LOVELY PROFESSIONAL UNIVERSITY

TERM PAPER
MBA

(EMERGING TRENDS IN BUSINESS ENVIRONMENT AND PAST ANALYSIS OF THE DECADE 2001-2010)

SUBMITTED TO,
SANJAY JINDAL

SUBMITTED BY,
NISCHAY MEHTA B-71 (S1003) MBA REG.NO- 11012892

TABLE OF CONTENTS1. 2. 3. 4. 5. 6. TITLE OBJECTIVE INTRODUCTION ANALYSIS INTERPRETATIONS CONCLUSIONS

EMERGING TRENDS IN BUSINESS ENVIRONMENT AND PAST ANALYSIS OF THE DECADE 2001-2010 OBJECTIVE-

- TO DETERMINE WHAT IS BUSINESS ENVIRONMENT? - WHAT ARE THE BASIC INGREDIENTS OF BUSINESS ENVIRONMENT? - WHAT ARE THE VARIOUS EMERGING TRENDS IN BUSINESS ENVIRONMENT? TO UNDERSTAND HOW IT HAS BECOME SO IMPORTANT FOR ALL INDUSTRIES IN TODAYS TIME. TO REALIZE THE SITUATION UNDER WHICH THE CONCEPTS OF B.E IS APPLIED IN REVITALIZING THE ORGANIZATION. TO DESCRIBE THE PAST ANALYSIS OF THE DECADES 2001 -2010. TO ANALYSE AND INTERPRET THE ABOVE MENTIONED OBJECTS. MY CONCLUSIONS.

INTRODUCTION-

Meaning of Environment: Environment literally means the surroundings, external objects, influences or circumstances under which someone or something exists. Types of Business Environment1. Internal Environment 2. External Environment Internal Environment The Internal environment is the environment which exists internally within the environment. The internal factors are known as controllable factors because the

Discussing the Environment >> Social Factors: Has to work within the norms (which include culture. employment generation. Analyze the competitor¶s strategies and formulate the counter strategies. values. 4. 3. 5. Dynamic Approach. 4. tastes and preferences) and strives to satisfy the needs and wants of the society. infrastructure development.1. national resources. There are three types of economic systems: 1. Mixed Economy. The organization has to do some sort of social responsibility. 3. The important external factors are: Economic Conditions Governmental factors Legal Factors Technological factors Geographical & Social Importance of studying the Business Environment 1. Adaptability to the current environment. Develop Strategies & long term policies. Organizational resources. 3. The important internal factors include: Financial Capability Marketing Capability Technological Capability. 2. These are uncontrollable because they are beyond organization control. External Environment- The term business environment generally refers to the external environment and include all the factors which exist outside the firm and can lead to opportunities or threats to the firm. organization has control over these factors. 2. inflation rate. The internal environment reveals an organization strength & weakness. >> Economic Factors: It includes the per capita income. Capitalistic Economy. 2. . Communist Economy. 1. 3. 4. 2.

It deals with the issues. Business environment is a set of political. social. Development across a range of factors will have an impact on business and industries. factors.U. THEOROTICAL FRAMEWORK OF BUSINESS ENVIRONMENT 2. Here. Here. Labor policy. forces. the impact of these upon consumers and the extent of consumer power in respect of ecological issues. in which business organizations operate. Today¶s world is a rapidly changing place.P. Telecom . concepts and techniques that are used to understand the internal and external business environment in which businesses and organizations operate. 5.T. >> Political Factors: Trade Policy. and technological (PEST) forces that are largely outside the control and influence of a business and that can potentially have both a positive and negative impact on the business. and influences that companies face in their daily operational activities and business strategies.Russia & United States . >> Technological Factors: Technological Imports & Foreign Technical Collaboration. The different approaches adopted by businesses towards environmental & ethical issues. i will also address.Retail. location policy. BASIC INGREDIENTS AND TRENDS UNDER BUSINESS ENVIRONMENT 1.China . i will introduce a variety of tools. Political Environment : With in India itself .Power . The number of interrelated environmental forces found in the different types of organization and in the PEST.K 8. Sri lanka .Bhutan & Nepal .4. The classic PEST framework identifies 4 major categories of external factors that affect the ability of our organization to survive and prosper. Business environment is a broad area and compromises of internal environment and external environment. economic.I. y Government policies .Future Growth is projected in double figures: 9. 6.G . >> Legal Factors: 7. Pakistan . Upcoming rising sectors: Insurance . licensing. ECONOMIC ENVIRONMENT. Economic & Financial Environment : Following the Policy of L. export import policy. taxation policy. The dynamic nature and complexity structure of the competitive environment. monetary policy & fiscal policy.

