Business Environment for Students

8/14/2019 Business Environment for Students

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BUSINESS ENVIRONMENT:

Environment of a business means the external forces influencing the business decisions. They can beforces of economic, social, political and technological factors. These factors are outside the control ofthe business. The business can do little to change them.

TYPES:

6. INTERNAL ENVIRONMENT:

a. Managementb. Manpowerc. Machinesd. Materiale. Money

2. EXTERNAL ENVIRONMENT

A. MICRO ENVIRONMENT

B. MACRO ENVIRONMENT

A. MICRO ENVIRONMENT:

The branch of economics that analyzes the market behavior of individual consumers and firms in anattempt to understand the decision-making process of firms and households. It is concerned with theinteraction between individual buyers and sellers and the factors that influence the choices made bybuyers and sellers.

FACTORS AFFECTING MICRO ENVIRONMENT:

1 ECONOMIC CONDITIONS: Economic condition is the set of economic factors that have great influenceon business organization. Those economic factors are:-

A. GROSS DOMESTIC PRODUCT (GDP): GDP or Gross Domestic Product is a measure ofadding together the total value the overall production of goods & services within a countryin a year. The GDP shows how well a particular country is doing economically.

GDP can also be measured by income by considering the factors producing the output thecapital and labour or by expenditure by government, individuals, and business on that output.

GDP growth rate: The change in GDP from one year to the next (or from quarter to quarter)can be given as a percentage. This is called the GDP growth rate.

Formula for calculating GDP = C+G+I+NX

C = All private consumptions.G = All Govt. spending.

I = Investments.NX = Countrys Net Exports (total exports total imports)

B. PER CAPITA INCOME: Per capita Income means how much an individual earns, of the yearlyincome that is generated in the country through productive activities. It means the share ofeach individual when the income from the productive activities is divided equally among thecitizens. Per capita income is reported in units of currency. Per capita income reflects thegross national product of a country. Per capita income is also a measure of the wealth of apopulation of a nation when compared with other countries. It is expressed in terms of


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commonly used international currency such as Euro, Dollars because these currencies arewidely known.

PER CAPITA INCOME IN INDIA:

India's per capita income is found by the Atlas method and by employing official exchange ratesfor conversion. Further, this Atlas method of calculating the per capita income of India is not

determined by using purchasing power parity, which essentially adjusts exchange rates forpurchasing power of currencies.

Economist have been giving considerable importance to the performance of states vis a vis eachother in terms of per capita income. It has been observed that those states that were more openand better adapted to economic liberalization have overall shown faster rate of growth.

History of India Per Capita GDP:

In 2002-03 the Per Capita Income in India was Rs 19040.In 2003-04 the Per Capita Income in India was Rs 20989.In 2004-05 the Per Capita Income in India was Rs 23241.In 2008-09 the Per Capita Income in India was Rs 37490.

C. FOREIGN EXCHANGE RESERVES:

DefinitionTotal of a country's gold holdings and convertible foreign currencies held in its banks, plusspecial drawing rights (SDR) and exchange reserve balances with the International Monetary Fund(IMF).

Liquid assets held by a central bank or government of a country, for use in intervening in theforeign exchange market.

Deposits of a foreign currency held by a central bank. Holding the currencies of other countriesas assets allow governments to keep their currencies stable and reduce the effect of economicshocks.

This includes gold or convertible foreign currencies, e.g. US Dollars for countries other than the

United States, and DM for countries other than Germany. This also includes governmentsecurities issued in the above currencies.

D. MEANING AND SCOPE OF FOREIGN TRADE:

Trade between two or more nations is called foreign trade or international trade. This involvesthe exchange of goods and services between the citizens of two nations. When the citizens ofone nation exchange goods and services with the citizens of another nation, it is called foreigntrade; for example, India's trade with USA, Japan, France and Pakistan. Foreign trade is alsoknown as external trade.Foreign trade transactions are classified under three categories:

Import Trade Export Trade

Entrepot Trade.

What is Entrepot trade?An entrept (from the French "warehouse") is a trading post where merchandise can be importedand exported without paying import duties, often at a profit.

SCOPE OF FOREIGN TRADE:


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The aim of foreign trade is to increase production and to raise the standard of living of thepeople. Foreign trade helps citizens of one nation to consume and enjoy the possession of goodsproduced in some other nation. There is a need of foreign trade due to the following reasons:

a) Uneven Distribution of Natural Resources: Natural resources of the world are not evenlydivided amongst the nations of the world. Different countries of the world have different

amount of natural resources and they differ with each other in regard to climate, mineralsand other factors. Some countries can produce more of sugar like Cuba, some can producemore of cotton like Egypt, while there are some others which can produce more of wheatlike Argentina. But all these countries need sugar, cotton and wheat. So they have to dependupon one another for the exchange of their surpluses with the goods are in short in theircountry and hence the need for foreign trade is natural.

b) Division of Labour and Specialization: Due to uneven distribution of natural resources,some countries are more suitable placed to produce some goods more economically thanother countries. But they are geographically at a disadvantageous position to produce othergoods. They specialize in the production of such goods in which they have some naturaladvantage in the form of availability of raw material, labour, technical know-how, climaticconditions, etc., and get other goods in exchange for these goods from other countries.

c) Differences in Economic Growth Rate: There are many differences in the economic growthrates of different countries. Some countries are developed, some are developing, whilethere are some other countries which are under-developed; these underdeveloped anddeveloping countries have to depend upon developed ones for financial help, whichultimately encourages foreign trade.

d) Theory of Comparative Cost: According to the theory of comparative cost each countryshould concentrate on the production of those goods for which it is best suited, taking intoaccount its natural resources, climate, labour supply, technical know-how and the level ofdevelopment. Each country specializes in the production of those goods which it can produceat the lowest cost as compared to other countries which leads to international specializationand division of labour. This reduces the cost of production all over the world and improvesthe standard of living of the people in various countries. Hence the theory of comparativecost encourages foreign trade.

E. CAPITAL MARKET

Definition:Financial market that works as a center for demand and supply of (primarily) long-term debtand equity capital. It channels the money provided by savers and depository institutions(banks, credit unions, insurance companies, etc.) to borrowers and investors through avariety of financial instruments (bonds, notes, stocks) called securities. A capital market isnot a compact unit, but a highly decentralized system made up of three major parts: (1)stock market, (2) bond market, and (3) money market. It also works as an exchange fortrading existing claims on capital in the form of shares.

