Assi

gnment

Cour
seCode : MS-
3

Cour
seTi
tl
e : Economi
candSoci
alEnv
ironment

Assi
gnmentNo. : MS-
3/TMA/
Sem-
II
/2020

1|
Page
Q1.
a)St
atet
hei
mpactofsoci
alenv
ironmentonbusi
ness.

Ans:

Thei
mpactofsoci
alenv
ironmentonbusi
ness

Thereisnodoubtt hatthesociet
yiscont i
nual
lychangi
ng.Thet ast
esandfashionsareagreat
exampleoft hischange.Oneoft hemostsi gnif
icantdi
fferencesisthegrowingpopular
it
yof
soci
almedi a.Socialnetwor
kingsiteslikeFacebookhav ebecomev er
ypopul aramongt he
youngerpeople.Theyoungconsumer shavegrownusedt omobi lephonesandcomputers.

Theyoungergenerati
onpr efer
st ousedi git
altechnol
ogyt oshoponli
ne.Olderpeoplewi l
l
per
hapssti
cktotheirt
radit
ionalmethods.Theeffectofchangi
ngsoci
etyi
sanof t
endiscussed.
Youmustalsounderstandthatthesechangingfactorshaveatol
lonbusi
nessestoo.Changes
i
nthesoci
alfact
orscani mpactafirminmanydi f
ferentways.

Companiesof tenf ocusonthesechangesi ndepth. Todoso,t heyempl oyenv i

ronmental
anal
ysissuchasPESTanal ysis.STEPisavari
ati
onofPEST.Extendedv er
sionsincl
udePESTLE,
STEEPandSTEEPLEanal y
sis.The“ S”i
nalltheseanal
ysesindicatessocialorsocio-cul
tur
al
fact
ors.Otherfactorsyoushouldassessarepoli
ti
cal
,economic,technol
ogical
,envir
onment al
,
ethi
calandlegal.

Busi
nesseschooseanenvir
onment
alanal
ysi
sdependi
ngont
henat
ureofoper
ati
ons.Howev
er,
al
lofthem st
udythesoci
alf
act
ors.

Inthesocialstepfortheseanalyses,youhav et
olookcareful
l
yatthesoci
alchanges.Youwil
l
alsohavet olooki nt
ot heculturalchangeswhichtakeplaceinyourbusi
nessenv i
ronment
.
Marketresearchisacr it
icalpartofthisstep.I
tisvi
talt
oseet hetr
endsandpat t
ernsofthe
societ
y.

To underst
and the i
mpactsbetter,you mi
ghtneed t o st
udythe factor
si n detai
l
s.Most
companiesanal y
ze t
he popul
ation gr
owth and age str
uctur
e.Theyal so show inter
estin
consumerattit
udesandlif
estyl
echanges.Youranalysiscanshow iftherearef aul
tsinyour
marketi
ngstrat
egy.I
tcanalsohelpfi
ndnewideas.

Bel
owi
sal
i
stofsoci
alf
act
orswhi
chi
mpactcust
omerneedsandsi
zeofmar
ket
s:

 Li
fest
yles

 Buy
inghabi
ts

 Educat
ionl
evel

 Emphasi
sonsaf
ety

 Rel
i
gionandbel
i
efs

 Heal
thconsci
ousness

2|
Page
  Sexdi
str
ibut
ion

 Av
eragedi
sposabl
eincomel
evel

 Soci
alcl
asses

 Fami
l
ysi
zeandst
ruct
ure

 Mi
nor
it
ies

 At
ti
tudest
owar
dsav
ingandi
nvest
ing

 At
ti
tudest
owar
dgr
eenorecol
ogi
cal
product
s

 At
ti
tudest
owar
dforr
enewabl
eener
gy

 Popul
ati
ongr
owt
hrat
e

 I
mmi
grat
ionandemi
grat
ionr
ates

 Agedi
str
ibut
ionandl
i
feexpect
ancyr
ates

 At
ti
tudest
owar
dimpor
tedpr
oduct
sandser
vices

 At
ti
tudest
owar
dwor
k,car
eer
,lei
sur
eandr
eti
rement

 At
ti
tudest
owar
dcust
omerser
viceandpr
oductqual
i
ty

The socialaspectfocuses on t
he forces wit
hint he soci
ety
.Fami ly,fri
ends,col
leagues,
nei
ghborsandt hemediaaresoci
alfactor
s.Thesefactor
scanaf fectouratt
it
udes,opi
nionsand
i
nter
ests.So,i
tcanimpactsalesofproductandrevenuesearned.

Thesocialfactorsshapewhowear easpeople.I
taffect
showwebehav eandwhatwebuy .A
goodex ampleishowpeopl e’
satt
it
udetowardsdietandheal
thischangi
nginUK.Becauseof
this,UKbusinessesareseei
ngsomechanges.Mor epeoplear
ejoi
ningfi
tnesscl
ubs.Ther
eis
alsoamassi vegrowthindemandf
ororgani
cfood.

Pr
oductsoft
entakeadvant
ageofthesocialf
actor
s.TheWi iFi
t,f
ori
nst
ance,at
temptt
odeal
wi
ththesoci
ety
’sconcer
naboutchi
l
dren’
slackofexer
cise.

