Unit 2
Business and Society
The word ‘ethics’ is derived from the Greek word ‘ethos’ which means character Ethic refers to morally and socially correct actions. Business Ethics refers to morality (thinking) in business. It means the right way of doing business such that the actions are morally and socially correct. Thus Business Ethics refer to the dealing of business with all social groups which must be just fair and honest.
Business Ethics refer to the code of conduct that business should follow while undertaking their business activities. Business Ethics is a part of social responsibility, which business has to honour by adopting business ethics, the business is able to mould it activities in such a way that all its activities are just fair towards the society and other related groups as well as follows the social, legal and moral values in which it operates.
Features of Business Ethics:
1) Moral values: Business ethics is concerned with morality in business. In today’s world, business community forms a large part of the society and its actions (like right or wrong, legal or illegal) are bound to have a direct impact on the wellbeing and welfare of the society. Therefore, it is necessary that business community conduct its activities with self-check, and self-control keeping always in mind the interest of community at large.
2) Relative term: Ethics is a relative term i.e., the concept of morality and immorality differs from one individual to other or society. What is moral in one society may be immoral in other. For e.g. taking or giving bribe is considered as unethical in our society but may be a routine affair or just ignored by society in other countries.
3) Interest of Society: Business ethics implies that the business should do first good to the society and then to itself. Business is an important institution and has a social responsibility to protect the interest of all those groups like employees, shareholders, consumers who contribute to the success of business.
4) Business-society Relationship: Business ethics set the terms and standards to understand business-society relationship. It indicates what society expects from business and what it thinks about business.
5) Provides Framework: Like an individual, business is also bound by social rules and regulations. Business is expected to confine its activities within the limits of social, legal, cultural and economic environment.
6) Guiding principles: Business ethics are the guiding principles which help to differentiate good or bad, right or wrong, proper or improper business decisions and actions.
7) Universal Application: Business ethics has universal application. It is applicable to all business units in all countries whether large or small. However, the degree of business ethics may vary from country to country.
8) Code of conduct: Business ethics, like code of conduct or professional ethics provides guidelines to regulate business activities on legal, moral, social and ethical principles. It prescribes what should and should not be done for the welfare of the society.
Need and Importance (Benefits) of Business Ethics:
1) Survival and growth: Business which adopts business ethics will survive and grow in the long run. Those businesses which use unethical means may succeed in the but will not be successful in the long run.
2) Social Welfare: Business that adopts business ethics ensures that it serves the society to the best of its capacity. They provide goods and services which gives maximum satisfaction to the customers and undertake various activities to increase social welfare in the society.
3) Protection of Consumer Rights: It is the legal as well as social obligation of every business to honor the consumer’s rights. By adopting ethical business practices, businessmen are thus ensuring that they honor the rights of the consumers.
4) Better Interaction with Society: Every business depends heavily on the society where it operates for its existence. By adopting business ethics, businessmen can build cordial relationship with all the shareholders of the society.
5) Goodwill: Business that adopts business ethics is able to increase its goodwill in the society. Its customers and employees are satisfied and loyal towards it. Creditors, Government and even rival’s business enterprise which adheres to business ethics in all its field of operation.
6) Mutual Benefit: Business ethics benefits the business firm as well as the society. The Business firm that adopts business ethics get good name in the society. It may be able to increase confidence in the minds of the buyers who in turn would help to improve the sales of the firm. Because of that consumer also get goods at right price, the employees can fair treatment and so on.
7) Benefits to shareholders: Business ethics helps a company to expand and growth. Therefore, the performance of the firm will improve in terms of market share, profits, etc. As a result, the shareholders stand to gain in terms of higher returns in form of dividends, bonus shares and high share price on the stock markets.
The code of Business Ethics:
Do’s:
a.] Pay taxes and other charges regularly.
b.] Pay fair wages, allowance and other monitory incentives to worker.
c.] Ensure safety and security of product.
d.] Supply quality goods as per expectations of consumers at reasonable prices.
e.] Give due respects and honour basic rights of consumers
f.] Use part of profit for the society.
Don’ts:
a.] Do not destroy healthy competition.
b.] Do not cheat or exploit customers.
c.] Do not create monopoly
d.] Do not resort to hoardings or black marketing.
e.] Do not create secret or unreasonable profit.
Avoid:
1.] Unfair competitions.
2.] Concentration of economic power.
3.] Agreement with fellow businessmen for controlling production, distribution, pricing etc.
Accept:
1.] Principle of “Services first and profit next”
2.] Truth in business that “A customer is the king”
3.] Make your business just, fair, human, efficient and dynamic.
