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Unit 3 of Business Environment

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3 views29 pages

Unit 3 of Business Environment

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vickymzn123
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Unit 3

Introduction of industrial
policy
Industrial policy is an important document,
which lays a wide canvas and sets the tone for
implementing promotional and regulatory roles
of the government.
The term industrial policy refers to the
government’s policy towards industries their
establishment, functioning, growth, and
management.
The industrial policy plan of a nation, sometime
shortened IP,” denotes a nation’s declared,
official, total strategic effort to influence
sectoral development and, thus, national
industry portfolio.
Objectives of industrial
policy
1) Correct the imbalance in the development of
industries and helps in bringing about a
desirable balance and diversification in them.
2) Direct the flow of scarce resources in the
most desirable areas of investment in
accordance with national priorities.
3) Prevent the wasteful use of scarce resources
and ensure their conservation and judicious
utilization.
4) Employer the government to regulate the
establishment and expansion of private
industry in accordance with the planned
objectives.
5) Demarcate areas among the public,
private and joint sectors of the economy, as
well as large, medium and small- scale
industries.
6) Prevent, through fiscal and monetary
policies, the formation of monopolies and
concentration of wealth in a few hands so
that the evils associated with monopolies
can be effectively curbed.
7) Give guidelines for importing foreign
capital and the conditions on which such
capital should be permitted to operate.
Role of government in
industrial development
1) Liberalization of industrial licensing policy.
2) Introduction of industrial entrepreneurs’
memorandum (IEM).
3) Liberalization of the location policy.
4) Policy for small scale industries .
5) Non resident Indians' scheme.
6) Electronic hardware technology park
/software technology park scheme.
7) Policy for foreign direct investment (FDI)
Importance of industrial
policy
1) Helpful in establishing co-ordination
between industrial development and
agricultural development.
2) Helpful in establishing co-ordination
between public sector and private sector.
3) Helpful in directing national resources in
desired direction .
4) Helpful in formulating a plan of industrial
development.
5) Helpful in formulating rules, principles and
policies for the management regulation
and control of industrial undertakings.
6) Helpful in preventing the concentration
of economic power.
7) Helpful in establishing effective co-
ordination between capital and physical
resources on one hand and natural and
social resources on other hand .
8) Helpful in promoting exports and
reducing the dependence on imports.
9) Helpful in maintaining regional balances.
10) Helpful in formulating the target and
programmer of industrial development.
Industrial policy resolution,
1956
The resolution of 1956 made the industrial
policy socialist- oriented, and widened the
scope of the public sector.
Objectives of industrial policy, 1956
1) To accelerate the rate of economic growth
and to speed up industrialization.
2) To expand the public sector, develop heavy
and machine making industry.
3) To increase employment opportunities and
improvement of living standards and
working condition of people.
Features of industrial policy 1956
1) New classification of industries.
2) Assistance to private sector.
3) Expanded role of cottage and small scale
industries.
4) Expanded role of cottage and small scale
industries.
5) Balanced industrial growth among various
regions.
6) Role of foreign capital
Meaning

of privatization
It means the transfer of ownership,
management, and control of the public sector
enterprises to the private sector.
Privatization can suggest several things
including the migration of something from the
public sector to the private sector.
 It is also used as a metonym for deregulation
when a massively regulated private firm or
industry becomes less organized.
 Government services and operations may also
be (denationalized) privatized. In these
circumstances, private entities are tasked with
the application of government plans or the
execution of government assistance that had
earlier been the vision of state-run companies
Characteristics of privatization
Transfer of Ownership – In privatization,
ownership of a company, undertaking or
property is transferred to the private sector.
Lack of Government Interference –
Privatization reduces indulgence and
interference of the state in the activities of a
company.
Economic Democracy – Privatization dilutes
state monopoly and allows private
companies to participate in economic
activities more democratically.
Advantages of Privatization

