Economics of Business Environment PDF 2nd Semester

ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Unit-3 Government and business in India Political environment The political environment is related to the business environment including all the rules and regulations, laws...

ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Unit-3 Government and business in India Political environment The political environment is related to the business environment including all the rules and regulations, laws and the role of government in the day-to-day operations of organizations. The business political environment refers to the political or governmental actions that affect business operations. 1. Bureaucracy : a system of government in which most of the important decisions are taken by state officials rather than by elected representatives. 2. Corruption : Scoring 180 countries around the world, the Corruption Perceptions Index is the leading global indicator of public sector corruption. India has a score of 39. 3. Freedom of press : The concept of freedom of speech is often covered by the same laws as freedom of the press, thereby giving equal treatment to spoken and published expression. 4. Tariffs : a tax or duty to be paid on a particular class of imports or exports. "the reduction of trade barriers and import tariffs" 5. Trade control :Trade Controls are restrictions imposed on the transfer of items from one country to another by any individual, company, government or public body. 6. Law related to education, health,&environment :The policies and statutes/legislation enacted particularly with reference to India for environmental protection should be known to every Indian citizen and. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com 7. Tax policy:Tax policy refers to the guidelines and principles established by a government for the imposition and collection of taxes. 8. Political stability:Political stability signifies a state of tranquility, organization, and sustained continuity within the political domain. It is marked by consistent institutions and policies, as well as a commitment to upholding the rule of law. 9. Regulation & deregulation; Regulation constrains strategic choice, limits competition and, produces industry inefficiencies, whereas deregulation contributes to operating freedom, unfettered competition and improvements in efficiency. 10. Trade unions:Trade unions may be composed of individual workers, professionals, past workers, students, apprentices or the unemployed. 11. Intellectual property:Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce. 12. Consumer protection :The Consumer Protection Act, 1986 was enacted to provide a simpler and quicker access to redressal of consumer grievances. The Act for the first time introduced the concept of 'consumer' and conferred express additional rights on him. Economic system meaning An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society. An economic system is a system of production, resource allocation, exchange and distribution of goods and services in a society or a given geographic area. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur  ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Types of economic system There are 3 types of economic systems, namely mixed economy, capitalist economy, and socialistic economy. Here are some general characteristics of an economy: The type of economy is based on the means of production and ownership of resources. Capitalism is often thought of as an economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society. The essential feature of capitalism is the motive to make a profit. USA, UK, Germany, Japan, Singapore all are classic examples of capitalist economies. Capitalism affords economic freedom, consumer choice, and economic growth. This type of economy, however, may promote monopolies and inequality and lead to an economic recession. The Demerits of the Capitalist Economy  Unequal distribution of income.  Poor get poorer and the rich get richer- class struggle.  High social costs.  Unwanted multiplicity and way too much competition.  Unsteadiness of capitalist economy.  The situation of unemployment and under-employment.  Slow development. Socialism Socialism is, broadly speaking, a political and economic system in which property and the means of production are owned in common, typically controlled by the state or government. Socialism is based on the idea that common or public ownership of resources and means of production leads to a more equal society. advantages of a socialist economy The goal of socialism is to create a society in which everyone has an equal share of resources and wealth. Socialist Economy is based on the principle of collective ownership. This means that the resources of Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com society, such as land, factories, and businesses, are owned by the community, and not by private individuals. n theory, based on public benefits, socialism has the greatest goal of common wealth; Since the government controls almost all of society's functions, it can make better use of resources, labors and lands; Socialism reduces disparity in wealth, not only in different areas, but also in all societal ranks and classes. Disadvantages of socialist economy The chief economic problem of socialism has been the efficient performance of the very task for which its planning apparatus exists— namely, the effective coordination of production and distribution. Some of the primary criticisms of socialism are claims that it creates distorted or absent price signals, results in reduced incentives, causes reduced prosperity, has low feasibility, and that it has negative social and political effects. mixed economic system The mixed economic system is defined as an economic system that combines the elements of a market economy and the elements of a planned economy. It is a synthesis of socialism and capitalism, which contains both private enterprises and public enterprises. Most modern economies implement a mixed economic system. Advantages of a Mixed Economy 1. private businesses can decide how to run their businesses (e.g. what to produce, at what price, who to employ, etc.). 