Example of Unethical Business Practices
Satyam Computers, a global IT company, was defamed in a very notorious list of companies involved in fraudulent financial activities. The list includes names like Enron, WorldCom, Parmalat, Ahold, Allied Irish, Bearings and Kidder Peabody.
Satyam’s CEO, Ramalinga Raju, accepted his role during a broad accounting impropriety that had overstated the company’s net revenue and profit. The corporate had earlier reported a cash reserve of roughly $1.04 billion that really existed only in books but not actually .
In his letter to his board, exposing the fraud, Satyam’s Raju showed the propensity of the fraud. He stated that, “What started as a marginal gap between actual operating profits and ones reflected within the books of accounts continued to grow over the years. It's attained unmanageable proportions. …”
Later, he described the method as “like riding a tiger, not knowing the way to get off without being eaten.”
In every society there are three sources of business ethics-Religion, Culture and Law. The HR manager in every organisation, thus, must be well versed with the unique system of values developed by these three sources.
These sources are discussed as follows:
1. Religion:
Religion is that the oldest source of faith is that the oldest source of ethical inspiration. There are quite ethical inspirations. 1, 00,000 religions which exist across the entire world, but all of them are in agreement on the elemental principles. Every religion gives an expression of what's wrong and right in business and other walks of life. The Principle of reciprocity towards one’s fellow beings is found altogether the religions. Great religions preach the need for an orderly social system and emphasize upon social responsibility with an objective to contribute to the overall welfare. With these fundamentals, every religion creates its own code of conduct.
2. Culture:
Culture is that the set of important understandings that members of a community share in common. It consists of a basic set of values, ideas, perceptions, preferences, concept of morality, code of conduct etc. which creates distinctiveness among human groups. Once we mention culture we typically ask the pattern of development reflected in a society’s pattern of knowledge, ideology, values, laws, social norms and day to day rituals. Depending upon the pattern and stage of development, culture differs from society to society. Moreover culture is passed from generation to generation. Culture facilitates the generation of commitment to something larger than one’s individual self-interest.
Culture encourages the members of the organisation to offer priority to organizational goals over and above their personal interests. Culture also is a way making and control mechanism that guides and shapes the attitudes and behaviour of individuals. Managers need to run an industrial enterprise on the cutting edge of cultural experience. The stress that their actions create makes the business ethically more complex.
3. Law:
The system of any country, guide the human behaviour in the society. Whatever, ethics the law defines is binding on the societythe society expects the business to abide by the law. Although it's expected that each business should be law abiding, seldom do the companies adhere to the principles and regulations. Law breaking in business is common e.g.Tax evasion, hoarding, adulteration, poor quality & high priced products, environment pollution etc.
OTHERS
• Leadership
• Strategies and policies
• Corporate culture
• Individual characteristics
Importance of Business Ethics:
1. Corresponds to Basic Human Needs:
The basic need of each person is that they want to be a part of the organisation which they will respect and be proud of, because they perceive it to be ethical. Everybody likes to be related to an organisation which the society respects as a honest and socially responsible organisation. The HR managers need to fulfil this basic need of the workers also as their own basic need that they need to direct an ethical organisation. The essential needs of the employees also as the managers compel the organizations to be ethically oriented.
2. Credibility in the Public:
Ethical values of an organisation create credibility in the public eye. People will wish to buy the product of a corporation if they believe that the company is honest and is offering value for money. The general public issues of such companies are sure to be a success. Due to this reason only the cola companies are spending huge sums of cash on the advertisements now-a-days to convince the general public that their products are safe and free from pesticides of any kind.
3. Credibility with the Employees:
When employees are convinced of the ethical values of the organisation they're working for, they hold the organisation in high esteem. It creates common goals, values and language. The HR manager will have credibility with the workers just because the organisation has creditability in the eyes of the general public. Perceived social uprightness and moral values can win the workers more than any other incentive plans.
4. Better Decision Making:
Respect for ethics will force a management to take various economic, social and ethical aspects into consideration while taking the decisions. Decision making will be better if the choices are in the interest of the general public , employees and company’s own future good.
5. Profitability:
Being ethical doesn't mean not making any profits. Every organisation features a responsibility towards itself also i.e., to earn profits. Ethical companies are sure to be successful and more profitable within the end of the day though in the short run they will lose money.
6. Protection of Society:
Ethics can protect the society during a better way than even the system of the country. Where law fails, ethics always succeed. The govt. cannot regulate all the activities that are harmful to the society. A HR manager, who is ethically sound, can reach out to agitated employees, more effectively than the police.