Types of capital market

Primary Market: Deals in newly launched shares in the market. Secondary Market: Deals in existing shares in the market.

The market for long-term funds where securities such as common stock, preferred stock, andbonds are traded. Both the primary market for new issues and the secondary market forexisting securities are part of the capital market.

2 ECONOMIC POLICIES:


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All business activities and operations are directly influenced by the economic policies framed by thegovernment from time to time. The actions taken by a government to influence its economy is calledEconomic Policies.

TYPES OF POLICIES:

A. INDUSTRIAL POLICY:

Industrial Policies are the traditional government policies intended to provide a favorableeconomic climate for the development of industry in general or specific industrial sectors.

Government-sponsored economic program in which the public and private sectors coordinatetheir efforts to develop new technologies and industries.

Definition:All the principles, policies, rules, regulations and procedures of the government whichdirect & control the industrial enterprises are called the Industrial Policies.

B. FISCAL POLICY :

The government's decisions about the amount of money it spends and collects in taxes toachieve full employment.

Definition:Fiscal policy involves the Government changing the levels of Taxation and Govt. Spending inorder to influence Aggregate Demand (AD) and therefore the level of economic activity.

The purpose of Fiscal Policy:

Reduce the rate of inflation

Stimulate economic growth in a period of a recession Basically, fiscal policy aims to stabilize economic growth, avoiding the boom

C. MONETARY POLICY :

The strategy of influencing movements of the money supply and interest rates to affect outputand inflation. Aim of this policy is to smooth the supply of credits to the business to boosts Trade& Industry in India.

TYPES OF MONETARY POLICY:

1). Tight Monetary Policy: Is also called concretionary monetary policy, tends to curb inflationby contracting the money supply.

2). Easy Monetary Policy: Is also called expansionary monetary policy, tends to encouragegrowth by expanding the money supply.

D. FOREIGN INVESTMENT POLICY :

This policy regulates the inflow of foreign investments in various industrial sectors of thecountry. The present policy permits foreign investors to collaborate with localpartners as well asestablish wholly owned subsidiaries. Indias present foreign investment policy facilitates easyentry of foreign capital in most areas subject to specific limits on extent of foreign ownership.

Indias foreign investment policy has progressed in spite of political opposition and lobbyistpressures. This is primarily due to favorable dispositions of key decision-makers towards foreigninvestment.


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E). EXPORT & IMPORT POLICY (EXIM Policy):

EXIM Policy in India aims to increase or maximize the exports and reducing the imports and tobridge a gap between Exports and Imports.

No country wants that its imports exceeds its export because more imports means more funds

going out of country which will have an adverse effect on the economy of that country.

3. ECONOMIC SYSTEM:

WORLD ECONOMY IS DIVIDED INTO THREE TYPES:

Capitalist Economy : Also called as the free market economy. Its an economicactivity, where the means of production are privately owned. Here in such form ofeconomy there is no Government interference.

Socialist Economy: In case of a socialist economy, the means of production anddistribution are made by the public authority or the Government. It aims at achieving abetter distribution of income and wealth.

Mixed Economy: Mixed Economy can be defined as a form of organizationwhere the elements of both capitalist economy and socialist economy are found. Thiseconomy is adopted by India where there is Existence of both Public and Private sectorsworking together.

MACRO ENVIRONMENT

Major external and uncontrollable factors that influence an organization's decision making, and affect itsperformance and strategies.

Factors that influence a company's or product's development but that are outside of the company'scontrol. For example, the macro environment could include competitors, changes in interest rates,changes in cultural tastes, or government regulations.

THERE ARE SIX MAJOR MACRO ENVIRONMENT FORCES:

1). Cultural/Social Environment

2). Demographic Environment

3). Economic Environment

4). Natural Environment

5). Political Environment

6). Technological Environment

1). CULTURAL/SOCIAL ENVIRONMENT:

The cultural/Social environment includes institutions and other forces that affect the basic values,behaviors, and preferences of the society-all of which have an effect on consumers marketing decisions.

Along with "economics", "culture" is another so called "environmental uncontrollable" which marketersmust consider. In fact, it is a very important one as it is so easy to misread a situation and take decisionswhich subsequently can prove disastrous.

FACTORS:


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a) Customsb) Traditionsc) Valuesd) Beliefse) Poverty f) Literacy

2). DEMOGRAPHIC ENVIRONMENT:

It includes the study of human populations in terms of size, density, location, age, sex, race, occupation,and other statistical information.

The main demographic force that marketers monitor is population, because people make up markets.Marketers are keenly interested in the size and growth rate of population in cities, regions; and nations;age distribution; educational levels; household patterns; and regional characteristics and movements.

3). ECONOMIC ENVIRONMENT:

The economic environment affects the demand structure of any industry/ product. In order to assess the

impact of these forces, it is necessary that a marketer examines the following factors in a greater detail:

A. Gross National Product: The Gross National Product (GNP) is the total monetary value of allfinal goods and services produced for consumption in society during a particular time period.

Its rise or fall measures economic activity based on the labor and production output within acountry. The GNP growth rate is one of the most important ECONOMIC INDICATORS of a countryshealth.

B. Balance of Payments: The balance of payments (BOP) is the method countries use to monitorall international monetary transactions at a specific period of time. Usually, the BOP iscalculated every quarter and every calendar year.

Categories of BOP:

Current Account: The current account is used to mark the inflow andoutflow of goods and services into a country.

Capital Account It is where all international capital transfers arerecorded. This refers to the acquisition or disposal of non-financial assets (suchas land) and non-produced assets, which are needed for production but havenot been produced, like a mine used for the extraction of diamonds.

Financial Account: In the financial account, international monetaryflows related to investment in business, real estate, bonds and stocks aredocumented.

C. Industry Life Cycle: A concept relating to the different stages an industry will go through,

from the first product entry to its eventual decline.

The four stages that make up the industry life-cycle are:

1. INTRODUCTION

2. GROWTH

3. MATURITY


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4. DECLINE

D. Trends in the prices of goods and services:

1. Inflationary trends: Inflationary trends is basically the constant andsubstantial rise in general levels of prices in relation to an increase in the volume ofwages and resulting in the loss of value of the currency.

2. Deflationary trends : The term refers to a fall in prices (despite no change inproduct quality or quantity) and is the opposite of inflation. But like inflation,deflation can have a devastating impact on individual pocketbooks and the broadereconomy.

