Q1)

i- What is the goal of any business ?

Ans) The Goals of a Business i.e the primary purpose of a business is to

maximize profits for its owners or stakeholders while maintaining corporate social
responsibility.

Successful businesses are based on both goals and objectives, as they clarify the
purpose of the business and help identify necessary actions Goals are general
statements of desired achievement, while objectives are the specific steps or actions
you take to reach your goal. Both goals and objectives should be specific and
measurable. Goals can involve areas such as profitability, growth and customer
service, with a range of objectives that can be used to meet those goals.

ii- What are different types of environments in which a business works?

Ans) Business environment refers to any kind of internal or external forces which have

an effect on the functioning of the business in a positive or negative way. The
environment may affect the business to the extent that there may be a need to modify or
revamp the entire business.

The environment poses threats challenges as well as gives opportunities and chance to
grow to the business. All of this comes with an enriched learning experience for
everyone associated with it. For the purpose of classification, there are different types of
business environment.

1. Internal Business Environment

2. External Business environment

Internal Business environment: As the name suggests, the internal business

environment includes physical assets, human, financial and marketing resources,
technological supports, the management etc.

External Business environment: The external environment is relatively

watched compared to the internal business environment. It is composed of various
organizations institutions and other forces which operate beyond the control of the
organization. It is further classified into external micro and external macro
environment.

iii- What factors affect economic environment?

Ans) There are mainly 2 factors affecting the economic environment.

They are the Macro and Micro factors.

The macro factors are generally termed as PESTLE which is Political, Economic, Social,
Technological, Legal, and Environmental factors. These are those which cannot be
controlled by any company. They have to maintain a contingency for it. For example, let
us take demonetization. In the event of demonetization, no company or enterprise no
matter how big it may be, have any control over the events. They had to maintain a
contingency plan and that's how they mainly survive that phase.

Micro factors includes all those which can be controlled by the company. It includes the
company policies, relation with the customers, suppliers, etc. Since it takes place within
the business space, it can be easily monitored.

iv- What is meant by mixed economy in context of India?

Ans) Before Independence, Indian economy was a ‘laissez faire’ economy. But post-
independence, India adopted the mixed economy system.

In a mixed economy, private and public sectors go side by side. The government directs
economic activity in some socially important areas of the economy, the rest being left to
the price mechanism to operate.

The term ‘mixed economy’ is used to describe an economic system, which seeks to
compromise between capitalism and socialism. In such a form of economy, the elements
of government control are combined with market elements in organizing production
and consumption.

Here, some planning of production is undertaken by the State directly or through its
nationalised industries, and some is left to private enterprise. It means that both the
public sector and the private sector exist side by side and complement each other. So,
this type of economy tries to secure the advantages of both capitalism and socialism.

v- What is fiscal policy?

Ans) Fiscal policy is the means by which a government adjusts its spending levels
and tax rates to monitor and influence a nation's economy. It is the sister strategy to
monetary policy through which a central bank influences a nation's money supply.
These two policies are used in various combinations to direct a country's economic
goals.
 Fiscal policy is based on the theories of British economist John Maynard Keynes.
Also known as Keynesian economics, this theory basically states that governments
can influence macroeconomic productivity levels by increasing or decreasing tax
levels and public spending. This influence, in turn, curbs inflation, increases
employment, and maintains a healthy value of money. Fiscal policy plays a very
important role in managing a country's economy. 

ix- What is WTO?

Ans) WTO stands for World Trade Organization (WTO). The WTO is the only global
international organization dealing with the rules of trade between nations. At its
heart are the WTO agreements, negotiated and signed by the bulk of the world’s
trading nations and ratified in their parliaments. The goal is to help producers of
goods and services, exporters, and importers conduct their business.

The WTO  is a forum for governments to negotiate trade agreements. It is a place for
them to settle trade disputes. It operates a system of trade rules. Essentially, the
WTO is a place where member governments try to sort out the trade problems they
face with each other. The WTO is run by its member governments. All major
decisions are made by the membership as a whole, either by ministers or by their
ambassadors or delegates. The WTO agreements are lengthy and complex because
they are legal texts covering a wide range of activities. But a number of simple,
fundamental principles run throughout all of these documents. These principles are
the foundation of the multilateral trading system.

Q2) What factors influence economic environment? What is the environment in

India?

Ans) The economic environment refers to all the economic factors that affect

commercial and consumer behavior. The economic environment consists of all the
external factors in the immediate marketplace and the broader economy. These factors
can influence a business, i.e., how it operates and how successful it might become.

