2.1 The PoliticoLegal Environment The relationship between Business and Government in India | unit 2 the politico legal environment

UNIT II

The Politico-Legal Environment

2.1 The Politico-Legal Environment, The relationship between Business and Government in India

It is the national legislative, administrative and judicial environment that shapes and manages business activities. The legislature explains the laws and policies of action that companies must follow, the administration implements the decisions made by the legislature (parliament), and the judiciary ensures that the legislature and administration function for the benefit of society. To do. A stable political environment leads to business growth. The business operates in a government-regulated environment. Various laws have been enacted to regulate the functioning of companies. They relate to product standards, product packaging, protecting the balance between the environment and the ecosystem, banning advertising for certain products (liquor), advertising for certain products with statutory warnings (tobacco), and more.

There are laws to prevent restrictive trade practices and concentration of economic power in the hands of a few. Regulations encourage companies to enter the underdeveloped region and products are reserved for the small sector. The liberalization policy allowed Indian industry to operate in the international market and foreign companies to operate in the Indian market. This will give you access to market growth and diversification, as well as advanced science and technology for Indian entrepreneurs. At the same time, it threatens small Indian companies that cannot compete with large foreign companies.

The political and legal environment provides many laws and regulations that affect business. It provides enterprises with opportunities, threats, and challenges. Governments interact with businesses at the local, state, and central levels and regulate their functions through various rulings.

Governments interact with businesses in the following ways:

1. As a regulator:

Regulate the business of your business by facilitating activities in certain areas and restricting them in other areas. These regulations prevent unhealthy competition between businesses and protect consumer interests from false advertising and unfair trading practices.

Therefore, the political and legal environment plays two important roles.

(A) Role of promotion:

Securing goods that cannot be produced by large companies, large industrial parks and industries (industrial parks, industrial parks, loan facilities, etc.) set up in underdeveloped areas.

(B) Role of suppression:

Business organizations must operate within the legal framework of the country. You have to obey the law and you have to obey the judicial interpretation.

2. As a supplier:

Its resources for business concerns.

3. As a competitor:

We compete with private entrepreneurs in areas such as telecommunications, electricity and construction.

4. As a customer:

It supports business houses by buying their products.

Companies should have a healthy interaction with the government. They need to promote economic growth and indulge in activities that know the legal system.

Some of the laws that exist in the country for the smooth operation of a company are as follows.

Economic Law [Air (Pollution Prevention and Control) Law of 1981; Consumer Protection Law of 1986; Essential Commodity Law, 1955; Foreign Exchange Control Law of 1999; Foreign Trade (Development and Regulation) Law of 1992; Industry (Development and Regulation) Act, 1951; Patent Act 1970; Standards of the 1976 Metering Act; Trademark Act, 1999],

The political legal system helps answer questions such as:

a) Is the political situation of the country stable so that the government policy does not change many times?

b) Are political organizations promoting business activities? In other words, is the paperwork done without delay because of bureaucracy and bureaucracy?

c) Is the judiciary effective in making decisions to deal with business disputes and proceedings?

d) Do government policies encourage business growth in terms of incentives, markets, taxes, etc.?

e) Is the licensing process for starting a new business generous or rigorous?

f) To what extent are import / export policies promoted to promote import / export, etc.?

The relationship between Business and Government in India:

The failure of the free-market mechanism has made government intervention essential for economic process. Now the question arises of determining the degree of state intervention within the regulation and control of economic activity. This remains a controversial issue among the varied economists. this is often because government intervention cannot completely eradicate the country's economic problems. Different economists have different views on the role of state within the economy.

According to Colin Clark, "the role of state must be held at a cap of 25 percent of value."

According to Samuelson, "there are not any rules regarding the right role of state which will be established by a priori reasoning."

From the above perspective, it is often concluded that determining the precise proportion or amount of state intervention within the economy is difficult and demands the question of collective social choice. The scope of state role depends on the economy. A financial system may be a way of owning and distributing economic resources. supported resource ownership and distribution, economic systems are often divided into three categories: capitalist, socialist and mixed economies.

