ers7 suppliers7 middlemen and the public7 it is necessary to understand the culture and mental ma*e-ups of those people! For e8ample 'or*ers in different regions behave differently! If this is understood conflicts 'ith 'or*ers may be reduced! %he trade practices and services are designed based on the customs and habits of the people! %his includes holidays7 :Fridays7 instead of undays in $uslim areas; 'or*ing hours7 consumer service7 sales retail-outlets7 demonstrations etc! In introducing varieties7 improvements and innovations in products7 care should be ta*en to understand the social characteristics of people! $any products in cosmetics 1(

b;

c;

d;

e; f;

g;

failed in Indian mar*ets! =e can also <uote the hesitated acceptance of electric appliances and gas stoves in rural mar*ets! %he general attitude of people to'ards consumption7 savigs and investment patterns also affect the overall business gro'th! Indian people usually don@t prefer Fuse and thro'@ goods! %hey prefer investing in gold than in shares and bonds!

%hus7 as a unit of the society7 the business can not alienate itself from the society to gain and gro'! &lso the businessmen need to satisfy the e8pectations of the society!

1+

&ESSON ( 4 "EMO)RAP/IC REN"

%he population of a country serves as the human resources in the economic development! &lso people are the ends in economic activities! %herefore study of demography becomes necessary for the rulers7 economists and businessmen! %he term FDemography@ means the study of population characteristics! It is mainly the physical phenomenon7 'hereas the culture is the psychological phenomenon! %his stydy deals 'ith structure and composition7 distribution7 rate of gro'th and other feature of population! It becomes so important in a populous country li*e India! =e are the second largest in the 'orld in population and 'e have to *no' the trend to plan for the future prospects and problems of the business!

C/ARAC ERIS ICS O# "EMO)RAP/IC PA

1. SI5E AN" )RO6 / O# POPU&A ION

ERN IN IN"IA

Aur country has (!,L of the total land area of the 'orld but has to support about 1.L of the 'orld@s population! &t present our population is nearing 155 crores and it may overta*e China@s first place if 'e fail to control it! It@s gro'th rate 'as around 1L annually till 16.1! %hen it increased to (L in the recent decades! In 1611 the population 'as (.1 million and 'e added 155 million in the ne8t ,5 years! From 16.1 to 1661 this number increased by .55 million and reached 4,0 million7 in 1661 :C3 estimates it as 62.!4 million in 1664; *. BIR / RA E AN" "EA / RA E

%he gro'th rate is the function of birth and death rate! %he birth rate increased due to the early marriages and the long reproductive stage of the Indian couples! =hereas the death rate is controlled due to medical and health measures! %he infant mortaility rate :death; has considerably been lo'ered! "e,+7e 1651 15 16.1 05 1641 65 Birt8 r+te ,6!(L ,1!2L +(!.L "e+t8 r+te ,(!0L ((!4L 11!,L

%he annual gro'th rate at present is slightly lo'er than (!11L 'hereas in 1641 it 'as (!,0L! -. SE! COMPOSI ION

%he ratio of male population is to female population is almost adverse to female in the average! But in #erla and Dadra nagar Daveli the ration is in favour of female population! It is important for a businessman to *no' this ratio and the number of males and females to calculate demand of products suitable for the particular se8! 1,

CENSUS .EAR 1651 16+1 1601 1641 1661

No. #EMA&ES91::: MA&ES 62( 6.5 6,1 6+, 6(2

teps are ta*en to chec* the maternal mortality :death of 'omen during childbirth; and female infanticides to correct this trend adverse to females! 4. A)E S RUC URE

$ore than half of the country@s population :,6L; belongs to /uvenile group i!e! belo' 16 years of age! %he people of (5-+5 years constitute 1.L and middle aged are :+5-.5 years; about +5L! %he aged people above 05 years are about 0L! o the 'or*ing group constitutes about ,.-,0L! %hese data are useful in calculating demand! 5. &I#E E!PEC ANC.

%he average life span of the people in a country is *no'n as the life e8pectancy! It 'as very lo' in India in 16517 /ust (1 years and substantially increased to .,!2 years in 1641! In the 1661 census this increased to 05 years! :It is 0(!4 years as on 166,;! %his 'as achieved through increased medical facilities! Do'ever it is still very lo' compared to the advanced countries! 0. RURA& ( URBAN RA IO

Due to industriali1ation and urbani1ation the rural mass slo'ly migrate to to'ns see*ing employment! %his could be understood from the data tht sho'sK in 16217 45M(5 'as the rural urban rationK in 1641 it 'as 20M(, and in 1661 it 'as 2,M(0! %his information helps planning the mar*eting efforts for the to'ns and separately for villages! 2. "ENSI . O# POPU&A ION

%his is the number of persons living in on <! #m area! 3aturally to'ns have more density than Eillages! %he average density in India in 1621 'as 122 person per <! #m! compared to 16.1 'hen it 'as 112 only! In the year 1641 it 'ent upto (10 and in 1661 it is (02! In )ada*h :Jammu B #ashmir; the density of population is /ust ( persons per s<! *m! nd it is 1555 persons in %rivandrum! In 1661 census 'est Bengal has 202 persons7 #erala has 2,67 Pondchery has 10,(7 Chandigarh has .0+( and Delhi has 0+.(7 &ndaman has lo'est of +, and JB# has 20 persons per s<! *m! &part from the above factors the literacy level7 standard of living7 employment pattern etc!7 are analysed under study of demographic pattern! In 1661 census he -eneral literacy level 'as .(!1L! &mong males it 'as 0+!4L and among females +6!1L only! In 1651-16+1 literate 'as only .L to 15L! 1.

&s per 1661 census 0.L of population is engaged in agriculture and mining :In &dvanced countries it is ( to .L only;7 1,L in factories and (1L in service sector! %he large population provides a potential mar*et for goods and the foreign companies are also interested to utili1e this! But increasing population is a challenge to our government as it has to plan for the provision of employment7 education7 sanitation7 housing and all other facilities! %herefore -overnment of India has developed a national population policy7 'hich provides for Rising the age of marriage to 14 years for 'oman and (1 years for men! Raising the monitory compensation for permanent family planning measures! Increasing the propaganda to educate people! )eaving the compulsory sterili1ation to the option of ttes and increasing group incentives to medical professionals and local bodies!

10

&ESSON ( 5 S RUC URE AN" S.S EMS O# IN"IAN SOCIE .

Indian society possesses and organi1ed civic life right from the days of the Indus valley culture to the present day! %he early Indian society has various divisions and the harmonious functioning of these divisions 'as possible as the life of the people 'as governed by Dharmshastras7 the 'or* of great sages! But these codes of ethics later created 'ide discriminations among &ryans and non-&ryans! =hen the number of occupations in the society multiplied7 and the castes 'ere determined by birth the dominating and suppressed groups and treated as slaves IpanchamasN!%hese people did not have any civil right! %he sudras among the &ryans society 'ere also treated much inferior and they had to serve the other Fsuperior@ communities! %he &ryan and non-aryan races mingled 'ith each other and become a mi8ed groupK also there are many foreign invaders and migrators mingled 'ith these groups! 3o' no single race could be detected from our society! Buddhism7 Jainism and i*hism originated form India and had contributed many reforms in the FEarnasrams Dharms@! $any superstitious rituals and beliefs 'ere seriously opposed by Buddha and $ahavira! %he British rule in India7 'hich lasted for about t'o countries also7 provided its contributions in reforming Indian social systems! )i*e this our society have absorbed and assimilated the best available in other cultures!

C&ASSI#ICA IONS O# OUR SOCIE .

1. &IN)UIS IC )ROUPS Indian society is divided into many groups based on religions7 castes and language! %he linguistic study classifies the lingual groups into four based on the origins of presently spo*en languages! %hey are 1! Indo-&ryan (! Dravidian +! &ustro-&siatic and ,! %ibeto-Burman! %he four Dravidian languates are %amil7 %elugu7 $alayalam and #annadam! ans*rit 'as the original &ryan language7 'hich is not in vogue no'! %his language too* the from of Dindi and then developed to many forms as &ssamese7 Bengali7 -u/arathi7 $arathi7 Ariya7 Pun/abi7 and indhi! %he Crdu language 'as used by $uslim relers 'hich is the mi8ed form of Persian7 &rabic and %ur*ish! %here are about 126 languages spo*en in India and also .,, dialects Imodified forms of a language but 'ithout grammar and literature! %he follo'ing table sho's the position of languages as in 166.! Mot8er ton'ue Dindi -u/arathi $alayalam #annada Ariya Pun/abi &ssam S;e+<ers =in mi%%ions> ,+2 ,1 +. ,, +( 6. (( Mot8er ton'ue %elugu Bengali $arathi %amil Crdu 3epali indhi S;e+<ers =in mi%%ions> 2, (55 25 21 15( 10 14

%here are other languages li*e #ashmiri7 antali etc!7 spo*en by more than four million spea*ers! 12

*. RE&I)IOUS )ROUPS Regarding the religious groups in India7 the Dindu religion forms the ma/ority! %he religious tolerance is the peculiar feature of out society and that is 'hy India could emerge as a secular state! &ll the religious groups co-operate 'ith each other and live peacefully despite some religions conflicts! %he ma/or religions in India are given belo' 'ith their share in the total population :as per 1661 census;! ot+% Po;u%+tion Dindus $uslim Christians i*hs Buddhists Jains Athers -. CAS E )ROUPS 1::.:: 4(!2( 11!(1 (!05 1!46 5!25 5!,2 5!,1

%he other important class of the Indian society namely7 the caste groups are discussed in detail in the follo'ing chapter! %he people forming groups among themselves too* part in he social and economic activities! =e could see many e8amples for the business or occupation developed by a particular lingual7 religious or caste group! %his becomes possible by the mutual help and close co-ordination and control 'ithin the group members! %his also acts as s means of social security! %o <uote some instances the Christian groups run man hospitals and educational institutions7 the $uslim in leather processing and hard'ares the ourashtras in handloom and the $ar'aris in pa'nbro*er business! S.S EMS O# OUR SOCIE . %he /oint-family system7 caste7 system7 marriage system7 traditional occupation system and the religious oriented ethical system are considered as the most common social systems of India! %hey reflect our art of living7 and our people attach more 'eightage in maintaining these systems and values! In the /oint-family system our people find it more convenient in running agricultural farms or business and it is considered as prestige symbol in the society! %he sons after marriage live 'ith their parents and 'ith their children or even their grand children! $utual co-operation and patience provide mutual benefit in this system! But this system is 'eaning out no' a days due to changed occupational structure! $arriage system and its related rituals and ceremonies are considered as important social aspects! Digh standards are prescribed for 'omen and they have to be get married at the early stage! %heir life is mostly dependent on men! &lso our people are e8pected to give respect for elders7 to follo' spiritual ideas7 to sho' nepotism Ifavour or preferenceN to their relatives7 and to adhere fatherly 14

affection and respect to their employers! %raditional occupations too* important role till the recent past! &s this system 'as insisted by birth based on castes7 people attach lo' dignity to manual labour! &ll these features of our social structure and systems interplay 'ith each other to form our socialcultural set up! %hey are also modified from time to time along 'ith economic and technological developments! %his may be understood from improved status of 'omen through education and employment7 reservations for suppressed classes7 reforms in ceremonies and so on! IMPAC O# SOCIA& S.S EMS ON BUSINESS %he peculiar social system of India has its impact on business as pointed out belo'! 1! (! +! ,! .! 0! 2! %he trade and employment opportunities re given to family members and o'n caste group members! %his affects balanced economic development of the country! %his may affect the productivity also7 as the merit is not the main consideration! %he seniors claim respect irrespective of their talents! Dere the /uniors are discouraged to contribute to business development! %his is so significant in /oint-families! %he 'omen@s role in economic development is underestimated7 'hile they constitute fifty percent of population! %heir s*ills are yet to be utili1ed in many fields! Due to the impact of feudal setup the employers e8pect greater respect and intimacy from employees 'hich is not suitable for the scientific management approach! %he manual labourers are not respected and they are paid very lo'! %his the result of FEarnasrama Dharma@! Dence many educated youth desitate to do physical 'or*s! People spend a lot of money on unproductive ceremonies! %his ta*es the 'hole lot of their life-time savings! Dence7 they could not spend on necessary B convenient goods and hesitate to invest their saving in business! %he people are more sensitive than rational! o they get emotional easily and involve in inter-caste or inter-religious clashes! Aut off superstitious beliefs the hesitate to get education and to *no' their role in economic development!