An ethical dilemma (ethical paradox or moral dilemma) is a problem within the decision-making process between two possible options, neither of which is completely acceptable from an ethical perspective. Although we face many ethical and moral problems in our lives, most of them come with relatively straightforward solutions.
On the opposite hand, ethical dilemmas are extremely complicated challenges that can't be easily solved. Therefore, the ability to seek out the optimal solution in such situations is critical to everyone.
Every person may encounter an ethical dilemma in almost every aspect of their life, including personal, social, and professional.
How to Solve an Ethical Dilemma?
The biggest challenge of an ethical dilemma is that it doesn't offer a clear solution that would suits ethics al norms. Throughout the history of humanity, people have faced such dilemmas, and philosophers aimed and worked to seek out solutions to them.
The following approaches to solve an ethical dilemma were deduced:
• Refute the paradox (dilemma): things must be carefully analysed. In some cases, the existence of the dilemma is often logically refuted.
• Value theory approach: Choose the choice that gives the greater good or the lesser evil.
• Find alternative solutions: In some cases, the matter is often reconsidered, and new alternative solutions may arise.
Examples
Some samples of ethical dilemma examples include:
• Taking credit for others’ work
• Offering a client a worse product for your own profit
• Utilizing inside knowledge for your own profit
The Solutions to Workplace Dilemmas
Morality and value-based issues in the workplace are often difficult to handle when the workers got to choose from the right and wrong by their own principles. Smart employers who skills to implement workplace ethics policies are usually well prepared for the potential conflicts of interest of opinion, values and culture within the workforce.
However, managing ethical issues requires a steady and cautious approach to matters, which may potentially be dangerous or illegal.
Step 1: Documenting the problems
• Develop a workplace policy counting on your company’s philosophy, mission statement and conduct guidance.
• Incorporate the policy into your performance management program to carry employees in charge of their actions.
• Alert the workers to their responsibilities to follow professional standards in their job performance and interaction with peers and supervisors.
• Revise the worker handbook to incorporate any missing policy and provide revised handbook to employees.
• Obtain written acknowledgement from employees that they have received and understood the workplace ethics policy.
Step 2: Training and Guidance for Up-Keeping Values
• Provide ethics training to employees.
• Provide instructions in learning the way to address and resolve ethical dilemmas.
• Experiential learning, or role-play, could also be used as an efficient way to facilitate workplace ethics training.
• Provide samples of workplace ethics simulations, like misappropriation of company funds, improper workplace relationships etc.
Step 3: Taking Effective Measures
• Designate an executive in-charge of handling employees’ concerns concerning workplace ethics.
• Consider whether your organization also needs an ethics hotline, a confidential benefit service for workers to contact whenever they need.
• Confidential hotlines assure employees’ anonymity, which may be a concern for “whistle blowing” actions.
Step 4: The Legal and Private Angle
• Research and apply federal, state and municipal labour and employment laws concerning whistle blowing.
• Refrain from making suspension, termination decisions, in reference to whistle blowing or when employee’s right is protected under whistle blowing laws or public policy.
• Look for legal advice for the worker reports of workplace ethics issues which will increase your organization’s legal liability.
Step 5: Keeping the standard Intact
• Apply workplace policy consistently while addressing employee concerns about workplace ethics.
• Use an equivalent standard in every circumstance, no matter the perceived intention, seriousness or the position of employees involved.
• Communicate an equivalent rules for all employees – whether executive or front-line production roles.
• Approach every issue with equal interpretation of the corporate policy.
We can view corporate culture as the way by which an organization operates. For instance , Acme Co. And Construct Co. Are two construction companies. Acme's corporate culture is about winning at all costs and it isn't bashful about it. On the opposite hand, Construct Co. Is more about professionalism, relationships, and sustainability.
Ethical deciding actually plays a crucial role in corporate culture. If corporate culture is the way by which a corporation works, then a corporation’s ethical culture is how a company operates with reference to ethics. If a company's ethical culture is strong, then ethical decision making comes more naturally also.
For example, for instance you're the CEO of Construct Co. You're close to make a deal that involves an ethical dilemma. There appears to be no good course of action when reaching a decision. Either way you play your cards, there'll be an undesired consequence. If you select to build a building, you'll destroy a vital habitat for an endangered species. If you are doing not, you seek to lose tons of money.
So, what are you getting to do? Well, as a general rule of thumb, you ought to consider your organization's ethical culture. What courses of action are going to be the foremost ethical supported your company's ethical culture? It appears that Construct Co. Is about sustainability, which involves making money while still watching out for the environment.
