BUSINESS ENVIRONMENT 2019

Dr. SHAKUNTALA MISRA NATIONAL REHABILITATION UNIVERSITY

Lucknow

Faculty of Law

TITLE FOR PROJECT

[A LEGAL ASPECTS OF BUSINESS ENVIRONMENT]

For

COURSE ON ‘BUSINESS ENVIRONMENT REGULATORY FRAMEWORK AND

ITS CHALLENGES’

Submitted by
[ANAMIKA YADAV]

[154140026]

Academic Session: 2019-20

Under the Guidance of

Mrs. Vijeta Dua Mam

Asst. Prof. in Law & Faculty for BUSINESS ENVIRONMENT REGULATORY
FRAMEWORK AND ITS CHALLENGES
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University

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ACKNOWLEDGEMENT
The completion of this Assignment could not have been possible without the participation
and assistance of so many people whose names may not all the be enumerated. Their
contribution is sincerely appreciated and gratefully acknowledged. However, I would like to
express my deep appreciation and indebtedness particularly to the following.
Assistant Prof. Mrs. Vijeta Dua Mam for his endless support, kind and understanding spirit
during making of this assignment. To all relatives, friends and others who in one way or
another shared their support, either morally, financially and physically, thank you.
Above all, to the Great Almighty God, the author of knowledge and wisdom, for his countless
love.
I thank you all.
Anamika yadav
5th year Student
B.Com. LL.B (Hons.)

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 BUSINESS ENVIRONMENT 2019

TABLE OF CONTENT
1. INTRODUCTION………………………………………………………...04
2. BUSINESS ENVIRONMENT…………………………………………....05
3. STEP TO BE TAKEN FOR DEVELOPMENT OF INDUSTRIES……..06
4. POLICIES FOR EVOLUTION OF INDUSTRIES IN INDIA………....08
5. GROWTH OF CERTAIN SECTORS IN INDIA……………………….10
6. ECONOMIC DEVELOPMENT IN INDIA……………………………..12
7. CONCLUSION………………………………………………………… ..13
8. BIBLIOGRAPHY……………………………………………………..… 14

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INTRODUCTION
Business may be understood as the organized efforts of enterprise to supply consumers with
goods and services for a profit. Businesses vary in size, as measured by the number of
employees or by sales volume. But, all businesses share the same purpose: to earn profits.
Large organizations, with a large workforce will not exist. They will be ‘Mini’ organizations.
Business during the 21st century will be knowledge-based, tomorrow’s manager need not
spend his time on file pushing and paper-shufling. Information technology will take care of
most of that work. Organizations will become flat. Linear relationship between the boss and
manger and authority flowing downwards and obedience upward will disappear. Employees
will have no definite jobs. Most of the jobs will last for two to five years. Remuneration will
depend on one’s contribution to organization.1

New technologies were introduced in many industries. Industrial investment took place in a
large variety of new industries. Modern management techniques were introduced. An entirely
new class of entrepreneurs has come up with the support system from the Government, and a
large number of new industrial centres have developed in almost all parts of the country.
Over the years, the Government has built the infrastructure required by the industry and made
massive investments to provide the much-needed facilities of power, communications, roads
etc. A good number of institutions were promoted to help entrepreneurship development,
provide finance for industry and to facilitate development of a variety of skills required by
the industry as well as agriculture. The Government also followed a policy of encouraging
indigenous industries and provide them all facilities and encouragement. As a result, we have
now a widely diversified base of industry and an increased domestic production of a wide
range of goods and services.

Particularly significant achievement has taken place in the field of agriculture. We are now
having a problem of plenty, with Government godowns overflowing with wheat stocks. This
is not a mean achievement for a country that relied on imported food aid until the early
1960s. The credit for this green revolution goes to Indian scientists as well as to millions of
Indian farmers, who wholeheartedly cooperated with the Government, to make India self-
sufficient in the matter of its food requirements.

1
www.unidp.com

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BUSINESS ENVIRONMENT:

Environment refers to all external forces, which have a bearing on the functioning of
business. Environment factors “are largely if not totally, external and beyond the
control of individual industrial enterprises and their managements. The business
environment poses threats to a firm or offers immense opportunities for potential
market exploitation. Environment includes such factors as socio-economic,
technological, supplier, competitor and the government. There are two more factors,
which exercise considerable influence on business. They are physical or natural
environment and global environment.

 Technological Environment
Technology is understood as the systematic application of scientific or other
organized knowledge to practical tasks. Technology changes fast and to keep pace
with it, businessmen should be ever alert to adopt changed technology in their
businesses.

 Economic Environment
There is close relationship between business and its economic environment. Business
obtains all its needed inputs from the economic environment and it absorbs the output
of business units.

 Political Environment
It refers to the influence exerted by the three political institutions viz., legislature
executive and the judiciary in shaping, directing, developing and controlling business
activities. A stable and dynamic political environment is indispensable for business
growth.