including labor . ` NI ± National Income . LPG. EMPLOYMENT HERE. INFLATION 12.The income earned by a country's people. .The total market value of all final goods and services produced in a country in a given year. INTERNATIONAL AND TECHNOLOGICAL ENVIRONMENT 5. POVERTY 14. FINANCIAL MARKET STRUCTURE y y y y y CREDIT MARKET FOREIGN EXCHANGE MARKET DEBT MARKET DERIVATIVE MARKET BANC ASSURANCE 8. POPULATION 13. ` GDP ± Gross Domestic Product . STOCK EXCHANGE 10. & PRIVATIZATION 11.y y y y y y y y y y y y y y Industrial policy Fiscal and monetary policy Exim policy MRTP Act FERA FEMA MNC¶S NRI¶S AND CORPORATE SECTOR WTO WORLD BANK IMF FOREIGN TRADE POLICIES PATENT LAW TECHNOLOGY TRANSFER 3.LIBERALISATION. INDUSTRIAL POLICY 6. Political and legal environment of business 4. MONEY AND CAPITAL MARKET 9. WE WILL ALSO BE DISCUSSING OTHER MAJOR TRENDS AS FOLLOWS. MONETARY AND FISCAL POLICY 7. GLOBALISATION.

profits.5% ` CRR.Income per person in a population.5% ` Exchange Rate (Nov. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to these attractive interest rates. ` Reverse Repo Rate . Monetary Policy . rents. This is what each citizen is to receive if the yearly national income is divided equally among everyone.Repo rate is the rate at which our banks borrow rupees from RBI. ` Inflation Rate (Nov 2010) ± 8. interest. government expenditure taxation. Per capita income is often used to measure a country's standard of living.Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks.6% ` Bank Rate-6% ` Food Inflation(Nov 2010) ± 15% . Changes in the level and composition of taxation and government spending can impact various variables in the economy. ` Fiscal Policy . and pension payments to residents of the nation.Monetary policy is the process by which the monetary authority of a country controls the supply of money. 2010) ± 45. ` Repo Rate . When the repo rate increases borrowing from RBI becomes more expensive.sum of wages. ` Per Capita Income . A reduction in the repo rate will help banks to get money at a cheaper rate. often targeting a rate of interest.Fiscal policy is the use of government expenditure and revenue collection to influence the economy.01 ` REP RATE-30% ` Reverse Repo Rate-4. It can cause the money to be drawn out of the banking system.

the machine goods sector. RELATIVE ROLES OF PUBLIC AND PRIVATE SECTORS A noteworthy feature of the changing industrial pattern in the planning era in India is the growth of the public sector in a big way in the heavy and basic industries. Capital Goods Consumer Goods. . The gap in per capita incomes between the developed and underdeveloped countries is largely reflected in the disparity in the structure of their economies.` GDP ± 8.345 ` Repo Rate (Nov 2010) ± 5. So for that Industrialization is the answer. 44. engineering industries.80 ` Per Capita Income ± Rs.75% ` SLR ± 25% ` Effects of Trade Policy ` Five Year Plans and their impact ` Political situation showing greater signs of stability ` FDI inflows gaining momentum ` Infrastructure Growth ` Privatization of PSU¶s ± new IPO¶s ± NHPC INDUSTRIALISATIONIndustrialization has a major role to play in the economic development of the underdeveloped countries. and so on.