16

&ESSON ( 0 CAS E AN" COMMUNA& S.S EMS

Caste ad communal systems are ancient and deeply rooted in Indian society! %he communalism and casteism become the great hindrances to the democracy and economy of the country! Despite industriali1ation and urbani1ation these communal and caste systems play their role in or society esp!7 in marriages and diet habits! By this system people are closely *nitted but their emotions are 'rongly e8ploited by selfish politicians and communal leaders! Communal groups are based on religions! %his is a dominant factor in minority religions! ome e8tremists in these groups develop communal clashes and tensions! &lso in he ma/ority religious groups7 some may stimulate violence on minorities 'hen they give up the traditional sprit of tolerance! Disparities among caste groups7 untouchbility7 and other anti-social and anti-human practices are spread by casteism! Caste is defined by Dr! -o*hale as FEarna@ and FJati@ 'hich mean comple8ion and birth! Invasions of foreign religions and spread of ne' religions 'ithin our country made the castes more regid! It gives some social security and at the same time 'as use+d by upper caste groups7 to e8ploit lo'er groups! %here are as many as +555 castes in India! 3o other country has such micro classification! %his helps to uphold traditional values and at the same time they develop social evils and superstitions7 and hence affects development! /E I&&4E##EC S O# CAS E S.S EM INC&U"E 1! (! +! ,! .! Caste pre/udices and feuds 'hich lead the society to disunity affect national integration! Caste decided by birth7 decreases the human dignity and so it is undesirable! Caste system chec*s the free association 'ith other groups and 'ith foreigners! &s a result people are reluctant to accept changes and modern *no'ledge! Cn-touchability and e8ploitation are the chief evil effects of caste system! %hey are strictly anti-democratic! Communalism and casteism are unscientific practice! %he clashes among people very much affect our country!

%he role of caste system in business development could be observed from the Indian history! %hough this role is not much suitable in the modern days the caste system 'as used in the follo'ing 'aysM 1! (! +! ,! Division of labourM & particular group in the society concentrated in the development of a particular occupation or trade! %his helped smooth functioning of the society! %raditional trainingM %he group members are trained from the child-hood in a particular trade! It gives social security and development of s*ills! Competition is avoidedM %he same group members are involved in similar lines of business! By maintaining trade secrets7 unhealthy competitions are avoided! prit of cooperationM %he business organi1ation run by caste groups claim that it develops cooperation among members and a sense of belongingness-'e can <uote e8amples of trade or business developed by some caste groups! %he Chettiars in ban*ing7 3adars in groceries7 Ealayars in constructions7 &asaris in /e'el ma*ing and so on!

(5

CAS E S.S EM IN MO"ERN SOCIE . It is claimed that the traditional caste system has been considerably altered on account of industriali1ation7 urbani1ation7 scientific education7 information net'or*7 social a'a*ening7 ne' legislations and political regulation! Do'ever our rural social structure ma*es the caste system survive and it continued to prosper as long as there is lac* of education and a'areness among the masses! %he influence of caste in politics is noticeable during the elections! %he role of government and social service originations is to be enlarged to educate the evils of the caste system!

(1

&ESSON ( 2 PO&I ICA& ENVIRONMEN AN" BUSINESS

Political environment is one of the important and inevital forces for a business! It influences day today decisions and is mostly uncontrollable! Political environment means Fthe set of activities of the government 'hich include plans policies7 programs and controls 'hich directly or indirectly intervene the business@! %he government is the regulatory organ of the society! %herefore it interferes especially in a mi8ed economy li*e ours7 in the business activities! It has to ensure optimum utili1ation of national resources7 maintaining conducive and stable economic climate7 promoting business and industries7 controlling the administration ad trade practices of business and implementation of social 'elfare measures! Political environment is much related to legal environment also and they affect business as stated belo'! "very manager is encircled by massive 'eb of la's7 commission reports7 official regulations and our decisions! ome of them are to protect labourers7 consumers or general public! ome are to regulate contractual rights and property rights! ome others are to regulate management affairs7 trade practices7 utili1ation of foreign e8change reserves and so on! %he managers are e8pected to *no' the legal restrictions and re<uirements connected 'ith their actions! %hat is 'hy they have legal e8perts close at their hands! %hey should *no' all the political regulations and should also predict future government actions! %he managers could not control these political actions but they can represent and sometimes influence on government decisions :that is called lobbying;! Political environment is very much important in out country! =e follo' socialistic pattern and mi8ed economy and for this the -ovt! imposes many restrictions over the private sector! %hese controls affect the interest of private business people but on the other hand avoid concentration of economic po'er among fe' individuals and ensure e<ual distribution of 'ealth! -overnment regulation on private enterprises is e8ercised 'ith a vie' to directin the economy ma8imum social good in this socialistic pattern of society! Aur political setup allo's private sector to attain repid economic gro'th and at the same time regulated it to reduce ine<uality of income and concentration of economic resources7 in the society! Political intervention in private business in enforced in India in the follo'ing 'aysM 1. ECONOMIC CON RO& MEASURES %he planning commission headed by the Prime $inister f India prepares Five Oear Plans to utili1e the resource allocation more effectively! %he economic activities are also planned by the 3ational Development council :3DC;! %he general economic conditions in he country are monitored by the government agencies! %he Import ad "8port policy of the -ovt! is affecting the production and mar*eting decisions of he business units! &lso the foreign investment in Indian business is allo'ed by our -ovt!7 in this globali1ation era!

((

*.

IN"IREC CON RO& MEASURES

%he -ovt!7 can indirectly stimulate or restrict business activities! For e8ample7 the $onetary policy determines the volume of money in circulation and the ban* rate that 'ill affect capital availability to business! %he Fiscal policy7 namely %a8ation and public e8penditure :Budget; and public debt7 affects the level of business activities! -ovt! may also provide financial and physical incentives or penalties t promote9control a business! Control on capital issues7 stoc* e8change dealing and money9capital mar*ets is another important measure to regulate business investment! %he follo'ing categories denote various types of direct regulatory measures! -. IN"US RIA& RE)U&A IONS

%he Industrial policy resolution of the -ovt! is enforced to allo' private business house into selected industries! It further regulates investment7 location7 si1e and e8pansion of industrial units! %he Industrial )icensing policy is also an effective control for this purpose! :e!g! &ccording to he present policy a ne' industry cannot be started in a city having a population of . la*hs or more! 4. CON RO& ON RA"E PRAC ICES

%he unfair trade practices of business are restricted by $R%P &ct t protect public! %he Foreign "8change regulations &ct Controls the utili1ation of foreign e8change reserves! %here are many &cts for Prevention of Blac*-mar*eting7 supplies of essential commodities7 prevention of smuggling7 &dulteration etc! 5. &ABOUR &E)IS&A IONS

%he -ov! regulates business in order to safeguard the interests of 'or*ers also! For e8ample the Factories &ct7 Industrial! Disputes &ct7 =or*men Compensation &ct7 " I :"mployee@s tate Insurance; &ct7 etc! to promote 'or*ing conditions7 employer-employee relations and loabur 'elfare! 0. RE)U&A ION O# COMPAN. MANA)EMEN

%he companies &ct specially regulates he compulsory registration of companies7 and the procedures and functioning of company management! %his &ct protects the rights of share holders and creditors! 2. PRICE AN" "IS RIBU ION CON RO&S %he government ensures maintenance of stable and reasonable prices for essential commodities through price ceilings7 administered pricing :cement7 steel etc!7; and dual pricing :sugar7 rice; %he government also procure some commodities :i!e! levy; and distribute them to the needy people :Public Distribution ystem; ad permit system helps either to move commodities to the scarce areas or to chec* unnecessary flo' of commodities! 3. CONSUMER PRO EC ION CON RO&S

-ovt! ensures prevention of hoarding7 adulteration and artificial scarcity by specific &cts! %he Consumes Protection &ct7 and other legislations protect consumers from suppliers@ unfair practices! (+

%he co-operative to reali1e their rights! -ovt! also ensures that consumers are ade<uately informed about 'eight7 contents7 price7 date of e8piry etc! about the goods! ?. NA IONA&I5A ION

-ovt! underta*es he management and o'nership of business units 'hen re<uired to serve the public! For e8ample ban*s 'ere nationali1ed :1, ban*s in 1606 and 0 in 1645; to serve the public! )IC7 Rail'ays and a part of road transport 'ere also nationali1ed! $any sic* units 'ere underta*en by -ovt! to protect 'or*ers! %he public sector business units serve for the public and create healthy competition 'ith private sector and also fulfil social ob/ectives of -ovt! 1:. CON RO& ON SPECIA& AC IVI IES

%he government is regulation to chec* some gambling activities on shares and commodities7 for'ard contrasts etc! to protect the public from inflationary pressure! Form the above discussion 'e can understand the close relationship of political forces 'ith the business units!

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&ESSON ( 3 "IREC IVE PRINCIP&ES O# S A E PO&IC.

%he constitution of India adopted in January (07 16.5 contains the >Directive principles of state policy?! %he constitution in any country is *no'n s the body of rules 'hich allocates various po'ers of government has over the people! %he Constitution of our country proclaims the sovereignty of the people in its preamble 'hich says! >=e the people if India7 having solemnly resolved to constitute India into a sovereign ocialist7 Democratic Republic? %he constitution provides fundamental rights to the citi1ens and later the fundamental duties 'ere also incorporated! Aur constitution defines the composition and the po'ers of the cabinet7 the parliament and the courts of la'! For the functioning of the government and the legislature in ma*ing public policies7 there are also some guidelines given in our constitution! %hey are *no'n as FDirective Principles of state policy@! It shall be the duty of the government and legislators to apply these principles in ma*ing la's! $ore over they are the codes of conduct for the administrators 'hile they discharge their responsibilities as agents of sovereign po'er of the nation! &lthough these directives or guidelines are not /ustifiable in the courts of la'7 the /udiciary may interpret the la' based on the sprit of these principles! %he directive principles of state policy are provided in si8teen articles of the constitution from article +4 to .1! %hose directions are significant to the socio-economics field and are given belo'! 1! (! %he tate :rulers; shall strive to promote 'elfare of the people by securing and protecting as effectively as it may7 a social order in 'hich /ustice7 social7 economic and political shall inform all the institutions of the national life! %he tate shall in particular strive to minimi1e the in-e<ualities in income and endeavour to eliminate in-e<ualities in status7 facilities and opportunities7 not only among individuals but also amongst groups of people residing in different areas or engaged in different vocations! %he state shall7 in particular7 direct its policy to'ards securingi! ii! iii! iv! v! %hat the citi1ens7 men and 'omen e<ually7 have the right to an ade<uate means of livelihood! %hat the o'nership and control of the material resource of the community are so distributed as best to subserve the common hoodK %hat the operation of the economic system does not result in the concentration of 'ealth and means of production to the common detrimentK %hat there is e<ual pay for e<ual 'or* for both men and 'omenK %hat the health and strength of 'or*ers7 men and 'omen7 and the tender age of children are not abused and that citi1ens are not forced by economic necessity to enter a vocation unsuited to their age or strengthK and

+!

