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Explain the features of business environment

1. Environment is inseparable part of business:
Environment is an integral part of any business. Business cannot work without environment. Business
requires good framework of legal, political, social, cultural and economic factors.
2. Environment is Dynamic:
Business environment is dynamic in nature. The government may change certain policies; there may be
changes in consumer tastes, preferences etc.
3. Business lacks control over environment:
Business environment is a constantly changing process. Business lacks control over external environment.
4. Internal and external factors:
The environment of business comprises of internal and external factors. Internal environment includes
plans and policies, employees, business objectives etc.

2. Explain the concept of privatization

The repurchasing of all of a company's outstanding stock by employees or a private investor. As
a result of such an initiative, the company stops being publicly traded. Sometimes, the company might
have to take on significant debt to finance the change in ownershipstructure. Companies might want to go
private in order to restructure their businesses They might also want to go private
to avoid the expense and regulations associated with remaining listed on a stock exchange.
2. The process of moving from a government-controlled system to a privately run, for-profit system.

3. Explain the importance of small scale enterprises in india

In a developing country like India, the role and importance of small-scale industries is very significant
towards poverty eradication, employment generation, rural development and creating regional balance in
promotion and growth of various development activities.
It is estimated that this sector has been contributing about 40% of the gross value of output produced in
the manufacturing sector and the generation of employment by the small-scale sector is more than five
times to that of the large-scale sector.

The following are some of the important role played by small- scale industries in India.
1. Employment generation:
2. Mobilization of resources and entrepreneurial skill:
3. Equitable distribution of income:
4. Regional dispersal of industries:
5. Provides opportunities for development of technology:

4. Explain the fiscal policy of India

The fiscal policy is concerned with the raising of government revenue and incurring of government
expenditure. To generate revenue and to incur expenditure, the government frames a policy called
budgetary policy or fiscal policy. So, the fiscal policy is concerned with government expenditure and
government revenue.
The fiscal policy is designed to achieve certain objectives as follows :1. Development by effective Mobilization of Resources
2. Efficient allocation of Financial Resources
3. Reduction in inequalities of Income and Wealth
4. Price Stability and Control of Inflation
5. Employment Generation
6. Balanced Regional Development
7. Reducing the Deficit in the Balance of Payment

5. What is balance of Payment? Explain.

the balance of payments (BOP) is the method countries use to monitor all international monetary
transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar
year. All trades conducted by both the private and public sectors are accounted for in the BOP in order to
determine how much money is going in and out of a country. If a country has received money, this is
known as a credit, and if a country has paid or given money, the transaction is counted as a debit.
Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance,
but in practice this is rarely the case.

6.Explain the role of public sector in india

Public sector is considered a powerful engine of economic development and an important instrument of
self-reliance. The main contributions of public enterprises to the country's economy maybe described as
1. Fillings of Gaps
2. Employment
3. Balanced Regional Development
4. Contribution to Public Exchequer
5. Foreign Exchange Earnings
6. Development of Ancillary industries
7. Research and Development
8. Community Development
9. Social Justice
In addition to the foregoing, the public sector has played an important role in the achievement of
constitutional goals like reducing concentration of economic power in private hands, increasing public
control over the national economy, creating a socialistic pattern of society, etc. With all its linkages the
public sector has made solid contributions to national self-reliance.

Q.4.Explain foreign trade policy of india. Give recent trends of

indias exports.
Exim Policy or Foreign Trade Policy is a set of guidelines and instructions established by the DGFT in
matters related to the import and export of goods in India.
The Foreign Trade
Policy of India is guided by the Export Import in known as in short EXIM Policy of the Indian
Government and is regulated by the Foreign Trade Development and Regulation Act, 1992.
DGFT (Directorate General of Foreign Trade) is the main governing body in matters related to Exim
Policy. The main objective of the Foreign Trade (Development and Regulation) Act is to provide the
development and regulation of foreign trade by facilitating imports into, and augmenting exports from
India. Foreign Trade Act has replaced the earlier law known as the imports and Exports (Control) Act
Indias overall export trends

The table below reveals that the period between 1961 and 1970 had higher imports (as a share of GDP),
compared to exports which may have contributed to a growing foreign exchange shortage. Additionally,
high levels of inflation and budget deficits coupled with the India-Pakistan war severely affected foreign
aid and led to a foreign exchange crisis, which resulted in the devaluation of the rupee in 1966.8

Table 1: India: Export and Import growth (%)


Share of Indias

growth rate

export in world

over period

Percent of GDP


export (%)
































India Exports
Exports in India increased to 27998.50 USD Million in May of 2014 from 25634.08 USD Million in April
of 2014. Exports in India averaged 3975.36 USD Million from 1957 until 2014, reaching an all time high
of 30541.44 USD Million in March of 2013 and a record low of 59.01 USD Million in June of 1958.
Exports in India is reported by the Ministry of Commerce and Industry, India.