The share of the public sector in employment and value added was only 24 per cent and 28 per cent. Liberalization Building strength of our own Loosening or removal of regulations ` Dismantling industrial licensing system ` Reduction in physical restrictions on imports ` Reduction in controls on forex ` Reform of financial system ` Reduction in levels of personal and corporate taxation ` Reduction in restrictions on foreign investments ` Opening up areas reserved for public sector .if we judge the contribution of different sectors in terms of employment and value added. respectively. then it is evident that nearly 69 per cent of employment and 60 per cent of value added are contributed by the private sector. ROLE OF INDUSTRIES IN THE ECONOMIC DEVELOPMENT Utilisation of Natural Resources Balanced Sectoral Development Increase in National Income Increase in Job Opportunities Supplementing Export Attaining Economic Stability Accumulation of Wealth Support to Agriculture Development of Markets Contribution Towards National Defense. Contribution to Government.

. change in the product . ` FERA and MRTP relaxation ` Decontrol of Steel ± price control removed ` Privatization of public sector / Disinvestment ` Simplification of industrial licensing ` Banking and financial sector reforms ` Industrial licensing-It is basically approval required by an industry or an organization in respect of starting a new unit.manufacturing a new product and making the expansion of the existing plant.` Partial privatization of PSU¶s ` Softening of MRTP Removal of Import restrictions ` Import restrictions partially withdrawn ` Prior clearance from RBI removed ` Licensing on import of capital done away with.

T e Industries ( D &R ) Act . ent & Regul ti n Act of 1951.Industri s Devel Thi act appli undertaking.1951-60 Industri l Licensing Policy . 1991 and after. and to the indust ial OB E TIVE 1. 3. 6. Regulation and Development of Important Industries 3.1980-90 Li erali ation in Industrial Licensing. .1951 Industri l Licensing Policy.1960-70 Industri l Licensing. Industrial Policy Statement. 4. 2. Planning and Future Development of New Undertakings Different licensing policies 1.³ T e ti e when MRTP was introduced´. Implementation of the Industrial Policy 2. 1970-1977 . t the whole India incl ding the state of J&K. 5.

measuring income and wealth inequalities) ` National Income refers toThe income of a country to a specified period of time.e.National Income ` It is the money value of the flow of goods and services available in an economy in a year ` National income measures the total value of goods and services produced within the economy over a period of time. ` National income figures for various countries provide us the rates of growth in different economies. say a year includes all types of goods and services which have an exchange value counting each one of them only once . Importance ` Help us to know the performance of an economy during one year and over a period of years. ` Indicates living standards of the population ` Looking at the distribution of national income (i.

M Y = C + I + G + NX Gross National Product ` GNP is most frequently used national income concept ` GNP=GDP +Income from Abroad. Spending + (E port ± Import) ` GNP = GDP + Capital gain from investments made abroad ± Income earned by foreign nationals in the country .Gross Domestic Product GDP (Y ) is the sum of the following: u Consumption (C) u Investment (I) u Government Purchases (G) u Net E ports (NX) = X . ` GDP = Consumption + Investment + Govt.

if 1990 were chosen as the base year. Nominal GDP will include all of the changes in market prices that have occurred during the curren t year due to inflation or deflation ` Real GDP is GDP evaluated at the market prices of some base year. by deducting the depreciation from GNP Therefore NNP = GNP .` Nominal GDP is GDP evaluated at current market prices. ` ` ` ` refers to the net production of goods and services in a country during a year NNP is also called National Income at Market Prices We get NNP.Depreciation Personal Income . then real GDP for 1995 is calculated by taking the quantities of all goods and services purchased in 1995 and multiplying them by their 1990 prices.

.

Inflation- .

.

Causes of slow growth- ` High growth rate of population ` Excessive dependence on agriculture ± 66% of population engaged in agriculture which contributes 34% to GDP ` Occupational Structure ± underemployment ` Low level of technology and poor adoption ` Poor Industrial Development ± failed to maintain a consistent and sustainable growth ` Poor development of Infrastructural Facilities ± causes hurdles in path of development ` Poor rate of savings and investment ` Socio ± Political Conditions ± caste system. illiteracy. unstable political scenario PRIVATIZATION OF PSU ` Change in ownership resulting in change in management from public sector to private sector ` Reduction of political interference in the management ` Provides competition to state run enterprise .

