Page 87 - DMGT401Business Environment

Business Environment

Notes In India, people still die of hunger, and commit suicides because of poverty. After fifty years,
this is the state of affaire not only in India but almost all the socialist countries like China, Cuba,
North Korea, etc. Today, these socialist and mixed economies have to accept the hard realities of
the world and have to yield to market forces. These countries have accepted the characteristics of
a capitalist economy in the last decade by promoting more and more private sector companies
and opening their boundaries to the world.
India has a slowly developed a multiple mechanism of dual prices, ceiling prices, floor prices,
subsidized prices, statutory prices, retention prices, procurement prices, levy prices, and free
market prices. In India, there is a complex system of liberal rules, strict regulations, control
mechanism, planning, and a host of price regulations.
During the 1980s, the Indian economy took a new direction, towards freedom and deregulation.
MRTP and FERA companies were allowed to expand and various export promotion incentives
were introduced. Liberalisation measures were supplemented by relaxation in price and
distribution controls and amendment in the MRTP Act. During this period, the government
took various steps to promote the private sector in various fields. Even the import policy was
liberalised. The new economic policy was announced in July 1991, which is of far reaching
importance. The Industrial Policy has five important features:
1. Industrial Licensing

2. Foreign Investment
3. MRTP
4. Public Sector
5. Foreign Technology Agreement

After liberalisation in 1991, the very face of Indian economy has changed. There is growth in
national and per capita income, new opportunities in employment have been generated in
telecom, software, call centers, biotechnology, pharmacy, tourism, education, etc. Today, the
economy is going through a transition phase, the share of service sector in GDP and employment
of India is steadily increasing.
Though is slight change in the growth rates of the 1980s and 1990s but there is a drastic sectoral
change.

Example: In 1952 agriculture had a 56.5% share in GDP and in 1988-99 it fell
to 29.2%.
Not only this, earlier we produced mostly substandard goods but today we produce goods of
international standards from automobile to GSLV (Geo Stationary Satellite Launch Vehicle).

There has been rapid growth in the production of petroleum products and infrastructure in the
last decade. India has also signed various bilateral and multilateral agreements with nations
like China, the ASEAN nations, Brazil, South Africa, Argentina, Venezuela, etc.
In the last decade a few Indian companies like IOC and Reliance have gained a place among the
Fortune 500 companies. While MNCs have spread their wings in India, Indian companies like
Infosys, TCS and Wipro have also spread out across the world as leaders in customised software.

Example: Ranbaxy, Cipla and Dr. Reddy's Lab have also acquired firms in the US and
Europe and are not only launching their products in these countries but also have manufacturing
facilities there.

80 LOVELY PROFESSIONAL UNIVERSITY