You might think that choice is foolish. You're giving Acme Co. The upper-hand but you would like to consider as things aren't always so cut and dry. What if you expire the deal supported your corporate/ethical culture and Acme takes the deal to create as a result but is met with stiff public opposition to the project? The project might stall, Acme may lose tons of cash within the process, and their reputation will be so damaged nobody will want to figure with them for fear of eventually damaging their own reputation.
Enterprise is provided by an Entrepreneur. The terms entrepreneur is derived from a French word, ‘Entreprendre’ which means to undertake.
Entrepreneur is the one who combines all the three factors of production. Such as land, labour & capital in the right proportion to make production fruitful and also bear the risk involved in it.
Concept of Entrepreneur
The word ‘Entrepreneur’ comes from the French word “Entreprendre” means, “to undertake.”
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There are two popular beliefs about who the person was who used the term entrepreneur in economics.
It is believed that the word “Entrepreneur” was first employed by Irish banker operating in Franco Ricardo Cantillon.
Another belief is that the French economist J. B. Say (1824) was first used the word entrepreneur in economics. It’s derived from the French word “Entreprendre” means, “to undertake”.
Oxford English dictionary has adopted this word in 1897 and meant as “director or manager of a public musical institution”. The term goes through evolutionary changes of meaning. Till now, there's no consensual concept of entrepreneurs.
In the early 16th century, it had been applied to those that were engaged in military expeditions. It had been extended to cover civil engineering activities like construction and fortification within the 17th century.
It was only at the start of the 18th century that the word was wont to ask economic aspects. During this way, the evolution of the concept of an entrepreneur is taken into account over quite four centuries.
Since then, the term ‘entrepreneur’ is employed in various ways and various views.
These views are broadly classified into three groups, namely, risk-bearer, organizer and innovator.
Qualities of Entrepreneur:
1) Ability of initiate the production process: An Entrepreneur is his ability to initiate the production process by combining other factors of production.
2) Ability to bear the risk: Another important quality of an Entrepreneur is the ability to take risk. It is not essential that the Entrepreneur always gets profits. Sometimes, he may also bear some loss. Thus, he should have the ability to bear risk of profit and loss. He has to take the risk of making product, pricing and production decisions.
3) Ability to introduce an innovation: An entrepreneur must be an innovator to survive in the market and to keep his product popular. Innovation means to introduce new technology, new product, a new method of sales, new ideas of advertisements etc. In the absence of such innovative quality, it is difficult to survive.
4) Coordinator: The entrepreneur acts as the co-ordinator between different factors such as land, labour, capital, etc. which are scattered over different places. He collects, combines and co-ordinates them in order to make the business a success.
5) Decision making: This is important quality of a successful entrepreneur to take the right decision at right time. Then only the Entrepreneur makes the profit in the business.
6) Efficient: He should be highly intelligent, able and efficient so as to solve the problem arising in industry.
7) Organizer: He should be a good organizer. He should have the ability to combine all the factors of production in appropriate manner. Thus, he should be a good co-ordinator.
8) Knowledge: H should have complete knowledge about his business, market conditions, new technology and ups and downs in the market etc.
9) Self Confident: Entrepreneur should be self-confident and should be able to develop confidence in others, regarding his integrity and honesty, which will help to maintain goodwill and reputation of his firm in the market.
Functions of Entrepreneur:
1)Planning: The most important function of an organizer is to make a plan. The plan is the blue print of production. Various factors like scale of production, types of goods and its quantity are involved in preparing the plan.
2)Selection of locality: The entrepreneur chooses a suitable site to locate the factory. Factors like nearness to market, availability of labour, supply of water and electricity, transport and communicator facilities are taken into consideration while choosing the locality.
3)Arrangement of funds: Business requires capital and if an entrepreneur may not have sufficient capital, then he must have to take all efforts to find out a capitalist, who is ready to provide the necessary amount of capital.
4)Provision of Land & Labour: The next step is to arrange land and labour. He may buy or hire land. He also recruits different types of labour from different places to produce a commodity.
5)Purchase of machines & raw material: An entrepreneur has to choose the right type of technology and purchase the required equipment for the same. He meets dealers who sell raw material and buy the best quality of raw material.
6)Co-ordinating: This is vital function in which he combines different factors in the right proportion to ensure maximum production with quality.
7)Advertisement & Publicity: The entrepreneur must assure that all the goods produce are sold. He takes keen interest in advertising and publicity in orders to generate demanded and promote sales.