Popul
ati
onchangesar
ealsodir
ectl
yaf
fect
ingor gani
zati
ons.Thesuppl
yanddemandofgoods
andserv
icesi
naneconomycanchangewi t
ht hestruct
ureofthepopulat
ion.Decl
ineinbi
rt
h
rat
esmeandemandwi l
ldecr
ease.I
tal
soindicatesgreat
ercompeti
ti
onast hetot
alconsumer
s
fal
l
.

Wor
ldfoodshor
tagepr edi
cti
onscanl eadtocal
lformoreinvestmentinfoodpr oduct
ion.An
i
ncr
easeint
hewor l
d’spopulat
ioncanhav et
hesameef f
ect.Afr
icancountr
iesli
keUgandaar e
f
aci
ngfoodshor
tage.Theyarereconsi
deri
ngrej
ect
ionofgenet
icall
ymodif
iedfoodsnow.

3|
Page
Organizati
onsshouldbeabl etoof ferproductsandserviceswhi chai
mt obenefitpeopl
e’
s
l
ifesty
le.Theoffer
ingsshoul
dcompl ementcust omer
s’behavior.Notr
eact
ingtochangesint
he
societycanbeacost l
ymi st
ake.Theymi ghtlosemarketshare.Demandforthei
rproduct
sand
servi
ceswi l
lfal
l
.

Qb)Exami
ne how sociol
ogi
calenvi
ronmentaf
fect
s and get
s af
fect
ed by t
he economi
c
env
ironmentofbusi
ness.Gi
veexampl
es.

Ans:

Thesoci alenvir
onmentofabusi nesscanbei ntegr
altoitssuccessorf ai
l
ure.Employ
eesar e
often inf
luenced bythe cont extin which theywor k and this can haveimpli
cati
ons for
productiv
ity.Some effectsoft he soci
alenv ir
onmentar e easi
ert o measurethan other
s.
Empl oyers who take the necessary str
ides to create a positi
ve and harmonious soci
al
env i
ronmentintheworkplacecansett hemselvesupf orfuturesuccess.

Teamwor
kandEmpl
oyeeCooper
ati
on

Onewayi nwhi chthesoci alenvir

onmentaf fectsthewor kpl
aceisinthewayt hatiteit
her
i
nspir
esordi scour
agesempl oyeecooperati
on.Inbusinesseswi t
hapositi
vesoci
alenv
ironment
whereempl oyeesgetal ongandar egener all
ypositiveint hei
rrel
ati
onshi
pt ooneanot her
,
cooper
ationandt eamwor kar emor elikel
yt oexistthani nanegativ
esocialenvi
ronment.
Negati
ve socialenv i
ronment swillgenerall
yf ost
erdi ssentand str
if
e among workersand
dest
roytheabi l
i
tyorwi l
li
ngnessofempl oyeestowor ktogether.

Empl
oyeeJobSat
isf
act
ion

Thesoci alenv i
ronmentoft heworkplacecan also havean ef f
ecton an empl oyee'sjob
sati
sfacti
on.Inbusinesseswhereemployeesexperi
enceapositi
vesocialenv
ironment,theyare
morel i
kelytohav eagr eat
ersenseofj obsati
sfacti
onandenj oyment.Inaj obenvironment
wherenegat i
vit
yisthenorm andemployeesareconstantl
yinconfl
i
ctwithoneanot her
,wor ker
s
aremor eli
kelytodreadworkandnothaveaposi t
iveassessmentofthei
remploy er
.

Ty
peandNumberofCust
omer
s

Thesoci alenvir
onmentofabusi nesscanal sohav eani mpactont hetypeandnumberof
customersi tattract
s.I nabusi nessenv ir
onmentwher eempl oyeesar egenerall
yposi t
ive,
upbeatand cooper ati
ve,cust omer s ar e mor el i
kelyt o appreci
atet he atmospheret hey
experi
encewheni nt
eractingwi t
hempl oyees.Cust omerswhoexper i
enceanegat i
vesoci al
envi
ronmentmaybemor el i
kel
yt oav oidabusi nessal t
ogether,
especiall
yifthebusinesshasa
compet i
torthatisconv enient
lylocatedneart hecust omer.Customer schoosewhi chbusiness
topatronizebasedonv ar i
ousfactors, andthesoci alenvir
onmentcanbet hedecidi
ngf act
orfor
some.

Posi
ti
onsofLeader
shi
p

4|
Page
A positi
veandnur tur
ingsoci alenv i
ronmentf orwor kersisonet hatcanengenderposi t
ive
changewi thi
nt heworkplace.Itcanal soleadt othecreati
onofleader
swi t
hint
hebusinessit
self
.
Businessest hatconstantl
yemphasi zeposi t
iverei
nforcement,sel
f-
improvementandeducati
on
ofempl oyeesar eli
kelytocul tiv
at eleadersfrom withintheorgani
zati
on.Somemaygoont o
pursueposi t
ionsofleadershipwi thinthecompanyori ndust
ry,whi
leother
smaysi mplyassume
alesserleadershiprol
ewi t
hint heircurrentoccupati
on.

Exampl
e

Businessowner sandmanager shav eagr eatdealofcontrolovert heinternalenvir

onmentof
business,whi chcov er
sday -to-daydeci si
ons.Theychooset hesuppl iestheypur chase,which
empl oyeest heyhire,t
heproduct st heysell
,andwher etheysellthosepr oducts.Theyuset hei
r
ski
ll
sandr esourcest ocreategoodsandser vicesthatwillsatisfyexisti
ngandpr ospecti
ve
customer s.Howev er,theexternalenv i
ronmentalcondi
ti
onst hataffectabusi nessaregenerall
y
beyondt hecont r
olofmanagementandchangeconst antl
y.Tocompet esuccessf ul
ly,busi
ness
owner sandmanager smustcont inuouslystudyt heenvi
ronmentandadaptt hei
rbusinesses
accordingly.

