Political Environment New

8/2/2019 Political Environment New

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POLITICAL ENVIRONMENT:

Political environment of the country affectsdifferent business units significantly. A stable

and dynamic political environment is

indispensable for business growth.

The components of political environment are as

follows:

political stability in the country

relation of govt. with other countries

defense and military policy



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Welfare activities of govt.

centre state relationship

Political ideology of government: Political ideology

of govt. refers to the political thinking, approach and

vision f govt. towards various economic and social

activities of the country. it also affects the business

units. It decides

what type of business activities should the country

have what areas should be opened for private sector

what areas should be reserved for public sector



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in what areas the entry of foreign companies to be

allowed

what areas to be allowed for small scale sector etc

A political system which is stable, honest, efficient,

dynamic and which ensures political participation of the people and assures personal security to the

citizens, is a primary factor for economic

development.

In the absence of political stability, long term planscannot be formulated. In case of frequent changes in

govt., economic policies are frequently changed.



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Some factors that influence political instability arecommunal riots, declaration of emergency, civil war etc.

Relations of govt. with other countries also affectbusiness.

If a country enjoys cordial and friendly relations withother nations, then it has favorable effect on foreigntrade.

Cordial relations of govt. with neighboring countries helpto reduce defense budget, hence more funds can bespend on developmental activities.

Cordial Centre State relations also have favorable effect

on business. Positive thinking and healthy attitude of oppositionparties also have favorable effect n the developmentalactivities.



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FUNCTIONS OF STATE:

Classification of functions of state:

The basic functions or minimal functions include the

pure public goods such as defence, law and order

provision of property rights, macroeconomic stability,

control of infectious diseases, safe water, roads, relief against disaster (earthquake, tsunami) etc.

The intermediate functions include management of

externalities (e.g. primary education, pollution control),

regulation of monopolies( public utilities), consumer protection and provision of social insurance (pension

and unemployment benefits etc.



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Activist Functions: States with more

capability can take on more activist

functions dealing the problem of missing

markets by helping coordination.



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ECONOMIC ROLES OF GOVERNMENT:

Regulatory role: Regulation may cover a widespectrum extending from entry in to the businessthrough the conduct of the business to final results of the business, and also the exit. Regulation is veryimportant for the proper functioning of the economy.

The reservation of industries to small scale, public andcooperative sectors, licensing system etc.

The regulatory role of Govt. comprises:

a) Determining the conditions under which individuals or

associations would be allowed to enter certain lines of business or avail the public facilities and scarceresources e.g., grant of license, restriction n locationof industry etc



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b) Regulating the conduct of business ventures e.g.,

regulation of working conditions in factories, ceilings

on managerial remuneration etc.c) Controlling the accrual and disposal of business

income e.g., ceilings on dividends, tax on income of

business enterprises etc

d) Regulating the relationship between varioussegments of the economy to prevent conflict of

interests or to protect legal rights or to prevent undue

concentration of economic power.eg, regulating inter

company investments, provision for settlement of

labour management disputes etc



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Promotional role: This is more important indeveloping countries than in the developedbecause speedy development of the industryand commerce and the economy requires thedevelopment of the infrastructure, includingfacilitating organizations, power, transport,

finance, marketing , institutions for training andguidance and other promotional activities etc.

It consists of

a) Development of infrastructure for industrial

and commercial activities through provision of power supply, transport facilities, availability of financial resources, training institutions and soon.



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b) Assistance by way of subsidies, allocation

of scarce resources, providing land at

concessional price, concessional rates for

power and water supply, facilities of

concessional rate of interest for the

development of backward regions.c) fiscal, monetary and other incentives,

insurance of business risks etc for the

development of priority sectors andactivities.



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Entrepreneurial role:

in many economies the state also plays the role of

an entrepreneur like establishing and operatingbusiness enterprises and bearing the risks.

The entrepreneurial role consists of governmentsparticipation in business through public

ownership and management of industrial andcommercial undertakings.

Several objectives have prompted the Governmentto become an entrepreneur e g, balanced

regional development of the country, promotionof capital intensive industries ,lack of competitionin certain industries etc.