8)Follows government formalities: The entrepreneur must follows all the formalities laid down by government. He must follow every rule and regulation. He obtains a license. He pays the necessary taxes.
9)Supervisory function: Supervision is the most responsible job of the organizer. He supervises all the departments and ensures high quality and maximum production.
10)Search of market: The entrepreneur conduct surveys & researches in order to explore and exploit new markets. This helps him in expanding his area of operation.
11)Risk taking: It is the most important function of the entrepreneurs. Despite the fact that there is every possibility of business running into heavy losses, he dares to face the risk and run a business.
12)Innovation: It is must for modern business. Innovation implies something new like a new product, a new advertisement, a new method of production etc. This will bring great success and ensure survival.
Peter Drucker states Entrepreneur is the one who searches fora change, responds to it, and exploits if as an opportunity. Innovation is the specific tool of entrepreneur with which he exploits change as an opportunity.
Robert Hisrich states 'Entrepreneurship is the process of creating something new and assuming the risks and rewards.
An entrepreneur is an innovative personality. Entrepreneurs operate not only in business sectors but also in social sectors. Every field needs entrepreneurs to come up with innovative ideas.
Nature and Characteristics of Entrepreneurship:
1. Process: Entrepreneurship is a distinct process of creating something new, i.e., new products, processes, techniques and so on. The entrepreneurship process requires managerial activities such as - planning, organizing, directing and controlling.
According to Joseph Schumpeter entrepreneurship is concerned with:
-Introduction of new product.
-Creation of new form of organization structure.
-Development of new technology.
-Development of new source of raw materials.
-Entry in new market.
2. Proactiveness: Entrepreneurship requires proactiveness. An entrepreneur is the one who takes proactive decisions. Unlike traditional managers, who take reactive decisions, an entrepreneur takes proactive decisions, and others follow the entrepreneur. Proactiveness gives first mover advantage or competitive edge in the market.
3. Purposeful Activity: Entrepreneurship is a purposeful activity. Emphasis is placed on results rather than mere activities. The results may be in the form of:
-reduction in wastages
-optimum use of resources
-motivated and dedicated workforce
-higher efficiency
The main purpose of entrepreneurship activity in business organizations is to aggrandize (increase) profits. Therefore, entrepreneurs place emphasis on cost-effective activities. The entrepreneurs undertake cost-benefit analysis of each and every activity. The analysis is made not only from short-term point of view term, but also from long-term point of view' depending upon the nature of activity.
4. Professionalism: Entrepreneurship requires high level of professionalism. Professionalism implies systematic conduct of activities to achieve objectives. Professional entrepreneurs place emphasis on marketing research, research and development, quality control, use of appropriate technology, training and development, and so on. Professionalism leads to growth and development in any business field- business, politics, education, social welfare, etc.
5. Innovation and Creativity: Entrepreneurship activity involves innovation and creativity. The most successful entrepreneurs are the innovators. The innovators are on the constant look out for something new or something different that would give them a competitive advantage. According to Joseph Schumpeter, a person behaves as an entrepreneur only when carrying out innovative activities.
The innovative activities may involve development of a new product in the market, development of new and innovative schemes to promote the product, development of new techniques for production and distribution, etc.
6. Individual or Group Activity: The entrepreneurship activity can be undertaken by an individual or by a group of individuals.
-In the case of small size projects, and where there is limited risk, the activity can be undertaken by an individual.
-In the case of large and risky projects the activity may be undertaken by a group.
7. Risks and Rewards: Entrepreneurship activity is undertaken to assume risks and rewards. Any innovative activity is always subject to risks and uncertainties. If the innovative activity is successful, the entrepreneur will reap rewards, otherwise, the entrepreneur has to assume risks of failure. Therefore, an entrepreneur needs guts to assume risks, and he gets glory when there is success. It is to be noted that entrepreneurs take moderate risks, as compared to gamblers who take extreme risks.
8. Exploits Change into an Opportunity: An entrepreneur always looks for a change. If there is a potential for a change, he responds to it He exploits the change as an opportunity in business. Seeking change and converting into an opportunity is the hallmark of entrepreneurship.
9. Organizing Abilities: An entrepreneur requires highest level of organizing abilities. The entrepreneurship activity requires a proper blend of physical, capital and manpower resources. Right amount of resources, both in terms of quality and quantity needs to be organized so as to achieve higher level of returns.
10. Social and Economic Development: Entrepreneurship activity facilitates social and economic development. Due to entrepreneurship, the production of better-quality goods and services take place, which in turn facilities economic growth of the nation. Also, entrepreneurs play an important role in social development by supporting social development activities like health, education, community development, etc.