There are mainly 2 factors affecting the economic environment.

They are the Macro and Micro factors.

The macro factors are generally termed as PESTLE which is Political, Economic, Social,
Technological, Legal, and Environmental factors. These are those which cannot be
controlled by any company. They have to maintain a contingency for it. For example, let
us take demonetization. In the event of demonetization, no company or enterprise no
matter how big it may be, have any control over the events. They had to maintain a
contingency plan and that's how they mainly survive that phase.

Micro factors includes all those which can be controlled by the company. It includes the
company policies, relation with the customers, suppliers, etc. Since it takes place within
the business space, it can be easily monitored.

As a component of economic reformations, the Government of India declared a new

industrial system in July 1991. The extensive characteristics of this system were as
follows:

 The Government decreased the number of enterprises below mandatory licensing

to six
 Many of the businesses held for the public sector under the initial policy, were
justified. The purpose of the public sector was defined only to 4 industries of vital
importance
 Disinvestment was conducted in case of many public sector industrial companies
 Policy towards foreign funds was expanded. The percentage of foreign equity
partnership was extended and in many ventures, 100 percent Foreign Direct
Investment (FDI) was allowed
 Automatic approval was now given for technology transactions with foreign firms
 Foreign Investment Promotion Board (FIPB) was established to support and
channelise foreign financing in India.

 Liberalisation:
 The economic reforms that were presented were directed at liberalising the
Indian business and trade from all redundant restrictions and limitations. They
indicated the end of the licence-permit-quota raj.

Privatisation:
The new set of economic changes intended at proffering a prominent position to the
private sector in the nation-building rule and a diminished role to the public sector. This
was a withdrawal of the growth policy attempted so far by Indian directors. To
accomplish this, the administration redefined the role of the public sector in the New
Industrial Policy of 1991, approved the policy of proposed disinvestments of the public
sector and determined to the loss-making and weak industries to the Board of Industrial
and Financial Reconstruction (BIFR).
Globalisation:
Globalisation implies the combination of the different economies of the world heading
towards the development of a united (closely-knitted) global marketplace. Till 1991, the
Government of India had followed a course of stringently controlling imports in price
and quantity terms. These laws were with respect to:

 Licensing of imports
 Tariff limitations
 Quantitative constraints
The new economic reforms directed at business liberalisation were focused towards
import liberalisation, export improvement through rationalisation of the tax structure
and changes with respect to foreign exchange so that the nation does not remain
separate from the rest of the world.

Q3) What is the role of PSUs in Indian economy?

Ans) The government-owned corporations are termed as Public Sector Undertakings

(PSUs) in India. In a PSU majority (51% or more) of the paid up share capital is held by
central government or by any state government or partly by the central governments
and partly by one or more state governments.

(The Government provides Public Sector Enterprises (PSEs/PSUs) the necessary

flexibility and autonomy to operate effectively in a competitive environment. The
government has also implemented revised salaries for executives of PSEs/PSUs.
Moreover, some innovative measures such as Performance Related Pay have been
introduced to make them more efficient. These incentives for the employees have been
linked to individual, group as well as company performance.)

Public Sector Undertakings (PSUs) have laid a strong foundation for the industrial
development of the country. The public sector is less concerned with making profits.
Hence, they play a key role in nation building activities, which take the economy in the
right direction.

PSUs provide leverage to the Government (their controlling shareholder) to intervene in

the economy directly or indirectly to achieve the desired socio-economic objectives and
maximize long-term goals.

As agriculture is the backbone of Indian economy, Public Sector Banks (PSBs) play a
crucial role in pushing the agricultural economy on to the progressive pathway and
helping develop rural India. Moreover, PSUs play a substantial role in the rural
development by providing basic infrastructural services to citizens.

the following are the nine important roles played by public sector in
Indian economy:
 i- Generation of Income:
Public sector in India has been playing a definite positive role in
generating income in the economy. The share of public sector in net
domestic product (NDP) at current prices has increased from 7.5 per
cent in 1950-51 to 21.7 per cent in 2003-04.

ii-  Capital Formation:

Public sector has been playing an important role in the gross domestic
capital formation of the country. The share of public sector in gross
domestic capital formation has increased from 3.5 per cent during the
First Plan to 9.2 per cent during the Eighth Plan.

iii- Employment:
Public sector is playing an important role in generating employment in
the country.