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Planning role:

Especially in the developing countries, the state plays a

very important role as a planner.The national necessity for proper utilisation of scarce

resources and prioritization of developmentobjectives and ideological reasons has made this an

important role of governments in the developing andsocialist countries.

The Govt.of India set up the planning Commission in1950.

The basic goals of five year planning have beenbalanced regional development, rapidindustrialization ,employment generation,development of agriculture and small scale industriesetc.



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CONSTITUTIONAL ENVIRONMENT:

The constitutional environment consists of preamble to the constitution,

Fundamental rights and duties and

directive principles of state policy

Structure of the Constitution: The Constitution, in its current form, consists of a preamble,

twenty-two parts containing three hundred and ninety fivearticles, twelve schedules, ninety-four amendments, and fiveappendices.

Preamble: Preamble is stem, root and source of constitution The Preamble states that

We, the people of India, have solemnly resolved to constituteIndia into a sovereign, socialist, secular, democratic,republic and to secure to all its citizens:



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Sovereign: The word sovereign means supreme or independent. India is internally and externally sovereign -externally free from the control of any foreign power and

internally, it has a free government which is directly electedby the people and makes laws that govern the people.

Socialist: It implies social equality. Social equality in thiscontext means the absence of discrimination on the grounds

only of caste, colour , creed, sex, religion, or language. Under social equality all are equal before law and has equal statusand opportunities.

Secular: It implies equality of all religions and religioustolerance. India, therefore does not have an official statereligion. Every person has the right to preach, practice andpropagate any religion they choose. The government musttreat all religions with equal respect. All citizens, irrespectiveof their religious beliefs are equal in the eyes of law.



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Democratic: India is a democracy. The people of India elect their governments at all levels (Union,State and local) popularly known as 'One man one

vote'. Every citizen of India, who is 18 years of ageand above and not otherwise debarred by law, isentitled to vote. Every citizen enjoys this right withoutany discrimination on the basis of caste, creed,

colour, sex, religion or education. Republic: a democratic republic is an entity in which

the head of state is elected, directly or indirectly, for a fixed tenure. The President of India is elected by

an electoral college for a term of five years. The Postof the President of India is not hereditary. Everycitizen of India is eligible to become the President of the country.



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Fundamental Rights in India

The six fundamental rights are:

Right to equality

Right to freedom Right against exploitation

Right to freedom of religion

Cultural and educational rights Right to constitutional remedies



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Right to equality

Equality before law: Article 14 of the constitution

guarantees that all citizens shall be equally protected by thelaws of the country. It means that the State cannotdiscriminate against a citizen on the basis of caste, creed,colour, sex, religion or place of birth.

Social equality and equal access to public areas: Article

15 of the constitution states that no person shall bediscriminated on the basis of caste, colour, language etc.Every person shall have equal access to public places likepublic parks, museums, wells, bathing ghats and templesetc.

Equality in matters of public employment: Article 16 of the constitution lays down that the State cannot discriminateagainst anyone in the matters of employment. All citizenscan apply for government jobs.



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Abolition of untouchability: Article 17 of the

constitution abolishes the practice of untouchability.

Practice of untouchability is an offense and anyonedoing so is punishable by law.

Abolition of Titles: Article 18 of the constitution

prohibits the State from conferring any titles.

Citizens of India cannot accept titles from a foreignState. The British government had created an

aristocratic class known as Rai Bahadurs and Khan

Bahadurs in India ² these titles were also

abolished. The awards of Bharat Ratna and Padma

Vibhushan cannot be used by the recipient as a

title.



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Right to freedom

Freedom of speech and expression, which

enable an individual to participate in public

activities.

Freedom to form associations or unions .

Freedom to move freely throughout the territory

of India

Freedom to reside and settle in any part of the

territory of India.

Freedom to practice any profession or to carry

on any occupation, trade or business



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Right against exploitation

The Right against exploitation, given in Articles 23 and 24 provides for the abolition of

human trafficking, and the abolition of

employment of children below the age of 14

years in dangerous jobs like factories andmines.

Child labour is considered a violation of the

spirit and provisions of the constitution. Trafficking in humans for the purpose of slave

trade or prostitution is prohibited by law.



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Right to freedom of religion

Right to freedom of religion, covered in Articles25, 26, 27 and 28, provides religious freedom to

all citizens of India.