Besides the CRR.0 per cent with effect from January 17.0 in August 2008 to 5. . depending on the state of the economy. The reverse-repo rate was lowered by 250 basis points in three tranches from 6.2008. the Monetary stance underwent an abrupt change in the second half of 2008-09. Previously the monetary policy is announced twice a year²a slack-season policy (April±September) and a busy-season policy (October±March) .0 (as was prevalent in November 2008) to 3. banks are required to invest a portion of their deposit in government securities as a part of their statutory liquidity ratio (SLR) requirements as e. The outflow of foreign exchange. 2009. The repo rate was reduced by 400 basis points in five tranches from 9. 2009. The CRR was lowered by 400 basis points in four tranches from 9.5 percent from March 5. also meant tightening of liquidity situation in the economy. The reverse-repo and repo rates were again reduced by 25 basis points each with effect from April 21. SLR was lowered by 100 basis points from 25 per cent of net demand and time liabilities (NDTL) to 24 per cent with effect from the fortnight beginning November 8. MEANING OF CRR AND SLR CRR. the CRR has fallen from 15 per cent in March 1991 to 6 per cent in December 2010. 2009.0 per cent beginning March 5. as the economy has recovered and sector reforms increased.0 to 5. The monetary policy has now become dynamic in nature as RBI reserves its right to alter it from time to time. Since 1991.g of guilt securities. and the statutory liquidity ratio (SLR). or cash reserve ratio. as fallout of crisis. The RBI responded to the emergent situation by facilitating monetary expansion through decreases in the CRR. refers to a portion of the deposit (as cash) which banks have to keep/ maintain with the RBI.MONETARY POLICY OF INDIA Monetary policy is primarily concerned with the management of supply of money in a growing economy and managing the rate of growth of money supply per period.5 per cent to 25 per cent over the past decade. repo and reverse repo rates.3ii). To deal with the liquidity crunch and the virtual freezing of international credit. 2009 (Figure 1. The SLR has fallen from 38.

public expenditures. To attain the growth of public sector for attaining the objective of socialistic pattern of society. 3. and so on. 4. To arrange an optimum utili ation of resources. and . 2. budgetary deficit. OB ECTIVES OF FISCAL POLICY The following are some of the important objectives of fiscal policy adopted by the Government of India: 1. To reduce regional disparities.FISCAL POLICY OF INDIA An effective fiscal policy is composed of policy decisions relating to entire financial structure of the government including tax revenue. To control the inflationary pressures in economy in order to attain economic stability.debt management. 6. To remove poverty and unemployment. To promote necessary development in the private sector through fiscal incentive. 5.

TECHNIQUES OF FISCAL POLICY 1. 4.5 per cent of the GDP. Domestic demand also had moderated considerably leading to a downturn in industry and in the services sector as seen in the GDP growth. On the other hand.9 per cent in rupee Terms (compared to 28.9 per cent and 14.9 . restore stability of the financial system. in September 2008. The large difference in growth in terms of the US dollar and in terms of the rupee was on account of the depreciation of rupee vis-à-vis US dollar during the year. Further tax reduction measures were announced by the Finance Minister during the discussions. The Finance Minister¶s speech also indicated that an additional fiscal stimulus of 0. Apart from the measures taken to restore and revive the domestic economy. India continued to engage actively at various international fora like the G-20 group of countries (of which India is a member) and at the multilateral institutional mechanisms on the range of issues that arose from the global financial crisis. on account of the drying up of international financing and trade credit. the growth in merchandise exports during 2008-09 was 3. collectively committed themselves to take decisive. if needed. Taxation Policy Public Expenditure Debt Policy Deficit Financing. especially for the third and the fourth quarters of 2008-09.7 per cent respectively in 2007-08). followed by a fall in global demand. which was the largest market. Export growth evinced a sharp dip and turned negative in October 2008 and remained negative till the end of the financial year. The continued decline in export growth was due to the recessionary trends in the developed markets where the demand had plummeted. To reduce the degree of inequality in the distribution of income and wealth. the main drivers of exports growth were engineering goods and chemicals and related products. restart the impaired credit markets and rebuild confidence in financial markets and institutions. 3. TRADE The adverse effect of the global financial crisis was also felt on the export sector. At the meeting in early April 2009. 2. The negative impact on the growth of India¶s exports becomes more evident from the fact that merchandise exports to the United States.7.6 per cent in US dollar terms and 16. to offset the shock induced declines in aggregate demand. During 2008-09. coordinated and comprehensive action to revive growth. Petroleum products and textile exports witnessed a positive but low growth. However. handicrafts.5 per cent to 1 per cent of GDP as additional plan expenditure could be considered. merchandise exports to Asia (including ASEAN) grew by 6. leaders of G-20 countries (including India). declined by 1. The extraordinary situation that emerged due to the crisis had led to a sharp shrinkage in the demand for exports. For the year as a whole.6 per cent during 2008-09 (AprilFebruary). primary products and gems and jewellery exports registered negative growth. the growth in exports was robust till August 2008. These were of the order of 0. However. During the period (April-February) in 2008-09. first.