(.

vi!

%hose children are given opportunities and facilities to develop in a healthy manner and in conditions of freedom and dignity and that childhood and youth are protected against moral and material abandonment :&rticle +6;! %he state shall secure that the operation of the legal system promotes /ustice7 on a basis of e<ual opportunity7 and shall7 in particular provide for legal aid7 by suitable legislation or schemes or in any other 'ay7 to ensure that opportunities for securing /ustice are not denied to any citi1en by reason of economic or other disabilities :&rticle +6-&; %he state shall ta*e steps to organi1e village panchayats and endo' them 'ith such po'ers and authority as may be necessary to enable them to function as units of selfgovernments :&rticle ,5; %he state7 'ithin the limits of its economic capacity and development7 ma*e effective provision for securing the right to 'or*7 to education and to public assistance in cases of unemployment7 old age7 sic*ness and disablement7 and in other cases of under served 'ant :&rticle ,1; %he state shall ma*e provision for securing /ust and humane conditions of 'or* and for maternity relief :&rticle ,(; %he state shall endeavour to secure7 y suitable legislation or economic organi1ation or in any other 'ay7 to all 'or*ers7 agricultural7 industrial or other'ise7 a living 'age7 conditions of 'or* ensuring a decent standard of life and full en/oyment of leisure and social and cultural opportunities and7 in particular7 the tate shall endeavour to promote cottage industries on an individual or co-operative basis in rural areas! %he tate shall ta*e steps7 by suitable legislation or in any other 'ay7 to secure the participation of 'or*ers in the management of underta*ings7 establishments or other orgnisations engaged I any industry! %he state shall promote 'ith special care the educational and economic interests of the 'ea*er sections of the people7 and in particular7 of the cheduled Castes and the cheduled %ribes7 and shall protect them from social in/ustice and all forms of e8ploitation! %he state shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and7 in particular7 the state shall endeavour to bring about prohibition of the consumption7 e8cept for medicinal purposes7 of into8icating drin*s and of drugs 'hich are in/urious to health! %he tate shall endevavour to organi1e agriculture and animal /usbandry on modern and scientific lines and shall7 in particular7 ta*e steps for preserving and improving the breeds7 and prohibiting the slaughter of co's and calves and other milch and draught cattle! %he state shall endeavour to protect and improve the environment and to safeguard the forest and 'ild life of the country! &dded to article +4 a ne' clause contains a directive to strive minimi1e the in-e<ualities in status7 facilities and opportunities! %he ,( nd amendment directs the state to ta*e steps for securing 'or*ers participation in management!

,!

.! 0!

2! 4!

6! 15!

11!

1(! 1+!

It is pointed out already that these directives cannot be inforced by courts li*e that of fundamental rights! But it is declared by he then P!$!7 Ja'aharlal 3ehru that the fundamental rights should subserve he directive principles! %his is supported by the argument that the e8istence of men in the state comes first then there can be fundamental rights! %here fore the directives are the ideological guidelines for any social and economic policy and legislations and they enshrine the basis for the reali1ation of principals of 'hich the states in India (0

stands! For instance some of the directives relate to the free and compulsory education for all children up to the age of fifteenK separation of the /udiciary from the e8ecutiveK protection of national monumentsK promotion of e<ual opportunitiesK provision of legal aidK promotion of international peace and security an so on! %he founding fathers of our constitution have anticipated all possible evils such as concentration of 'ealth and the means of production in hands of a fe' persons 7 gross ine<ualities of income7 child labour7 e8ploitation of 'ea*er sections and consumption of into8ication drin*s that might creep into the society! In Directive principles they have suggested the guidelines for correcting the evils! %hus these Directives provide ample scope for the regulatory role7 the promotional role7 the entrepreneurial role and the planning role of the government! %hat is 'hy in 16., it 'as amended and the ob/ective of or socio-economic policy 'as described as the F ocialistic pattern of society@! %his resulted in nationali1ation of Rail'ays7 industries7 insurance and ban*s etc!

(2

&ESSON ( ? CEN ER S A E RE&A IONS

%he constitution of a country provides for the government to e8ercise authority over a territory! For better control over the large territory it if constituted of smaller units! %he relationship bet'een the central government having /urisdiction over the territory and the smaller units namely states may be unitary or federal! In unitary form7 the states are subordinates 'here as in federal form they are coordinates to the central government! &nother form is confederation 'here the central is a subordinate to regional government! Aur constitution provides for a federal system-the Central -overnment as the unifying force and the tate -overnments as its coordinates! %he division of po'ers bet'een these t'o forms are provided in the constitution and also decided by the tradition! &t present 'e have t'enty-five states and they are regionally divided based on languages spo*en7 for the sa*e of administrative convenience! %he federal system involves the setting up of dual governments and division of po'ers! %he strength and success of the system depends upon the ma8imum of cooperation and coordination bet'een the t'o po'ers! Dence the Centre tate relations assumed greater importance and discussion! %heir relations reflect in the distribution of po'ers in the legislative7 e8ecutive or administrative and financial spheres! %hese po'ers are provided in the constitution! 1. &E)IS&A IVE RE&A IONS BE 6EEN /E UNION AN" /E S A ES

Aur Constitution7 under the system of Federation7 provide for he division of po'ers7 bet'een he central and state governments! %he other salient feature of our constitution is that it provides for setting up of a separate /udiciary7 the upreme Court 'hich interprets the constitution! %he Constitution divides the sub/ects into three lists the union list7 the state list and the concurrent list! %he union list contains 62 topics including Defense7 "8ternal &ffairs7 currency a coinage7 post and telegraph7 commutation7 Rail'ays7 Insurance7 'ar and peace7 Ban*ing7 telephones7 broadcasting7 foreign loans etc!7 the union parliament has e8clusive right to ma*e la's on these sub/ects! %he concurrent list contains ,2 sub/ects for e8ample po'er7 civil procedures7 criminal la's7 economic and ocial planning7 "ducation7 $arriage and Divorce7 3e'spapers and Press7 tatistics and Registrations of births and deaths7 Factories7 Price Control7 )egal $edical and other professions7 food stuffs etc!7 for these sub/ects both Cnion Parliament and the tate )egislative &ssemblies can frame la's! But incase of contradiction of la's of these t'o systems7 the la's of Parliament in final! %he tate list contains 00 sub/ects 'hich are of regional importance! It includes police7 local administration7 &griculture7 )and revenue Jail &dministration and so on! %he stae legislatures can enact la's sub/ect to the limitations of the constitution and the la's of parliament! Constitution provides that the President can declare "mergency in a state based on the reports of its -overnor! %he union government can enforce trade agreements 'ith any other countryK it can encroach upon state list 'hen supported by t'o third of parliament members! FResiduary po'ers@ are given to Cnion to all the sub/ects not included in any of the three lists! %hus the union is made stronger than the states! (4

*. A"MINIS RA IVE RE&A IONS BE 6EEN CEN RE AN" S A ES %he President can appoint tate -overnment 'ith the consent of the Prime $inister7 'ithout consulting tate )egislature! %he Cnion can give directions to a tate regarding the la's of parliament7 the construction and maintenance of communications to be of national or military importance7 and do on! Cnion -overnment by the la' of Parliament may provide for the ad/udication of any dispute relation to inter state rivers! For other inter-state disputes also the central government may establish FIntertate Councils@ on the public interest! %he parliament is empo'ered to constitute an FInter- tate Commission@ to ensuer freedom of trade P-but so for no such commission is constituted in India! %he President 'ill appoint "lecton Commissioner to supervise elections in states! tate Digh court Judges are also appointer by him! %he Comptroller and &uditor -eneral of India shall control financial accounts of the tate! %he FPlanning Commission@ 'as set up in 16.5 as an e8tra-constitutional and non-statutory body to plan effective and balanced utili1ation of country@s resources! :%his is critici1ed that it encroaches upon state autonomy;! %o support this body another council is fo5rmed namely7 F3ational Development Council@! -. #INANCIA& RE&A IONS BE 6EEN /E CEN ER AN" S A ES Financial ources are needed for he functioning of the tates! %he distribution of the sources of revenue bet'een the Center and tates is as follo's M a; b; %a8es lived by the Cnion -ovt! but collected and 'holly retained by the tate includeM tamp duties on 3egotiable Instruments7 latter of credit7 insurance7 transfer of shares and e8cise duty on medicine and toilet preparations containing alcohol! %a8es lived and collected by the Cnion but 'hose precedes are given over toe the tates includeM "state duty and succession duty on property7 other than agricultural land7 terminal ta8es on goods and passengers7 ta8es on rail'ay fares and freights7 ta8es on ne'spapers and advertisements and so on! %a8es lived on and collected by the Center but 'hose proceeds are shared bet'een the union and states include M the income ta8 aloneK the ratio of sharing is decided by the President of India7 considering the report of the Finance Commission! %a8es 'hich are devised and collected by the union but 'hose proceeds may be distributed among the states as per the union la' include M the e8cise duties7 other than on medicine and toilet preparations!

c; d;

F-rants-in-aid@M other than the above distribution of revenue7 Cnion also provides -rants-in-aid! For e8ample7 out of e8port duty on /ute7 grant-in-aid is given to states of &ssam7 Bihar7 Arissa and =est Bengal! %he union may further provide financial assistance from Consolidated Fund of India! %here is a control over tates as to their borro'ing po'ers & state can borro' only 'ithin India and cannot raise a ne' loan 'ithout the consent of central government!

(6

CON#&IC S BE 6EEN CEN ER AN" S A ES =hile the congress party 'as ruling at the center and some opposition parties too* over po'er in the state governments some conflicts and issues in the center-state relations 'ere raised by them! %hey include -ovt! of %amilnadu7 =est Bengal! Pun/ab #arnata*a and #erala and they demanded autonomy to states! %he main issued 'ere M i! Cse of para military forces in the states by the center 'hen it is not 'arranted by states! ii! "ncroachment of center even in the Fstate list@ matters! iii! Inade<uate funds allotted by center and the encroachment of planning commission in states revenue! iv! &rbitrary use of article +.0 by the Cnion -ovt! on the state governments! %here are number of instances for the center toppling the state governments 'ithout valid reasons! v! -eneral complaints are also there on center on the matters of hostile attitude and political dishonesty on states development and share of foreign e8change to states7 une<ual and biased financial assistance and sanctioning po'er pro/ects7 development grants and so on! %he cry for F tate autonomy@ increased during the non-congress governments at the center! %he F rinagar conclave@ and FCalcutta conclave@ of opposition parties ruling in states :non-congress parties; put forth eleven-point resolution at the center! %he ar*aria commission@ report in 1644 also have provided many measures to harmoni1e the center-state relations7 include amendment of &rticle +.07 proper selection of -overnors to states by consulting ht estate cabinet7 appointment and transfer of /udges of high courts7 grants and aid to states and so on! &ccordingly7 the Inter- tate Council set up in 1665 is a milestone in improving the center-state relations! Oet7 there are many improvements demanded by states and by the e8perts in this center-state relationship!

