Management Programme: Ms-03: Economic and Social Environment

Management Programme
MS-0
ASSIGNMENT
FIRST SEMESTER
2011
MS-03: ECONOMIC AND SOCIAL ENVIRONMENT
School of Management Studies

INDIRA GANDHI NATIONAL OPEN UNIVERSITY
MAIDAN GARHI, NEW DELHI – 110 068
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ASSIGNMENT
Course Code : MS-3

Course Title : Economic and Social
Environment
Assignment Code : 3/TMA/SEM-I/2011
Coverage : All Blocks
Note: Answer all the questions and send them to the Coordinator of the Study Centre
you are attached with.
1. Identify the critical elements of the sociological environment of business and

analyze the social problems and prospects with the help of examples.
The business environment includes the marketplace, yourself and your business partners,
and any external factor that may positively or negatively affect the level of your business
success. Today we are going to look at three aspects of the environment; transformation,
opportunities and obstacles, and two groups of environment handling strategies;
consolidation strategies, and exit strategies.
1. The Amount Of Transformation Required To Reach Your Goal
Achieving any goal requires change. It is important when setting business goals to
determine the amount of change required. If the change is great it may be better to break
the goal down to sub-goals in order to make success more accessible.
Start with the question; why hasn’t the business already attained that goal? This will help
determine exactly what needs to be changed as well as the amount of change needed.
It is important to determine how those changes can be accomplished in the current

environment by looking at the opportunities and threats in the environment and the
strengths and weakness within the business.
Opportunities, Strengths And Advantages
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Every environment provides opportunities to those who develop the skill of seeing them.
Every business has its own strengths and its own advantages over other businesses. The wise
business manager can determine the best combination of these opportunities, strengths and
advantages and then implement strategies to maximize profit at this point in the environment.
Even in the toughest times, when most businesses are in trouble, there are always some
businesses that are prospering. If you develop the skills for assessing opportunities, strengths
and advantages and the habit of acting on that assessment by taking appropriate goal directed
action, then your business will always be one of those that are prospering.
3. Obstacles, Threats and Limitations
The environment always contains opportunities and it also always contains obstacles. Your
business always has some limitations at any particular point in time and there are always
threats to your success and profitability.
Since we know that these “problems” will always exist the wise business manager develops
the skill of recognizing them early and develops and implements risk management strategies
to guide the business through the difficulties while at the same time the business is focusing
its efforts on profiting from the opportunities.
4. Consolidation Strategies
A business requires change in order to grow but constant change can be destabilizing. The
wise business manager determines when it is appropriate to consolidate the gains made so
that those gains become a strong foundation on which to build the next campaign of positive
change.
A thorough understanding of the business environment can help determine the best point at
which to consolidate and the best strategy to implement that consolidation.
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5. Exit Strategies
No matter how skilled the manager is, or how well the environment is analyzed for
opportunities, and threats, or how good the consolidation strategy may be, there is always the
possibility that things don’t go to plan.
For this reason there is a golden rule that needs to be followed in every campaign; never enter
any business campaign without a predetermined exit strategy.
The best time to determine strategies for how to exit a campaign with the minimum of
difficulty or loss is before the campaign starts. This is when you are calm and clear thinking.
If you wait until things are going wrong and the pressure is at a peak you are far less likely to
find the best solution.
That was a brief introduction to capitalizing on the business environment. Now it’s up to you
to put aside some time to use these five points to help you look at the current environment for
your business and determine how you can capitalize on that environment to increase your
business success.
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2. “The structural changes which are quite fundamental in character are inherent in the
process of economic growth.” Discuss this statement.
The Statement is totally agreeable that structural changes which are quite
fundamental in character are inherent in the process of economic growth. Structural-
change theory deals with policies focused on changing the economic structures of
developing countries from being composed primarily of subsistence agricultural practices
to being a "more modern, more urbanized, and more industrially diverse manufacturing
and service economy." There are two major forms of structural-change theory; W. Lewis'
two-sector surplus model, which views agrarian societies as consisting of large amounts
of surplus labor which can be utilized to spur the development of an urbanized industrial
sector, and Hollis Chenery's patterns of development approach, which holds that different
countries become wealthy via different trajectories. The pattern that a particular country
will follow, in this framework, depends on its size and resources, and potentially other
factors including its current income level and comparative advantages relative to other
nations. Empirical analysis in this framework studies the "sequential process through
which the economic, industrial and institutional structure of an underdeveloped economy
is transformed over time to permit new industries to replace traditional agriculture as the
engine of economic growth."
Structural-change approaches to development economics have faced criticism for their