Improved Performance: Private companies


are profit-incentivized rather than politically
motivated. Privatization, therefore, allows
companies to become more efficient by
eliminating unnecessary elements within an
organization like overwhelming bureaucracy
& red tape.
Better Customer Service: As private
companies are profit-driven and function in a
competitive market, their primary focus
rests on efficient customer service. State-run
companies lack this feature as they face no
competition and are not financially
motivated.
Improved Management: Privatization
enhances management of a company. As
managers of a privately-owned organization
are accountable to the company’s owners, it
becomes their responsibility to ensure
efficient management. This factor of
accountability is less intense in public sector
companies which results in poor and
inefficient operations that may ultimately
harm the economy.
Disadvantage of Privatization

Issues of Regulating Monopolies: The private


sector can manipulate their monopoly and neglect
social costs. Privatization of certain state industries
such as water and electricity regulators may create
only single monopolies.

Public Interest: The profit motive should not be


the primary objective for the industry which
performs an important public service, e.g. health
care, education, and public transport. For example,
According to the researchers, the private sector in
India has grown independently without any major
regulation; In the hands of Private health sector,
some private practitioners are not even registered
doctors and are referred to as quacks.
Accountability: The public does not
have any control or administration
of private companies. Privatization
has a bad effect on accountability
because Investors retain full
authority to do anything.

Unassured Success: Privatization is


unassured in terms of the success
rates of any individual unit, due to
which many private sector
companies suffer huge losses.
Meaning of liberalization
The Indian economy was liberalized in the
year 1991. In India, the concept of
economic liberalization was introduced to
attain several objectives – industrialization,
expansion in the role of private and foreign
investment, and introducing a free market
system. Restrictions were relaxed for
private companies to enter several core
industries, which were previously reserved
for the public sector.
Features of liberalization
Following are some of the features of
liberalization that was initiated as a part of
economic reforms of 1991 –
Abolition of the previously existing License
Raj in the country. License or Permit Raj is a
complicated system of regulations, licenses,
and restrictions that were imposed to run and
set up businesses between 1947 and 1990.
Reduction of interest rates and tariffs.
Curbing monopoly of the public sector from
various areas of our economy.
Reform of the financial system.
Factors Favoring Liberalization
in India
Reduction in Excise and custom Duties.

Peak Customs Duty Reduced from 220%to


30%.

Lowering Corporate Tax.

Widening of the Tax Base and Toning- UP


the tax Administration
Privatizations
meaning

Privatization is part of the


process of rethinking the
welfare state. Society is
Searching for new ways of
delivering services because of
our collective sense of
efficiency. The entrepreneur,
not the bureaucrat, is the hero
of society. While we cannot be
Nature of Privatization
Transfer of ownership.

Increased competition .

Increased Efficiency .

Increased opportunities .

Effectiveness of Deal Depends on Host


Country.
Factors Favoring Privatization
in India
Contraction of Public Sector.

Sale Of Shares OF Public Enterprises.

Increasing The Share of Private Sector


Investment.

Disinvestment In Existing Public Sector


Industries.
Sick Industries .
Meaning of
globalization
Globalization is the increase in the flow of
goods, services, capital, people, and ideas
across international boundaries, according to
the online course Global Business.
“We live in an age of globalization,” says
Harvard Business School Professor Forest
Reinhardt, who teaches Global Business. “That
is, national economies are ever more tightly
connected with one another than ever before.”
Whether you’re looking to learn more about your
international company or thinking of expanding
your business into other countries, you need a
strong foundation in the basics of globalization
in business.
FACETS OF GLOBAL BUSINESS TO CONSIDER

Politics and laws: International politics can


color relationships between nations and regulate what
products are allowed in and out of their borders.
Keeping up with current events can help you prepare
for the business impacts of shifts in policy and foreign
affairs.
The environment: There’s no global issue
more pressing than climate change.
Unfortunately, globalization can contribute
significantly to its negative effects due to increased
transportation of materials and products, business
travel, and the number of factories. If you’re engaging
in global business, keep sustainability in mind to avoid
contributing to climate change.
Steps in
globalization

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