+5

&ESSON ( 1: ECONOMIC ENVIRONMEN AN" BUSINESS

&ny e8ternal force is almost uncontrollable! %his is true7 particularly in case of economic environment! %his affects business and also every section of the society! %he business gro'th and economic development go hand by hand! )et us e8plore this relationship! %he economic environment7 as far as a business unit is concerned7 means the price level of factors of productions and their availability7 purchasing po'er of consumers ad the general forces that affect production and e8change activities! In short it is micro a 'ell as micro economic factors related to business decisions! %he economic conditions include nature and conditions in the national and international levels such as natural resources7 income distribution among population7 state of technology7 -ovt!@s economic policy7 entrepreneurial ability7 level of import 9 e8port etc! Rapid changes are ta*ing place in the technological sand economic environments! &dapting these changes is needed for the survival and gro'th of a firm! &naly1ing the ris*s in production <uantity and reali1ing he profit are rather difficult tas*s of the economic conditions are not properly understood! In this process7 getting consumers@ acceptance7 'inning competitive strategies and developing ne' products n terms of cost are the vital issues! "conomy is a comple8 and dynamic environment and it affects various business decisions! In turn7 the economic gro'th ta*es place 'hen more and more business opportunities are effectively utili1ed in a society! %hat is the productivity and ability in technological adaptation of business units7 'hich help economic development! ECONOMIC #AC ORS AN" BUSINESS 1. CAPI A&

&lmost every *ind of organi1ation need capital in the form of machinery7 building7 inventories of goods7 office e<uipments7 tools of all *inds7 and cash! Cash resources may be generated 'ithin an organi1ation out f profits7 but organi1ed enterprises are usually dependent for capital re<uirements on various outside sources! *. &ABOUR

&nother important element of the input side of the economic environment is the availability7 <uality and price of labour of all *inds! In some societies7 untrained 9 uns*illed labour may be plentiful7 'hile highly trained labor is in short supply! "ngineers may be scarce at one place and plenty at another! %he price of labour is also an important factor! %he rise of 'ages in the Cnited tates has often caused cost problems for the &merican producer 'ho could sell in many foreign countries! In India7 the 'are rates are very lo' 'hen compared toe h Cnited tates and the countries of =estern "urope and =estern &sia! %herefore7 the price7 <uality and availability of labour affect the production very much!

+1

-.

PRICE &EVE&S

%he input side of an enterprise is clearly affected by price level changes! If prices go up rapidly7 the problems created in the economic environment on both input and output sides are more! Inflation to some e8tent helps business but has highly disturb in effects on organi1ations 'hen they are galloping! 4. PRO"UC IVI .

Productivity means the ratio of input and output! Productivity increases 'hen input is decreased and output is increased! =hen productivity is high7 the price can be lo'! &ctually the reason that Japan and the Cnited tates are able to compete in the 'orld mar*et has been its productivity! Do'ever7 productivity is partly dependent on the state of technology! %hen technology improves7 productivity also develops7 that results in economic developments! 5. EN REPRENEURS AN" MANA)ERS

&nother ma/or economic input is the availability of high <uality entrepreneurs and managers! &n entrepreneur is a person 'ho sees business opportunity7 obtains the needed capital7 *no's ho' to put together an operation successfully and has the 'illingness to ta*e a personal ris* of success or failure! %he availability of intelligent and able managers has considerable effect on economy! %his availability and that of entrepreneurs7 is correlated 'ith the social environment7 particularly in the areas of education7 and cultural development! 0. )OVERNMEN #ISCA& PO&IC.

)i*e'ise7 another important element on the economic input side is the nature of government polici+es! %hese aspects of the political environment have their economic impacts on all *inds of organi1ations! -overnment@s fiscal policy for e8ample has impact on business and non-business operations7 as the ta8 affects every segment of our society! It must be ta*en into consideration by managers that all he decisions7 policies7 programs and la's of government are influencing the business decision! 2. CUS OMERS

An the output side of any enterprise7 there are customers! =ithout customers7 of course7 a business cold not e8ist! %o succeed in 'inning customers@ acceptance and in overcoming the forces of competition business units tend to *eep prices7 costs and profits lo'! %he output of business :products9services; is directed to satisfy the consumers! %he purchasing pattern of those consumers depends upon income level7 standard of living7 level of savings and buying capacity of money 'hich are determined by the economic conciliations of the country! %hus7 there are economic factors affecting both input and output side of business7 moreover7 the general economic planning7 controls7 foreign trade7 foreign debt etc!7 are also have indirect influence on business units!

+(

&ESSON ( 11 ECONOMIC S.S EMS AN" BUSINESS

%he fundamental ob/ective of economic system is to obtain the possible amount of human satisfaction to its member from the available resources! But there are differences in the method of achieving this satisfaction! the differences can be understood by e8amining the agencies 'hich are permitted to o'n and utili1e the productive resourcesK e8tent of individuals@ initiative permitted in the economic activityK and by e8amining the process of price determination! &ll these 'ill determine the nature of economic system! %he basic economic systems are *no'n as 1! (! +! capitalist economic system communist economic system and mi8ed economic system

%he institutional structure7 the manner of functioning and the problems in each of the above economic systems are different! )et us discuss them! 1. CAPI A&IS ECONOMIC S.S EM

%he capitalist economy represents a system of economic organi1ation in 'hich the instruments of production are o'ned by individuals and associations! %hey are used for ma*ing profit! %hus7 the essence of the capitalist economy is the private o'nership of capital and the o'ner to utili1e it for various purposes! Ather social aspects li*e freedom of religion7 freedom of speech7 free press7 and democratic government are associative parts of capitalism! 8e ,8ie@ ,8+r+,teristi,s o@ ,+;it+%ist e,onomA +re + @o%%oBs a; b; c; d; e; f; Individuals and associations behave 'ith economic motive of ma8imi1ing profits 'ith the least cost! %hey have e right to ac<uire7 *eep7 use and dispose of the tangible and tangible properties! %here e8ists7 rights of inheritance7 'hich acts as a strong incentive for the accumulation and conservation of 'ealth! Individuals and associations e8ercise their o'n initiative freely in utili1ing their energies and resources! Producers7 consumers and employees compete among themselves7 as the resources ad opportunities are limited! Price7 his invisible hand7 plays a predominant roe in the flo' of the factors and production and consumption!

CAPI A&IS S.S EM AN" BUSINESS In a purely capitalist economy -overnment never interferes in the activities of businessmen! It offer very good environment for the development and gro'th of business! Individual@s ability ad s*ills are suitably re'arded and it gives a good incentive to initiative and creativity of an individual! %he ++

number of sellers and manufacturers are unlimited! %he entry and e8it of manufacturers and sellers are decided by he success or failure of their business! In basis economic decisions-'hat to produce7 ho' much to produce7 by 'hat methods and for 'homare made by producers through the price mechanism7 and 'ith the advantage of their freedom! %hey may ma*e those decisions that 'ill yield profit! But in practice7 many controls7 and compulsions are imposed in the capitalist economic of the modern 'orld! %he governments of capitalist economics restrict the freedom of individuals by 'ay of ta8es7 restrictions on production of certain commodities etc! AN I&&US RA ION ( AMERICAN ECONOM. %he &merican economic system7 although modified by forces li*e la'7 custom7 practice7 etc! consists of all he capitalist institutions described above! &merican people preserve capitalism as their form of economic organi1ation! "very individual is free to utili1e his services7 income and other productive resources as he chooses! But this freedom is restricted by some social problems! Contrary to e8pectations that capitalism helps to maintain the level of full employment7 unemployment to some e8tent has become a permanent feature of C economy! %he -overnment ha to step in to solve this problem by creating additional employment opportunities in its o'n sector and regulate the activities of private enterprise! 8e Ameri,+n e,onomi, sAstem 8+s Ceen ,riti,iDe7 @or t8ree re+sonsE n+me%A ( a; Ine<uality in the distribution of income and 'ealth7 b; -ro'th of monopolistic tendencies7 and c; usceptibility of the economy to depression and inflation! *. COMMUNIS ECONOMIC S.S EM

%his is a contrary system to the capitalist economy! In capitalism7 'or*ing class is e8ploited by employers but communism in turn rests on the labor theory of value7 and establishment of dictatorship of 'or*ing class7 communism is a revolutionary method of attaining @ ocialism@ 'hich means common o'ner ship of all factors of production! &ccording to $ar8@s labor theory of value7 the e8change value of different commodities is determined not by conditions of demand and supply7 but by the amount of Fabstract human labor@ contained in them! But the laborers are paid only the value of the means of their minimum livelihood! %his is *no'n as the F urplus valu4e of labor@! %he surplus value is appropriated by the capitalist 'ho hires labor po'er! In other 'ords7 the capitalist e8tracts the full value of the labor7 but the pays only the amount7 'hich is /ust sufficient to *eep the 'or*er and his family alive! Further7 this e8ploitation is intensified by introducing machinery and other improved processes! 8e ,8ie@ e,onomi, @e+tures o@ @u%% ,ommunism +re +s @o%%oBs: 1! (! It comprises entirely of 'or*ers e8cept those 'ho are physically and mentally incapacitated! %he society o'ns in common the natural and man-made instruments of production! +,

+! ,! .! 0! 2!

%he society is classless %he 'or*ers possess the entire product7 'hich they have turned out as no surplus values being received by any individual! "ach individual is motivated to perform his part according to his full ability! %he increased productivity of society assures each member of getting 'hat he needs! Private possessions in the form of capital or consumer goods are neither possible nor necessary!

COMMUNISM AN" BUSINESS Individuals are not permitted to 'on profit-ma*ing private property or to engage in commercial private enterprise! But they are allo'ed to o'n durable consumer goods such as automobiles7 horses7 furniture7 small tools and e<uipment7 etc! o7 there is no scope for private sector industries in a communist nation! &ll manufacturing industries are o'ned and managed directly by the -overnment e8cept the producers cooperative 'hich are significant only in respect of small scale consumer@s goods industries and handicrafts! AN I&&US RA ION ( C/INESE ECONOM. In China7 all manufacturing industries are o'ned and managed directly by the -overnment! But the producers cooperatives are e8empted from this rule! %he second important feature is economic planning! &ll ma/or economic decisions regarding production and distribution are all determined by the Central Planning &uthority! %he prices of commodities and services are determined by the planning authority7 and they are not left to the free play of mar*et forces! &nother important feature of this economy is the absence of competition as it is understood in capitalist economies! %he -overnment has virtual monopoly in almost every sector of the economy! %he state has guaranteed the right to a /ob! It ha also underta*en to promote the collective 'elfare of the society by providing free of charge medical7 educational and other social security measures! -. MI!E" ECONOMIC S.S EM

%he 'ide disparities in the distribution of income and 'ealth in a capitalist economy had led to demand for more -overnment intervention! %he people are of the opinion that capitalism might be able to establish the political democracy7 but it cannot establish >true democracy? consisting of economic and social democracies! &s such7 movements in the name of democratic socialism have been started 'ith a vie' to control the adverse effects of capitalism and 'ithout going for cent percent nationali1ation! %he countries7 'hich have implemented the principles of democratic socialism7 have come to be *no'n as having mi8ed economic system! %he most important decision in the mi8ed economic system is planning! "very sector of the economy is planned 'ith regard to the allotment of resources7 targets7 methods to be employed and period 'ith in 'hich the targets have to be achieved!