emphasis on urban development at the expense of rural development which can lead to a
substantial rise in inequality between internal regions of a country. The two-sector surplus
model, which was developed in the 1950s, has been further criticized for its underlying
assumption that predominantly agrarian societies suffer from a surplus of labor. Actual
empirical studies have shown that such labor surpluses are only seasonal and drawing
such labor to urban areas can result in a collapse of the agricultural sector. The patterns of
development approach have been criticized for lacking a theoretical framework.
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.
3. Briefly explain the Tenth Five Plan (2002-2007), highlighting its weaknesses and
strengths. Refer to the Planning Commission report on website.
First Five-Year Plan, 1951–1956
The first Indian Prime Minister, Jawaharlal Nehru presented the first five-year plan to the
Parliament of India on 8 December 1951. The plan addressed, mainly, the agrarian sector,
including investments in dams and irrigation. The agricultural sector was hit hardest by the
partition of India and needed urgent attention. The total planned budget of 206.8 billion
(US$23.6 billion in the 1950 exchange rate) was allocated to seven broad areas: irrigation and
energy (27.2 percent), agriculture and community development (17.4 percent), transport and
communications (24 percent), industry (8.4 percent), social services (16.64 percent), land
rehabilitation (4.1 percent), and for other sectors and services (2.5 percent). The target growth
rate was 2.1% annual gross domestic product (GDP) growth; the achieved growth rate was
3.6%. The net domestic product went up by 15%. The monsoon was good and there were
relatively high crop yields, boosting exchange reserves and the per capita income, which
increased by 8%. National income increased more than the per capita income due to rapid
population growth. Many irrigation projects were initiated during this period, including the
Bhakra Dam and Hirakud Dam. The World Health Organization, with the Indian government,
addressed children's health and reduced infant mortality, indirectly contributing to population
growth.
At the end of the plan period in 1956, five Indian Institutes of Technology (IITs) were started
as major technical institutions. The University Grant Commission was set up to take care of
funding and take measures to strengthen the higher education in the country.[ Contracts were
signed to start five steel plants, which came into existence in the middle of the second five-
year plan.
Second Five-Year Plan, 1956–1961
This plan functioned on the basis of a nude model. The Mahalanobis model was propounded
by Prasanta Chandra Mahalanobis in the year 1953. The second five-year plan focused on
industry, especially heavy industry. Unlike the First plan, which focused mainly on
agriculture, domestic production of industrial products was encouraged in the Second plan,
particularly in the development of the public sector. The plan followed the Mahalanobis
model, an economic development model developed by the Indian statistician Prasanta
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Chandra Mahalanobis in 1953. Hydroelectric power projects and five steel mills at Bhilai,
Durgapur, and Rourkela were established. Coal production was increased. More railway lines
were added in the north east.
The Atomic Energy Commission was formed in 1958 with Homi J. Bhabha as the first
chairman. The Tata Institute of Fundamental Research was established as a research institute.
In 1957 a talent search and scholarship program was begun to find talented young students to
train for work in nuclear power.
The total amount allocated under the second five year plan in India was Rs. 4,800 crore. This
amount was allocated among various sectors:
• Mining and industry