E. Fiscal Policies: A government policy for dealing with the budget (especially with taxation andborrowing.)

fiscal policy -- The government's choice of tax and spending programs, which influencesthe amount and maturity of government debt as well as the level, composition, anddistribution of national output and income. Many summary indicators of fiscal policyexist. Some, such as the budget surplus or deficit, are narrowly budgetary. Othersattempt to reflect aspects of how fiscal policy affects the economy. For example, adecrease in the standardized-budget surplus (or increase in the standardized-budgetdeficit) measures the short-term stimulus of demand that results from higher spendingor lower taxes. The fiscal gap measures whether current fiscal policy implies a budgetthat is close enough to balance to be sustainable over the long term. The fiscal gaprepresents the amount by which taxes would have to be raised, or spending cut, to keepthe ratio of debt to GDP from rising forever. Other important measures of fiscal policyinclude the ratios of total taxes and total spending to GDP.

Another definition...

The government's decisions about the amount of money it spends and collects in taxesto achieve full employment and non-inflationary economy.

Definition:Fiscal policy involves the Government changing the levels of Taxation and Govt.Spending in order to influence Aggregate Demand (AD) and therefore the level ofeconomic activity.

The purpose of Fiscal Policy:

Reduce the rate of inflation, (UK government has a target of 2%)

Stimulate economic growth in a period of a recession.

Basically, fiscal policy aims to stabilise economic growth, avoiding the boom and

bust economic cycle.

4). NATURAL ENVIRONMENT:

Natural Environment involves all the natural resources, such as raw materials or energysources, needed by or affected by marketers and marketing activities.


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Natural environments are those environments on Earth that includes nature, and is notprimarily or solely human creation.

It exists in contrast to the phrase, the built environment.

The difficulty with the term natural environment and any definition is that all naturalenvironments have been directly or indirectly influenced by humans at some period in time.

5). POLITICAL ENVIRONMENT:

It includes:-

>> All laws

>> Government agencies

>> Nations governmental system

>> Level of political stability and

>> Recent political developments that influence or restrict individuals or organizationsin the society.

It comprises political stability and the policies of the government. Ideological inclination of politicalparties, personal interest on politicians, influence of party forums etc. create political environment. Forexample, Bangalore established itself as the most important IT centre of India mainly because of politicalsupport.

6). TECHNOLOGICAL ENVIRONMENT:

It includes the level of technology available in a country. It also indicates the pace of research anddevelopment and progress made in introducing modern technology in production.

Technology provides capital intensive but cost effective alternative to traditional labor intensivemethods. In a competitive business environment technology is the key to development.

The success of many organizations depends on how well they identify and respond to externaltechnological changes.

POSITIVE EFFECTS OF TECHNOLOGICAL ENVIRONMENT:

>> Increase productivity.

>> Production of new & better goods of standardized quality

>> Effective use of countrys resources

>> Basis of fast growth of the business.

BUSINESS RISK:


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Probability or threat of a damage, injury, liability, loss, or other negative occurrence, caused by externalor internal vulnerabilities, and which may be neutralized through pre-mediated action.

RISK ASSESSMENT: As a component of risk analysis, it involves identification, evaluation, andestimation of the levels of risks involved in a situation, their comparison against benchmarks orstandards, and determination of an acceptable level of risk.

TYPES OF BUSINESS RISK:

1. Country Risk.

2. Political Risk.

3. Legal Risk.

4. Regulatory Risk. (Regulatory design)

5. Social Risk.

6. Natural Risk

COUNTRY RISK

The potential volatility of foreign stocks or the potential default of foreign government bonds, due topolitical and/or financial events in the given country.

What Does Country Risk Mean?

A collection of risks associated with investing in a foreign country. These risks include political risk,exchange rate risk, economic risk, sovereign risk and transfer risk, which is the risk of capital beinglocked up or frozen by government action. Country risk varies from one country to the next. Somecountries have high enough risk to discourage much foreign investment.

Country risk can reduce the expected return on an investment and must be taken into considerationwhenever investing abroad. Some country risk does not have an effective hedge. Other risk, such asexchange rate risk, can be protected against with a marginal loss of profit potential.

POLITICAL RISK

The risk of loss when investing in a given country caused by changes in a country's political structure orpolicies, such as tax laws, tariffs,

The analysis considers four familiar variables or indicators that typically form the basis of macro-level political risk assessment:

War and external threats, including conflicts over issues of sovereignty and border disputes

Civil and labour unrest, including strikes, protests and demonstrations against thegovernment


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Internal violence, as evidenced by bombings, assassinations, kidnappings etc.

Regime stability based on the probability of a change in leadership through either a regularlyscheduled election.

METHODS OF HANDLING BUSINESS RISKS

Risks in any business are inevitable and they cannot be eliminated completely. But an entrepreneur cancontrol and minimise their negative consequences by adopting a suitable risk management strategy.

VARIOUS METHODS THAT MAY BE USED FOR HANDLING BUSINESS RISKS ARE AS FOLLOWS:-

An entrepreneur can avoid some of the risks by analysing the potential results (losses orgains) of the activity that gives rise to those risks.

The risk is worth taking if the outcome ultimately benefits the firm. Otherwise, such anaction should be avoided as far as possible.

The risk may be avoided by substituting the risky process with a relatively safer alternative.

If the risk is unavoidable, try to control and minimise the losses arising from the risk.

THE MAIN TECHNIQUES THAT CAN BE EMPLOYED BY A FIRM ARE AS FOLLOWS:-

Scientific forecasting Marketing research of future economic conditions Make appropriate plans in advance Aware of likely opportunities and threats to the business Continuous technological research and development Develop new products before the present products become obsolete. Credit screening of the customers Prompt collection of the outstanding debts

Tight inventory control

VARIOUS SAFETY PROGRAMMES LIKE:-

Fire fighting equipment and sprinkler system will help in preventing the losses caused byfire

Burglar alarms, night watchman, and safety vaults will help in reducing thefts, burglaryetc.

Cold storage or refrigeration will help in preservation of perishable products of the firmand thus reduce the damages caused to the products

Special packing will help in reducing any spoilage, breakage or leakage of the goods intransit or storage

Proper pest control methods will also help in reducing the damages caused to the

products Safe work environment including adequate lighting, covering of damaged floors as wellas proper medical care facilities will help in reducing the number of accidents in thefactory.

Risk of competition can be reduced through collective action by the competing firmswhich may agree to restrict output, allocate markets or charge uniform prices.