Otherf orces,suchasnat uraldisasters,canalsohav eamaj orimpactonbusi nesses.Whilest i

ll
i
nt her ebuildi
ngst ageafterHur ri
caneKat ri
nahi tin2005,t heU. S.Gul fCoastsuf f
eredanot her
disasterinApr il2010asar esultofanexpl osionont heDeepwat erHor i
zonoi l-
ri
g,whichki ll
ed
11wor kersandsentmor et han3mi l
li
onbar r
elsofoi lintotheGul fofMexi co.Thisev ent,which
playedoutf ormor ethan87day s,sev er
elyaffectedt heenv i
ronment ,businesses,tourism,and
people’sl i
veli
hoods.Gl obaloilcongl omerateBP,whi chwasr esponsiblefort heoilspill,has
spentmor et han$60bi l
li
oni nr esponset ot hedi sasterandcl eanup.Sev eny earsaf t
ert he
explosion,t ouri
sm andot herbusi nessesar esl owlyr ecoveri
ng,al thoughsci enti
stsar enot
certai
naboutt helong-t
erm env i
ronment alconsequencesoft heoi lspi
ll.

Q2.
Stat
ethemainobjecti
vesofindust
ri
alpoli
cy,1991.Cri
ti
cal
lyassesstheindust
ri
alpol
icyof
I
ndi
aparti
cul
arl
ywit
hr espectt
oeconomi cl
iberal
izat
ionandgl
obalizat
ion.

Ans:

Inor dertoaccel erat eIndust ri

alDev elopmentinIndia,andi naccor dancewitht hechangi ng
circumstances,v ariousi ndust r
ialpol ici
eswer edeclar
edi nthey ears1948,1956,1977,1980
and1985,buti nspi teofal lefforts,thepaceandaswel lasthelevelofIndustri
alDevelopment
i
nI ndi
a,coul d notr eached accor ding toi t
sneed.Ther efore,in ordertol i
ftunnecessar y
restri
cti
ons on I ndust r
ies,undert he li
censing poli
cy,and t oi ncrease theirefficiency,
dev el
opmentandt echnol ogicallevel,i nordertomakeI ndi
angoodsusabl eint hecompet i
ti
ve
globalmar ket,on24t hJul y,1991,i nLok- SabhatheMi nist
erofSt at
esf orindustr
ies,Mr .P.J.
Kur i
andeclaredtheI ndustri
al Poli
cy ,1991.

5|
Page
TheMai
nobj
ect
ivesoft
heNewI
ndust
ri
alPol
i
cyof1991ar
e:

 Tointr
oduceaneconomi
csy
stem f
reeofexcessi
ver
egul
ator
ynor
msandbur
eaucr
ati
c
cont
rols.

 Tol
i
ber
ali
zeI
ndi
aneconomyandwor
ktowar
dsgl
obal
i
zat
ion.

 Tor
elaxf
orei
gndi
recti
nvest
mentnor
ms.

 Totakeawayrest
ri
cti
onsoninvest
ment sbybusi
nessandi
ndust
ri
alf
ir
ms,undert
he
Monopol
i
sti
candRestr
ict
iveTr
adePract
ices(
MRTP)Act.

Toopensareasot her
wisereser
vedexclusiv
elyforpubli
csectorpart
ici
pati
onforpri
vateand
for
eignpar
ti
cipat
ion.Thiswasdrivenbyt hefactthatsever
alpubl
icsectorent
erpr
iseswere
eit
heri
ncur
ri
nglossesyearaft
eryearandhadv er
ylowrateofret
urn.

The i
ndustr
ialpol
i
cy of I
ndi
a par
ti
cul
arl
y wi
thr
espectt
o economi
cli
ber
ali
zat
ion and
gl
obal
izat
ion

Theeconomi cl iberal
isationi nI ndiar eferredt ot heeconomi cl iberalisationoft hecount ry'
s
economi cpol icies,initi
atedi n1991wi ththegoalofmaki ngt heeconomymor emar ket-and
ser vi
ce-ori
ented,andexpandi ngt her oleofpr iv
ateandf orei gni nv estment .Speci fi
cchanges
i
ncl udear educt ioni ni mpor ttariffs,der egul ationofmar ket s,r educt i
onoft axes,andgr eater
foreigni nvestment .Liberalisati
onhasbeencr editedbyi tspr oponent sf ort hehi gheconomi c
growt hr ecordedbyt hecount ryint he1990sand2000s.I tsopponent shav ebl amedi tfor
i
ncr easedi nequal i
tyandeconomi cdegr adat i
on.Theov eralldi rect i
onofl iberalisationhassi nce
remai nedt hesame, ir
respect i
veoft her uli
ngpar t
y ,al
thoughnopar tyhasy etsol vedav arietyof
pol i
ti
call
y di fficulti ssues,such as l iberalising l abour l aws and r educi ng agr icultural
subsi di
es.Ther eexi stsal ivelydebat ei nI ndiaast owhyt heeconomi cr ef ormswer enotr oll
ed
backaf ter1991al t
houghear li
erat t empt st or eformt heeconomywer eei t
herabandoned( i
n
1966)orcar riedoutwi thsteal t
h( 1980s) .Thedebat ealsoexi stonwhet herandt owhatext ent
ther eformshav ebeenbenef ici
altot hepeopl eofI ndia.Accor di ngt ot heDi scursiveDomi nance
Theor yofeconomi cr eformssust ainabi l
ity,economi cr efor msbecomesust ainablewhent he
domi nantsoci al discour seint hecount ryregar dingt hepr ef erredmodeofeconomi cgov ernance
(i
.e.,t he di scur sive condi ti
ons) t ip agai nst t he exi sting par adigm under except i
onal
circumst ances.Thedi scursivecondi ti
ons,accor dingt ot het heor y
,ar edet er minedbasedon
eightf actors:t he domi nantv i
ew ofi nternat i
onali ntel l
ect ual s,i l
lustrat i
ve count ry cases,
execut i
veor ient ati
ons,pol i
ticalwill,t hedegr eeandt heper cei vedcausesofeconomi ccr i
sis,
attit
udesont hepar tofdonoragenci es, andt heper ceivedout comesofeconomi creforms.