• Community and agriculture development
• Power and irrigation
• Social services
• Communications and transport
• Miscellaneous
Third Five-Year Plan, 1961–1966
The third plan stressed on agriculture and improving production of rice, but the brief Sino-
Indian War of 1962 exposed weaknesses in the economy and shifted the focus towards the
Defence industry. In 1965-1966, India fought a war with Pakistan. The war led to inflation
and the priority was shifted to price stabilisation. The construction of dams continued. Many
cement and fertilizer plants were also built. Punjab began producing an abundance of wheat.
Many primary schools were started in rural areas. In an effort to bring democracy to the
grassroot level, Panchayat elections were started and the states were given more development
responsibilities.
State electricity boards and state secondary education boards were formed. States were made
responsible for secondary and higher education.
Fourth Five-Year Plan, 1969–1974
At this time Indira Gandhi was the Prime Minister. The Indira Gandhi government
nationalised 14 major Indian banks and the Green Revolution in India advanced agriculture.
In addition, the situation in East Pakistan (now Bangladesh) was becoming dire as the Indo-
Pakistani War of 1971 and Bangladesh Liberation War took place.
Funds earmarked for the industrial development had to be diverted for the war effort. India
also performed the Smiling Buddha underground nuclear test in 1974, partially in response to
the United States deployment of the Seventh Fleet in the Bay of Bengal. The fleet had been
deployed to warn India against attacking West Pakistan and extending the war.
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Fifth Five-Year Plan, 1974–1979
Stress was laid on employment, poverty alleviation, and justice. The plan also focused on
self-reliance in agricultural production and defense. In 1978 the newly elected Morarji Desai
government rejected the plan. Electricity Supply Act was enacted in 1975, which enabled the
Central Government to enter into power generation and transmission leaders.
The Indian national highway system was introduced for the first time and many roads were
widened to accommodate the increasing traffic. Tourism also expanded.
Sixth Five-Year Plan, 1980–1985
The sixth plan also marked the beginning of economic liberalization. Price controls were
eliminated and ration shops were closed. This led to an increase in food prices and an
increase in the cost of living. This was the end of Nehruvian Plan and Rajiv Gandhi was
prime minister during this period.
Family planning was also expanded in order to prevent overpopulation. In contrast to China's
strict and binding one-child policy, Indian policy did not rely on the threat of force. More
prosperous areas of India adopted family planning more rapidly than less prosperous areas,
which continued to have a high birth rate.
Seventh Five-Year Plan, 1985–1990
The Seventh Plan marked the comeback of the Congress Party to power. The plan laid stress
on improving the productivity level of industries by upgrading of technology.
The main objectives of the 7th five year plans were to establish growth in areas of increasing
economic productivity, production of food grains, and generating employment opportunities.
The thrust areas of the 7th Five year plan have been enlisted below:
• Social Justice
• Removal of oppression of the weak
• Using modern technology
• Agricultural development
• Anti-poverty programs
• Full supply of food, clothing, and shelter
• Increasing productivity of small and large scale farmers
• Making India an Independent Economy
Eighth Five-Year Plan, 1992–1997
Modernization of industries was a major highlight of the Eighth Plan. Under this plan, the
gradual opening of the Indian economy was undertaken to correct the burgeoning deficit and
foreign debt. Meanwhile India became a member of the World Trade Organization on 1
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January 1995.This plan can be termed as Rao and Manmohan model of Economic
development. The major objectives included, controlling population growth, poverty
reduction, employment generation, strengthening the infrastructure, Institutional building,
tourism management, Human Resource development, Involvement of Panchayat raj,
Nagarapalikas, N.G.O'S and Decentralization and people's participation. Energy was given
priority with 26.6% of the outlay. An average annual growth rate of 6.7% against the target
5.6% was achieved.
Ninth Five-Year Plan, 1997–2002
Ninth Five Year Plan India runs through the period from 1997 to 2002 with the main aim of
attaining objectives like speedy industrialization, human development, full-scale
employment, poverty reduction, and self-reliance on domestic resources.
The main objectives of the Ninth Five Year Plan of India are:
• to prioritize agricultural sector and emphasize on the rural development