Proper Government action through appropriate policies and regulations canalso help in stabilising the economic environment and thus reducing thebusiness risks.


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An entrepreneur must assume the possibility of certain risks which are inherent in any form of businessorganisation. Such risks can be handled through proper planning and adopting two possible strategies.These are:-

Shifting the risks to the people who are skilled in managing them and are willing to bear them. The risksmay be transferred or shifted through:-

HEDGING:-

It is a method of risk transfer accomplished by buying and selling for future delivery. It is a form offorward trading to minimise losses due to changes in prices. Under it, the possibility of loss which occursbecause of price fluctuations is shifted during the time gap between purchase and sale of a commodity. Itinvolves entering simultaneously into two contracts of an opposite though corresponding nature, one inthe spot or cash market and the other in the future market. The purpose of hedging is to protect thetrade profit from adverse fluctuations in commodity prices.

UNDERWRITING: -

A public company issuing shares and debentures may face the risk of loss due to the failure to sell theentire issue of securities. Such risk can be shifted to an underwriter which is the financial intermediarybetween the company issuing securities and the ultimate investors. It provides several benefits to acompany:-

It relieves the company of the risk and uncertainty of marketing the securities. Underwriters have an intimate and specialised knowledge of the capital market. They offer

valuable advice to the issuing company in the preparation of the prospectus, time offloatation and the price of securities.

It helps in financing of new enterprises and in the expansion of the existing projects. It builds up investors' confidence in the issue of securities. The association of well-known

underwriters lends prestige to the company and the investors feel that the issue is soundenough for profitable investment.

It facilitates the geographical dispersal of securities because generally, the underwritersmaintain contacts with investors throughout the country.

Sharing the risks with other people so as to minimise the burden on the firm. Generallypooling of the investment of a large number of persons into the organisations.

ENVIRONMENTAL SCANNING/ANALYSIS: It is a process by which managers monitors the economic,governmental, technological, legal, social and cultural factors to determine the threats to theorganization and the opportunities available to the organization.

Environmental Scanning or Analysis is important in evaluating the present strategy, setting strategicobjectives and formulating future strategies.

Mismatch between organization and its environment is the major cause of corporate decline.Companies must be sensitive towards environment factors which help them to change in advanceregarding the change required by the organization from time to time.

SWOT ANALYSIS:

S = StrengthW = WeaknessO = OpportunitiesT = Threats

Definition of SWOT:

Opportunity and threats are the external to the organization whose internal Strength and Weakness aredecisive factors whether or not environment can be properly managed or not. With Strengths, an


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organization can seize the opportunities and capitalize on it, and because of its weakness, it becomes thevictim of threat in the environment

FEATURES OF ENVIRONMENTAL SCANNING:

Continuous Process

Exploratory Process: Choosing the alternatives available for future.

Holistic Exercise: Organization must scan the whole environment in order to minimize the chance

of surprise and maximize its utilities as an early warning system.

FACTORS AFFECTING THE ENVIRONMENTAL SCANNING:

Age

Educational Level

Social values

Cultural values

Ability to face challenges

Ability to cope up with stress Ability to motivate people

USES/SIGNIFICANCE/UTILITY/BENEFIT OF ENVIRONMENTAL SCANNING:

To know the socio-economic changes at the national and international levels.

To make the strategies and long-term policies for organization.

To know the competitors business strategies.

To understand the transformation of the industry environment.

To anticipate the present and future opportunities and threats.

To develop action plans to deal the technological changes.

To become dynamic for the organizational environment.

APPROACHES OF ENVIRONMENTAL SCANNING:

Approaches mean gathering, collecting or intake of essential information which are required forEnvironmental Scanning. These Approaches are:-

1. Systematic Approach:

Under this those information for environment scanning are collected which have a direct impacton an organizations activities such as:

Change in regulations

Markets

Customers

Govt. policies.

Information regarding these should be collected regular basis to monitor changes and to takecorrective actions in time.

2. Adhoc Approach:


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Under this approach information for environmental scanning are not collected regularly butorganization do special surveys or studies or investigations for some special projects at the timeof requirement to identify the unforeseen developments and changes in the economicenvironment.

3. Processed-Form Approach:

Information is collected through primary or secondary sources:

Primary Sources: Direct from Govt. Secondary Sources: Newspapers, magazines, periodicals etc.

SOURCES OF INFORMATION FOR ENVIRONMENTAL SCANNING:

1. Verbal Information:

It is very useful for the higher level of managers. They discuss the information with variousgroups of people outside the organization to know about their general feelings for environment.E.g.

Attending Management Conferences

Audio-Visual media

Conversation with customers

Suppliers

Stock Brokers

Govt. employees

Consultants

2. Written or Documentary or Secondary Information:

That information which comes only in written form and available through published sources. E.g.

Newspapers

Journals

Annual reports

Industry newsletters

Govt. publications.

3. Internal Sources:

It includes companys own files and documents of previous years, company employees and

management information system (MIS).

4. External Sources:

Information collected through various publications, outside agencies, suppliers, trade associations

etc.

5. Industrial spying and surveillance:


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Information through spying is required when one company wants to collect information of its

competitor companies to know the secrets of their operations. This can be done by contacting

customers of competitors, dealers, employees etc.

6. Formal studies:

This type of collecting information is done by employees, consultants, market research agencies etc.

through different sources like:

Newspapers & periodicals

Institutional publications

Govt. publications

International sources, like:

Overseas Business Reports

World Economic Surveys

Statistical Year Book etc.

STEPS IN ENVIRONMENTAL SCANNING:

Environmental scanning is a process and includes some specific steps. Those steps are:

I. Preparing groundwork for scanning: Organization try to understand why the changes are taking place

in the economy and for that, organization look into the past records and come to the conclusion purely

on the basis of historical data.

II. Estimating future business: On the basis of past records the future business is projected but theorganization just use these projections as guidelines and not the absolute truth.

III. Comparing actual with projected results: At the time of actual changes, organization compares theactual impact of those changes with its projected results to identify any deviation. And if there is anydeviation then organization can take the corrective actions as soon as possible.

IV. Refining the scanning/forecasting process: As the scanning/forecasting is a continuous process, ifcompany lacks in doing an effective scanning, then next time it will try to scan the environment inmore effective way to minimize deviations.