I
ndian gov ernmentcoal i
ti
onshavebeen adv i
sed bytheIMF and Wor l
d Bankt o conti
nue
l
iberal
isati
on.Bef ore2015,I
ndiagr
ewatasl owerpacethanChi na,whichhadbeenliberal
isi
ng
i
tseconomysi nce1978.In2015,Indi
a'sGDP growthoutpacedt hatofChina.TheMcKi nsey
Quarterl
yst atedthat"r
emov i
ngmajorobst
acleswouldf
reeIndia'seconomytogr owasf astas
China'
s,at10%ay ear
".

6|
Page
Therehasbeensi gnif
icantdebat e,however,aroundl iberal
isat
ionasani ncl
usi veeconomi c
growthstr
ategy.Incomei nequali
tyhasdeepenedi nIndiasince1992, withconsumpt i
onamong
thepooreststayingst ablewhi l
et hewealthiestgener ateconsumpt i
ongr owt h.I
ndia'sgross
domesticproduct(GDP)gr owthratein2012–13wast hel owestf oradecade,atj ust5.1%,at
whichti
memor ecr i
ti
cism ofIndi
a'seconomi creformssur faced;itapparentlyf
ai l
edt oaddress
employmentgr owth,nut r
iti
onalvaluesint ermsoff oodi ntakei ncalories,andal soexport
growth—andtherebywasl eadi
ngtoawor seningcur rentaccountdef i
citcompar edt ot heper
iod
pri
ortoref
orm

Q3.“
Forei
gn Di
rectI
nvest
ment(FDI)isi ncreasi
ngl
yimportantin economi
c dev
elopment
becauseofi
tscl
osel
inksi
ntr
ade,f
inanci
al f
lowsandtechnol
ogytr
ansfer”
.

Expl
aintheabovest
atementandexami
net
hepol
icyoft
hegov
ernmenti
npr
omot
ingf
orei
gn
capi
tali
nIndi
a.

Ans:

Foreigndirectinvestment(FDI)i
nI ndiaisamaj ormonet arysour cef oreconomi cdev elopment
i
nI ndia.For ei
gncompani esinvestdi rectl
yinfastgr owingpr i
vateI ndianbusi nessest otake
benef i
tsofcheaperwagesandchangi ngbusinessenv i
ronmentofI ndia.Economi cli
berali
sat
ion
startedinIndiainwakeoft he1991economi ccrisi
sandsi ncethenFDIhasst eadil
yincreasedin
India,whichsubsequent l
ygener atedmor ethanonecr ore( 10mi ll
ion)j obs.Accordingt othe
FinancialTimes,in2015I ndi
aov ert
ookChi naandt heUni t
edSt atesast hetopdest inati
onfor
theFor ei
gnDi rectI
nvestment.Inf i
rsthalfofthe2015,Indi aattractedinv estmentof$31bi l
l
ion
compar edt o$28bi l
l
ionand$27bi l
li
onofChi naandt heUSr espectively
.

On17Apr i
l2020,I ndi
achangedi tsforei
gndirectinvestment( FDI)pol
icytopr ot
ectIndian
companiesfrom "opport
unisti
ctakeover
s/acqui
sit
ionsofI ndiancompaniesduet othecurrent
COVID-19pandemi c",accordingtotheDepar t
mentf orPr omotionofIndustr
yandI nt
ernal
Trade.
Whil
et henewFDIpol icydoesnotrest
ri
ctmar ket
s,thepolicyensur
esthatallFDIwil
lnow
beunderscruti
nyoft heMinist
ryofCommer ceandIndustry.

Foreign dir
ecti nvestment s are commonl ymade i n open economi es t
hatoff era skil
led
wor kfor
ceandabov e-averagegrowthpr ospectsfort heinvest
or,asopposedt oti
ght l
yregul
ated
economi es.Foreigndirectinvest
mentf requentlyinvolvesmorethanj ustacapit
alinvestment.I
t
mayi ncludeprov i
sionsofmanagementort echnologyaswel l
.Thekeyf eat
ureofforeigndir
ect
i
nv estmentisthatitest abli
sheseithereffecti
vecont roloforatleastsubstanti
ali
nf l
uenceover
thedecision-
maki ngofaf orei
gnbusiness.