2. Consumers also have a choice in what they want to buy. In this system, there is also less income inequality. 3.A mixed economic system accepts private property and permits economic freedom in the use of capital, 4. but also allows for governments to interfere in economic activities in order to achieve social aims. 5. Governments regulate businesses to ensure their activities comply with laws and regulations and protect consumers from unfair practices. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com 6. They also provide financial assistance, tax incentives and subsidies to companies to encourage investment and stimulate economic development. 7. Local governments often establish or support business incubators and accelerators to provide entrepreneurs with resources, mentor ship, networking opportunities, and affordable office space. 8. These programs help startups grow and succeed in their early stages, creating positive change for the community in the future. provisions of indian constitution pertaining to business Article 19 ( 1) (g) of Constitution of India provides Right to practice any profession or to carry on any occupation, trade or business to all citizens subject to Art. 19 (6) which enumerates the nature of restriction that can be imposed by the state upon the above right of the citizens. What are the four provisions of Indian Constitution pertaining to business? (i) To provide adequate means of livelihood for all the citizens. (ii) To secure equal pay for work to both men and women. (iii) To protect the workers, especially children. (iv) To regulate the economic system of the country that it does not lead to concentration of wealth and means of production. Provision of constitution for business 1. Indian companies act1956:The Companies Act 2013 regulates the formation and functioning of corporations or companies in India. The first Companies Act after independence was passed in 1956, which governed business entities in the country. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com 2. Indian partnership act 1932: The Indian Partnership Act 1932 defines a partnership as a relation between two or more persons who agree to share the profits of a business run by them all or by one or more persons acting for them all. 3. Negotiable instrument act 1881:Negotiation.—When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof. 4. Indian contract act 1872:It is applicable to all the states of India. It determines the circumstances in which promises made by the parties to a contract shall be legally binding. Under Section 2(h), the Indian Contract Act defines a contract as an agreement enforceable by Law. Indian Contract Act, 1872. 5. The sale of goods act1930:A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part- owner and another. (2) A contract of sale may be absolute or conditional. 6. The carriers act1865:The Carriers Act, 1865, as the preamble states, was enacted because it was thought expedient not only to enable common carriers to limit their liability for loss of or damage. to property delivered to them to be carried but also to declare their liability for loss of or damage to such property occasioned. Indian company law 1. Meaning and nature of company:A company is a legal entity formed by a group of individuals to engage in and operate a business enterprise in a commercial or industrial capacity. A company's business line depends on its structure, which can range from a partnership to a proprietorship, or even a corporation. 2. Formation of company:File an application to ROC for company's name approval. After getting approval; get file an application for company incorporation to the same ROC. Need to submit fees for company formation in India under the corporate act and also need to Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur  ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com submit require legal documents like MOA / AOA and other company details. 3. Memorandum of association:A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepared during a company's formation and registration process. It defines the company's relationship with shareholders and specifies the objectives for which the company has been formed. 4. Articles of association:Articles of Association define what a company is and how it operates. This includes fundamental information such as the company's name, its founders and original shareholders, the purpose driving the company, how shareholders meetings are conducted, and how directors are hired. 5. Prospectus:a preliminary printed statement that describes an enterprise (such as a business or publication) and that is distributed to prospective buyers, investors, or participants. 6. Share capital: company's share capital is the money it raises from selling common or preferred stock. Authorized share capital is the maximum amount a company has been approved to raise in a public offering. A company may opt for a new offer of stock in order to increase the share capital on its balance sheet. 7. General meetings and proceedings:The company must give a clear 21 days' notice to its members for calling the AGM. The notice should mention the place, the date and day of the meeting, and the hour at which the meeting is scheduled. The notice should also mention the business to be conducted at the AGM. 8. Directors and powers:  the power to make calls to shareholders for the money unpaid on their shares.  the power to borrow money.  the power to make loans or to provide guarantees for the loan.  the power to make investments on behalf of the company.  