A capitalism is one that operates on the principles of the free market mechanism. Also referred to as the laissez-faire system. during a capitalism.

64 The role of state is extremely limited. the most function of the govt given by Smith is to take care of the law and order of the country and to create the country.

Strengthen your defences and regulate the cash supply. consistent with Smith, the market system manages various economic functions. However, over a period of your time, the functioning of state within the economy has increased. during a capitalism, the most responsibilities of state are:

Development and maintenance of free market mechanism system.

Remove all types of restrictions on the operation of free competitive markets.

Increase the effectiveness of the free competitive market system through various means

In Mead's view, the government's responsibilities during a capitalism are:

Regulate and manage different economic conditions like inflation and deflation by formulating and implementing different fiscal and financial measures.

Control the facility of monopolies and enormous corporations to avoid various economic problems like unemployment and unfair distribution of resources.

Owns ownership of utilities like rail, education, health care, water and electricity needed by the economy as an entire .

Prohibit discrimination between individuals and supply equal education and employment opportunities.

Limit restrictive trade practices and union power.

Maintain law and order, manage justice, and protect individual freedom within the economy.

Supporting private ventures within the economy.

Establishment of a central planning agency to support large-scale economic development

Responding to environmental problems, extinction of natural resources, increase.

Therefore, we will conclude that the most role of state within the capitalism is to manage and encourage free market mechanisms. additionally, the govt should encourage private ventures to guard the longer term of the economy.

In a socialism, the functioning of state is sort of different from that of state during a capitalism. During a capitalism, government acts as a regulatory and complementary body. On the opposite hand, during a socialism, government plays a comprehensive role in most economic activities like national production, distribution and consumption. during a socialism, not only is that the possession of personal property allowed in limited quantities, but the concept of a free-market mechanism is additionally eliminated. Private ownership of resources during a socialism changes with state ownership. Moreover, during a socialism, the govt centrally plans and regulates all economic activities at the state level. additionally, decisions associated with production, resource allocation, employment, pricing, and consumption are entirely hooked in to the govt or its central planning authorities. during a socialism, individual decisions are entirely hooked in to the bounds set by the govt. for instance, individuals are given freedom of choice, which is subject to the restrictions of the policy framework of the socialism. The countries where the socialism is adopted are China, Yugoslavia, Czechoslovakia and Poland.

The purpose of state during a socialism is that the same as during a capitalism, like growth, efficiency, and maintenance of justice. However, the method adopted by the socialist economy to achieve these goals is different from that of the capitalist economy. For example, in a capitalist economy, the main force of motivation is private interest, but in socioeconomics, the source of encouragement is social welfare. Socialist ways of managing the economy help eliminate various evil activities of the capitalist economy, such as labor exploitation, unemployment and social inequality. This is just the view of classical economics in the socialist economy. However, as the Soviet Union of Socialist Republics (Soviet Union) points out, the scope of the socialist economy is also time due to various reasons such as prohibition of profits from private ventures, inadequate use of resources, and restrictions on economic development. It has shrunk with the passage of time. Soviet Union).

Key takeaways:

There are three main types of legal system: (1) civil law, (2) common law, and (3) religious law. In practice, countries use one or more combinations of these systems and often adapt them to the values and culture of the region.

The trade relationship between governments and businesses is the relationship between governments and global businesses.

Governments not only protect their economies and industries, but also intervene in trade to promote and maintain social, cultural, political and economic structures and philosophies.

Governments have several important policy areas, such as tariffs and subsidies, that can create rules and regulations for managing and managing trade.

Import quotas and VER, currency control, local content requirements, anti-dumping rules, export finance, free trade areas, and management policies.

2.2 An introduction to some important business laws like MRTP, Industries (Development and Regulation) Act, FEMA, SEBI, the Competition law

MRTP Act:

After independence, various new and large corporate organizations entered the Indian trade market. The level of competition was not extreme, so they tried to establish a monopoly. The intentions of those business organizations were not hidden from the eyes of the Government of India. Therefore, the MRTP bill to protect the interests of consumers was passed, and finally the 1969 Monopoly and Restrictive Trade Practices Act was enacted. The law allowed the MRTP Commission to shut down any company or organization that attempted to interfere or obtain it. In a healthy way of competition.