ForeignDirectInvest
ment( FDI)isani nvest
mentdi r
ectl
yintopr oducti
onandser vi
cesina
count r
ybyacompanyl ocatedi
nanot hercountr
y,ei
therbybuy i
ngacompanyorbyexpandi ng
businessinthatcountry.I
tisananothermodeofdoi ngbusinessinaf orei
gncount r
y(PSubba
Rao2009) .Forei
gnersmaysubscr i
bet osharesanddebenturesofanot hercountr
y’sconcer
ns.
Foreigner
smaysubscr ibetosharesanddebenturesofanothercountry
’sconcerns.

7|
Page
Basically,totalFDIi ncl udes a)For eign di r
ecti nvest ment -whi ch incl udes t he shar e of
i
nv estmenti nequityt hroughSI A/FIPB,RBI ,NRI ,acqui sit
ionofshar esofI ndi
ancompani esby
NRI sunderFEMA,equi tycapi talofuni ncor porat edbodi esandot hercapi t
al.andb)For eign
portfoli
oinvestment -whi chconsi st
sofGl obalDeposi tor yRecei pts(GDR) ,Amer i
canDeposi tory
Recei pts(ADR) ,
ForeignI nst itut
ionalInvest or s( FIIs),offshor ef undsandot hers.FDIi ntr
oduces
moder ntechnologies,t r
ansf ersknowl edge,ski ll
,pr ov idesaccesst oexpor tmar ket salongwi th
i
nv estmentandmanager ialexper ti
se.I tpr ov i
dest hemuchneededf oreignexchanget ohel p
reducet hedef i
citofbal anceoft rade.Whenf oreignent erprisesent erintocompet iti
onwi thlocal
fi
rms,t helatteraref orcedt oi mprovet hei rtechnol ogy ,qual i
tyandmanagement .FDIi streated
asani mportantmechani sm f orchannel izing t ransf erofcapi t
aland t echnol ogyand t hus
perceivedt obeapot entf actorinpr omot ingeconomi cgr owt hinhostcount ries.Mor eov er
,
MNCsconsi derFDIasani mportantmeant or eor gani zet heirpr oduct i
onact ivi
ti
esacr oss
border sinaccor dancewi tht heircorpor atest rat egiesandt hecompet i
tiveadv ant ageofhost
count ri
es(RBIBul l
etin2012) .

Histori
call
y,Indiahasf ollowedv er ycautiousandsel ect
iveappr oachr egardingf or eigncapi tal
,
butaf t
ereconomi creformsi n1991, ithasl iberalizedt heforeigndi r
ecti nvestment( FDI )Poli
cy.
Numberofmeasur eswer eunder takent opr omot eFDI,ThusGov er nmentofI ndi a( GOI)has
beensucceededi nat tractingmor eFDIi nI ndi a.Fr om they ear1991- 1992t o2011- 12,I ndiahas
fetched4,26,318US$mi ll
ionFDIi nfl
ows( consi der i
ngest i
mat esmadebyRBIf orthey ear2010
to2012) .Accordingt oUNr epor t
, Indi
ai sthet hi
rdmostf avoreddest inationforinv est mentaf ter
China and t he US f ormaj orgl obalcompani es.The r eportf urtherexpect st hatf orei
gn
i
nv estmentinI ndiacoul di ncr easebymor et han20%i n2012- 1213.I ndianeedsf or ei gncapital
duet oinadequat edomest i
ccapi t alandal sof oreconomi cdev elopment .FDIisgener all
yknown
tobet hemostst ablecomponentofcapi talflowsneededt of inancet hecur rentaccountdef i
cit
.
Indiahasbecomeani nvest menthubov erl astdecade.Themaj orar easofFDI sar e-oi l
, mi
ning,
coalandgas,banki ng,i nsur ance,t r
anspor t
at i
on,f inance,manuf acturing,retail
inget c.FDIi s
signif
icanttoIndiaasanengi neofgr owt h.

Q4.
Discusst
her
oleofpubl
icsect
ori
nIndi
a.Exami
net
heachi
evement
sbypubl
icsect
orof
I
ndi
a.

Ans:

Rol
e ofPublic Sect
or:The publi
c sect
orhas been playi
ng a vi
talrol
eint he economi
c
dev
elopmentoft he count
ry.Publi
csectorisconsider
ed a power f
ulengine ofeconomi
c
dev
elopmentandani mport
antinst
rumentofsel
f-r
eli
ance.Themai ncontri
buti
onsofpubli
c
ent
erpr
isest
othecount r
y'
seconomymaybedescribedasf ol
lows:

1.Fi
ll
ingtheGapsi nCapitalGoods:Atthet i
meofindependence,t
hereexist
edseriousgapsi n
thei
ndustrialstr
uctureofthecountry
,parti
cular
lyi
nthefiel
dsofheavyindustr
iessuchasst eel
,
heav
ymachi netools,expl
orati
onandr efi
ningofoil
,heavyElect
ri
calandequipment,chemicals
andfert
il
izers,defenseequipment,et
c.Publ i
csect
orhashelpedtofil
lupthesegaps.Thebasi c

8|
Page
i
nfrastr
ucturerequi
redforr
api
dindust
ri
ali
sat
ionhasbeenbuil
tup,thr
ought heproduct
ionof
str
ategiccapit
algoods.Int
hiswaythepubli
csectorhasconsi
der
ablywidenedtheindustr
ial
baseoft hecountr
y.