EXCHANGE RATE The surge in the supply of foreign currency in the domestic market led inevitably to a rise in the price of the rupee. The rupee gradually appreciated from Rs. DII¶s. The global financial crisis however reversed the rupee appreciation and after the end of positive shock around January 2008. reflecting 21.per cent and to Europe by 10. With signs of recovery and return of FII flows after March 2009. rupee has again been strengthening against US dollar.20 per US dollar in March 2009. It is pertinent to note that a substantial part of the movement in the rupee-US dollar rate during this period has been a reflection of the movement of the dollar against a basket of currencies. which affected the emerging economies almost simultaneously. requiring RBI intervention to reduce volatility. FII¶s. STOCK EXCHANGE Stock exchange is that organized market place where trading of shares is done in terms of sale and purchase. 46. TYPES OF FINANCIAL MARKET . a movement that had begun to affect profitability and competitiveness of the export sector.23 per US dollar in March 2009. The exchange rate was Rs. rupee began a slow decline. the nominal value of the rupee declined from Rs. 39. with some volatility. The rupee stabilized after October 2008. 51.37 in January 2008. For the year as a whole.26 per US dollar in 2007-08. 40.2 per cent during this period. 51.2 per cent. India¶s merchandise exports to South Asian countries also declined by 5.2 per cent depreciation during the fiscal 2008-09. was the Unwinding of stock positions by the FIIs to replenish cash balances abroad.99 per US dollar compared to Rs. The decline in rupee became more pronounced after the fall of Lehman Brothers in September 2008. A major factor. The annual average exchange rate during 2008-09 worked out to Rs.54 per US dollar in August 2006 to Rs. 45.It also facilitates the issue and redemption of securities like dividends.36 per US dollar in March 2008 to Rs. That sale & purchase is done by the customers. 40.

SATYAM 26.Ahmedabad stock exchange 7. E. Secondary Market: Equity Shares.SBI 27.ACC 2.GRASIM 8.INFOSYS 16.HINDALCO 13. Capital Market: Long Term Investment 1. Primary Market 2. Commercial Papers.National stock exchange(Mumbai) 3.TCS 1.HERO HONDA 12.RELIANCE COMMUNICATION 23.RIL 25.Banglore stock exchange 4.Bombay stock exchange(Mumbai) 2.Utter pradesh stock exchange(kanpur) 5.Bhubaneswar stock exchange 9. .MARUTI 19.ONGC 21.Calcutta stock exchange(kolkata) 10.HDFC 10.DLF 7.‡ ‡ Money Market: Investment for short term.vadodara stock exchange(Baroda) 8.L&T 18.ICICI BANK 15.BHEL 5.HUL 14.GUJRAT AMBUJA 9.Magadh stock exchange(Patna) 6. Treasury Bills.CIPLA 6.RELIANCE ENERGY 24.NTPC 20.HDFC BANK 11.BAJAJ 3. TYPES‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Name: ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ 1.RANBAXY 22.AIRTEL 4.g.ITC 17.Madras stock exchange Bombay stock exchange: It has 30 Blue chips companies scripted.