• to generate adequate employment opportunities and promote poverty reduction
• to stabilize the prices in order to accelerate the growth rate of the economy
• to ensure food and nutritional security
• to provide for the basic infrastructural facilities like education for all, safe drinking
water, primary health care, transport, energy
• to check the growing population increase
• to encourage social issues like women empowerment, conservation of certain benefits
for the Special Groups of the society
• to create a liberal market for increase in private investments
During the Ninth Plan period, the growth rate was 5.35 per cent, a percentage point lower
than the target GDP growth of 6.5 per cent.
Tenth Five-Year Plan, 2002–2007
• Attain 8% GDP growth per year.

• Reduction of poverty ratio by 5 percentage points by 2007.
• Providing gainful and high-quality employment at least to the addition to the labour
force;*All children in India in school by 2003; all children to complete 5 years of
schooling by 2007.
• Reduction in gender gaps in literacy and wage rates by at least 50% by
2007;*Reduction in the decadal rate of population growth between 2001 and 2011 to
16.2%;*Increase in Literacy Rates to 75 per cent within the Tenth Plan period (2002
to 2007).
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4. “The Foreign Trade Regime has undergone changes overtime.” Briefly examine the
phases of change.
The administrative control regime, which applies to all merchandise has several changes
overtime which are as follow…..
Under Law 7/1991, the government is entitled to regulate the import regime through decrees.
Decrees must be approved by the Committee of Tariffs, Customs and Foreign Trade, whose
main members are the vice-ministers of economy.(1) Decrees must be approved with the
recommendation of the Superior Council of Foreign Trade, which is composed of the
ministers of economy and the president of India.(2)
Under Decree 3803/2006, the Committee of Imports of the Ministry of Trade, Industry and
Tourism will be the competent administrative authority to grant licences for the import of
goods. The administrative authorization of prior licenses for the import of goods is mandatory
now in the following cases:
* Goods included in the list established by the government;
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* Goods that do not require payment under the exchange regime, including:
* goods imported as foreign investment or contributions in kind;
* donations;
* previously-paid imports originating from the free trade zone;
* personal belongings and luggage;
* legalization of merchandise; and
* goods identified by the government within the import policy framework;
* Requests for import of goods with tariff and tax exemptions;
* Requests for import of used, faulty, reconstructed, refurbished or remanufactured goods

or inventory leftovers;
* imports originating from official and governmental organizations, except for gasoline
and other fuels; and
* waste and scrap iron in cases determined by the government .
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Any additional imports into India fall under the free import regime; some imports must be
registered, while in other cases registration is not required. Both types of import are regulated
by the Direction of Foreign Trade of the Ministry of Commerce, Industry and Tourism.
Under the regime of free import with registration set forth in Article 2 of Decree 3803/2006,
importers must submit certain information and request authorization in advance from the
relevant administrative authorities and the Ministry of Foreign Trade with regard to the
following goods:
* fishing resources;
* monitoring and security equipment;
* Radioactive isotopes and substances;
* Goods reserved for the armed forces;
* Hydrocarbons, fuels and gasoline;
* goods subject to sanitary control to preserve human, vegetal and animal safety and
health;
goods subject to technical requirements and regulations;
* goods subject to quantitative restrictions;
* goods subject to control to guarantee environmental protection; and
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* automotive vehicles.
The sanitary, environmental, energy, technical and radiation control authorities must receive
requests in advance and issue their opinions accordingly. Requests are received and
processed through the Unique Window of Foreign Trade, a service that operates on the
Internet. It is managed by the Assistant Direction of Design and Administration of Operations
of the Ministry of Commerce, Industry and Tourism.
The authorizations given within the framework of the foreign trade regime for the import of
goods (either through licences or registrations) have a term of 12 months for capital goods
(which may be extended by a further 12 months) and six months for other goods (which may
be extended by three months).
The free import regime without registration applies to goods that do not require licences or
authorizations within the free import regime with registration. In these cases importers may
request customs clearance declarations from the relevant authorities without having to
provide additional documents.
Authorizations (where applicable) must be presented as supporting documents for customs