2.Empl oy
ment :Publi
csectorhascreat
edmi l
l
ionsofj obstotackl
etheunemploymentpr obl
em
i
nt hecount ry
.Publ i
csectoraccountsforaboutt wo- t
hir
dsoft hetotalemploymenti nthe
organisedi ndustr
ialsectorinIndi
a.Byt aki
ngov ermanysi ckunit
s,thepubl i
csectorhas
protectedt heempl oymentofmi ll
i
ons.Publi
csectorhasal socontr
ibutedalott owardsthe
i
mpr ov ementofwor kingandli
vi
ngconditi
onsofwor kersbyservi
ngasamodel empl oyer
.

3.Bal ancedRegi onalDev el

opment :Publi
csectorunder t
akingshav elocatedtheirplantsin
backwar dandunt roddenpar t soft hecount
y.Thesear easl ackedbasicindustr
ialandci vi
c
faci
li
ties li
ke electri
cit
y,wat ersuppl y,townshi
p and manpower .Publi
c enter
pr i
ses have
developed these f acil
i
ties ther eby bri
ngi
ng aboutcompl etet r
ansfor
mat i
on int he soci
o-
economi clifeoft hepeopl eint heseregi
ons.Steelpl
ant sofBhi lai
,Rourkel
aandDur gapur;
fert
il
izerfactor
yatSi ndri,aref ew examplesofthedev elopmentofbackwar dregionsbyt he
publi
csect or.

4.Contri
but
iontoPubl i
cEx chequer
:Apartfrom generati
onofi nternalresourcesandpay mentof
divi
dend,publi
cent erpri
seshav ebeenmaki ngsubst antialcont r
ibuti
ont ot heGovernment
exchequert
hroughpay mentofcorporat
et axes,excisedut y,custom dut yetc.Inthi
swayt hey
helpinmobili
zi
ngf undsf orfi
nanci
ngtheneedsf ortheplanneddev el
opmentoft hecountr
y.In
recentyear
s,thet otalcontri
buti
onfrom t hepubl i
cent erpriseshasi ncr
easedconsi der
ably
,
betweentheperiods2002- 03to2004-05thecont ri
buti
oni ncreasedbyRs81, 438cror
esont he
average.

5.Expor
tPromot ionandFor eignExchangeEar ni
ngs:Somepublicent erpri
seshavedonemuch
to pr
omoteI ndia’
sexpor t.TheSt ateTr adi
ng Corporat
ion(STC) ,theMi ner
alsand Metal
s
Tradi
ngCorporat i
on( MMTC) ,Hindust
anSt eelLtd.
,theBharatElectronicsLtd.
,theHindust
an
MachineTools,etc.,
havedonev er
ywellinexportpromoti
on.Thef oreignexchangeearni
ngsof
thepubl
icsectorenterpr
iseshav ebeenri
singfrom Rs35cr or
esin1965- 66toRs42,264cror
es
i
n2004-05.

6.ImportSubst i
tuti
on:Somepublicsectorenterpri
seswer est ar
tedspecifical
l
yt opr oduce
goodswhi ch wer eformerl
yimport
ed and thust o sav efor
eign exchange.TheHi ndustan
Anti
biot
icsLt d.,theIndianDrugsandPhar maceuticalsLtd.(
IDPL) ,theOilandNat uralGas
Commi ssion( ONGC) ,theIndi
anOilCorporat
ionLt d.,theBharatEl ect
roni
csLt d.
,etc.
,hav e
savedforeignexchangebywayofi mportsubst
itut
ion.

7.ResearchandDev elopment:Asmostoft hepubl i

centerpri
sesareengagedi nhight echnology
andheav yi
ndust
ries, theyhaveundertakenresearchanddev el
opmentpr ogrammesi nabi gway.
Publi
csectorhasl aidst r
ongandwi debasef orself-r
eli
anceinthef i
eldoftechnicalknow- how,
maintenanceandr epairofsophisticatedindustri
alplants,machineryandequi pmenti nt he
country
.Through t he dev el
opmentoft echnologicalskil
l,publ
ic enter
prises haver educed
dependenceonf or eignknowhow.Wi ththehelpoft hetechnol
ogicalcapabili
ty,publicsector

9|
Page
under
taki
ngshav
esuccessf
ull
ycompet
edi
nthei
nter
nat
ional
mar
ket
.

Inadditi
ontot heabove,thepublicsectorhaspl ayedani mport
antroleintheachievementof
consti
tuti
onalgoal
slikereducingconcentrat
ionofeconomi cpowerinpr i
vatehands,i
ncreasi
ng
publi
ccont r
oloverthenationaleconomy ,creat
ingasoci al
ist
icpat
ternofsociety
,etc.Withall
i
tsli
nkagest hepubl
icsectorhasmadesol i
dcont r
ibut
ionstonati
onalself
-r
eli
ance.

Theachi
evement
sbypubl
i
csect
orofI
ndi
a

Publi
cSect orinI ndi
ahaveplayedast ell
arroleinspeedingupt heprocessofindust
ri
al
developmentint hecountr
y.Theyhav eserved theneedsoft henati
onand ensured t
hat
productsandservi
cesaremadeav ai
l
abletoconsumersataff
ordabl
ecost
s.Thefol
lowingar
ea
fewoft heachi
evementsofpubl
icSectori
nIndi
a:

1.Setupi
ndust
ri
esi
nst
rat
egi
candcor
esect
ors.