TYPES OF ANALYSIS/FORECAST:

1. Economic Forecast:

To analysis:

Economic conditions Consumer price index Productivity


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Personal income and wages Sales Market Share Investments and outputs Balance of Payments

2. Social Forecast

Analyzing the trend of:

Population Social security and welfare Education and training Wealth and expenditures

3. Political Forecast:

Analyzing factors like:

Size of government budgets Tariffs Tax rates Defence Expenditures Govt. Planning Growth of regulatory bodies

4. Technological Forecast:

Analyzing the purpose of investment in:

Nuclear energy projects Satellite projects Communication devices

Electric cars Computer development projects


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ECONOMIC REFORM IN INDIA

The fundamental objective of economic reforms is to bring about rapid and sustained improvement in thequality of the people of India.

Central to this goal is the rapid growth in incomes and productive employment The only durable solution

to the curse of poverty is sustained growth of incomes and employment.

Such growth requires investment:

in farms

in roads

in irrigation

in industry

in power

in people

And this investment must be productive. Successful and sustained development depends on continuing

increases in the productivity of our capital, our land and our labour.

NEED/OBJECTIVES OF ECONOMIC REFORM:

1 Due to Increase in fiscal deficit.

2 Due to increase in adverse Balance of Payment

3 Due to fall in foreign exchange reserves

4 Due to rise in prices

5 Due to poor performance of public sector undertakings

PHASES OF ECONOMIC REFORMS:

1 FIRST PHASE:

This phase was introduced in 1985 by the then Prime Minister of India Rajiv Gandhi. Indian Economy wasin a very worst condition at that time.

He felt the need to:


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Remove control

Invite private sectors

Improve productivity

Adopt modern technologies

Full utilization of capacity/resources of India

FOLLOWING ACTIONS WERE TAKEN BY HIS GOVT.:

A. Cement: Industry was totally decontrolled and private sectors units were issued thelicense.

B. Sugar: Share of free sale of sugar in open market was widen.

C. Asset Limit: Ceiling of assets limit was increased from 20 crores to 100 crores.

D. Drugs: 94 drugs were completely delicensed and 27 industries were freed from MRTPAct.

E. Electronic: Industry was freed from MRTP Act. Foreign companies were allowed to enterin India.

F. Foreign Trade: EXIM policy was introduced which makes import export easier for theorganizations,

G. LTFP: Long-Term Fiscal Policy was introduced which helps in increasing the Govt.revenues.

2. SECOND PHASE:

First phase did not give the expected results. Nothing was going right for India as foreign companies werehesitating to invest in India. Not much increase in Industrial sectors and its development was very slow.

Deficit balance of trade increases from 5930 crores to 10,840 crores. India comes under the burden ofhuge loan and to get rid if this deficit India took the help of International Monetary Funds (IMF) whoinstructed India to seriously focus on the economic development.

On June, 1991 once again Congress Govt. comes into force and the then Finance Minister, ManmohanSingh immediately introduced the Second Phase of Economic Reform of India.

At that time Manmohan Singh realizes the need of:

Mega-Industrialization through Open Door policy

Monetary policy was tightened by increasing the interest rates

Focus to improve the exchange rate of rupee

Liberalization of Trade Policies

Effort to increase the efficiency and International competitiveness of Industrial production.

To utilize foreign investments and technologies

To improve performance of Public sectors

Modernizing the financial sectors


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OBJECTIVES OF SECOND ECONOMIC REFORM:

1. Increase the economic growth

2. Reducing the rate of Inflation

3. Increasing the Foreign Exchange Reserves

4. Reducing the Fiscal Deficits

5. Political Reforms for Good Governance

6. Re-engineering the Role of the government

7. Agricultural Sector Reforms

8. Industrial Restructuring

FEATURES OF ECONOMIC REFORMS:

LIBERALIZATION:

It means to free the economy from the direct control of the Govt. before the year 1991, Govt. hadimposed its control on the majority of the Indian Economy like:

Industrial Licensing System

Price Control

Financial control on goods

Import License

Foreign Exchange control

Restrictions on heavy Investments

After the year 1991, the decision was made to lift up the control of Govt. In order to liberalize the

economy for the purpose of increasing the growth rate of Indian Economy and to be capable to compete

with world economy.

MEASURES TAKEN FOR LIBERALISATION:

1. Abolition of Industrial Licensing and Registration:

Economic Reforms

LiberalizationLiberalization PrivatisationPrivatisation GlobalizationGlobalization


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Till now the industrial sector including both public and private industries were functioning under arigid licensing system. But now it was the time to give the industrial policy more relaxations.Industrial licensing was abolished for the almost whole industrial sector except the followingindustries:

Liquor

Cigarette

Defense Equipments

Drugs

Industrial Explosives

Dangerous chemicals

2. Concession from Monopolies Act:

At the time of economic reform, the companies having assets more than 100 crores were put under

MRTP Act and were facing many restrictions imposed by the Govt. but at the time of Liberalisation all

those companies were freed from MRTP Act. Now those companies were free to expand their business

and investment limit restrictions were also abolished. Now there was no restriction on the setting up

new industries or expansion of industries or taking over and amalgamations.

3. Freedom for Expansion and Production to Industries:

Under this the companies are not required to take official approval by the Govt. for expansion and

production of the business.

Govt. gave the following freedoms:

Maximum limit of the production capacity policy was removed to provide the

industries in India to take full advantage of large-scale production. Producers are free to produce anything on the basis of market demands.

4. Increase in the Investment limit of small industries: Investment limits for small scale industries was

raised to 1 crore for the purpose of adopting the modern technologies.

5. Freedom to Import capital goods: After liberalization Indian Industries were freed to buy

modernized machineries and raw material from abroad in order to expand their operations of

business.

6. Freedom to Import Technology: Objective of this new economic policy was to develop the fast

growing companies like computers and electronics. Govt. allowed those industries to import high

technologies from abroad.


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7. Free determination of Interest Rates: Reserve Bank of India was not going to control the interest

rates of the banking system in India now. This authority was given to all the banks in India that they

can increase or decrease the interest rates of borrowings and deposits.

8. Action plan for Information Technology and Software Development: Information technology and

software development industry submitted 108 points action plan to Indian Govt. which got the

recommendation and got approved by the Indian Govt. and orders were issued for the

implementation in India at the earliest.

