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Since independence, India
followed the mixed economy framework by combining the advantages of the
market economic system with those of the planned economic system. On July 24,
1991, India instituted a series of ongoing economic reforms, which is now known
as the New Economic Reforms of 1991.
Main
Objectives of New Economic Policy – 1991, July 24 by the union Finance
Minister Dr. Manmohan Singh
1.Higher economic growth and standard of living
2.Remove imbalances in BoP statement
3.Remove the unnecessary restrictions of the
government.(Liberlisation)
4.Creates consumerism
5.To permit the international flow of goods,services,capital human
resources and technology into our country.(Globalisation)
6.To increase the participation of
private players in all sectors of the economy.(Privatisation)
Branches of New Economic Policy
Liberlisation:-
Removing the unnecessary restrictions and government controls.
It includes:-
·Increase
in the investment limit for the small scale industries(SSI):-Investment in the
small scale industries has been raised upto Rs.1Crore. So these companies can
upgrade their machinery and improve their efficiency.
·Freedom
from licensing system.
·Simplification
of tax systems for better compliance of tax payments.
·Reduction
in tax rates.
·Freedom
to fixing up the prices of goods and services
·Freedom
to import capital goods
Privatisation:- It means
to permitting the private sector to set up industries which was previously
reserved for the public sector only. It can be adopted by two ways: A.) Selling
the part of PSU stakes to the private sector (Disinvestment) & B.) Closing
down the operation of sick undertakings which were came under public sector.
Globalisation:-
Integration of our economy with the line of world of economy. It involves the
free movement of goods and services, capital, technological know-how and many
more such things.
Impact of Government policy changes on business and industries:-
1.Increased
Consumerism:- With the introduction of economic reforms since 1991 a large
variety of goods and services are now available to the Indian consumers which
increases competitive environment.
2.Creates
Global market:- Growing global markets in services. People can now execute
trade services globally -- from medical
advice to software writing
to data processing
, that could
never really be
traded before.
3.Efficient
technology innovation:- It provide us the world class technological advancement
so that our country’s business will grow faster.
4.More
demanding consumers:- Now-a-days customers are more demanding because they are
well informed about the market info.
5.Increased
competition:- Due to increase in the number of industries in private sector,
competition amongst them is also increases.
6.Only the
bestest will survive:- Thanks to the LPG policy, that the support for financing
the public sector expenditure has declined.
a.)GDP and its related
aggregates:- GDP or gross domestic product means the value of goods and
services produced within an accounting year. Rise in GDP means rise in the
level of disposable income and which is a good sign for business enterprises.
b.)Per Capita Income:- Per capita income is a ratio of the amount of
all region's income divided by its population. Higher
per capita income of a particular region means the region’s population is
prosperous and lower per capita income means that standard of living of that
region is low. Thus it brings about the idea that which region will target
first by the business.
c.)Inflation:- Higher inflation
means more constraints on the business enterprises because it increases the
value of raw materials, labour and other important factors which is not a good
sign for any business.
d.) Stock market conditions:- Stock market conditions may be
categorised into two parts Bull market and bearish market. Bull market means
that market is at its boom and growing day by day and bearish market is like a
dull and stagnant situation of a market. Mostly bull market is a good sign for
any business.
e.)Stage of Economic Phase:- It
includes like phases like early expansions peak slowing into recession recovery
etc.
Social Environment
·Customs and traditions of the
society:- various kind of festivals like Holi, Diwali, Eid, Christmas etc. All
are the part of our country’s tradition and customs. This will brings a great
opportunity for greeting card companies, sweets or confectionaries manufactures
and many other related businesses.
·Standard of living:- A very
high standard people can easily spend their money on various things as compared
to those who are just earning their bread and butter.
·Taste and preference:- Social
trends has been changed tremendously. Now people are aware about the benefits
of gym, health and fitness kinds of stuff. So it increases the demand of gyms,
health related high nutrient supplement food, mineral water etc. and also
decreases the demand of tobacco products and liquor.
·Expectations of the society:- Changing
in the social trend of business will create various opportunities for
businesses and also creates threats for the businesses at the same time.
Political Environment
vGovernment attitude towards business:-
vStability or instability of government
vPeace
Government attitude towards business:-
Government creates rules and policies under which various business groups will
sustain and grow. Thus, the positive side of government towards the business
groups will likely to be the favourable impacts on businesses.
Stability of Government:- Business operates
according to the forecast of near future and leaders of business houses hates
instability of these factors, such as frequent strikes, social unrest and
chaos as their operations would be hit adversely due to these factors. It can
be seen most of the time that these factors usually come up with the frequent
change in the government.
Peace:-
Businesses will grow much faster in the peaceful environment where there is
less chances of strikes, lockouts etc.
Legal Environment: The Law of land is the
supreme power. Every business house must fulfil the conditions of law for the
successful working of organisation. It includes various laws passed by the
legislative assembly, orders made by the concerned authorities, various case
judgements, etc.
Few examples of legal environment:
1.Statutory warning on cigarettes
pack- ‘Cigarette smoking is injurious to health’ is due to the anti-smoking law.
2.Same warning is also given on
the packing of alcohol.
Technological Environment:-Every
businessman must constantly watch the new upcoming technology related to his
business. It helps him to facing the competition and creates innovation into
the business.
1.Smart TVs in place of LED and
LCD
2.Remote control Fans in place of
ordinary fans
3.Smart watches in place of
ordinary watches
4.Use of digital mode of payments
in place of traditional mode of cash or cheque such as wallets and BHIM app.