It assists the economist development by providing a body of interested investors. the fiscal needs of government. in its guidelines on Public Debt Management (2001). It also underlined that such operational freedom is essential to assure the system that conduct of monetary policy balances the three relevant elements. discussed that clarity in the roles and objectives for debt management and monetary policy minimizes potential conflicts.TATA MOTERS 29. external debt and nonmarketable debt and other liabilities are largely managed by the Ministry of Finance through various departments and marketable debt is largely managed by the Reserve Bank of India. Broadly. In course of managing the government debt and financing requirement by the Reserve Bank. whereas government debt management is designed to search for an optimal trade-off between the cost of government debt and the risk involved and the two are potentially conflicting goals. advantages of clear separation between debt management and monetary policy have been discussed extensively in the literature on this subject. DEBT MANAGEMENT The need for separation of monetary and debt management functions/objectives is recognized internationally. For instance.It encourages capital formation 4. Government can undertake projects of national importance and social value raising funds through the sale of its securities on the stock exchange. the compulsion of a deregulated interest rate regime and requirements of a more open external sector.‡ ‡ ‡ 28..TATA STEEL 30. It uploads the position of superior enterprises and assists them in raising further funds. the extent of monetization and the terms of such monetization would depend on the judgement of the Reserve Bank in regard to overall stability. The IMF. 2. At a theoretical level also. Monetary policy¶s major objective is price stabilization. Ways and means agreement of the Reserve Bank with the Government in 1997 and prohibition of direct borrowings by the Central Government from the Reserve Bank under the Fiscal Responsibility and Budget Management Act. In this backdrop. the debt management function is presently dispersed over several agencies. 3. viz. however. the Report mentioned that ³the separation of the functions of debt management and monetary management is regarded as a desirable medium-term objective. In the changed framework. In India. as noted in Reserve Bank¶s Annual Report 2000-01. in general. the fiscal operations have been perceived to be overburdening the monetary policy and even leading to blurring of distinction between fiscal and monetary policy operations. Mohanty (2002) discussed that. conditional upon .WIPRO BENEFITS OF STOCK EXCHANGE FROM THE POINT OF VIEW OF COMMUNITY: ‡ ‡ ‡ ‡ 1. open market operations function most effectively when a clear division is maintained between debt management and monetary policy operations. Reserve Bank of Australia (1993) discussed how monetary policy implementation was made difficult by unpredictable net contribution of government to the amount of cash in money market and yields fixed by authorities on Commonwealth governments securities. 2003 have provided greater transparency and operational autonomy to the monetary policy framework.

recommended establishing a centralized middle office in the Department of Economic Affairs to develop a comprehensive risk management framework as the first stage of this process. € To stimulate sustained economic growth by providing access to essential raw materials. It may be mentioned that IMF. in its guidelines on Public Debt Management (2001). and to encourage the attainment of internationally accepted standards of quality. the issue was examined extensively by various groups/committees.´ Following the announcement. recommended the creation of a new independent agency which may be called the National Treasury Management Agency (NATMA). The group submitted its report "Establishing a National Treasury Management Agency´ in October 2008 which was placed in the public domain for comments. components. while recognizing the conflicts of interest that arise between the multiple roles of RBI. The establishment of a Debt Management Office (DMO) in the Government has been advocated for quite some time. thereby improving their competitive strength while generating new employment opportunities. durable fiscal correction and an enabling legislative environment´. The Percy Mistry Committee (HPEC. Arvind Virmani. SALIENT FEATURES OF EXIM POLICY (2001-10) . the Middle Office was established within the Ministry of Finance. The Report of the Internal Expert Group on the Need for a Middle Office for Public Debt Management. and separate reporting lines. The Kelkar Report (MoF. 2009) suggested expediting process of establishing debt management office in India. This separation helps to promote the independence of those setting and Monitoring the risk management framework and assessing the performance from those responsible for executing market transactions. debt management is distinct from monetary management. Accordingly. 2007) suggested setting up a debt management office which may operate either as an autonomous agency or under the Ministry of Finance. The Rajan Report (CFSR. It recommended establishing an autonomous public debt office as the second stage. The Government has constituted an Internal Working Group on Debt Management to devise a suitable framework for debt management in India. consumables and capital goods required for augmenting production and providing services. I propose to set up an autonomous DMO and. € To provide consumers with good quality goods and services at internationally competitive prices while at the same time creating a level playing field for the domestic producers. The fiscal consolidation achieved so far has encouraged us to take the first step. intermediates. The comments and feedback are currently being examined. 2001 chaired by Dr. 2004). Subsequently.development of the Government securities market. The Union Budget for 2007-08 stated that ³World over. discussed that operational responsibility for debt management is generally separated into front and back offices with distinct functions and accountabilities. a Middle Office will be set up to facilitate the transition to a full-fledged DMO. in the first phase. industry and services. € To enhance the technological strength and efficiency of Indian agriculture. EXIM POLICY€ To facilitate sustained growth in exports to attain a share of at least 1% of global merchandise trade.