Capital market objectives of liberalisation:

SEBIs capital market objectives :

To promote, develop, and regulate the securities market by such measures as it thinks fit

Pre-budget Economic Survey (93), Ministry of Finance:The corporate sector will have to be encouraged to raise resources increasingly from themarket

Stock market performance since liberalisation:

Interestingly, though Indian capital markets have not become more important as a primarysource of funds for the private sector, over the same period the stock markets have experiencedmuch more volume of trading.

At the end of 2004, BSE and NSE combined was the 14th largest stock market in the world (interms of total market capitalisation), significantly ahead of China (15th).

Banks and financial institutions as a financing source:

The banking sector in India has grown steadily in size (total deposits) at a fairly uniform annualrate of 18% since the 1980s.

With deposits of over $385 billion dollars in 2003, the sector accounted for 75% of the countrysfinancial assets.

On the other hand, the proportion of funds provided by banks and financial institutions actuallydeclined for private sector companies over 1993 2002.

PRIVATISATION

Privatization means allowing the private sector to set upmore and more industries that were previously reservedonly for public sector.

Under this economy policy many of the existing enterprisesof public sector are either wholly or partially sold to privatesector.


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Definition:

Privatisation is the general process of involving the private sectors in the ownership or operation of thestate owned enterprises.

NEED FOR PRIVATISATION:

Inefficiency of the public sectors.Most of the public sectors enterprises were making losses.Managers were not free to take the decisions regarding business. Biasness of ministers in taking the business decisions. Production capacity remained under utilized. To compete with the other economies in the world. To enhance the quality of production. To provide maximum benefits to the consumers.

KINDS OF PRIVATISATION:

There are mainly three types of privatizations such as:

1 Change in Ownership: It means handling over the control wholly or partially into others hand. This

can be of four forms:

Total Nationalisation: Under this 100% ownership of the business is transferred to theprivate sectors.

Joint Venture: It means when partial transfer ofownership of the business is made by the publicsector to private sector.

Liquidation: In this the assets of the public sector enterprise is sold to other person whomay use them for the same purpose or some other purpose depending upon the choiceand taste of the buyers in the market.

Workers Co-operatives: Its a kind of denationalization in which ownership istransferred to its employees or workers who may form a co-operative to run the

business. Special provision is made for the bank loans for the workers to buy the sharesof the enterprise.

2 Organizational Measures: Under this there are various measures to limit the state control of thebusiness run by the public sector such as:


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Holding Company Structure: Under this type of privatization the Govt. retains or keepsthe control for taking the top level decisions and rest of the decision regarding thebusiness operations are given to the private sector.

Leasing: In this the Govt. trasfers the rights to use the assets of the organization to theprivate sectors but for some fixed period of time. After that particular period the

ownership again comes to public sector.

Restructuring: It is of two types:I. Financial Restructuring: In this the accumulated losses are written off.

II. Basic Restructuring: In this some activities of Govt. enterprises are distributed tosmall scale industries.

3 Operational Measures: It involves the increasing the efficiency in the operations of thepublic enterprises. Keeping this in mind the areas which were reserved for the public sector nowwere opened for the private sectors to achieve the high level of efficiency and productivity.

CAUSES OF PRIVATISATION:

Public sector was facing many shortcomings due to inefficient economic and political structure of thecountry which makes the implementation of privatization must for its survival.

1 Disintegration of Socialist Economy: Due to lack of decision making power or ability onthe part of management and excessive political interference, public sector becomes inefficient andproved to be the single only factor responsible for the failure of the economy.

2 Inefficient Public Sector: Privatisation becomes the need for the country due to:

Organizers dont have the authority to take decisions. Most decision was taken by the ministers. Decisions were political motivated. Long delays in making decisions. Production capacity not fully utilized.

3. Uneconomic Pricing Policy: Under this prices are not determined on the basis of economicprinciples for the public utility services like electricity, irrigation, transport, water etc. politicianskeeps the prices low for the political advantages which result in huge losses as the prices chargedkept less even than the actual cost of production.

4. Burden on the Government: In this losses made by the public enterprises due to charging prices less

than the cost are bear by the Govt. through its revenues collected from the public in the form oftaxes. Govt. faces the shortfall of funds due to which Govt. was not able to undertake the projectswhich would help in the countrys development. On the other hand inefficiency and production wasfalling. Quality of production becoming worst and ultimately the sufferers were the consumers.

OBJECTIVES OF PRIVATISATION:

To increase efficiency To increase competitive power To reduce fiscal deficit


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To strengthen the industrial development To earn more and more foreign currency To make the full utilization of the economic resources To achieve rapid industrial development

ADVANTAGES OF PRIVATISATION:

Reduction in Economic Burden. Increase in efficiency. Reduction in sense of irresponsibility. Scientific management due to privatization, management of industries has

become more scientific conscious and responsive to need. Reduction in political interference. Encouragement in new inventions.

MEASURES ADOPTED FOR PRIVATIZATION:

I. Contraction of Public Sector except:

a. Atomic Energyb. Defense Equipments

c. Mining of Atomic Mineralsd. Railway Transport

II. Disinvestment in existing Public Sector industries.

III. Sale of shares of Public sector enterprises.

IV. Increase in Private sector investments.

V. Conversion of loans into shares is now not necessary.

VI. Sick industries Efforts to make them strong.

VII. Memorandum of Understanding (MoU) This was introduced to improve the working ofexisting public enterprises and will be accountable for results.

GLOBALIZATION

It means the expansion of business into other countries. In this, the economy of one country integrateswith the economy of other country under the condition of unrestricted free flow of the trade of goods andservices, technology, capital, and movement of persons across the borders.

Definition:

Globalisation may be defined as a process associated with increasing openness, growingeconomic independence and deepening economic integration in the world economy.

PARAMETER OF GLOBALISATION:

(i) Reduction of trade barriers for free flow of goods and services across border.

(ii) Creating environment for free flow of capital.

(iii) Creating environment for free flow of technology.

(iv) Creating environment for free movement of labour in different countries.

FEATURES OF GLOBALISATION:


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Business expands throughout the world.

Goods and services are bought and sold from/to any country in the world.

Difference between domestic and foreign markets comes to an end.

Production are planned and developed according to the target market of whole world. Manufacturing of goods can be made in any part of the world and distribution of those can

be made in entire world.

Outsourcing of goods and services can be done.

SOURCES OF GLOBALISATION:

(i) Technological Advancements.

(ii) Trade Liberalisation.

(iii) Organizations having wider reach.

(iv) Global Agreements.

(v) Cultural Developments.