1957 - 2014

USD Million


Indias main exports are engineering goods (19 percent of total exports), gems and jewelry (15 percent),
chemicals (13 percent), agricultural products (9 percent) and textiles (9 percent). India is also one of
Asias largest refined product exporters with petroleum accounting for around 18 percent of total exports.
Indias main export partners are United Arab Emirates (12 percent of total exports) and United States (11
percent). Others include: China, Singapore, Hong Kong and Netherlands. This page provides - India
Exports - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Q.2 . How is internal environment of business different from

external environment
The formula for business success requires two elements - the individual and the environment. Remove
either value and success becomes impossible. Business environment consist of all those factors that have
a bearing on the business. The term 'business environment implies that those external forces, factors and
institutions are beyond the control of individual business, organizations and their management and can
affect the business enterprise as a whole.
A business environment influences the functioning of the business system. Therefore, a business
environment may be defined as all those conditions and forces which are external to the business and are
beyond the individual business unit, but they all operate within it. These forces are customers, creditors,

competitors, government, socio-cultural organizations, political parties national and international

organizations etc. Some of these forces affect the business directly whilst some others have an indirect
effect on the business.
Business environments are the sum total of all things external to business firms and are aggregative in
The external environment covers parts of the organization which are usually unable to be controlled
within the organization and include factors such as social, legal, technological and political factors. The
external environment can also include the people outside your organization who are also a part of it in
some or the other way This can include society, government and stakeholders.
The internal environment is the environment that has a direct impact on the business. Here there are some
internal factors which are generally controllable because the company has power over these factors. It can
alter or modify factors such as its personnel, physical facilities, and organization and functional means,
like marketing, to suit the current environment. The value system of the founders and those at the helm of
affairs has an important bearing on the choice of the business, its mission and the objectives of the
organization, including its business policies and practices.

Q.6.Explain FDI. Discuss the trends of indias FDI after 1990-91

Foreign direct investment (FDI) is a direct investment into production or business in a country by an
individual or company of another country, either by buying a company in the target country or by
expanding operations of an existing business in that country. Foreign direct investment is in contrast
to portfolio investment which is a passive investment in the securities of another country such
as stocks and bonds.
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven
by then finance minister Manmohan Singh. As Singh subsequently became the prime minister, this has
been one of his top political problems, even in the current times. [12][13] India disallowed overseas corporate
bodies (OCB) to invest in India.[14] India imposes cap on equity holding by foreign investors in various
sectors, current FDI limit in aviation sector is maximum 49%. [15]
Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the
second most important FDI destination (after China) for transnational corporations during 20102012. As
per the data, the sectors that attracted higher inflows were services, telecommunication, construction
activities and computer software and hardware. Mauritius, Singapore, US and UK were among the
leading sources of FDI. Based on UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the
first half of the last year.[1]

Since independence, India's balance of payments on its current account has been negative. Since
liberalization in the 1990s (precipitated by a balance of payment crisis), India's exports have been
consistently rising, covering 80.3% of its imports in 200203, up from 66.2% in 199091. Although India
is still a net importer, since 199697, its overall balance of payments (i.e., including the capital
account balance), has been positive, largely on account of increased foreign direct investment and
deposits from non-resident Indians; until this time, the overall balance was only occasionally positive on
account of external assistance and commercial borrowings. As a result, India's foreign currency reserves
stood at $285 billion in 2008, which could be used in infrastructural development of the country if used
India's reliance on external assistance and commercial borrowings has decreased since 199192, and
since 200203, it has gradually been repaying these debts. Declining interest rates and reduced
borrowings decreased India's debt service ratio to 4.5% in 2007. In India, External Commercial
Borrowings (ECBs) are being permitted by the Government for providing an additional source of funds to
Indian corporates. The Ministry of Finance monitors and regulates these borrowings (ECBs) through ECB
policy guidelines.

Q.7. discuss the problems of indian small scale industries and

incentives offered to small scale industries in india
Small-scale industries in India could not progress satisfactorily due to various problems that they are
confronted with while running enterprises. In spite of having huge potentialities, the major problems,
small industries face are given below.
1. Problem of skilled manpower:
The success of a small enterprise revolves around the entrepreneur and its employees, provided the
employees are skilled and efficient. Because inefficient human factor and unskilled manpower create
innumerable problems for the survival of small industries. Non-availability of adequate skilled manpower
in the rural sector poses problem to small-scale industries.
2. Inadequate credit assistance:

Adequate and timely supply of credit facilities is an important problem faced by small-scale industries.
This is partly due to scarcity of capital and partly due to weak creditworthiness of the small units in the
3. Irregular supply of raw material:
Small units face severe problems in procuring the raw materials whether they use locally available raw
materials or imported raw materials. The problems arise due to faulty and irregular supply of raw
4. Absence of organized marketing:
Another important problem faced by small-scale units is the absence of organized marketing system. In
the absence of organized marketing, their products compare unfavorably with the quality of the product of
large- scale units.
5. Lack of machinery and equipment:
Small-scale units are striving hard to employ modern machineries and equipment in their process of
production in order to compete with large industries. Most of the small units employ outdated and
traditional technology and equipment.
6. Absence of adequate infrastructure:
Most of the small units and industrial estates found in towns and cities are having one or more problems
like lack of of power supply, water and drainage problem, poor roads, raw materials and marketing
7. Competition from large-scale units and imported articles:
Small-scale units find it very difficult to compete with the product of large-scale units and imported
articles which are comparatively very cheap and of better quality than small units product.

incentives offered to small scale industries in india

i. give more power to branch manager of Banks to grant loan,
ii. simplification of forms-strengthening of recovery mechanism
iii. opening of more specialised SSI branch etc.

Refer Attachement.