Page 110 - DMGT401Business Environment

Unit 4: Political Environment

resource from exploitation. While doing business, enterprises have to abide by the law. Notes
This not only ensures healthy competition but it also gives companies a level playing
field. It is the law which protects the intellectual capital of an organization. Business
flourishes only in states which have is a healthy legal system.
3. Infrastructure Development: In developing nations the growth of infrastructure is
imperative and the government plays a critical role in this. It is said that take care of roads
and electricity and development and employment generation will take care of itself.
Well-established infrastructure is the basic requirement for the establishment and growth
of industry. In a developing nation where infrastructure is in a poor state, the government
has to take steps to develop the same, i.e. is construction of roads, development of railways,
supply of power, transport, finance sector, training and guidance, research and
development, etc.

Notes Since independence, the state in India has invested heavily on infrastructure. Now
under the new regime even the private sector is playing a critical role in developing
infrastructure. In the budget of 2005-06, provision of SPV (special purpose vehicle) has
been made for the development of infrastructure.

4. Human Resource Development: Today, it is not the raw material or geographical proximity
to the market which decides the location of a unit, but the availability of human resources
which now days play a decisive role in settling down on the location of any establishment.
Today, when research, new product development, economies of scale, low production
cost are the mantra to success, trained and skilled human resource have become the critical
success factors for every industry.
But in developing nations like India, the state plays a critical role in developing human
resources as at the time of independence, the private sector was not in a position to invest
in higher and technical education. Unlike developed nations, the masses of India were and
still are not in a position to afford higher technical education. This is the reason that the
state invested heavily in higher technical education established premier education like
IITs, IIMs, IVRIs, AIMS, BHU and other universities.

Notes Recently, Dr. Manmohan Singh, the Prime Minister of India announced an investment
of 100 crore in a university in Bangalore to develop it as research house in science. Not
only this, thanks to Nehru India retained English as a medium of instruction in education.
Because of these efforts of the State, India is justifiably proud of its human resources.
Today many businesses such as BPO, software, electronics, are flourishing in India because
of its human resources and India is becoming a manufacturing hub for mobile phones,
pharmaceuticals, fundamental research etc. Technical and knowledge Level of HR is also
a critical input for the industry and the State plays a vital role in influencing and deciding
this.
5. Entrepreneurial Role: The State also plays the role of an entrepreneur by investing in
business. The Govt. of India has been one of the biggest investors in business and indusrty
since Independence. Through its investment, the government considerably influences the
business environment. In India after independence the government reserved some
industries for only the Public Sector where the private sector cannot invest. But the
government has invested in other areas, which were not reserved for the private sector.
In a developing nation, investment by the government helps the private sector a lot.

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