+.

&nother important feature is social security! In fact7 in the countries having mi8ed economic system7 efforts are being made to introduce a comprehensive scheme of social security measures to provide greater economic security to the individuals! MI!E" ECONOM. AN" BUSINESS In a country having mi8ed economic system as their 'ay of life7 there are t'o sectors in business7 vi1!7 private and public! Private sector consists of industrial underta*ings7 'hich are o'ned and managed by private individuals! Public sector consists of industrial underta*ings7 'hich are o'ned and managed by the -overnment! %here is also Joint ectors in 'hich both the -ovt! and private /oin their hands! Do'ever7 -overnment 'ill have its o'n control over the private sector industrial underta*ings through many la's and directives! For e8ample7 industries in the private sector 'ill not be allo'ed to gro'7 very large in si1e7 'hich 'ill hamper the gro'th of other small industrial underta*ings in the same industry! It is only in the interest of the general industrial development of the nation7 'hich 'ould ultimately result in the e<uitable distribution of income and 'ealth! AN I&&US RA ION ( IN"IAN ECONOM. %he fundamental ob/ective of economic planning in India is >raising living standards and opening up to the people ne' opportunities for a richer and more varied life!? %he ob/ectives of economic planning have been given shape and color by the Industrial Policy Resolutions of 16,4 and 16.0! %he underlying idea in the Industrial policy7 16,4 'as a desire to control the capitalistic form of industrial organi1ation and to introduce a socialistic form of industrial frame 'or*! %he policy laid do'n that the distinction bet'een the public and private sectors is one of relative emphasis and these t'o sectors are to be vie'ed as parts of single mechanism! Do'ever7 private enterprise functions 'ithin the conditions created largely by the tate! -overnment policy 'ould influence private decisions through fiscal measures7 licensing and7 to the e8tent necessary through direct physical allocation so as to promote and facilitate the reali1ation of the targets proposed in the national plans! It can be noted from the recent e8perience that phased program of nationali1ation is underta*en since independence! &fter Independence7 many commercial ban*s7 general insurance business7 coal mines etc!7 'ere nationali1ed! Beside nationali1ation7 the public sector has been enlarging its role in the economy! In the /oint sector enterprises7 controlling interest is usually 'ith the -ovt! =ealth %a87 gift ta87 estate dutyK curbing restrictive trade practices of $anaging &gencies are prominent among the means used to contain ine<ualities in the economy! %he above discussion of economic systems and their impact on business reveals that capitalist economic system and mi8ed economic system allo' private business 'ith a fe' restrictions and guidelines7 'hereas communist economic system does not permit any scope for them! %he restrictions on the business in the capitalist economic system are much less in number than the mi8ed economic system!

+0

BC I3"

)" A3 1( "C%AR &3D "CA3A$IC O %"$

=e have discussed7 in the earlier chaptersK the meaning of economic environment and the types of economics system can be easily identified by the e8tent of using the follo'ing business sectors in utili1ing the economic resourcesK they are 1 ( + Private sector Joint sector Public sector

the communist economy uses only the public sector business units 'hereas the capitalist economic system uses mostly the private sectors units Kthe mi8ed economyK as the compromise of the above t'o systems Kused both private and public sectors and in addition /oint sector business unit K'e can no' analy1e the nature and role of these sectors in economyK 1 PRIVA E SEC OR

%he democratic countries li*e C! !&! and 'est -ermanyK 'hich adopt capitalist economic systemK achieved remar*able economic development through the great efficiency of private sectorK the mi8ed economies too believe and allo' the private sectors accelerating economic gro'thK Private sector means the industries completely o'ned and managed by private individualsK they e8ploit the natural resources to produce the goods and services for the consumers stimulated by profit motive! %he individual entrepreneurs 'ho have to s*ill7 interest7 initiatives and ability to organi1e7 start the private sector units! $ostly they get success because they efficiently and economically use the resources for increasing their profits and private property! %heir decisions are influenced by competitions7 price mechanism and mar*er economy! Role of profit sector in economic developmentM $ost of the capitalist countries have reached economic advancement by the e8tensive use of private sector! %he mi8ed economies li*e India retain selected industries 'ith the public sector and let other business units in the hands of capitalists for improving economy! %he recent Indian -ovt! Policies aim at liberali1ing controls on private sector to e8pedite economic gro'th! %he private sector helps rapid economic development in the follo'ing 'ays M 1! (! +! &s the private businessmen are mainly aimed at profits7 they manage and use the resources in the most economic 'ay! %hey efficiently control the cost of production and supply and fi8 lo'er prices! ince there is competition in most of the private business they are careful in giving <uality products at competitive rates! %hey achieve this by the e8tensive use of efficiency and control! %he survivals of the private units depend upon the consumer@s acceptance of their products! %herefore they find out e8act needs7 'ants and tastes of consumers and try to satisfy them 'ith modern Research and Development! %hus the consumers get variety of goods and services for their choice! Private sector functions 'ith time bound programs and increases the turnover of capital! %his leads to increased money circulation and in come levels in the society! +2

,!

.! 0!

2! *.

Private sector uses efficient managers7 staff and 'or*ers! %hey are assigned 'ith clear targets and controlled by close supervision and fi8ed responsibility! %he inefficient and 'ea*er units are lost in the competitive mar*et! %herefore the most efficient firms alone survive and e8pand rapidly! %hey invest money in good opportunities and utili1e all the possible chances to convert into business transactions! Dence they stimulate economic activities to a great e8tent! %he productivity is very high and the technological gro'th is fast in private sector 'hich are essential for economic advancement!

FOIN SEC OR

MEANIN) O# FOIN SEC ORS In simple terms7 the /oint sector is a form of partnership bet'een the private sector and the -overnment! J!R!D! %ata defines a /oint sector as one that is intended to be a form of partnership bet'een the private sector and the -overnment in 'hich state participation in capital 'ill be not less than (0 per cent7 the day-to-day management 'ill normally be in the hands of the private sector e8ercised by a board of directors on 'hich -overnment is ade<uately represented! ORI)IN O# FOIN SEC OR EN ERPRISES In pre-independence days7 several industrial enterprises 'ere set up in the princely states of $ysore and Dyderabad 'ith public participation in e<uity! oon after Independence7 the %ata@s pioneered government-private sector participation 'hen they created &ir India International /ointly 'ith the -overnment of India! But the seeds of the /oint sector are to be found in the concept of the mi8ed economy envisaged by the Industrial Policy Resolution of 16.0! =hich classified all industries into three categories as follo'sQ 1! chedule & industries being the e8clusive responsibility of the tateK (! chedule B industries being progressively state o'nedK and +! chedule C industries left ordinarily for the initiative and enterprises of the private sector! oon after the policy resolution of 16.07 a number of companies floated by the -ovt!7 of India in collaboration 'ith the private sector by sharing management and control! Prominent e8amples are as follo'sM 1! (! +! ,! Cochin Refineries )imited $adras Refineries )imited $adras Fertili1ers )imited7 and -u/arat Fertili1ers Company limited!

%he Industrial )icensing Policy In<uiry Committee popularly *no'n as Dutt Committee :1606; recommended the creation of the /oint sector on the basis of the 16.0 Resolution! Dutt Committee Report appeared in 16067 a number of tate -overnments have procured licenses for industrial pro/ects for a 'ide range of products and have promoted companies 'ith private participation in o'nership and management!

+4

RA IONA&E AN" SCOPE O# /E FOIN SEC OR It is important to understand the ob/ectives and the basis reasons for the development of the /oint sector! %hey are stated belo'M 1. SOCIA& CON RO& OVER IN"US RIES

%he /oint sector is e8pected to ac<uire a lot of anto-monopoly role and control the e8pansion of the leading industrial houses! Besides7 the /oint sector can be used to promote socio-economic ob/ectives of the -overnment7 such as maintenance of reasonable prices7 regional dispersal of industries7 development of e8ports etc! Joint sector could thus be vie'ed as a tool for social control over industry7 'ithout resort to outright nationali1ation! *. #AI&URE O# PRIVA E AN" PUB&IC SEC ORS

Both private a public sectors have sho'n certain limitations! Dence7 a combination of the t'o sectors in the form of /oint sector is advocated! It is recogni1ed that the private sector has built up a reservoir of good technical and managerial talents! Anly -overnment can contribute very huge financial resources to set up large industries! %he problem can be solved if there is a /oint sector! -. ACCE&ERA ION O# ECONOMIC )RO6 /

Private investment is not coming in a big 'ay in the basic and essential industries! By providing public support and patronage7 the /oint sector may encourage small and medium entrepreneurs7 help them mobili1e resources7 to procure machinery and e<uipment and built up confidence to face the uncertainties of modern business! %his 'ill help accelerate economic gro'th of the country! 4. S A E4SPONSORE" IN"US RIA&I5A ION

%he -overnment decides on the choice or pro/ects7 'hich are desirable from a social point of vie'7 and persuades private parties to /oin hand! o the /oint sector may be regarded as a part of the strategy of state-sponsored industriali1ation! 5. E! ENSION O# PUB&IC CON RO&

%he /oint sector 'ill enable the -overnment to enter the highly profitable lines of industrial activity7 reduce the dominant economic po'er of the large industrial houses and increase social control over industries! It is a form of partial nationali1ation! 0. MOBI&I5A ION O# EC/NO4MANA)ERIA& RESOURCES

In the last fe' decades the private sector has e8panded considerably! Just as the /oint sector can be used to mobili1e financial resources7 it can be used to mobili1e scarce human resources as 'ell!

+6

PA

ERN O# O6NERS/IP

%he nature of o'nership pattern 'ill depend upon 'hether the pro/ect is planner and initiated by the private sector partner7 or government7 'eather the private sector partner is a leading industrial house 'ith large financial as 'ell as managerial resources7 'hether technologically the pro/ect is highly comple8 or not7 'hether it is highly profitable or not7 etc! %he -overnment may normally see* partnership 'ith an established company or 'ith a large business house7 'henever substantial amount of capital and technological competence are re<uired! PA ERN O# MANA)EMEN

$anagement involves t'o ma/or function M policy ma*ing and operational management! %he role of policy ma*ing in the /oint sector rests generally 'ith the board of directors7 'hile the day-to-day management rests 'ith the managing director and his team of managers! %here is considerable difference of opinion on the management pattern of the /oint sector enterprises! 8ere +re t8ree tA;e o@ Co+r7 o@ 7ire,ts in t8e eGistin' Hoint se,tor un7ert+<in': 1! (! +! "nterprises 'ith a ma/ority of non-official directors! "nterprises 'ith ma/ority of -overnment nominated directors! "nterprises 'ith directors in proportion to the e<uity o'nership of the participants!