For entrepreneurs - Nothing is permanent except change. "The only thing that is constant is change. Heraclitus, the Greek philosopher
IMPORTANCE OF ENTREPRENEURSHIP
Entrepreneurship plays an important role in the economic and social development of a nation. Due to economic and social development, Entrepreneurs create economic and social wealth. The importance and significance of entrepreneurship is explained as follows:
1. Economic Development: Entrepreneurship activity enhances the economic development of a nation. Due to entrepreneurship, new and innovative goods, technologies, processes are developed. This increases production and distribution of goods and services, resulting in growth and development of the nation.
Developed countries like Japan, USA, Germany, etc., owe their economic development to the contribution of their entrepreneurs. With the innovative role of entrepreneurs, economic development of a nation could not get hampered.
2. Regional Development: The entrepreneurs set up industries not only in urban areas, but also in backwards areas. Due to government incentives such as cash subsidy, tax holiday, duty concessions, etc., entrepreneurs are induced to set up industries in backward areas. As a result of such initiative, the backward areas get developed not only socially but also economically.
3. Capital Formation: Entrepreneurs facilitate capital formation in the country. The entrepreneurs provide employment to people. The employees save a part of their incom3. The entrepreneurs save a part of their profits. These savings lead to investment. Investment in return facilitates capital formation, i.e., production of capital goods, which can be used for further production of consumer products and services.
4. Social Development: Entrepreneurs play an important role in social development of a nation. Professional and successful entrepreneurs recognize and respond to social development needs of the society.
The entrepreneurs contribute funds towards social development activities like health, education, and community development activities. For instance, Mr.Azim Premji of Wipro is the most generous philanthropist of India and Asia. He donated t education US $ 4.4 billion between 2001 till 2013. The social entrepreneurs generate new and innovative ideas to enhance social development of the society. For instance, Mr Muhammad Yunus, (Bangladeshi social entrepreneur and Nobel Prize winner for Economics in 2006) founded the Grameen Bank for providing micro finance to poor people (who do not qualify for loans from the organized banking sector due to lack of security). With the help of micro finance, the poor people can set up self-employment units and overcome the problem of poverty and unemployment.
5. Consumer Welfare: Entrepreneurship activity facilitates consumer welfare. Due to innovative ideas, consumers can enjoy new and better types of goods and services. Also due to employment, purchasing power of the people increases, resulting in more demand for new and better type of goods. Therefore, the standard of living of the society improves.
6. Revenue to the Government: The entrepreneurs provide revenue to the government. They provide revenue by way of direct and indirect taxes. The direct revenue comes in form of personal income tax, and corporate tax paid by entrepreneurs. The indirect revenue comes in the form of excise duty, custom duty, services tax, etc., paid by the entrepreneurs.
7. Facilitates Competition: Entrepreneurship facilitates competition in the business world. Entrepreneurs take proactive decisions. The proactive decisions lead to reactive decisions the part of competitors in the industry. When competition becomes stiff, the entrepreneurs further come up with innovative ideas in the areas of production as well as marketing resulting in further fillip to competition.
8. Reduction in Income Inequalities: The entrepreneurs are responsible for reduction of income inequalities in the country. Since the entrepreneurs provide employment to the people, the• income level of those employed increases, which in turn reduce income inequalities. Also, the ownership of small enterprise Is in the hands of several small businessmen, and therefore the income inequalities get reduced.
9. Employment: Entrepreneurship facilitates employment generation. Due to entrepreneurship, there is generation of self-employment. Apart from self-employment, the entrepreneurs generate direct and indirect employment:
-The direct employment in the business units managed by entrepreneurs.
-The indirect employment is the supporting units that provide inputs and services to the enterprises or that depend on the enterprise for the inputs and services.
10. Standard of Living: Entrepreneurs generate employment. Employment increases income level of the employed people. Increase in income leads to higher purchasing power, which leads to increase in consumption of goods and services. The increase in consumption results in higher standard of living of the people.
11. Efficiency: Entrepreneurs make efforts to improve efficiency of the organization. The entrepreneurs undertake various activities to improve efficiency:
-Research and development
-Training and development
-Technology upgradation, etc.
12. Foreign Exchange: Entrepreneurs generate foreign exchange by way of export of goods and services. The entrepreneurs operate not only in domestic market but also in overseas markets. In India, about 1/3rd of the total exports are exported by MSEs. A number of items are exported by MSEs, which include - gems and jewellery, readymade garments, light engineering goods, chemicals, etc.
