Economic Environment of

Business
Dr. Balakrushna Padhi
Assistant Professor
Economics and Finance Department
BITS, Pilani Campus, Rajasthan
 Course Details
Course No : ECON F214
Course Title : ECONOMIC ENVIRONMENT OF BUSINESS
Text Books:

• Shaikh, Saleem., “Business Environment”, Pearson Publishers (India), 4th Edition (2020).
Reference Books:

• 1. Pailwar, Veena Keshav., “Business Environment”, PHI Learning Private Limited (2014).

• 2. Paul, Justin., “Business Environment: Text and Cases”, Tata McGraw Hill, New Delhi, 3rd Edition
(2010).

• 3. Fernando, A.C., “Business Environment”, Pearson Publishers (India) (2011).

• 4. Cherunilam, Francis., “Business Environment: Text and Cases”, Himalaya Publishing House, 24th
Edition (2015).
Module No. of Lect. Lecture Session (Topics) Reference Learning outcomes
No.
1. Ch. 1 Business Environment-Concepts
2 Business Environment
and its Constituents
Economic System: Planning and the
2 Planning in India R1. Ch.2
Market
Economic Liberalization and Policy
1 Liberalization Ch. 18, 20
changes, Globalization
2. Concept of Level Value and Various
Calculation of various growth
2 Notes Types of Growth Rates: PoP, AG,
rates
YoY and AAG
National income: Concept and
4 National Income Ch. 7, R1. Ch.5 and notes
Measurement
Concept of Business fluctuations
Business Cycles and
2 R1. Ch.1, 4 and Cycles, Approaches to Business
Fluctuations
Cycle Analysis
Economic Structure: Its
Economic Structure and
2 R1. Ch. 3 Determinants, Constituents and
Stages of Development
Structural Shifts in India
3. Inflation and Business Inflation, Measures, Causes, Types
4 Ch. 10 & R1. Ch.7
Environment and Calculation
Module No. of Lect. Lecture Session (Topics)
No.
4.
India's Fiscal Policy and
8 Ch. 4 & R1. Ch.8, 10
Monetary policy
Industrial Structure, Policy
3 Ch. 2, 3, 8, R1. Ch. 11 & notes
and Business Environment
5.
Foreign Trade Policy and
4 Ch. 9
Balance of Payments
Foreign Investment,
2 Ch.21 and 22
Multinational Corporations
India's Export-Import
2 Ch. 23 and 24
Policies, SEZs in India
International Business
2 Organization, World Trade Ch. 25 and 26
Organization
Reference Learning outcomes
India's Fiscal policy and its
Various Techniques, components.
Monetary Policy: Measures of
Money stock, Instruments
Industry: Classification of
Industry, Factors Affecting
Location of Industries, Industrial
Policy
Meaning of BOP, Items of BOP
and the Role of Foreign Trade
Policy
Meaning of FDI and MNC’s,
Advantages and Disadvantages
India's Trade Environment
Related Issues
Familiarity with Organizations
like GATT, GATS, IMF, World
Bank, WTO, ADB, UNCTAD
Evaluation Scheme- Duration Weightage Date & Time Nature of component
Component (%)
(Closed Book/Open Book)

Quiz-1 30 Min 15 Sept. 10- Sept. 20 CB/OB

Mid-Sem Exam 1.5 H 25 October 16-October CB/OB
25
Quiz-2 30 Min 15 November 10-20 CB/OB
Other evaluative components 30 Min 10 Completed by CB/OB
(Assignments/Presentation) November 30
Comprehensive Examination 2H 35 December 22 CB/OB
 Major Learning
Objective of the Study

• To understand what is Economics, Business and Environment?

• Business Environment-significance, concepts, nature, types and objectives
• Interaction between internal and external business environment
• Understanding the Economics of Business Environment for India
 Introduction

Economics Business Environment

• Economics is about the • Activity performed by • Surrounds, external
study business firm with objects, influences or
of scarcity and choice. objective of profit circumstances under
Resources are finite, and
people and governments
maximization which something exists
must make choices.

• It may be defined as the total surroundings which have direct and indirect bearing on
the function of the business. Also to understand the environment within which the
business has to operate.
• It also means the totality of all individuals, institutions and other forces that are
external to a business unit but that potentially affect its performance.
 Significance of the study

• It helps an organization to develop its broad strategies and long-term policies.

• It enable an organization to analyse its competitors strategies and thereby
formulate effective counter strategies.
• Knowledge about changing environment will keep the organisation dynamic in its
approach.
• It enables the organisation to foresee the impact of socio-economic changes at the
national and international level on its stability.
• Development of effective strategies to ensure sustainability.
• It helps in assisting in planning and policy formulation.
 Business Environment

Internal External

Organisational R&D Human Financial Marketing

Physical Assets
Resources Facility Resources Capability Capability

Micro
Market
Suppliers Customers Competitors Govt. Agencies
Intermediaries

Macro
Economic Govt. Legal Technological Geographical Social
 Constituents of Economic Environment
of Business
Economic Environment is largely affected by,

Economic
system
Economic
Structure
Trends in
Economic
Variables Business
Fluctuations International
Economic
Events Planning
Process
Economic
Policies
 Economic Environment

• Mostly, the success of every business enterprises depends upon its economic
environment. This can featured as,
• Economic conditions
• Economic policies and
• Economic system
 Economic system

Economic system

On the basis of ownership of resources On the basis allocation mechanism

Market Mixed Planned

Capitalism Mixed system socialism
Economy Economy Economy
 Environmental Factors which can affects
the Business Environment

Social Factors
Economic
Factors Geographical
Factors Cultural
Factors Political
Factors Technological
Factors
Legal
Factors
Government
Policies
 Business Environment and Strategic
Management

• The managers must take into consideration the following factors while designing
the policies.

 Security risk
 Government effectiveness risk
 Legal and regulatory risk
 Macro-economic risk
 Foreign trade risk
 Tax policy risk
 Labour market risk
 Infrastructure risk
 Management of Environmental Risk

• Developing the local economy

• Good cooperate citizenship
• Tie-up and collaboration with other firms
• Private insurance
• Maintaining good political relations
 10
12

-10
-8
-6
-4
-2
0
2
4
6
8
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974

High income
1975
1976
Environment

1977
1978

India
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988

Low & middle income

1989
1990
1991
GDP Growth

1992
1993
1994
Recent Economic and Financial

1995
1996
Middle income

1997
1998
1999
2000
2001
2002
2003
2004
2005
Upper middle income

2006
2007
2008
2009
2010
World

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
 -1
0
1
2
3
4
5
6
7
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971

High income
1972
1973
1974
1975
1976

India
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987

Low & middle income

1988
1989
1990
1991
1992
1993
1994
1995
1996
Middle income

1997
1998
1999
2000
Foreign direct investment, net inflows (% of GDP)

2001
2002
2003
2004
2005
2006
2007
Upper middle income

2008
2009
2010
2011
2012
2013
World

2014
2015
2016
2017
2018
2019
 Time required to start a business (days)
70

60

50

40

30

20

10

0
High income India Low & middle Low income Middle income Upper middle World
income income
2005 2010 2015 2019
 Cost of business start-up procedures (% of GNI per capita)
400

350

300

250

200

150

100

50

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
High income India Low & middle income Low income Middle income Upper middle income
Thank You…