 Natural Environment
Business, an economic pursuit of man, continues to be dictated by nature. To what
extend business depends on nature and what is the relationship between the two
constitutes an interesting study.

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STEP TO BE TAKEN FOR DEVELOPMENT OF INDUSTRIES
Business is the product of the technological, political-legal, economic, social – cultural,
global and natural factors amidst which it functions. Three features are common to this web
of relationship between business and its environment. There is symbolic relationship between
business and its environment and among the environmental factors. In other words, business
is influenced by its environment and in turn, to certain degree, it will influence the external
forces. Similarly, political-legal environment influences economic environment and vice
versa. The same relationship between other environment factors too. These environmental
forces are dynamic.

After India became independent in 1947, the country embarked upon an ambitious plan of
industrial development and encouraged the setting up of new industries and the expansion of
existing industries2.

They keep on changing as years roll by, so does business. The third feature is that a
particular business firm, by itself, may not be in a position to change its environment.
But along with other firms, business will be in a position to mould the environment in
its favour.3

Financial Infrastructure
To provide the financial infrastructure necessary for industry, the Government set up a
number of development banks. The principal function of a development bank is to provide
medium and longterm investments. They have to also play a major role in promoting the
growth of enterprise. For financial assistance to small entrepreneurs, Finance Corporations
were established in all states on the basis of an Act that was passed by Parliament in 1951. In
addition to this, the National Small Industries Corporation was also established at the Centre
and a Small Industries Development Bank of India was established in 1989.

Control of Indian Business

As a consequence of the restrictions on imports, those who were importing products entered
into collaboration with their principals and entered the field of manufacturing. Thus, what
was once a trading community, gradually transformed into a community of industrialists.

2
https://www.investopedia.com/terms/n/net-national-product.asp
3
Report of II Law Commission.

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 BUSINESS ENVIRONMENT 2019
Regulations under the Foreign Exchange and Regulation Act (FERA) restricted foreign
investment in a company to 40%. This ensured that much of the control in companies with
foreign collaboration remained in the hands of Indians. To succeed, Indian businessmen had
to learn and apply modern management and production techniques.

Protection to Indian Industries

Protection from imports encouraged Indian industry to undertake the manufacture of a variety
of products. There was a ready market for all these products. The Government also gave
encouragement to industries to import parts and components that were required for
indigenous production. The import policy was meant to serve two categories of importers -
actual users and established importers4. Actual users of imported raw materials or products
were given preference over the category of established importers i.e. traders. Certain items
that were scarce and not available were channelized through the State Trading Corporation,
Mines & Minerals Trading Corporation and such other Government bodies. They arranged
for the import of such products and distributed them to indigenous industries according to
requirements. Thus, imports were strictly controlled by the import policy announced every
year by the Government of India.

POLICIES FOR EVOLUTION OF INDUSTRIES IN INDIA

4
Report of II Law Commission.

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Before Independence, the policy of the British Government was against encouraging
industrial development in India. No incentives were offered to Indian industries for
their growth. There were many desired and undesired hurdles placed in the way of
the growth of Indian industry. Whatever industrial development took place in India
was in spite of the negative and hostile attitude of the British Government.

Industrial regulation act, 1951

The Industrial Policy Resolution of 1948 was followed by a Government of India (GOI)
Resolution on 2nd September 1948, constituting a Central Advisory Council of Industries
under the chairmanship of the Minister for Industry.

In 1951, the Industrial (Development and Regulation) Act was passed by the Parliament. The
main provisions of the Act were:

 All existing undertakings at the commencement of the Act, except those owned by the
Central Government were compulsorily required to register with the designated
authority.

 No one except the central Government would be permitted to set up any new
industrial undertaking “except under and in accordance with a licence issued in that
behalf by the Central Government.”

 Such a licence or permission prescribed a variety of conditions, such as, location,

minimum standards in respect of size and techniques to be used, which the Central
Government may approve.

 Such licenses and clearances were also required in cases of ‘substantial expansion’ of
an existing industrial undertaking.

Industrial policy resolution, 1956

The Industrial Policy Resolution - 1956 was shaped by the Mahalanobis Model of growth,
which suggested that emphasis on heavy industries would lead the economy towards a long
term higher growth path. The Resolution widened the scope of the public sector. The
objective was to accelerate economic growth and boost the process of industrialization as a
means to achieving a socialistic pattern of society. Given the scarce capital and inadequate

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entrepreneurial base, the Resolution accorded a predominant role to the State to assume
direct responsibility for industrial development.

The Industrial Policy Resolution - 1956 classified industries into three categories:

 First category comprised 17 industries (included in Schedule A of the Resolution)

exclusively under the domain of the Government. These included inter alia, railways,
air transport, arms and ammunition, iron and steel and atomic energy.

 Second category comprised 12 industries (included in Schedule B of the

Resolution), which were envisaged to be progressively State owned but private sector
was expected to supplement the efforts of the State.