Public sector employments are of two categories, i.e:

(a) Public sector employment in government administration, defence
and other government services and

(b) Employment in public sector economic enterprises of both Centre,

State and Local bodies.

Iv - Infrastructure:
Without the development of infrastructural facilities, economic
development is impossible. Public sector investment on infrastructure
sector like power, transportation, communication, basic and heavy
industries, irrigation, education and technical training etc. has paved
the way for agricultural and industrial development of the country
leading to the overall development of the economy as a whole. Private
sector investments are also depending on these infrastructural
facilities developed by the public sector of the country.

V- Strong Industrial base:

Another important role of the public sector is that it has successfully
build the strong industrial base in the country. The industrial base of
the economy is now considerably strengthened with the development
of public sector industries in various fields like—iron and steel, coal,
petroleum and natural gas, fertilizers, chemicals, drugs etc.

vi- Export Promotion and Import Substitution:

Public sector enterprises have been contributing a lot for the
promotion of India’s exports. The foreign exchange earning of the
public enterprises rose from Rs. 35 crore in 1965-66 to Rs. 5,831 crore
in 1984-85 and then to Rs. 34,893 crore in 2003- 04. Thus, the export
performance of the public sector enterprises in India is quite
satisfactory

vii-  Contribution to Central Exchequer:

The public sector enterprises are contributing a good amount of
resources to the central exchequer regularly in the form of dividend,
excise duty, custom duty, corporate taxes etc. During the Sixth Plan,
the contribution of public enterprises to the central exchequer was to
the tune of Rs. 27,570 crore.

viii- Checking Concentration of Income and Wealth:

Expansion of public sector enterprises in India has been successfully
checking the concentration of economic power into the hands of a few
and thus are redressing the problem of inequalities of income and-
wealth of the economy.

ix- Removal of Regional Disparities:

From the very beginning industrial development in India was very
much skewed towards certain big port cities like Mumbai, Kolkata and
Chennai. In order to remove regional disparities, the public sector
tried to disperse various units towards the backward states like Bihar,
Orissa, and Madhya Pradesh.

Thus, considering all these foregoing aspects it can be observed that

in-spite of showing poor performance, the public sector is playing
dominant role in all-round development of the economy of the
country.

Q5) What role do small scale industries play in economy?

Ans) Small scale industries are important because it helps in increasing

employment and economic development of India. It improves the
growth of the country by increasing urban and rural growth. Role of
Small and medium scale enterprises are to help the government in
increasing infrastructures and manufacturing industries, reducing issues
like pollution, slums, poverty, and many development acts. Small scale
manufacturing industries and cottage industries play a very important
role in the economic development of India.
The following are some specific roles that SSIs play in the Indian
economy:
i- SSI Increases Production
India is one of the world’s fastest growing economies in the world.
Consequently, its production output is massive. It is pertinent to note
that SSIs contribute almost 40% of India’s gross industrial value.

These industries produce goods and services worth over Rs. 40 lakhs for
every investment of Rs. 10 lakhs. Furthermore, the value addition in this
output increases by over 10%.

ii- SSI Increases Export

Apart from producing more goods and services, SSIs have been able to
export them in large numbers as well.

Almost half of India’s total exports these days come from small-scale
businesses.

35% of the total exports account for direct exports by SSIs, while
indirect exports amount to 15%.

Even trading houses and merchants help SSIs export their goods and
services to foreign countries.

iii- SSI Improves Employment Rate

It is important to note firstly that Small Scale Industries employs more
people than all industries after agriculture.

Almost four persons can get full employment if Rs. 10 lakhs are
invested in fixed assets of small-scale sectors.
Furthermore, SSIs employ people in urban as well as rural areas.

Consequently, this distributes employment patterns in all parts of the

country and prevents unemployment crisis.

iv- SSI Open New Opportunities

Small-scale industries offer several advantages and opportunities for
investments.

For example, they receive many tax benefits and rebates from the
government. The opportunity to earn profits from SSIs are big due to
many reasons.

Firstly, SSIs are less capital intensive. They even receive financial
support and funding easily.

Secondly, procuring manpower and raw materials is also relatively

easier for them. Even the government’s export policies favour them
heavily.

v- SSI Advances Welfare

Apart from providing profitable opportunities, Small Scale Industries
play a large role in advancing welfare measures in the Indian economy
as well.

A large number of poor and marginalized sections of the population

depend on them for their sustenance.

These industries not only reduce poverty and income inequality but they
also raise standards of living of poor people. Furthermore, they enable
people to make a living with dignity.