The post-Independence period in India witnessed the growth of entrepreneurship development. The factors can be broadly divided into two groups:
- Economic Factors
1. Increase in Demand: The demand in Indian market (urban as well as rural) has increased especially in the post reform period. The increase in demand is mainly on account increase in purchasing power of the people (due to employment). With the increase in purchasing power, people demand new and better type of goods and services. This has given scope to the development of innovative products and services.
2. Economic Infrastructure: In India, the economic infrastructure facilities have improved, especially in the post reform period. i But power sector is still lagging even in urban areas. The infrastructure facilities that improved considerably include the transport and the telecom sectors. With the growth of infrastructure facilities, entrepreneurs are at a better advantage in setting up new units, especially in small towns and cities.
3. Bank Credit: The banks are providing credit facilities entrepreneurs. Small entrepreneurs come under the priority sector. As per RBI directives, banks must provide funds to priority sector (40% of total lending) at low interest rates. The increase in bank credit to entrepreneurs is due to:
-Increase in bank deposits.
-Decrease in CRR and SLR since 1991.
-RBI guidelines on lending to the priority sector.
4. Competition: The competition in Indian market has been at greater pace, especially after 1991. The Government of India has liberalized the Indian economy. FDT has increased across several industries. In 1991, FDI was increased to 51 % in certain high priority industries. At present, FDI is allowed even up to 100% in certain sectors such as pharma, exports, tourism, etc.
The Government has also started the process of dereservation of public sector, which has generated competition between the public sector and private sector. The Dereservation of items from the SSl list has further increased competition between the large sector and the small sector.
To face competition, there is a need for entrepreneurs to come up with:
-Innovative or new products.
-Innovative techniques or methods.
-Innovative schemes to promote products, etc.
5. Government Incentives: The Central and State Governments provide number of incentives to entrepreneurs, which have given a boost to entrepreneurship development in India. The incentives include:
-Incentives for Research & Development.
-Tax holiday for setting up units in backward areas. -Cash subsidy.
-Loans at low interest rates.
6. Funding by Venture Capitalists: A number of venture capital funds have come up in India to provide funds to new enterprises. Venture capital providers invest in firms that have the potential to develop into successful ventures. The venture capitalists provide three types of funding:
-Equity capital
-Loans
-Mezzanine funding (partly equity and partly debt)
In 1988 ICICI Ventures was set up and soon followed by Gujarat Venture Finance Limited (GVFL). Due to timely infusion of funds by Venture Capitalists, entrepreneurship gained momentum in India.
II. Non-Economic Factors:
1. Quality Consciousness of Customers: Over the years, customer expectations have increased. They expect quality of goods at lower prices. Also, Indian customers have shown growing preference tor new and better type of goods. Young entrepreneurs are coming up with innovative products to satisfy customer requirements. Therefore, entrepreneurship in India has got a boost.
2. Reduction in Bureaucratic Formalities: In the post-reform period, there has been a reduction of bureaucratic formalities. Reduction in bureaucratic formalities has motivated young entrepreneurs to venture in business field.
For instance, the Government has abolished licensing for most of the industries. Therefore, the businessmen can concentrate on productive activities like market research, R & D, training to employees, etc. They need not waste their time, effort, and money, on procuring licenses.
3. Training Facilities: Nowadays, entrepreneurs are sharpening their knowledge and skills due to the training support provided by various training institutes. Entrepreneurship Development Programmes (EDPs) are designed by various institutes such as:
-Small Industries Development Organization (SIDO)
-Entrepreneurship Development Institute of India (EDII)
-National Small Industries Corporation (NSIC) -National Institute for Entrepreneurship and Small Business Development (NIESBUD)
-District Industrial Centers (DICs)
4. Professionalism in Business: The concept of professionalism in business has entered in the Indian corporate world. Indian firms, large or small, have realized the importance of professionalism in business activities. Professionalism implies systematic operation of business activities - right from the conception stage. The professional firms place emphasis on market research, research & development, quality control, use of appropriate technology, training to employees, and so on. The professional attitude is largely responsible for the entrepreneurship development in India.
5. Personal Factors: The personal factors are also responsible for entrepreneurship development in India. The younger generation has developed a greater need for independence. The young entrepreneurs want to do things in their own way as they do not like to work for some else. Also, the need for achievement drives young persons to set up new enterprises. The willingness to assume risks has also increased, especially in the case of talented and educated youth of today. Therefore, the three factors - need for independence, need for achievement, and willingness to assume risks, - have contributed to the development of entrepreneurship in India.