%hose 'ho believe in the efficiency and dynamism of private sector management advocate that the board of directors 'ould consist of nominees in proportion to the e<uity o'nership of the participants! Further they 'ould li*e as -overnment ot e8ercise its influence on the policy-ma*ing role of management and leave the operational management to the private partner! )OVERNMEN POSI ION ON /E FOIN SEC OR %he /oint sector concept 'as accepted by the -overnment of India7 through its industrial licensing policy7 1625! %he -overnment reiterated its position in its Industrial Policy decision of February7 162+! Four prints emerge here M 1! (! +! ,! Joint sector units 'ould be created7 but they have to conform to -overnment@s social and economic ob/ectives! %he /oint sector 'ill be allo'ed in areas from 'hich the private sector is e8cluded under the e8isting policy! %he /oint sector 'ill be a promotional instrument in the case of ne' and medium entrepreneurs! In all the different *inds of /oint sector units the -overnment 'ill ensure for itself and effective role in guiding policies7 management and operations!

%he concept of the /oint sector is a compromise bet'een the alternative of total nationali1ation and free enterprise economy! %he implementation of the /oint sector 'ill alone demonstrate 'hether the tate can use this instrument to further the professed goals of social policy!

,5

-.

PUB&IC SEC OR

%hough the scope of the state enterprise in the industrial economy of India 'as limited in the preIndependence period7 it has increased very much in recent years! %he philosophy and program of action for the public sector are incorporated in the 'ell-*no'n Industrial Policy Resolutions of 16,4 and 16.0! %he Directive Principles of tate Policy contained in the Constitution also re<uire the tate to ensure >that the o'nership and control of the material resources of the community are so distribute at best to sub serve the common goodK that the operation of the economic system does not result in concentration of 'ealth and means of production to the common detriment! Dence7 for achieving planned and rapid economic development7 industries in 'hich the scale of investment is more7 'here the investment is ris*y and uncertain and 'hich are in the nature of basic and strategic importance have been assigned to the public sector! OBFEC IVES %he ob/ectives for 'hich the public sector has come into e8istence in this country are of t'o type :I; the macro ob/ectives and :II; the micro ob/ectives! %he macro ob/ectives are those7 'hich public enterprises are to pursue each in its limited 'ay! %hese areM 1! (! +! ,! .! 0! 2! 4! 6! 15! 11! %o promote rapid economic development by filling critical gaps in the industrial structure K %o provide basic infra-structural facilities for the gro'th of the economyK %o underta*e economic activity strategically important for the gro'th of the country! %o achieve balanced regional development and dispersal of economic activity! %o reduce disparities in incomeK %o avoid concentration of economic po'er in a fe' handsK %o e8ercise social control and regulation of long-term finances through public financial institutionsK to control over sensitive areasK %o attain self-reliance in different technologiesK %o enhance the employment opportunitiesK and %o increase e8ports and earn foreign e8change!

%here are also micro ob/ectives the specific ob/ectives for the functioning of individual public enterprises! )RO6 / O# PUB&IC SEC OR IN IN"IA %he gro'th in public sector investment over the years has not only 'idened the scope for increasing employment and industrial output7 but has laid greater stress on social 'elfare industrial activity! Investment in the public sector in India is very large in magnitude! Investments are made for creating the basis-infra-structure and also for running industrial concerns! Public sector underta*ing include a varied range of activities li*e mining and metallurgy7 electrical goods7 machine tools chemicals7 petroleum and oils7 aviation and shipping7 industrial financing etc! %he total investment as on +1st $arch7 162. 'as at about Rs! 2(01 cores in 1(6 underta*ings besides ,1

an amount of about Rs! 157555 cores in departmental underta*ings such as rail'ays7 posts and telegraphs7 overseas communication service and #olar gold mines! %he follo'ing table gives an idea of gro'th in public sector investment! "+te &pril 16.1 &pril 16.0 &pril 1600 &pril 162( &pril 162. &pril 1645 41 &pril 1641 - 4( No. o@ enter;rises 0 (1 2, 151 1(6 1.2 105 Investments (Rs. In ,ores) (6 41 (,1. .5.( 2(01 (,412 (6145

Ba*aro teel )imited is the biggest company not only in the public sector7 but in the country as a 'hole and accounts for a accounts for a total investment of Rs! 15,0 cores! Dindustan teel )td! Comes ne8t 'ith an investment of Rs! 15(.! PAR&IAMEN AR. CON RO& %he 'or*ing of the public sector is sub/ected to Parliamentary control! %he public sector is accountable to the Parliament! In vie' of the si1able investment in the public sector enterprises7 the Parliament has greater duty and responsibility to see that the community@s funds are better reali1ed! PROB&EM O# PRICIN) IN PUB&IC SEC OR COMPANIES %he Price policy of a public corporation e8tends to :i; ma*e neither a loss nor a profit after meeting all capital chargesK and :ii; the prices it charges for different services should correspond to relative costs! It should be agreed that there can@t be only uniform pricing policy for all public sector enterprises! &rriving at an uniform price policy for all public enterprises is neither practicable nor desirable! But at the same time7 it is necessary that public sector underta*ings should adopt sound practice,s of business management! & public enterprise7 even if it is departmentally run7 should be treated as a separate entity! %hese enterprises should be re<uired by statute to set aside ade<uate provisions for depreciation! $ost of the public enterprises are seen in public utilities or producer goods industries7 'hich yield a lo'er return than in consumer goods industry! %heses public enterprises adopt a deliberate policy of lo'er prices! %he supply of electricity at lo' prices to industrial concerns7 and supply of 'ater for irrigation at no profit no - loss basis and cheap credit by Industrial Finance Corporation may be cited as e8amples of such policy! =hile formulation the price policy7 any public underta*ing should *eep in mind the follo'ing principlesM 1! Prices should be fi8ed so as to enable the underta*ing to recover the full cost of production and also a reasonable return on the capital employed! ,(

(! +! ,! .!

In the public utilities and services7 importance to be given to output than to return on investmentM the former being e8tended up to a level at 'hich marginal cost is e<ual to price! Prices should be such7 'hich e<uate demand and supply! %he price structure should lead to most economical use of all scarce resources! %he enterprises should aim at ma*ing substantial amount of contribution to provide for development out of their o'n earnings!

ome public enterprises hold the monopoly of the product or service imply because they are in a monopoly position they can@t increase the prices of such commodities or services as the burden 'ould fall on the consumers 'ho are already contributing by 'ay of direct ta8es! MANA)ERIA& PROB&EMS IN PUB&IC SEC OR %he productive efficiency of public underta*ings 'ill depend substantially on the ability of those 'ho are concerned 'ith the management of these underta*ings! By and large7 the manager of a government underta*ing has to face the same set of problems that the manager of comparable private unit has! $any committees and commissions have stressed the need to select the right men to run the public sector underta*ings! Public companies have brought the rules7 procedures7 and methods of 'or* and even attitudes of mind from their parent organi1ation7 i!e!7 civil services! $ost of the public sector units are suffering from shortage of professional managers! %he staff and chief e8ecutives for the public company have been dra'n from the &dministrative service7 but their abilities are dependent on their bac*ground e8perience and managerial culture! =e cannot blame these officers! Perhaps their preconditioning as professional public servants ma*e them more 'illing to try to 'or* 'ithin the old procedures rather than strive to get them changed! $anagers in the public enterprises should be given clear commercial targets to be achieved in timebound programs! &fter this they must be given the freedom of action7 and must be /udged by their performance alone! In Ougoslavia7 'here public sector occupies almost the entire industrial scene7 the manager is given the necessary freedom to prove his 'orth! & similar managerial autonomy can be introduced in India as 'ell! %he use of the personnel in management is not to the optimum because of either 'orng placement or inade<uate utili1ation! In several units at an enormous cost they are put on the /obs 'hich have nothing to do 'ith their speciali1ation! &s a result of this7 talents are being 'asted7 or optimum use is not being made of them! &nother obstacle to development of the personality of each public underta*ing is its close relationship 'ith the parent ministry or underta*ing! &s the underta*ing is responsible to the parliament7 everyone in the parliament begins to thin* it is the ministry or the department7 'hich has to manage the underta*ing! In most cases7 the public enterprises are denied the autonomy7 'hich they need for efficient management! Interference of the $inisters even in the day to day affairs of the underta*ings have been reported! %o ensure proper management of the concerns in the public sector7 some changes have to be implemented! Professional managers should be appointed on all managerial cadres! For sophisticated positions7 recruitment should not e confined to local people only! %o Chec* the flight of talented personnel salary structure and other monetary incentives need be revised! Promotions should strictly ,+

be on the basis of merit and not seniority! Politicians should not interfere in all the matters of the underta*ings! =ithin the enterprise the divisional ob/ectives and department! %hey should be assigned to the divisional or departmental e8ecutives for implementation! uch managerial process 'ill lead to greater accountability of the individuals 'ho are entrusted 'ith specific responsibilities! It finally results in improved management performance! AR)UMEN S #OR /E PUB&IC SEC OR %he follo'ing are the arguments put for'ard by the supporters of public sector! 1. SERVICES MO IVE

%he main idea behind the setting up to public companies is to serve public7 the ma8imum e8tent! If the *ey industries are given in the hands of the private people7 they 'ill e8ploit the resource to their o'n advantages! Cltimately7 the public 'ill suffer! *. 1UA&I . O# /E PRO"UC

-overnment can invest huge amounts of money in Research and Development Pro/ects and thus the <uality of the products can be improved! -. #AIR REA MEN O# /E 6OR$ERS

In the -overnment Industries7 =or*ers are paid good 'ages and they are provided 'ith good 'or*ing conditions unli*e the private sector industries! 4. PRICIN) PO&IC.

Public sector enterprises fi8 the prices for their commodities reasonably lo' unli*e the private sector industries! It is due to their policy of service motive! 5. ASSE S O# /E PEOP&E

-overnment companies are the assets of the nation! %he real o'ners of the -overnment companies are people! =hen these assets gro'7 naturally the properties of the common people also gro'! 0. SOCIA&IS IC PA ERN O# SOCIE .

%he ocialistic Pattern of society underlines the need for public sector industries! %o achieve this ob/ective7 it is necessary that public sector enterprise sho' gro'th in number and si1e! 2. SE&#IS/ PRIVA E SEC ORS ector itself has been an important reason for the need to

)imitations and &buses of private encourage public sector!

AR)UMEN S A)AINS PUB&IC SEC OR %he follo'ing are the arguments put for'ard against public sector! ,,

1! &+,<s Person+% C+re: %he officers of the government companies do not have much interest in their 'or* because there is no on to effectively supervise them! %his not the case in private sector! (! Ine@@i,ien,A: In government enterprises7 incentives are not provided to those 'ho are efficient in their 'or*7 promotion is a'arded on the basis of seniority and not by merit! +! Mism+n+'ement: %he government enterprises7 lac*s in time-bound managerial goals and the funds are misused! %hey lac* responsibility and accountability! ,! Un7eruti%iD+tion of capacityM the public sector does not ma*e full use of its capacity! It results in lo' production and high cost! %he government is very much conscious of the shortcomings of public enterprises! ome actions have already been ta*en! It is needed to have a cost-conscious and serious thought about the improvement of the 'or*ing of the public sector enterprises!