2.Pr
ovi
dedbasi
cinf
rast
ruct
uref
aci
l
iti
esataf
for
dabl
ecost
s.

3.Pr
omot
edbal
ancedr
egi
onal
dev
elopmentbyset
ti
ngupi
ndust
ri
esi
nbackwar
dar
eas.

4.Restr
ict
edt
hegrowt
hofpr
ivat
emonopol
i
esandpr
otect
edconsumer
sagai
nstt
heev
il
sof
pri
vat
emonopoli
es.

5.Generat
ed l
arge scal
e empl
oymentoppor
tuni
ti
es and cont
ri
but
ed t
othe r
educt
ion i
n
unempl
oyment.

6.Ser
vedasamodelempl
oyer
,pr
ovi
dinggoodr
emuner
ati
on,j
obsecur
it
yandwel
far
efaci
l
iti
es
toemploy
ees.

7.Expor
tedgoodsandser
vicest
her
ebyear
ningv
aluabl
efor
eignexchange.

8.Setupi
ndust
ri
eswit
haf ocusoni
mpor
tsubst
it
uti
ont
oconser
vef
orei
gnexchanger
esour
ces
andachi
evesel
f-
suf
fi
ciency
.

9.Takenov
ersi
cki
ndust
ri
aluni
ts,
rest
ruct
uredt
hem andconv
ert
edt
hem i
ntov
iabl
euni
ts.

10.Achi
evedpr
ofi
tabl
egr
owt
handcont
ri
but
edt
othenat
ional
exchequer
.

11.Setupanet
wor
koff
inanci
ali
nst
it
uti
onswhi
chhav
efi
nancedt
hegr
owi
ngneedsoft
he
i
ndustr
y.

12.Promotedthegrowthofvi
ll
age,
cott
age,t
radi
tionalandsmal
lscal
eent
erpr
isesbypr
ovi
ding
advi
ce,consul
tancy
,fi
nanceandmarket
ingf
acil
it
ies.

Q5.
Wri
teshor
tnot
es:

Qa)
Smal
lScal
eIndust
ri
es.

Ans:

10|
Page
Smallscaleindust
riesarelabouri
ntensi
veyetr
equi
relit
tl
ecapital
.Smal lscal
eindust
riescanbe
eit
hermanuf actur
ingindustri
esorservi
ceprovi
ders.Smallscaleindustri
escompr i
seofsmall
enter
pri
sesthatmanuf act
uregoodsorprov
ideserv
iceswiththehelpofsmal l
ermachi nesanda
fewwor ker
sandempl oyees.

Theenterpri
semustf allundertheguidel
inessetbytheGovernmentofIndi
a.Smallscal
e
i
ndustr
iesinIndi
aaretheli
fel
ineoftheI
ndianeconomy,
andtheyoff
ersev
eralj
oboppor
tuni
ti
es
forski
ll
edl abour
s.Afterall
,smallscaleindust
ri
esareessent
ialfort
heeconomyf rom a
fi
nanci
alandsocialpoi
ntofview.

Foradev elopingcount r
yl i
keIndi
a,theseindust
ri
esbloom becauseofhugedemandand
opport
uni t
y.Somesmal lscal ei
ndustr
iesarealsoexpor
ti
nggoods,t her
ebybringi
ngf
orei
gn
curr
enciesinI ndi
a.InIndi a,near
lyhal
foftheproduct
s(45-55%)shi
ppedar ef
rom Smal
lscal
e
andmi d-scaleindust
ries.Somesmal lscal
eindust
ri
esarecreatedbecauseofthedemandof
vendor
sf ormul ti
nati
onal companies.

TheGovernmentofI
ndiahassomegui deli
nesforsmal lscal
eindustr
iesintermsofi
nvestment
thecompanyismaki
ngandther evenueithasgenerated.Smallscal
eindustr
iesar
ecategori
zed
i
ntothr
eepart
s:manufact
uri
ng/producti
on,anci
ll
ary
, andservi
ceindustr
ies.

 Manufact
uringI ndustr
ies:Unitsthatproducefi
nishedgoodsei
therforconsumpti
onor
used i
n processing industr
ies.Theset y
pesofsmal lscaleindust
ri
esar egeneral
l
y
i
ndiv
idual
lyowned.Manuf acturi
ngsmal lscal
eindustr
iesexamplesarepowerlooms,
engi
neeri
ngi ndustri
es,foodprocessing,et
c

 Ancil
l
aryIndust
ri
es:BigcompaniesorMNCmanuf acturesf i
nishedgoods,buttheydon’
t
general
l
ymakeal lthepart st
hemselv
es.Vendorsoft hesecompani esareanci l
lar
y
i
ndustri
es.Anci
ll
aryindust
riescanal
sobeident
ifi
edast hosecompani eswhichmakes
machinesformult
inati
onalcompani
esormedium scaleindustries

 Serv
iceIndustr
ies:Repai
rshopsandmai
ntenancei
ndust
ri
escomesundert
hecat
egor
y
ofserv
iceindustr
ies

Qb)
Global
izat
ion.

Ans:

Global
izat
ionisthespreadofproduct
s,technology
,informati
on,andjobsacr ossnati
onal
border
sandcultur
es.I
neconomicter
ms,itdescr
ibesaninter
dependenceofnat
ionsaroundthe
gl
obef ost
eredt
hroughfr
eetr
ade.