DIVERSIFICATION OF MARKETS € Setting up of a 'Business center in Indian missions abroad for visiting Indian exporters / businessmen € Focus LAG (Latin American countries) which was launched in November 1997 has been extended up to March 2003 € Focus Africa has been launched for developing trade relations with the Sub-Saharan African region. € 100 per cent retention of foreign exchange in exchange earners' foreign currency (EEFC) account. The remittance.5 crore € Links with CIS (Common Wealth of Independent States) countries to be revived. € In order to promote diversification of agriculture. AGRICULTURE€ Restrictions on export of all cultivated (other than wild) varieties of seed. poultry and dairy products. € Enhancement in normal repatriation period from 180 days to 360 days. € The units in the handicrafts sector can also access funds from MAI scheme for development of a Web site for virtual exhibition of their product. transport subsidy shall be available for export of fruits.€ License/certificate/permissions and customs clearances for both imports and exports on self-declaration basis. removed € To promote export of agro and agro-based products. € Units in SEZ would be permitted to undertake hedging of commodity price risks. would continue to be received through banking channels. € Three per cent special DEPB rate for primary & processed foods exported in retail packaging of 1 kg or less. except jute and onion.b. value of their exports. however. floriculture. The exporters exporting to these markets shall be given the Export House status on export of Rs. . SPECIAL ECONOMIC ZONES (SEZ) € OFFSHORE banking units (OBUs) shall be permitted in SEZs. vegetables. € It has also been decided to permit external commercial borrowings (ECBs) for a tenure of less than three years in SEZs. 20 agro export zones have been notified. provided such transactions are undertaken by the units on stand-alone basis.o. COTTON SMALL SCALE INDUSTRIES AND HANDICRAFTS € An amount of Rs 5 crore under market access initiative (MAI) has been earmarked for promoting cottage sector exports coming under the KVIC. and € The units in handicraft sector shall be entitled to duty-free imports of an enlarged list of items as embellishments up to 3 per cent of f. € Exemption from compulsory negotiation of documents through banks. This will impart security to the returns of the unit. € These units shall be entitled to the benefit of Export House status on achieving lower average export performance of Rs 5 crore as against Rs 15 crore for others.

8 per cent of GDP) during the corresponding period in 2007-08. This should help the country emerge as a major international centre for diamonds. € Licensing regime for rough diamond is being abolished. € Personal carriage of jewellery allowed through Hyderabad and Jaipur airport as well. Such blended fabrics to have the lowest rate as applicable to different constituent fabrics.. Export of all mechanized unstudied jeweler allowed at a value addition of 3% only. finance and staffing that transcend national boundaries. marketing. BALANCE OF PAYMENT The overall balance of payments (Bop) situation remained resilient in 2008-09 despite signs of strain in the capital and current accounts.8 per cent of GDP) as compared to US$ 82. € Value addition norms for export of plain jeweler reduced from 10% to 7 %.TEXTILES € Sample fabrics permitted duty-free within the 3% limit for trimmings and embellishments. During the first three quarters of 2008-09 (April-December 2008).  Implements business strategies in production. The capital account balance declined significantly to US$ 16.1 per cent of GDP) as against US$ 15. IMPLICATONS OF EXIM POLICY All-round Development of Indian Economy      To facilitate sustained growth in exports To stimulate sustained economic growth To enhance efficiency of Indian industry.5 billion (4.  exercises direct control over the policies of its affiliates. due to the global crisis. FOREIGN DIRECT INVESTMENTS .09 billion (1.68 billion (9. Higher FDI flows in 2008-09 were also a reflection of the confidence of foreign investors in the growth prospects of the Indian economy. services & agriculture To generate new employment opportunities To attain internationally accepted standards of quality MULTINATIONAL COMPANIES engages in foreign production through its affiliates located in several countries. GEMS AND JEWELLERY € Customs duty on import of rough diamonds is being reduced to 0 per cent.8 per cent of GDP) for the corresponding period of 2007-08. the current account deficit (CAD) was US$ 36. A positive development was higher private transfers and software earnings and increase in non-resident deposit flows and foreign direct investment vis-à-vis the corresponding period last year. € Duty entitlement passbook (DEPB) rates for all kinds of blended fabrics permitted.5 billion (1.