According to the Constitution, all religions areequal before the State and no religion shall be

given preference over the other.

Citizens are free to preach, practice and

propagate any religion of their choice.

Religious communities can set up charitable

institutions of their own.



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Cultural and educational rights

The cultural and educational rights²given in Articles29 and 30²are measures to protect the rights of ethnic and religious minorities.

No citizen can be discriminated against for admission in State or State-aided institutions.

In granting aid to institutions, the State cannotdiscriminate against any institution on the basis of the fact that it is administered by a minorityinstitution.

The right to education at elementary level has beenmade one of the Fundamental Rights under right tofreedom by the 86th constitutional amendment of 2002



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Right to constitutional remedies

Right to constitutional remedies empowers the

citizens to move a court of law in case of any

denial of the fundamental rights.

in case of imprisonment, the citizen can ask the

court to see if it is according to the provisions of

the law of the country.

If the court finds that it is not, the person will

have to be freed.



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Fundamental Duties

To abide by the Constitution and respect its ideals and

institutions, the National Flag and the National Anthem To uphold and protect the sovereignty, unity and

integrity of India.

To defend the country and render national service

when called upon to do so. To promote harmony and the spirit of commonbrotherhood amongst all the people of India.

To value and preserve the rich heritage of our composite culture.

To protect and improve the natural environmentincluding forests, lakes, rivers and wild life, and tohave compassion for living creatures.

To safeguard public property and to abjure violence.



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Directive Principles of State Policy

The directive principles ensure that the State shall

strive to promote the welfare of the people by

promoting a social order in which social, economic

and political justice is informed in all institutions of life.

the State shall work towards reducing economicinequality as well as inequalities in status and

opportunities, not only among individuals, but also

among groups of people residing in different areas .

The State shall aim for securing right to an adequatemeans of livelihood for all citizens, both men and

women as well as equal pay for equal work for both

men and women.



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The State should work to preventconcentration of wealth and means of

production in a few hands. Child abuse and exploitation of workers

should be prevented.

Children should be allowed to develop in a

healthy manner and should be protectedagainst exploitation .

The State shall endeavour to provide the right

to work, to education and to public assistancein cases of unemployment, old age, sicknessand disablement, within the limits of economic capacity.



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The state shall provide for just and humaneconditions of work and maternity relief.

The State should also ensure living wage andproper working conditions for workers, with fullenjoyment of leisure and social and culturalactivities.

the promotion of cottage industries in rural areas isone of the obligations of the State.

The State shall take steps to promote their participation in management of industrialundertakings.

To provide free and compulsory education to allchildren till they attain the age of 14 years. Thisdirective regarding education of children was addedby the 86th Amendment Act, 2002.



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It should and work for the economic and

educational upliftment of scheduled castes,

scheduled tribes and other weaker sections of thesociety

The directive principles commit the State to raise

the level of nutrition and the standard of living and

to improve public health, particularly by prohibitingintoxicating drinks and drugs injurious to health

except for medicinal purposes.

It should protect and improve the environment and

safeguard the forests and wild life of the country.

Protection of monuments, places and objects of

historic and artistic interest and national importance



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GOVERNMENT AND LEGAL ENVIRONMENT:

In most countries, apart from those laws that controlinvestment and related matters, there are a number of laws that regulate the conduct of the business.These laws cover such matters as standards of product, packaging, promotion, ethics, ecological

factors etc. Some govts specify certain standards for the

products to be marketed.

Some prohibit the marketing of certain products.

Some countries restrain the use of children incommercial advertisements.

In countries like Germany, product comparisonadvertisements and the use of superlatives like bestor excellent in advertisements is not allowed.



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Many countries have laws to regulate competition in

the public interest. Eliminations of unfair competition

and dilution of monopoly power are the importantobjectives of these regulations.

Certain changes in government policies such as

industrial policy. Fiscal policy, monetary policy, foreign

trade policy, tariff policy etc may have profound impact

on business.

Some policy developments create opportunities as

well as threats.E

.g. industrial policy liberalizations inIndia have opened up new opportunities and threats.

They have provided a large number of opportunities

inorder to diversify and make their product mix better.

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