the power to authorize buy-back of securities under Section 68. Competition policy and law Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Competition is the act of the sellers individually seeking to acquire the patronage of buyers in order to achieve profits or market share. Broadly speaking, competition policy can be defined as a government policy that helps maintain the level of competition in markets. This includes governmental measures that directly affect the behaviour of enterprises, as well as the structure of industries and markets. Competition law, or antitrust law, has three main elements: prohibiting agreements or practices that restrict free trading and competition between business. This includes in particular the repression of free trade caused by cartels. Objectives 1. To promote and sustain competition in markets 2. To protect the interests of consumers’ 3. To ensure freedom of trade carried on by other participants in markets 4. To prevent and regulate mergers and acquisitions 5. To establish the competition commission of India Patents and trademarks Intellectual property rights The legal rights granted with the aim to protect the creation of the intellect. 1. Patents: the right to exclude others from making,using,selling,offering to sell or importing the patented invention for a limited period. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com 2. Trademarks: the right to use a distinctive symbol or sign to identify and distinguish the goods or services of one business from those of others, and to prevent others from using a similar mark that is likely to cause confusion. 3. Copyrights: the rights to reproduce, distribute and display original works of authorship, such as literary, artistic and musical work. 4. Trade secrets: the right to protect confidential information such as formulas, designs, and processes. 5. Industrial designs: the rights to protect the aesthetic or visual aspects of a products such as tis shape, configuration, patterns. 6. Geographical indications: the rights o use and control the use of a name or symbol that identifies the geographical origin of a product and to prevent others from using a similar. Procedure to get patent 1. Application for grant of patent 2. Provisional\complete specification 3. Statement and undertaking under section,8 4. Declaration by inventor 5. Request for publication 6. Request for examination of application for patent. Industrial policy Industrial Policy is the set of standards and measures set by the Government to evaluate the progress of the manufacturing sector that ultimately enhances economic growth and development of the country. The government takes measures to encourage and improve the competitiveness and capabilities of various firms. The New Industrial Policy of 1991: The Industrial policy of 1991 marked a shift towards liberalization and globalization. It focused on reducing government controls. Also, regulations in the industrial sector and promoting foreign investment and technology transfer. Features of industrial policy Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Prohibition of Unfair Labor Practices: The Act prohibits unfair labor practices by both employers and trade unions, safeguarding the interests of employees. Right to Strike: While it recognizes the right to strike, the Act lays down specific conditions and procedures to be followed before workers can resort to strikes. The main objectives of industrial policy: 1. Economic Growth 2. To increase the production of goods and services, 3. create new jobs and raise the standard of living. 4. Increased Efficiency: 5. To increase efficiency in the production process through the use of technology and the division of labor. 6. To accelerate economic growth and boost the process of industrialization. 7. To develop heavy industries and machine making industries. 8. To expand public sector. 9. To reduce disparities in income and wealth and the removal of regional disparities. Labor laws and social security Labour law also known as employment law is the body of laws, administrative rulings, and. precedents which address the legal rights of, and restrictions on, working people and their. organizations. As such, it mediates many aspects of the relationship between trade unions, employers and employees. 1. Industrial relation and industrial disputes act1947:These are the advisory body and responsible for the discussion of matters that are of all India importance in labour relations. Three major laws were passed by Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com this tripartite system i.e. the Minimum Wages Act of 1948, Employee State Insurance Act of 1948, and the Employees' Provident Funds Act of 1952. 2. Industrial employment act1946:This Act is to require employers in industrial establishments to formally define conditions of employment under them and submit draft standing orders to certifying Authority for its Certification. 3. Trade union act 1926:The Trade Unions Act, 1926 provides for registration of trade unions (including association of employers) with a view to render lawful organization of labour to enable collective bargaining. The Act also confers on a registered trade union certain protection and privileges. 4. Labor laws on social security :The Act provides for payment of compensation to the employees and their dependents in case of injury and accident {including certain occupational diseases) arising out of and in the course of employment and resulting in disablement or death. 5. Building and other construction worker welfare act 1995:Welfare facilities are an essential feature of most construction and remote work sites. There are a great many industries that rely on people who work outdoors, frequently in harsh conditions. These workers must be guaranteed certain legally stipulated levels of hygiene and comfort 6. Karnataka labor welfare fund:The Karnataka Labour Welfare Fund is constituted for financing and conducting activities to promote welfare of contributing employees. 7. Maternity benefit act 1961:Vide Section 5 of the Maternity Benefit Act, 1961, as amended in 2017, the Government has increased paid maternity leave from 12 weeks to 26 weeks of which not more than eight weeks shall precede the date of expected delivery. 8. Payment gratuity act1972:The Payment of Gratuity Act, 1972 is an act that makes the payment of gratuity mandatory for employers to their employees. Employees working in mines, oilfields, railways, factories, ports, and shops or establishments are covered under this Act and stand to benefit from its provisions. Objectives of labor law 1. Increase standard of living 2. Workers right protection 3. Social fairness 4. Recognize human values 5. Reduce problems 6. Industrial peace keeping. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com Environmental law Environmental law is seen as the body of laws concerned with the protection of living things (human beings inclusive) from the harm that human activity may immediately or eventually cause to them or their species, either directly or to the media and the habits on which they depend. Environmental law is the collection of laws, regulations, agreements and common law that governs how humans interact with their environment. Environment can be defined as a sum total of all the living and non-living elements and their effects that influence human life. While all living or biotic elements are animals, plants, forests, fisheries, and birds, non- living or abiotic elements include water, land, sunlight, rocks, and air. 1. Environment protection act 1986: The Environment (Protection) Act was enacted in 1986 with the objective of providing for the protection and improvement of the environment. It empowers the Central Government to establish authorities [under section 3(3)] charged with the mandate of preventing environmental pollution in all its forms and to tackle specific environmental problems that are peculiar to different parts of the country. The Act was last amended in 1991. 2. Forest conversion act-1980:The Forest (Conservation) Act of 1980 (FCA, 1980) is an act by the Parliament of India which ensures the conservation of forests and their resources. It was enacted by the Parliament of India to control the ongoing deforestation of the forests of India. 3. Wild protection act-1972:Wildlife Protection Act of 1972 is a law in India that aims to protect and conserve wildlife. It prohibits the hunting, poaching, and trading of endangered species, and establishes penalties for such activities. The act also focuses on the preservation of habitats and the prevention of wildlife exploitation. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur  ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com 4. Air (prevention & control of pollution )act1981 :the Air (Prevention and Control of Pollution) Act was enacted in 1981 and amended in 1987 to provide for the prevention, control and abatement of air pollution in India. 5. Indian forest act1927:The Indian Forest Act,1927 aimed to regulate the movement of forest produce, and duty leviable forest produce. It also explains the procedure to be followed for declaring an area as Reserved Forest, Protected Forest or a Village Forest. Current issues 1. Ease of doing business:The Ease of Doing Business (EoDB) index is a ranking system established by the World Bank Group. In the EODB index, 'higher rankings' (a lower numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights. Five biggest challenges of doing business in India.  Handling the construction permits.  Paying taxes.  Trading across borders.  Infrastructure.  Intellectual property rights protection.  A large and fragmented market.  How Acclime can help. 2. Performance of MSME:In India MSMEs are facing a number of problems such as absence of adequate and timely banking finance, non- Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur  ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com availability of suitable technology, ineffective marketing due to limited resources and non availability of skilled manpower. Micro, Small, Medium Enterprises (MSMEs) are entities that are involved in the production, manufacturing and processing of goods and commodities. The concept of MSME was first introduced by the government of India through the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. 3. Make in India: Make in India – Challenges  Complex regulatory environment and bureaucratic hurdles that increase compliance costs and deter investment.  Inadequate infrastructure, including power shortages, poor transportation networks, and limited access to finance, constraining manufacturing operations.  Partisan differences in views of inflation....  Federal budget deficit....  Unemployment....  Illegal immigration....  Crime and gun violence....  Climate change....  Racism.  4. Economic and social infrastructure:Social infrastructure refers to the essential social services a society needs to function effectively, such as education, healthcare, and social services. On the other hand, economic infrastructure refers to the physical infrastructure that supports economic activity, such as transportation, communication, and energy. Challenges related to economic & social infrastructure  Health Infrastructure: Lack of basic infrastructure in primary and secondary healthcare systems....  Education Infrastructure: Absence of a comprehensive approach:...  Housing: Absence of technology during construction.  Poverty and Income Inequality: In India, poverty and income inequality are pressing issues....  Unemployment and Underemployment:...  Agricultural Distress:... Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur  ECONOMICS OF BUSINESS ENVIRONMENT 2nd Semester,B.Com  Infrastructure Deficit:...  Fiscal Deficit and Public Debt:...  Inflation:...  Corruption and Red Tape:...  Environmental Sustainability:  5. National monetization policy:he NMP envisages an aggregate monetization potential of Rs 6-lakh crore through the leasing of core assets of the Central government in sectors such as roads, railways, power, oil and gas pipelines, telecom, civil aviation etc, over a four-year period (FY 2022-25). The sectors covered under NMP include roads, ports, airports, railways, warehousing, power transmission and generation, gas & product pipelines, mining, telecom, stadium, hospitality, and housing. Finance Minister Nirmala Sitharaman in August 2021, announced the National Monetisation Pipeline under which sale of brownfield assets worth Rs. 6 lakh crore under central government ministries and public sector units are to be undertaken during the four year-period from 2021- 22 to 2024-25. Asst,Prof,Vijay Dev Mclaren VVFGC,Tumkur