the trade ratio is 47 per cent of GDP for 2007-08. INVESTMENT DIRECTLY MADE IN INDUSTRY OF A COUNTRY BY FOREIGN INDUSTRIAL HOUSES OR MNCs WITH THE OBJECTIVE OF EARNING PROFITS. CONCLUSIONS If doing business was easy.  COSTS ARISE FROM INCENTIVES AND CONCESSIONS OFFERED. HIGHER OUTPUT. The rapid growth of the economy from 2003-04 to 2007-08 also made India an attractive destination for foreign capital inflows and net capital inflows that were 1. EMPLOYMENT AND DEVELOPMENT. REVENUE TO GOVT THROUGH TAXATION. These include increasing importance of external trade and of external capital flows.2 per cent in 2007-08. which was reflected in the high volume of outbound direct investment flows. WIDER CHOICE. INCOME.  SINCE.ETC  BENEFITS ACCRUE IN THE FORM OF MORE EMPLOYMENT.7 per cent in 2003-04. in India and abroad.  AN INDEPENDENT COUNTRY CAN ALWAYS CONTROL THE NEGATIVE INFLUENCES OF MNCs AND CAPITALISE ON POWER AND RESOURCE FOR FASTER DEVELOPMENT OF THE ECONOMY. What is certain is that more and more Indian companies find that µfit¶.BOP PROBLEMS. Only the firms themselves can determine if doing business in India can meet their bottom line objectives. including in India. to their profit and benefit. identify opportunities and minimize risks. Foreign portfolio investment added buoyancy to the Indian capital Markets and Indian corporate began aggressive acquisition spree overseas. ETC. target their markets. LOWER PRICES. The services sector has become a major part of the economy with GDP share of over 50 per cent and the country becoming an important hub for exporting IT services. assemble and develop their assets. There are ample examples of success in these endeavours. we would all be rich. The share of merchandise trade to GDP increased to over 35 per cent in 2007-08 from 23. Firms must determine their objectives. GLOBALIZATION OF INDIAN ECONOMYThe structure of the Indian economy has undergone considerable change in the last decade. IMPROVED TECHNOLOGY. If the trade in services is included. This is a challenge anywhere. .9 per cent of GDP in 2000-01 increased to 9. ECONOMIC DEVELOPMENT.  IT HAS A MAJOR IMPACT ON THE COUNTRY¶S PRODUCTION. WE CAN USE THESE TERMS INTERCHANGEABLY. FDI COMES IN THE FORM OF INVESTMENTS MADE BY MNCs.  A COUNTRY SEEKING FDI FROM MNCs SHOULD WEIGH IT¶S COST AGAINST BENEFITS.

SUGGESTIONS` ` ` ` ` ` ` ` ` ` Development of Agricultural Sector Development of Industrial Sector Raising the rate of savings and investments Development of infrastructure Utilization of natural resources Containing growth of population Balanced growth Higher growth of foreign trade Economic liberalization Removal of inequality ± progressive rates of taxation. welfare and poverty ± eradication programs .

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer: Get 4 months of Scribd and The New York Times for just $1.87 per week!

Master Your Semester with a Special Offer from Scribd & The New York Times