clearance and import declarations. Authorizations and registrations must be provided to the
customs authorities to obtain customs clearance.
Importers must keep these documents for a minimum of five years; they must be available for
review and control by the customs authorities of the National Direction of Taxes and
Customs whenever required.
To benefit from all the legal advantages and comply with the legal requirements of the
regime for the import of goods into India, importers and suppliers may seek legal advice from
a trade lawyer before developing any projects for international sales of goods or import
contracts.
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5. Discuss the approaches to tax equity with special reference to ‘ability to pay
principle.’
User pays, or beneficiary pays, is a pricing approach based on the idea that the most
efficient allocation of resources occurs when consumers pay the full cost of the goods that
they consume. In public finance it stands with another principle of "ability to pay," which
states that those who have the means should share more of the burden of public services.
The ability to pay principle is one the reasons for the general acceptance of the
progressive income tax system.
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The principle of user pay supports the idea of horizontal equity, which states that those in
similar wealth and income positions should be treated equally by the tax system. The
basic idea is that those who do not use a service should not be obligated to pay for it. As
long as the beneficiary aligns exactly with the user, the user pay principle works. Those
who do not go to a movie are not obligated to pay for someone else to attend.
In public goods, beneficiaries and users often do not align. The divergence of user and
beneficiary occurs when production and consumption have external effects. The driver,
who purchases gasoline, may believe he or she is paying for the full cost (user pay) of
using gasoline, except that greenhouse gases are produced. These impose costs on the
environment and are believed to contribute to climate change. The "beneficiaries" must
bear costs not paid in the purchase of gasoline. In this case the user pay principle results
in the driver not paying the full or social cost of using fossil fuels, which creates a strong
argument for regulation and other forms of public intervention. Increasing taxes on
gasoline is one possible response that preserves the user pay principle by increasing the
costs to user.
6. Write short notes on the following:-
Growth and Efficiency of industry
The industrial sector is one of the main sectors that contribute in india. The country ranks
fourteenth in the factory output in the world. The industrial sector is made up of
manufacturing, mining and quarrying, and electricity, water supply, and gas sectors. The
industrial sector accounts for around 27.6% of the India and it employs over 17% of the total
workforce in the country. The Growth Rate of the Industrial Sector in India came to around
5.2% in 2002- 2003. In this year, within the India , the mining and quarrying sector
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contributed 4.4%, the electricity, water supply, and gas sector contributed 2.8%, and the
manufacturing sector contributed around 5.7%.
The Growth Rate of the Industry Sector in India came to around 6.6% in 2003- 2004 and in
this year, the electricity, water supply, and gas sector contributed 4.8%, the mining and
quarrying sector contributed 5.3%, and the manufacturing sector contributed 7.1% in India .
Industry Growth Rate in India came to 7.4% in 2004- 2005, with the manufacturing sector
contributing 8.1%, the mining and quarrying sector contributing 5.8%, and the water supply,
electricity, and gas sector contributing 4.3% in India .
Industry Growth Rate in India came to 7.6% in 2005- 2006. In this year, the mining and
quarrying sector contributed 0.9%, the manufacturing sector contributed 9.0%, and the water
supply, gas, and electricity sector contributed 4.3%. The Growth Rate of the Industrial Sector
finally came to 9.8% in 2006- 2007. This shows that Industry Growth Rate in India has been
on the rise over the last few years.
The reasons for the rise of Industry Growth Rate in India
The reasons for the increase of Industry Growth Rate in India are that huge amounts of
investments are being made in this sector and this has helped the industries to grow. Further
the reasons for the rise of the Growth Rate of the Industrial Sector in India are that the
consumption of the industrial goods has increased a great deal in the country, which in its
turn has boosted the industrial sector. Also the reasons for the increase of Industry Growth
Rate in India are that the industrial goods are being exported in huge quantities from the
country.
The Indian government must boost the Industrial Sector
Industry Growth Rate in India thus has been registering steady growth over the past few
years. This has given a major boost to the Indian economy. The government of India thus
must continue to make efforts to boost the industrial sector in the country. For this will in
turn help to grow the country's economy.
Primary functions of money
* Medium of exchange:
The most important functions of money is to serve as a medium of exchange. It facilitates