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&ESSON ( 1MU& INA IONA& CORPORA IONS

%he present day is mar*ed as the period of evolving global mar*ets! $ost of the developing countries have opened their doors for this change 'ith Fred carpets@ spread for foreign investment! ince 1665@s the globali1ation concept is accepted under the pac*age of Fne' economic policy@ -lobali1ation means allo'ing free trade among 'orld countries7 giving out restrictions! In this liberal foreign trade scenario the multinational corporations play a dominant role! CONCEP O# MU& INA IONA& CORPORA IONS (MNCIS) >&ny business corporation in 'hich o'nership management7 production and mar*eting e8tend over several national /urisdictions is called a multinational Corporation?! %he term $3C is used to identify Fan enterprise7 'hich controls assets-factories7 mines7 sales and other offices in t'o or more countries@! %he multinational corporations are also called %rans national corporations :%3C@s; or FCosmocorps@! %he total value of the individual assets and turn-over of $3Cs run into billions! Prod! Raymon Eenven says $3C is one 'hose total sales turnover is over 155 million dollars@ $3C@s have three basic characteristicsM i; international operations ii; collective transfer of resources and iii; o'nership 'ith control over the economic activities of the foreign affiliates! ORI)IN O# MNCS Inflo' of foreign private capital in the colonies by Imperial Po'ers 'as and usual practice! Ariginally many /oint-stoc* companies li*e "ast-India company established their trade in number of countries crossing continents! But later their ob/ect 'as not only trade but also to establish their rule over the territories 'hich very much helped their trade! 3o' the style of $3Cs is different it is to meet the local demand 'here the investment is made by their advanced technology and resources and by 'idening mar*ets to ma*e profits! %he $3Cs gro' by research and development and by effectively competing 'ith local products! %he gro'th of $3Cs 'as rapid during 16(5@s and after 1665@s! In the later phase7 C & ventures began to dominate among $3Cs! %he other $3Cs mostly belong to C!#! France -ermany7 follo'ed by Japan! &mong these countries7 the top $3Cs of C & alone occupies more than .5 percent share in 1625@s! IMPOR ANCE O# MNCS %he $3Cs create internationali1ation of production by transforming htge ra' materials produced in one group of countries 'ith the labour and plant facilities in other to manufacture goods and sell them in different mar*ets! %he fruits of science in the form of instant communication7 <uic* transport7 computers7 modern managerial techni<ues etc!7 have been helping $3Cs and also the hosing countries to derive some benefits! %he functioning of $3Cs develop ne' /obs7 ne' 'ealth and higher standard of living in less developed nations! %hey facilitated speedy flo' of capital 'ith technology! %he economic and social conditions of hosting countries are also improved7 by the operation of $3Cs

,0

By signing the -&%% :-eneral &greement on %ariffs and %rade;7 India agreed to introduct F)iberali1ation@7 Fprivati1ation@ and F-lobali1ation@ in her economic policy! Conse<uently the $3Cs are 'elcomed to shoulder our economic gro'th by their ma/or investment pro/ects! %his include po'er pro/ects ma/or infrastructure industries li*e transport7 communication B ban*ing and large manufacturing units! Dence our economic activities are geared up and out domestic business units 'ill enter into competition 'ith $3Cs by increasing productivity! %he importance of $3Cs can also be understood from the follo'ing advantages of $3Cs! A"VAN A)ES O# MNCS 1! %he less developed countries are industrially and technologically bac*'ard! %hey can@t afford for Research and Development :RBD; activities! %herefore 'hen $3Cs are allo'ed they can invest their large resources in RBD7 'hich 'ill help for the economic gro'th of developing nations! %he $3Cs 'ith their Fbrain and muscle@ can save the bac*'ard countries from destruction7 by transferring technology management s*ills7 innovations and capital resources! %his 'ill create more and more industries and employment opportunities in bac*'ard economies! $3Cs internationali1e production and mar*eting functions! %hey utili1e cheaper ra' materials7 labour and facilities of some countries and mar*et in many other countries! %hus the 'orld trade and global economic activities are stimulated! $3Cs promote e8ports of developing countries and increase inflo' of foreign e8change7 'hen they invest and establish large industries and increase volume of output through improved technology! &lso they plough bac* their profits in the host countries 'hich 'ill again increase production! %he efficiency of domestic business units is increased by the competition from $3Cs! %he inefficient units are driven out! By the F urvival of the fittest@ concept every unit is forced to increase its efficiency! %his 'ill improve the <uality of economy and lead to progress! %he social and economic conditions of less developed countries are improved by $3Cs! %hey develop entire infrastructure and also social amenities li*e schools7 hospitals7 housing etc!7 for the conduct of their business!

(!

+! ,!

.!

0!

"ISA"VAN A)ES O# MNCS %he 'ea*nesses of $3Cs or the evil effects of allo'ing them in less developed economies are discussed belo'K and the criticism of ruthless e8ploitation of $3Cs and their effort to establish economic imperialism7 can not be neglected! 1! (! +! Inspite of specific agreements on payment of royalties7 dividends etc! the $3Cs ac<uire enormous po'er in host countries7 'hich they use to ensure a free out flo' of funds across international borders! %he $3Cs use their oligopolistic po'er only a fe' competitors; in ma8imi1ing their profits and repatriate them to their home countries! %he ooutflo' of foreign e8change by 'ay of their profits is ever increasing in ratio of inflo' by 'ay of foreign investment! %he $3Cs try to corrupt the 'or*ers through higher 'ages and incentives and the officials and rules of host countries by bribery commission7 lobbying etc! ,2

,! .! 0! 2!

4!

$3Cs develop their economic dominance on host countries and also force their o'n culture spoiling home cultures and brings do'n the moral values! %he governments of host countries can not chec* the activities of the $3Cs especially their malpractices in ta8 evasion7 misuse of foreign e8change7 corrupting the local public7 cut-throat competition advertisement 'ars and so on! $3Cs do not create large employments in practice! =ith advanced technology and automation they utili1e little labour force! &lso 'hen the small and medium industries are thro'n out by the competition of $3Cs the unemployment become still vigorous! In actual practice7 the less developed nations reali1ed that $3Cs hesitate to transfer advance technology needed for the host country and to train7 local personnel! &lso they interfere in national and political affairs and even they influence and change the political po'ers of the local governments to their favour! $3Cs Fdrain off@ developing countries n the long run by 'ay of monopolistic position and profits! It is critici1ed that $3Cs are the ne' form of e8ploiting tools of Imperial po'ers! %he top $3Cs at present have sales turnovers more than the total -DP@s :-ross Domestic Products; of some developing countries!

MU& INA IONA& IN IN"IA India had better e8periences 'ith $3Cs! %hey have started dominating in tobacco7 toiletries7 pharmaceutical7 cosmetics7 foodstuffs7 petrochemicals and many other manufacturing industries! %he government@s policy on $3Cs is not clear! $3Cs in India helped in capital tPfromation and in increasing efficiency of competing firms! But they repatriated large profits :Rs 0+, crores from 160. to 1625;! %hey did not sho' interest in increasing our e8ports! %hey have imported on fifth of total e8ports! %hey 'ant to ma*e use of our 'ide mar*ets and ma*e huge profits! %hey never sho' their true balance sheets and they do not develop R B D here7 as e8pected! %he $3Cs produce goods of less needed technology li*e vanaspathi7 toothpaste7 shampoo7 soaps etcK they hesitate to invest in basic industries7 'hich re<uire long gestation period! In our country7 the affiliates of multinationals li*e Bata7 Pfi1er7 iemens7 Cnion carbide7 Phillips India7 Dindustan lever7 Colgate Palmolive7 Dunlop etc!7 en/oy a highly protected mar*et 'ith high profitability! &t present7 India have become much depending on $3Cs and cannot restrict or control foreign capital! =e have the necessity of protecting home industries 'hile admitting $3Cs7 to protect our employment7 self-reliance and economic gro'th! %his 'ill be a tough tas* for our government in the full form of globali1ation in the days to come!

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&ESSON ( 14 EC/NO&O)ICA& ENVIRONMEN AN" BUSINESS:

%he modern society is living in an age of science and technology! cience is the body of *no'ledge and technology is the application of *no'ledge in production! Basically technology refers to the *no'ledge of ho' to do things7 so the term F*no' ho'@ is also used! >& technological change? is usually defined as >that results in a shift in the overall production function?! %echnology is a macro level term used to denote the considerable changes in business activities and in the economy to advance to the ne8t phase! "8amples for technological changes are invention of steam engines7 and electrically operated engines that resulted in industrial revolutionK the electronic field and no' the computers that help the business activities to gro' in a galloping speed! o7 the technology includes technical advancements7 applications of inventions and innovative ideas! It ta*es the form of ne' methods and procedures in productions function7 entirely a ne' product or improved product features drastic cut n production cost and so on7 %echnology very much influences the gro'th of business and industries and ultimately economic development! It also influences the society! )et us discuss the impacts of technology one by one! IMPAC O# EC/NO&O). ON SOCIE . 1! (! +! ,! .! 0! 2! 4! 6! 15! %echnology improves the standard of living by means of increased employment and personal income! It brea*s /oint family system through the easy mobility of labour! Due to technological development more industrial employment emerged and the rural population migrated to to'ns! %he hold on religions gets rela8ed by the spared of technology! %he mode of living changed and many religious and superstitious beliefs vanished! People adopt rational approach in continuing their socal practices and their outloo* has broadened! =omen get employment and due to their earning capacity their status7 and independent ness increased! $aterialism occupied the place of personal and moral values i!e! people become money minded and even they could not spare much time for the brought up of their children! %echnology has 'idened the gap bet'een the poor and rich and results in unemployment7 'hich is dangerous for the labour oriented countries li*e India! %echnology leads to rapid urban development7 'hich results in congestion7 pollution and ecological problems! It results in e8cess dependence of developing countries on advanced countries for the import of technology! ocial7 religious and cultural reforms too* place <uic*ly due to the 'ide contacts of the people in 'or* place and outside!

IMPAC O# EC/NO&O). ON BUSINESS 1! %echnology facilitates large scale production7 'hich economi1es cost and improves <uality! %herefore the profit 'ill be higher! ,6

(! +! ,! .! 0!

&doption of technology is necessary to meet or 'in competitive price and <uality! =hen a firm fails to adopt improved technologies it may be driven out from mar*et! It increases the efficiency of labourers through division of labour and speciali1ation! ometimes it may result in many employer-employee disputes and 'astage of energies! %his is due to the resistance to technological change by the 'or*ing class! %echnological improvements help to improve the process7 techni<ues and use of materials! %his reduces the time and energy of 'or*ers therefore their performance increases! It is possible by modern technology for the business people to offer variety of goods that could effectively satisfy the consumer needs!