 Third category contained all the remaining industries and it was expected that
private sector would initiate development of these industries but they would remain
open for the State as well. It was envisaged that the State would facilitate and
encourage development of these industries in the private sector, in accordance with
the programmes formulated under the Five Year Plans, by appropriate fiscal measures
and ensuring adequate infrastructure.

GROWTH OF CERTAIN SECTORS IN INDIA

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Business involves activities, which links an organization with outside world. Within an
organization, a business is governed by the behaviour of its employees, management or
decision makers. But externally a business is influenced by a score of factors, which
range from customers to competitors and government. Therefore, a business cannot be
independent of (he influence of these external factors. So often it becomes necessary for
business houses to modify their internal decisions and policies, on the basis of the
pressure from external factors This highlights the need to be ever-cognizant of changes
and influences of external factors so as to conduct business on healthy lines.

Telecommunication
India's telecom sector has been one of the major successes in the country. With more than
270 million connections, India's telecommunication network is the third largest in the world
and the second largest among the emerging economies of Asia. The total number of
telephones has increased from 76.53 million on March 31, 2004 to 688.38 Million telephone
(landlines and mobile) subscribers and 652.42 Million mobile phone connections as of July
2010 it is projected that India will have 1.159 billion mobile subscribers by 20135

Petrochemicals

Petrochemicals include synthetic fibres, polymers, elastomers, synthetic detergents, and

performance plastics, apart from their intermediates such as synthetic fibre intermediates,
synthetic detergent intermediates, olefins, and aromatics. The main sources of feedstock and
fuel for petrochemicals are natural gas and naphtha. Petrochemical products cover the entire
spectrum of daily-use items ranging from clothing, housing, construction, furniture,
automobiles, household items, toys, agriculture, horticulture, irrigation, and packaging to
medical appliances.

Textile-sector
The textile sector has so far remained subdued during the current financial year. The total
cloth production has declined by 4.74 per cent during April-December 2011. The decline in
production has been due to two major segments, namely power loom (-2.54 per cent) and
hosiery (-14.89 per cent). Cloth production by the mill and handloom sectors increased by 1
per cent and 2 per cent respectively during the period. During April – December 2011, man-
made fibre production and filament yarn production recorded a decrease of about 2 per cent
5
As Provided by Govt. of India on Its Official Webpage.

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and 7 per cent respectively. Production of cotton yarn decreased by 13 per cent during this
period. However, blended and 100 per cent non-cotton yarn production increased by 5 per
cent.

Fertilizers
India is meeting 80 per cent of its urea requirement through indigenous production but is
largely import dependent for its requirements of phosphatic and potassic (P & K) fertilizers
either as finished fertilizers or raw materials. Its entire potash requirement, about 90 per cent
of phosphatic requirement, and 20 per cent urea requirement is met through imports. In
addition to urea, 25 grades of P & K fertilizers namely di ammonium phosphate DAP),
muriate of potash (MOP), mono-ammonium phosphate (MAP), triple super phosphate (TSP),
ammonium sulphate (AS), single super phosphate (SSP) and 18 grades of NPKS complex
fertilizers are provided to farmers at subsidized prices under the Nutrient Based Subsidy
(NBS) Policy6.

Economic Development Of India

The economic development in India followed a socialist-inspired policies for most of its
independent history, including state-ownership of many sectors; extensive regulation. The
6
As Provided by Govt. of India on Its Official Webpage.

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economic growth has been driven by the expansion of services that have been growing
consistently faster than other sectors. It is argued that the pattern of Indian development has
been a specific one and that the country may be able to skip the intermediate
industrialization-led phase in the transformation of its economic structure. Serious concerns
have been raised about the jobless nature of the economic growth.

Favourable macroeconomic performance has been a necessary but not sufficient condition for
the significant reduction of poverty among the Indian population. The rate of poverty decline
has not been higher in the post-reform period (since 1991). The improvements in some other
non-economic dimensions of social development have been even less favourable. The most
pronounced example is an exceptionally high and persistent level of child malnutrition (46%
in 2005–6).

CONCLUSION

A good number of institutions were promoted to help entrepreneurship development, provide

finance for industry and to facilitate development of a variety of skills required by the

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industry as well as agriculture. The Government also followed a policy of encouraging
indigenous industries and provide them all facilities and encouragement. As a result, we have
now a widely diversified base of industry and an increased domestic production of a wide
range of goods and services.

It can provide depth to Indian manufacturing while increasing value addition from this sector.
Acquiring depth in manufacturing is important not only for improving the competitiveness of
manufacturing but for diversifying the industrial base. Unlike this strong forward linkage
with the services sector, the backward linkage is of the weak nature with the agriculture
sector due to the inadequate pace of development of agrobased industries. And as a result, the
employment-generation potential of the manufacturing sector has not been fully harnessed in
India.

Bibliography
Websites
1. www.unidp.com

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2. www.investopedia.com
3. https://www.investopedia.com/terms/n/net-national-product.asp
4.

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