The MRTP bill has been passed to protect consumer rights and check for all types of monopolies or alliances that may prove harmful to consumer interests. Its purpose is to curb the practice of accumulating wealth with a small number of hands.

Harm to consumers. It also curbs trade monopolies and unfair practices.

The main objectives of the MRTP method are:

Regulate and manage the accumulation of financial strength.

Suppress monopoly and dominant trade practices until proven useful to people.

Limit unfair trading practices.

Industries (Development and Regulation) Act:

What is industry?

Industry is the production of goods or related services within the economy. Development and regulation were discussed and dealt with under the Industrial (Development and Regulation) Act (IDRA), which came into effect on May 8, 1952 under the notification of the Central Government, published in the Government Bulletin of India.

Applicability-This law applies throughout India, including Jammu and Kashmir, and its activities are central and regulated by many important industries that must affect the country as a whole and govern its development. Is aimed at. By all the important economic factors of India.

The provisions of this law apply to industrial businesses that manufacture any of the goods listed in the initial schedule.

Purpose:

The main purpose of this law is to empower the government.

Take the necessary steps to regulate and develop important industries: This law is under the control of the central government and the activities of such industries will affect it, so it is stated in the first schedule attached to the law. It brings about the development and regulation of many important industries. The development of the central government, and therefore such an important industry, must be dominated by all the important economic factors of India.

To implement industrial policy: This law provides the central government with the means necessary to implement it.

Regulate patterns and directions of industrial development.

To manage the activities, performance and outcomes of industrial businesses for the public good: New business plans for sound balance lines and licensing schemes to regulate future development have been introduced under the law, the opinion of the central government that may be considered appropriate.

The Act: Fake Days:

An industrial business (also called a factory) for the purposes of this law is a business in which the manufacturing process takes place.

With the help of power, provided that more than 50 workers have worked or have worked on any day of the last 12 months.

No power assistance, provided that more than 100 workers have worked or have worked on any day of the last 12 months.

This law applies only to industrial businesses. Trading companies and financial institutions are outside the scope of the law.

Exemption from conduct:

This law empowers the central government to grant exemptions from this law in certain cases. Section 29B of the Act provides if the central government determines that it is not in the public interest to apply all or part of the provisions of this Act to industrial enterprises. In that case, the central government may exempt the industrial business or the class of industrial business from the operation of all or part of the provisions of this law by notification in the official bulletin.

Law provisions:

The law has 31 sections, all of which can be divided into three major categories according to purpose.

Precautions:

Registration and Authorization: Section 10 provides that the owner of any industrial business other than the central government shall register his business within the designated period of time in which the central government is the owner. At the time of registration, the owner shall be issued a registration certificate containing the capacity of the industrial business and other details.

Investigation: Section 15 empowers the central government to investigate industrial enterprises regarding the occurrence of the following:

The potential for a significant reduction or reduction in production for an article or class of articles related to a particular business or industry. Or

Poor or possible loss of product quality that could or could be avoided. Or

The price of an article or article class may rise or rise (injustice). Or

When it becomes necessary to work on the conservation of important resources of the country used by the business operator, or

When an industrial business, whether planned or not, is managed in a way that is very detrimental to the planned industry or public interest involved.

License Revocation: Section 10A of the Act authorizes the central government to revoke registration if:

The registration was obtained by misrepresentation of the essential facts. Due to the exemption granted by law, you can no longer register your business, or

Registration has become useless or ineffective.

Article 12 of the Act establishes or takes effective measures against the central government without a reasonable reason to establish a license granted to establish a new business or to manufacture a new good. Grants the right to revoke or modify if it determines that it could not be done. Implement the license within the allowed time.

The e-regulation includes:

Control or Handover of Control: Section 18A of the Act may, if the central government expresses an opinion, allow an individual or group to take over control or control a particular industrial enterprise by means of a notified order. It is stipulated as. The relevant industrial enterprise did not follow the government's instructions.