IMPAC O# EC/NO&O). ON ECONOMIC "EVE&OPMEN 1! %echnology is inevitable for the economic progress of any country! By the use of technological improvements7 rapid industriali1ation and industrial output is possibleM it increases national income! (! Due to the e8panding industrial employment opportunities the individual income and the standard of living increases7 'hich is the indication of economic progress! +! It develops the <uantity and <uality of s*illed labourers 'hich is the potential factor for economic progress! ,! It reduces the preponderance of agriculture and develops industrial sector! 3ormally the agricultural productivity is affected by natural calamities and e8cess use of labour input! =hereas industrial productivity could be increased by technology7 and economic progress could be fastly achieved! .! By improving technological applications a variety of ne' products could be offered to consumers! By this a number of ne' business units could also emerge! 0! By developing indigenous technology through research and development7 import of foreign technology could be reduced! %his 'ill reduce the use of foreign e8change reserves7 so the economy can prosper! IMPOR ANCE O# EC/NO&O). O"A. Joseph chumpeter the reno'ned economist enlights the contribution of technology! De said that industrial gro'th depends upon technological innovations and the ability to translate technology into profits! By using modern technology7 ne' and useful good and services are introduced and this facilitates the progress of business in the dynamic 'orld! Based on the broad phases of technology civili1ation have been classified into five societiesM 1; (; +; ,; .; 3omadic society &gricultural society Industrial society ervice society and #no'ledge society!

In the first three stages manual labour 'as used as the primary s*ill! In services society7 the service industries li*e retailing7 ban*ing7 insurance7 health care etc!7 use the manual7 s*illed and intellectual labour! In *no'ledge society7 *no'ledge and information as the ne' form of technology7 play a vital role in serving the human 'ants! %hat if 'hy the computers and the information technology is occupying a greater attention of business 'orld today! .5

&ESSON ( 15 C/OICE O# APPROPRIA E EC/NO&O).

%oday@s business in any country as 'e have already discussed7 is to compete in the 'orld level! It is actually7 competition through technology! o7 every country should develop its o'n technology or atlas it should import from other countries for using in its production and economic gro'th! 3ormally the underdeveloped economies for their industrial gro'th re<uire import of technology from the developed countriesK %hey can not 'ait till their domestic technology is developed as rapid promotion of industries is inevitable! Aur country imports technology in the form of improved machines7 process7 techni<ues7 products and s*ills! In this process the importing countries have to be careful in choosing the right technology! C/OICE O# EC/NO&O). Choosing a technology is a critical decision! =hen 'e have to import a technology it should be a relevant one to the domestic climate! Foreign technology is a double-edged *nife7 unless 'e are careful it may retard our economic development! &n unfit technology7 'hen imported also causes a great foreign e8change burden! #AC ORS O BE CONSI"ERE" IN C/OOSIN) /E APPROPRIA E EC/NO&O). 1. POPU&A ION

%he proposed technology is to be foully analy1ed 'ith relevance to the social and industrial needs of the country! uch technology should develop industries 'ithout affecting employment opportunities especially in a populous country li*e ours! *. ABI&I . %echnical readiness of the country to accept the ne' technology is to be considered! If our technical personnel are not s*illed enough to use the technology properly7 it 'ill not cause the e8pected development! -. #OREI)N E!C/AN)E CRISES

Import of technology is a <uestion of using the scarce foreign e8change reserves! It should not be chosen based on *ic*-bac*s or narro' focused decisions! &lso the out-dated technologies may be cleverly sold by some advanced countries7 for e8ample some medicines that 'ere banned for pollution are e8ported by them! 4. SE&# ( RE&IANCE

Choice should be made such that the technology does not ma*e our country highly dependant on some advanced countries! %his 'ill lead to e8ploitation of our resources through unscrupulous terms and conditions of developed nations! lo'ly our self-reliance may be corded7 by their domination!

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5.

RESOURCE AVAI&ABI&I .

%he proposed technology should be aimed to utili1e surplus resources 'ithin the country7 and not the scarce resources! It may be avoided if the ra' materials are also to be imported! 0. "EVE&OPMEN S A)E

%he appropriate technology may be chosen by analy1ing the stage of domestic technology level! %oo much of advanced technology may not be suitable for a primitive or intermediated level of technology climate! %he importing country should be in a position to put into the effective use of technology7 for e8pediting economic development! 2. PO&&U ION

%he technology that causes pollution may be carefully avoided! %he developing nations usually fail to thin* in the long run to preserve natural and ecological balance of the country! &part from choosing the right technology developing country should try to substitute the import of technology by 'ay fo research and development! Continuous import 'ill ruin the economic self-reliance! o7 very much cautious approach is needed to choose the right technology *eeping in mind the selfish motive of the e8porters and the specific needs of importing counties!

.(

&ESSON ( 10 ACI&) R" PA3 IBI)I%O AF BC I3"

%here 'as a time 'hen ma*ing of profit by the business unit 'as the sole ob/ective! It is no' generally agreed that business should reformulate its ob/ectives in such a 'ay that social goals are put on a par 'ith economic goals! ome people may not reali1e the need for Fsocial involvement@ of business! %oday the operations of business enterprises affect a 'ide spectrum! %he resources they ma*e use are not limited to their o'n of the proprieties but also to the contributions of shareholders7 suppliers7 employees7 local community and the society at large! %hese groups are also affected by the 'ay an enterprise functions! -eorge -oyder rightly points out that >industry today can no longer be regarded as a private arrangement for enriching shareholders it need to embrace many interests 'hich go to ma*e up industry in a common purpose! >-andhi/i? had also stressed this vie' in his Ftrusteeship concept@ of business managers! &lso7 nationali1ation of business by government is possible under our constitution! For e8ample7 ban*s7 rail'ays7 insurance etc!7 'ere nationali1ed to serve better the community! o prevention is better than cure and the business units may volunteer to solve social problems! MANA)EMEN E"UCA ION preading of business management education and the development of professional managerial class has created a climate of socially responsive business units! %hey reali1e the need to serve 'or*ers7 consumers and the local public! %he co-operate 'ith government measures! o this responsibility has become an accepted management philosophy! MORA& S AN"AR"S %eachings of the ideals of moral values and ethical standards among businessmen have increased the importance of social involvement! Because 'hen in a society the problems and disorders are increasing a business unit can@t /ust e8ist! For e8ample in the great depression all business units had to be closed due to social problems! %hen only the businessmen started re<uesting the government to intervene in business and industrial activities to control economic fluctuations! Business units are the creations of the societyK through the government regulations and the la's of the parliament they are given the rights and good climate to continue their operations! %he Business enterprises therefore have to function by *eeping in mind the interests of society 'hile at the same time they should /ustify themselves on economic performance! In other 'ords7 they have to consider the interest of the consumers7 shareholders7 employees7 employees7 government and society7 'hile they try to earn profit! Further7 as the business is an organ of society7 it is re<uired to discharge its social obligations to the various interest groups of the society! )et us no' see the obligations in detail M 1. OB&I)A IONS O CONSUMERS & business enterprise has the basic responsibility to 'ards the consumers 'hile offerings the products! %he responsibilities of the business to'ards the consumer may be listed as :1; reasonable <uality products7 :(; fair and /ust process :+; good after sales service :,; &voiding misleading advertisements :.; &voiding adulteration7 hoarding blac*-mar*eting and other unfair practices and :0; *eeping un consumer@s long run 'elfare by giving consumer education7 avoiding un'holesome products etc!! .+

*. OB&I)A IONS O 6OR$ERS Responsibilities of business enterprise to'ards 'or*ers are as follo's M 1! (! +! ,! .! %he 'or*ers must be given security of service along 'ith fair 'ages! =or*ers must be given e<ual opportunities for gro'th and development %here must be good schemes for employee 'elfare7 health and safety and also social security measures! %here must be profit-sharing schemes! Apportunities must be provided to the 'or*ers to participate in management!

-. OB&I)A IONS O S/ARE/O&"ERS %he shareholders are the persons 'ho provide the funds to the business enterprise and hence the management has some responsibilities to the shareholders! %he business should be managed efficiently so as to provide a fair return on the investments and to ensure business gro'th to the shareholders! Further the business enterprise should supply to its shareholders accurate and comprehensive reports and accounts about its 'or*ing! 4. OB&I)A IONS O SOCIE .

%he business enterprise should produce 'holesome goods and maintain economic 'ell being of the society! %he gains of the improved production of the enterprise should be shared by all the constituents of the society7 vi1! management7 shareholders7 'or*ers7 consumers and further7 the enterprise should ta*e the responsibility for providing amenities in the locality 'here it is located! It must behave as a good citi1en and must not cause damage to la' and order of the community! It should ta*e measures to remove effluents7 fouling the air and conditions of slum7 congestion7 ecological imbalance and other evils! 5. OB&I)A IONS O )OVERNMEN Business community should e8tend full support to the government in implementing its policies and programmers! It should help the -overnment in the e<uitable distribution of commodities 'hich are in scare supply in controlling prices and inflationary trend in the country! It should also respect -overnment@s social 'elfare measures! Business community should submit all the documents to the -overnment as re<uired by la'! Business should pay all ta8es in time! %he foregoing discussion of the social responsibilities of business indicates that a business unit has social obligations to the various segments of society! %he businges community must strive to provide the greatest possible service to the masses of the society! Business enterprise being an unit of society 'ill have to /ustify the e8pectation of the community! Ather'ise7 the community may try to replace it by some alternatie institution! Dence the business community7 in its o'n interest of survival7 has to recognist and implement the concept of social responsibility!

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BC I3" "3EIRA3$"3% $AD") RC" %IA3 P&P"R

ime : - 8ours M+G. M+r<s : 1:: (5 ! 3 J 4: M+r<s) SEC ION ( A AnsBer +nA #IVE o@ t8e @o%%oBin' Kuestion: 1! "8plain the meaning and importance of business environment! (! Define culture! =hat are the feature of Indian cultureQ +! =hat are the evils of caste systemQ ,! =rite e8amples for the intervention in business7 by political polices and programs! .! =hat do you mean by Directive Principles of tate PolicyQ "8plain its nature! 0! =hat are the merits and demerits of capitalist economic systemQ 2! Describe the ob/ectives of public sector in India! 4! "8plain the importance of choosing the appropriate technology! SEC ION ( B : , H 1. S 05 $ar*s; AnsBer +nA #OUR o@ t8e @o%%oBin' Kuestion: 6! &ccount for the various environmental factors and e8plain their impact on business! 15! =hat are the features of demographic trendQ 11! "8plain the important provisions of Directive Principles of tate policy! 1(! "valuate the issues in Center- tate relations! 1+! Describe the different economic systems and the role of business units in each system! 1,! =hat are the relevance of multinational corporations in our ne' economic policyQ 1.! "8plain the different responsibilities of business to the society!

BC I3" "3EIRA3$"3% RC" %IA3 P&P"R - $&O (55,

1 ! % ( ) + . 8 Attempt any five (8 Marks each) Mention the External and Internal factors influencing the Business Environment "o# a demographic varia$le affects the Business Environment Business and &ommunal system' &omment Explain a$out the significant role of political factors influencing the Business Environment *iscuss a$out the economic environment role in $usiness environment "ighlights the mature and scope of multinational companies (M,&-s) /echnology Environment and its impact on Business Environment Explain "o# a Business Manager can maintain the social responsi$le Attempt any four (1) Marks each) *iscuss a$out the environment influences factors for a $usiness 2ocial environment' &omment *irective principles of state policy ' it role in $usiness *iscuss Business Economy is a ma3or contri$utor to the ,ational Economy' &omment 4 /echnology Environment and its impact on Business' &omment /echnology 5$solence #ill $ring do#n the economy gro#th6 *o you agree or disagree 2u$stantiate #ith suita$le illustrations "o# a legislation governs the $usiness social responsi$ility Mention some la#s6

0 11 11 1! 1% 1( 1)

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