buying and selling to take place. It solves all the problems of barter system. People can
exchange goods and services through money. By using money anything anything can be
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purchased in the market. For example, a seller sells a commodity by accepting money and by
using this money, he can buy some other commodity which he wants.
* Measure of value:
Money is a common measure of value. The value of all the commodities can be expressed
in terms of money. It is a measuring rod and it can be expressed in the price ratio of different
commodities. In India, rupee is the standard of measure, and therefore prices of goods and
services are expressed in terms of rupees.
Subsidy
A subsidy (also known as a subvention) is a form of financial assistance paid to a business or

economic sector. Most subsidies are made by the government to producers or distributors in
an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable
operations) or an increase in the prices of its products or simply to encourage it to hire more
labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of
exports; subsidies on some foods to keep down the cost of living, especially in urban areas;
and subsidies to encourage the expansion of farm production and achieve self-reliance in
food production.
Subsidies can be regarded as a form of protectionism or trade barrier by making domestic

goods and services artificially competitive against imports. Subsidies may distort markets,
and can impose large economic costs. Financial assistance in the form of a subsidy may come
from one's government, but the term subsidy may also refer to assistance granted by others,
such as individuals or non-governmental institutions.
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Management Programme

MS-03: ECONOMIC AND SOCIAL ENVIRONMENT

School of Management Studies

Course Code : MS-3

1. Identify the critical elements of the sociological environment of business and

1. The Amount Of Transformation Required To Reach Your Goal

It is important to determine how those changes can be accomplished in the current

Opportunities, Strengths And Advantages

3. Obstacles, Threats and Limitations

Structural-change approaches to development economics have faced criticism for their

First Five-Year Plan, 1951–1956

Second Five-Year Plan, 1956–1961

• Mining and industry

Third Five-Year Plan, 1961–1966

Fourth Five-Year Plan, 1969–1974

Sixth Five-Year Plan, 1980–1985

Seventh Five-Year Plan, 1985–1990

Eighth Five-Year Plan, 1992–1997

Ninth Five-Year Plan, 1997–2002

• to prioritize agricultural sector and emphasize on the rural development

Tenth Five-Year Plan, 2002–2007

• Attain 8% GDP growth per year.

* Goods included in the list established by the government;

* goods imported as foreign investment or contributions in kind;

* previously-paid imports originating from the free trade zone;

* personal belongings and luggage;

* legalization of merchandise; and

* goods identified by the government within the import policy framework;

* Requests for import of goods with tariff and tax exemptions;

* Requests for import of used, faulty, reconstructed, refurbished or remanufactured goods

* waste and scrap iron in cases determined by the government .

* monitoring and security equipment;

* Radioactive isotopes and substances;

* Goods reserved for the armed forces;

* Hydrocarbons, fuels and gasoline;

goods subject to technical requirements and regulations;

* goods subject to quantitative restrictions;

* goods subject to control to guarantee environmental protection; and

Authorizations (where applicable) must be presented as supporting documents for customs

6. Write short notes on the following:-

Growth and Efficiency of industry

The reasons for the rise of Industry Growth Rate in India

The Indian government must boost the Industrial Sector

Primary functions of money

The most important functions of money is to serve as a medium of exchange. It facilitates

A subsidy (also known as a subvention) is a form of financial assistance paid to a business or

Subsidies can be regarded as a form of protectionism or trade barrier by making domestic

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