Control of Supply, Price, and Distribution of Specific Goods: Section 18FA, with the permission of the High Court, which involves the central government taking over the control or control of the industrial business owned by the liquidating company, the individual or Empowers groups of individuals to authorize. The central government is of the opinion that it may carry out or resume such business to maintain or increase the production, supply or distribution of goods or classes of goods for the public good. The duration of such acquisitions is five years and is extended six times every two years. The state or local government cannot take over control or control of a planned business.

FEMA:

In 1999, the Foreign Exchange Control Act (FEMA) was introduced to replace the Foreign Exchange Regulation Act (FERA) of 1973. The purpose of FERA was to regulate the conduct of business of Indian companies in foreign markets and foreign companies in Indian markets. FEMA came into effect on January 1, 2000. This law applies to all offices, branches and agencies in India, as well as foreign offices and branches residing in India.

FEMA is assembled by the Government of India and is directly related to foreign direct investment in the economy. FEMA plays an important role in facilitating external payments and transactions.

Therefore, FEMA "integrates and amends foreign exchange-related laws with the aim of promoting foreign trade and payments and promoting the orderly development and maintenance of India's foreign exchange market." is. The main objectives of FEMA are:

Modify and integrate FERA.

Supporting external payments and trade.

To promote the systematic development of India's foreign exchange market.

SEBI:

The laws and regulations of the Indian Stock Exchange (SEBI) must be strictly and strictly adhered to by all parties and organizations engaged in securities trading on the registered stock exchanges of India. The SEBI Act of 1992 gives this highest regulator of the Indian securities market the statutory authority to enact such laws and regulations, especially under its Section 30 and many other relevant sections. Not surprisingly, the importance of these SEBI legislation is the importance of all listed companies, their boards of directors, key managers of such companies, investors, and all operating in the securities market sector. Large for a company or company. Mediation agency. For over a decade, the resource-rich and internationally acclaimed Delhi law firm has made trading on the stock exchange completely secure (legally), optimally productive / profitable, and constantly booming. We have helped all these people and organizations to present. This web page provides brief information on SEBI regulations and compliance with registered stock exchanges by listed companies to assist website visitors and immovable clients in India and around the world.

The most important of the various laws, rules, regulations and regulations promulgated by SEBI are:

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009: These regulations address issues and matters related to capital and disclosure conducted by listed companies in India in order to make securities transactions perfect and profitable. We have established rules for this. For both listed companies and investors.

SEBI (Substantial Acquisition and Acquisition of Shares) Regulations, 2011:

These SEBI regulations are designed to resolve issues related to the legal and fair acquisition and acquisition of shares. 2015 SEBI (Insider Trading Prohibition) Regulations: This law abolishes the provisions of the 1992 SEBI (Insider Trading Prohibition) Regulations. The law introduces new rules and regulations regarding the prohibition of insider trading of securities and strengthens the legal framework for complete and fair securities trading in India. The term "insider" includes those associated with a listed company or anyone else in a company who owns or has access to private price-sensitive information. Insider disclosure provisions (for securities trading and securities derivatives) are provided in this Act for both types of disclosure, namely initial and ongoing disclosure.

Stock Listing Agreement: The provisions contained in this Agreement (including any provisions that are inserted from time to time through amendments to this listing agreement) primarily provide mandatory compliance for listed companies on registered stock exchanges in India.

Competition (or antitrust) law:

Competition (or antitrust) law is an exciting field of law that serves at the confluence of law and economics. Its purpose is to protect Process 2 of competition in the free market economy. When a company competes for its customers, competition is usually a profitable process because it encourages consumers (us) to produce the highest quality products (or services) at the lowest prices that are good for them.

The central purpose of competition law is, for example, to prevent companies from settling in anti-competitive agreements, for companies with strong positions in the market to have their market power or dominant position, and for companies to compete with competitors. Prevents reduction of competition by merging. For example, if competing companies agree rather than competing for fixed prices or market splits, the benefits of competition are lost, eliminating an important aspect of competition between companies. In these situations, businesses can be lazy and inefficient, and directors can spend a lot of time on golf courses rather than looking at the best ways to reduce costs and innovate. (It's safe to know that competitors do too!) Otherwise, it meets the needs of our customers.