PROCESS OF GLOBALISATION:

Globalisation is a process which happens slowly and gradually. It does not take place at once. Normallycompany has to follow a certain process to be a part of the global market. There are five stages throughwhich an organization can make its place in global market.STAGE I : Domestic Company exports to foreign country through the dealers and distributors of the

home country.

STAGE II : Domestic Company now exports its goods and services to foreign country directly on itsown.

STAGE III : Domestic Company establishes its production and marketing operations in variouspotential countries and becomes an international level company (MNC).

STAGE IV : The Company replicate (becomes almost same) as a foreign company in the foreigncountry by having all facilities like R&D, full-fledged human resource etc.

STAGE V : The Company becomes a true foreign company as it starts to serve the needs of foreigncustomers just like the host countrys company.

ESSENTIAL CONDITIONS FOR GLABALISATION:

There are few essential conditions which should be provided by the host countrys government for makingthe Globalisation successful. They are as follows:

All the tariffs should be removed.

Freedom should be given to the business and industries.


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Complete freedom to be provided to public sector to compete with private sector.

Bureaucratic hurdles should be removed.

Rules & regulations of control are librelised to encourage globalization.

Competitiveness should be based on quality, prices, delivery, customer services etc. Administrative and Governmental support for making globalization successful.

Money and capital markets should be developed.

Govt. should provide the facilities in form of R&D, Finance etc.

Suitable globalization strategies should be made.

TYPES / COMPONENTS OF GLOBALISATION:

1 )1 ) GLOBALISATION OF MARKETS:

Globalisation of markets means integration or merger of the different markets of the world into asingle market. Under this situation, there are common norms, values, tastes, preferences andconvenience which are observed in this kind of markets.

Features:

Size of the company which is willing to enter into global market does not matter. It is notnecessary that only large companies can create global market but small scale industries canalso be a part of it.

Distinction between the Domestic market and Foreign market still prevails/remainsdepending upon the quality, pricing etc. of the goods manufactured by them.

Due to this distinction, different strategies are needed for the companies to produce goodsand services as good as foreign companies.

GLOBALISATION OFMARKETS

GLOBALISATION OF

PRODUCTION

GLOBALISATION OF

INVESTMENTS

GLOBALISATION OFTECHNOLOGY


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Global firms have to compete with each other in different markets for their survivals.

Reasons for Globalisation of Markets:

Size of domestic market is becoming small for the companies due to increase in the

production level of the companies.

To increase the income of the company and to maximize the profitability of thebusiness.

Shortage of production as compared to the excessive demand in the country pulledforeign companies to enter into the global markets to fulfill the actual demand of the targetmarket.

Adverse selling environment regarding any product in the country will push thatorganization to identify and sell its products in the markets out of their country.

Expanding business globally which will also help that company to reduce its businessrisk.

2 )2 ) GLOBALIZATION OF PRODUCTION:

Globalisation of production means when a company establish its plant or unit in other country toproduce some particular product to sell in that particular market. It also happens if themanufacturing facilities of the host country seems to be favorable than the home country.

Features:

To produce good quality of goods and services at low and reasonable cost.

Economy of that country is favorable for establishing the industry.

Availability of cheap raw material.

Availability of cheap labour in underdeveloped countries.

Reasons for Globalisation of Production:

Raw Material availability in bulk/excess in foreign country or underdeveloped countries.

Availability of skilled and unskilled labour.

Some countries impose restrictions on imports but on the other hand they allow foreign

countries to establish the industry in their country.

To reduce transportation cost.


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To produce goods and services as per the requirements and preferences of the customers.

GLOBALIZATION OF TECHNOLOGY:

Under this process the Technological advancement is the only way for the foreign companies to enterinto the foreign market and to develop itself into a global company.

Methods of Globalisation of Technology:

a )a ) Joint-Ventures and Mergers.(i) Joint Ventures: Partnership of two or more companies of different countries.

(ii) Merger: One company Takeover the other (foreign) company under itsownership.

b )b ) On the basis of Royalty or Outright Purchase of Technology: Under this method thecompanies with higher technologies allows the companies of other countries to adopt theirtechnology on the basis of royalty payments or on outright purchase basis.

c )c ) Technological Collaboration: In this method the companies of less developed countriescollaborates with the companies of developed countries having advance technologies.

d )d ) Latest Technology: Companies with latest technologies obtains advantageous position ofproducing high quality products at low prices. Due to these advantages, companies enter theforeign markets to earn huge profits.

)) GLOBALIZATION OF INVESTMENTS:

It is also popularly known as Foreign Direct Investments (FDI). All the countries in the world haveremoved the investment barriers. In India Foreign Direct Investment in some specific sectors isallowed upto 51% out of the total capital share and in almost all other sectors 49% out of the totalcapital share is allowed as the Foreign Direct Investments.

Reasons for Globalisation of Investments:

Foreign companies go for FDI to avoid the restrictions imposed by the hostcountry on exports.

MNCs invest in foreign countries to have control over the manufacturing andmarketing activities of the business.

Volume of global trade has increased and it needs the foreign money forfurther business.

Some countries imposed the restrictions of licensing which is to be issued onlyto domestic companies so in case foreign companies enter these markets through FDI.

Rate of Interest and rate of Returns are high in less developed countries ascompared to developed countries.INDUSTRIAL POLICY AND INDUSTRIALIZATION TRENDS:

After the Independence, there was a need to improve the industrial sector ofthe country. Industries were in a very bad shape at the time of independenceand lots of changes and improvements were required with immediate effect.

Definition:


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It refers to all objectives, principles, rules, regulation, procedures, location, functioningof the industries, ownership pattern, and rate of growth of the industry in the country.

FEATURES OF INDUSTRIAL POLICY:

Economic growth & development of a country mainly depends upon the Industrial production. To attain the better growth rate, the Industrial production needs to grow and develop at a very

fast speed. This policy also describes the government policy towards foreign capital, labour and other

related aspects. It shows the relationship between government and business. It provides clear guidelines for promoting, regulating and controlling the industrial development

of that country.

INDUSTRIAL POLICY 1948:

Government introduced this policy on 06/04/1948 immediately after the Independence of India. Focuswas on to securing a continuous increase in production and ensuring its equal distribution throughout the

country.

This policy was introduced in keeping in view a mixed economy in which both sectors, public as well asprivate, will be operating with a common goal of economic development.

CATEGORIES OF INDUSTRIAL POLICY 1948: Industrial Policy 1948 divides the industries of India into

four main categories.