Ononehand,gl
obali
zati
onhascreatednewjobsandeconomicgr
owtht
hrought
hecross-
bor
der
fl
ow ofgoods,capit
al,andlabor.Ont heotherhand,thi
sgrowt
handj obcreat
ionisnot

11|
Page
di
stri
butedevenlyacrossindustri
esorcountri
es.Specif
ici
ndust
riesi
ncertai
ncount
ri
es,such
astexti
lemanuf act
uri
ngint heU.S.orcornfarminginMexi
co,havesuff
eredsev
eredisr
upt
ion
oroutr
ightcol
lapseasar esultofi
ncreasedi
nternat
ional
competi
ti
on.

Global
i
zationmotivesareideali
sti
c,aswellasopport
unist
ic,butt
hedevelopmentofaglobal
fr
eemar kethasbenefit
edl ar
gecor por
ati
onsbasedintheWest er
nworld.It
simpactremai
ns
mixedforwor ker
s,cul
tures,andsmal lbusi
nessesaroundtheglobe,i
nbot hdevel
opedand
emergi
ngnat i
ons.

Qc)
Bal
anceofPay
ment
s.

Ans:

Thebalanceofpay ment
s(alsoknownasbal anceofinter
nati
onalpay ment
sandabbr eviat
ed
B.O.
P.orBoP)ofacount ryisthediffer
encebetweenallmoneyflowingint
ot hecountr
yi na
part
icul
arperi
odoftime(e.
g.,aquarterorayear)andtheoutf
lowofmoneyt otherestofthe
worl
d.Thesef i
nanci
altr
ansact
ionsar emadebyi ndi
vi
dual
s,fi
rmsandgov er
nmentbodi esto
comparerecei
ptsandpaymentsari
singoutoftr
adeofgoodsandser vi
ces.

Thebalanceofpay mentsconsistsofthr
eecomponent s:thecurr
entaccount
,thecapit
al
accountandt hefi
nanci
alaccount.Thecur
rentaccountrefl
ectsacountr
y'
snetincome,whi
le
thecapi
talaccountr
efl
ectst
henetchangeinownershipofnational
asset
s.

Thebal anceofpay
ment
sisi
mpor
tanti
nint
ernat
ionalf
inanci
almanagementf
ort
hef
oll
owi
ng
reasons:

Fir
st,thebalanceofpaymentsisafactori
nthedemandandsuppl yofacount r
y '
scurrency.For
exampl e,i
foutfl
owsexceedinfl
ows,t
henthedemandf orthecurrencyinthedomest i
cmar ketis
l
ikelytoexceedt hesuppl
yinthefor
eignexchangi
ngmar ket
,ceteri
spar i
bus.Onecant husinfer
thatthecurrencywouldbeunderpressuretodepreci
ateagainstothercurr
encies.Ont heother
hand,iftheinf
lowsexceedoutfl
ows,t
henitscurr
encywouldbel i
kelytoappreci
ate.

Second,acount ry'sbalanceofpayment sdat amaysi gnalthecount r

y’spotent
ialasabusiness
part
nerforther estofthewor l
d.Acount rygr appli
ngwi t
hamaj orbalanceofpay mentsdif
fi
cult
y
maynotbeabl et oexpandi mportsfrom theout si
dewor ld.Inst
ead,t hecountrymayimpose
measurestor est r
icti
mpor t
sanddi scouragecapi taloutf
lowsinor dertoimprovethebalanceof
paymentssituation.Ont heotherhand,acount r
ywi thasignif
icantbalanceofpay mentssurpl
us
wouldbemor elikelyt
oexpandi mpor t
s,offeringmar ket
ingoppor t
uniti
esforforei
gnenterpri
ses,
andlessli
kelytoi mposef orei
gnexchanger estr
ict
ions.

Thir
d,balanceofpay ment
sdat acanbeusedt oev al
uatet heper f
ormanceoft hecountr
yi n
i
nternat
ionaleconomiccompeti
ti
on.Acount
rythatisexperiencingtradedef
ici
tsyearaft
eryear
maybeasi gnalthatt
hecountr
y'
sdomestici
ndustr
ieslackinternati
onalcompeti
ti
veness.

12|
Page
Qd)
Soci
alResponsi
bil
it
iesofBusi
ness.

Ans:

Soci
alresponsi
bil
i
tyofbusi
nessimpli
estheobli
gat
ionsoft
hemanagementofabusi
ness
ent
erpr
isetoprot
ectt
hei
nter
estsoft
hesociet
y.

Accordi
ngtotheconceptofsoci
alr
esponsi
bil
i
tyt
heobjecti
veofmanagersf
ortaki
ngbusiness
deci
sionsisnotmerelytomaximizeprofi
tsorshar
ehold­ers’v
aluebutalsotoserveand
prot
ecttheinter
est
sofot hermembersofasoci et
ysuchaswor ker
s,consumersandt he
communi t
yasawhole.

Soci
alResponsibi
l
ityofabusi
nesscansimplybedef
inedasact
ivi
ti
est
hatabusi
nessconducts
overandabov ethestatut
oryrequi
rement
sofabusi nessf
orthebenef
itandwelf
areoft he
soci
ety.

AccordingtoHowar dR.Bowen“ Soci

alResponsibi
li
tyofbusinessrefer
st otheobli
gat
ionof
businesstopur suethosepol
i
cies,tomaket hosedecisionsortofol
low thosel
inesofacti
on
whichar edesi
rablei
ntermsofobjecti
vesandvaluesofthesoci
ety”

13|
Page