Key takeaways:

The intentions of those business organizations were not hidden from the eyes of the Government of India.

The MRTP bill has been passed to protect consumer rights and check for all types of monopolies or alliances that may prove harmful to consumer interests.

An industrial business (also called a factory) for the purposes of this law is a business in which the manufacturing process takes place.

Section 10 provides that the owner of any industrial business other than the central government shall register his business within the designated period of time in which the central government is the owner.

In 1999, the Foreign Exchange Control Act (FEMA) was introduced to replace the Foreign Exchange Regulation Act (FERA) of 1973.

The law introduces new rules and regulations regarding the prohibition of insider trading of securities and strengthens the legal framework for complete and fair securities trading in India.

Competition (or antitrust) law is an exciting field of law that serves at the confluence of law and economics.

2.3 Changing Dimension of these Laws and their impact on Business

Agent aspects or agents that shape the business environment include economic, social, legal, technical and political situations that are appropriately considered to enhance the achievement of decision-making and trading concerns. I will. Unlike the exact environment, these aspects represent the general environment and often affect many businesses at the same time. However, managers of all businesses are not biased in these aspects and can benefit from being informed about these aspects. Below is a brief discussion of the multiple factors that make up a company's global environment.

(A) Legal environment:

This includes various laws passed by the government, administrative orders issued by government authorities, court decisions, and decisions made by the central, state, or local governments.

Understanding legal knowledge is a prerequisite for the smooth functioning of business and industry.

Understanding the legal environment of business houses helps them avoid getting into legal entanglements.

The legal environment includes a variety of laws, including the Companies Act 2013, the Consumer Protection Act 1986, licensing and approval-related policies, and foreign trade-related policies.

Example: Labor laws that companies follow help avoid penalties.

(B) Political environment:

This means that action has been taken by the government and can affect the day-to-day activities of any company or company at the national or global level.

Business and industry success depends on government attitudes towards business and industry, government stability, and national peace.

Example: Political stability and central government attitudes towards business, industry and employment have attracted many domestic and international business entrepreneurs to invest in India.

The economic environment consists of economic systems, economic policies, and prevailing economic conditions in the country. Interest rates, taxes, inflation, stock indexes, rupee values, personal disposable income, unemployment, etc. are factors that affect the economic environment.

Example: Increasing people's disposable income by reducing tax rates in a country creates more demand for products.

(D) Social environment:

The social environment is composed of social forces such as traditions, values, social trends, educational standards, and living standards. All of these forces have a huge impact on the business.

Tradition: It refers to decades of social customs such as Ugadi, Deepavali, Id, and Christmas.

Impact: Increased demand during the festival offers opportunities for a variety of businesses.

Values: Refers to prevailing moral principles in society, such as freedom of choice in the market, social justice, equal opportunity, and non-discriminatory practices.

Impact: An organization that believes in values maintains a high reputation in society and facilitates the sale of its products.

Social trends: Refers to general changes and developments in society, such as the health and fitness trends of urban dwellers.

Impact: Health and fitness trends are creating demand for gyms and mineral water.

(E) Technical environment:

It consists of scientific improvements and innovations that provide new ways to produce goods, provide services, and provide new ways and technologies to run a business. Before deploying a product, it is very important for a company to understand the level of scientific achievement in a particular economy.

Product technical compatibility also drives the demand for manufactured products by companies. Example: E-commerce has changed the scenario of doing business, buying goods, and using services through mouse clicks or the government's mobile Digital India initiative. We will move toward a paperless society.

Key takeaways:

The rapid development of technology has a strong impact on all organizations, not just those operating in high-tech environments.

The socio-cultural environment is made up of a system of values, and the attitudes, beliefs, desires, expectations, aspirations, customs and customs of society change accordingly, and there are many opportunities and threats to the business operated for society.

The demand for goods and services depends on those demands, the demand is the potential or real market, and the market means the real and potential consumers.

The political and legal environment is, of course, called the regulatory environment.

The global or international environment is especially important in the face of strong globalization turmoil.

References-

Business Environment by Shaikh Saleem.

Business Environment by Veena Kaishav Pailwar.

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