A .A . EXCLUSIVE MONOPOLY OF THE CENTRAL GOVT.:

Companies fall under this categories were:

i .i . Atomic Energy Production.

i i .i i . Arms & Ammunition Production.

i i i .i i i . Railways and Air Transport.

i v .i v . Rights to takeover any company by Govt. at the time of War or Emergency.

B .B . EXCLUSIVE RESPONSIBILITY OF THE STATE:

It includes those Industries for which the changing of ownership or undertaking would be madeonly by the State Govt. Under this category if any company is under private sector then also thechange of ownership or undertaking would be made by the State Government.


i .i . Coal Industry.

i i .i i . Iron & Steel Industry.

i i i .i i i . Aircraft Manufacturing Industry.


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i v .i v . Ship Building.

v .v . Manufacturing of Telephone, Telegraph and Wireless Apparatus.

C .C . BASIC INDUSTRIES SUBJECT TO CENTRAL GOVT. REGULATIONS:

Under this category, companies which are very important for the countrys economy areregulated by the Central Government. Companies under this category contribute major part inthe economic growth so it becomes necessary for the Govt. to plan & regulate those companiesfor the betterment of the country.


i .i . Salt Industry

i i .i i . Automobiles

i i i .i i i . Electric Engineering

i v .i v . Heavy Machinery

v .v . Minerals Industry

v i .v i . Power Industry

v i i .v i i . Air/Sea/Road Transportation

v i i i .v i i i . Non-Ferrous Metal Industries

i x .i x . Rubber Industry

x .x . Heavy Chemicals

x i .x i . Fertilizer Industry

x i i .x i i . Cement & Sugar Industry

x i i i .x i i i . Cotton & Woolen Industry

x i v .x i v . Paper & News-Print Industry

D .D . PRIVATE SECTOR INDUSTRIES:

These were those companies which were not included in the above mentioned three categories.These industries were left open for private sector (private enterprises, Individual firms & Co-operatives)

But still the government retains the rights to participate or takeover any industry falling underthis category as and when required.

GUIDELINES OF INDUSTRIAL POLICY RESOLUTION 1948: These guidelines were made under this policy

specifically for:

Small scale & Cottage Industry. Industrial Labour. Foreign Capital.

Role of Small-scale & Cottage Industry: This guideline emphasizes on puttingfocus on the development of the small-scale and cottage industries as the development of these

industries can help in the development of the masses.


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Labour Management Relations and Remuneration to Labour: Under theseguidelines, the focus was on the development of healthy relationship between the workers and

the employees. This was essential for the peace and progress of the industry as well as country.

Labour should be given fair wages, and suitable and reasonable working conditions should also be

provided to the labour in order to get maximum out of them.

Workers participation in the management was also proposed in this Industrial Resolution

Attitude towards Foreign Capital: Government adopted a very positiveattitude towards the foreign capital investment in India as it can increase the speed of economic

growth. Foreign capital was to be regulated in the national interest and ownership and control

was to be kept in the Indian hands.

ADVANTAGES OF I. P. 1948:

1 .1 . New Acts were introduced for the welfare and betterment of the workers such as:

a )a ) Minimum Wages Act.

b )b ) Employees state insurance Act.

c )c ) Labour Welfare Act.

2 .2 . Nationalization of limited but important industrial sectors to strengthen the economy.

3 .3 . A mixed economy pattern was adopted.

DISADVANTAGES OF I. P. 1948:

1 .1 . Limitations of private sector were a hurdle.

2 .2 . Complete development and progress of the private sector was not possible due to interference of

the government.

3 .3 . Red Tapism in the public sector restricted the growth.

4 .4 . Lack of co-ordination.

INDUSTRIAL POLICY RESOLUTION 1956:


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The developments which took place in the country with the help of the first Industrial Policy Resolution 1948 was needed to carry on for the sake of economic development and few more developments wereneeded to be added with the previous ones. This Industrial Policy Resolution was announced on 30-Apr-1956.

Features:

Enactment of the constitution of India which guarantees certain fundamental rights. Adoption of socialistic pattern of society by the Parliament. Launching of the First Five Year Plan.

Objectives of Industrial Policy 1956:

To accelerate the rate of economic growth. To speed up the rate of industrialization. To develop heavy industry and machine making industries. To prevent private monopoly. To expand the public sector. To build up large and growing co-operatives sector. To reduce disparities in income and wealth.

MAIN PROVISIONS OF INDUSTRIAL POLICY 1956:

A .A . NEW CLASSIFICATION OF INDUSTRIES:

a) SCHEDULE A INDUSTRIES: This category includes those industries which were exclusively

responsibility of the State. Following industries falls under this category:

Arms & Ammunitions & other Defense Equipments. Atomic Energy.

S C H E D U L E A I N D U S T R I E SS C H E D U L E A I N D U S T R I E S

S C H E D U L E B I N D U S T R I E SS C H E D U L E B I N D U S T R I E S


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Iron & Steel Heavy plant & machinery. Electric plants. Coal, Gold & Diamond. Minerals. Aircraft & Air Transport. Railways. Ship building. Telephones, Telegraphs & wireless apparatus. Generation & Distribution of electricity.

b )b ) SCHEDULE B INDUSTRIES: These are those companies or industries

which were to be mainly owned and managed by the States. New undertakings falling under

this category will only be set up by the State and the private sector will be allowed to playonly supplementary role in the business.

Following industries falls under this category:

Aluminum and other metals.

Machine tools.

Manufacturing of Drugs, Dyestuffs and Plastics.

Antibiotics and other essential Drugs.

Fertilizers. Synthetic Rubber industry.

Chemicals industry.

Road Transport.

Sea Transport.

c )c ) SCHEDULE C INDUSTRIES: All the remaining industries which

are not included in the Schedule A &B categories. Development of these industries under

this category was the responsibility of the private sector.

These industries would be controlled and regulated as per the Industrial Act 1951 and other

regulations if any.


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B .B . NON-DISCRIMINATING TREATMENT OF PRIVATE SECTOR: Special provision were made in this

policy for no discrimination or partiality will be done with private sector in the country as they

are given the important role in the economic development.

Private sector was encouraged by the government by developing essential infrastructure facilities

such as electricity, transport facilities, consideration for monetary and fiscal policies.

Special financial institutions were established to provide necessary funds to private sector. If in

an industry both sectors are operating, then there should not be any discrimination on part of

the private sector.

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