6. Social Support for New Ventures: There has been increasing social support for new ventures from family members, relatives and friends. Setting up a good business venture is supported by family members and others. The support is both emotional and economical.
For instance, in urban areas, the concept of double income families is on the increase. One member may work for a fixed income or salary and the other member may operate a business venture. Even if the venture does not perform well, the family may not be badly affected on financial grounds because of the fixed income earned by one member of the family.
7. Socio-Cultural Factors: The socio-cultural factors have undergone a change in India. The Indian society has become socially and culturally more advanced, more so in the post reform period.
The society gives importance to entrepreneurs, and therefore, entrepreneurs enjoy a special status in the society. As a result of growing importance for entrepreneurs, young talents with innovative ideas are entering the field of entrepreneurship.
2.8 ENTREPRENEURSHIP IN INDIA: A GLOBAL PERSPECTIVE
Entrepreneurship is important for job creation, economic growth and problem-solving. It also reflects a society’s capacity for boldness, risk-taking and creativity. More specifically, per the global Entrepreneurship Development Institute (GEDI), there's a robust positive association between entrepreneurship, economic growth and innovation.
The GEDI has recently released its 2018 Global Entrepreneurship Index, a ranking of 137 countries. Countries are ranked on 14 criteria: Opportunity perception (whether the population can identify opportunities to start out a business); start-up skills; risk acceptance; networks; cultural support; opportunity start-up (whether entrepreneurs are motivated by opportunity instead of necessity); technology absorption; human capital; competition; product innovation; process innovation; high growth (business intention to grow); internationalisation and risk capital availability.
How does India fare? India’s performance is vital given the priority of the “start-up India” initiatives and therefore the crucial role of entrepreneurship in generating jobs during a stagnant Indian labour market.
India’s performance as per the GEDI index
According to GEDI, India is ranked 68th out of 137 countries, a “middling” performance. As per the Asia Pacific region, India is again in the middle position, 14th out of 28 countries. The leading regional players are Australia, Hong Kong and Taiwan initially , second and third positions respectively. It's noteworthy that India falls below China (9th) and skilled regional economies like Korea (4th) and Japan (6th) within the region.
The performance by specific criteria also makes for a stimulating viewing. India’s strength areas where its performance is above its overall score, are in product and process innovation, internationalisation, opportunity start-up, risk acceptance, opportunity perception and robust competition within the marketplace. Its performance on human capital is broadly at par with its overall performance.
2.9 EMERGING SECTORS
India is about more, much more, than IT and outsourcing. There are myriad opportunities across sectors. India is rapidly scaling up its infrastructure so as to sustain its growth. India’s manufacturing sector is additionally developing fast, with world-class companies like Bharat Forge, Tata Motors, and Mahindra. India’s healthcare industry will grow to over £40 billion in the next three years. India aims to train 500 million people, which exposes a market for British skills providers. Rising income levels among India’s bourgeoisie exposes new retail opportunities. The entertainment and media sector is predicted to succeed in £17.8 billion in 2018 – creating a lucrative marketplace for technology businesses with smart IP.
ADVANCED ENGINEERING AND MANUFACTURING:
The Indian Government’s ‘Make in India’ campaign is probably the only biggest development within the new government’s politics so far , bringing a replacement mind-set in government, changing focus to fostering investment, innovation, protecting property , and building best-in-class manufacturing infrastructure.
India may be a leading automotive manufacturer, with significant effort being placed on green technology. Defence and civil aviation is additionally a neighbourhood of massive expansion. India increased foreign direct investment limits in defence to 49% and liberalised the licensing of personal domestic firms to supply defence equipment to spice up manufacturing within the sector. Even current offset arrangements should be seen as a chance for alliances by UK companies. Frugal and other innovative models will increasingly come to the fore.
DIGITAL INNOVATION:
India has the third largest internet literate population within the world today and it's estimated that there'll be over 500 million internet users in India by 2018. However, internet penetration in India is currently only 19% and there's a big opportunity for growth in penetration and usage base in India with the Government’s Digital India initiative.
More and more Indian consumers are adopting digital technologies and this exposes a plethora of opportunities in sectors like finance and banking, retail, healthcare and education. Because the Digital India initiative takes shape, demand for technology related services like building the broadband infrastructure; creating identity solutions, payment systems, web or mobile based delivery structures then on is predicted to extend.
ENERGY:
India is that the fourth-largest energy consumer within the world and India’s energy consumption grew at 7.1% in 2014-15, the very best rate of increase among major economies. Coal, oil and gas are the foremost important sources of primary energy in India. Following the Government’s stated ambition to feature 175 Gw of capacity within the renewable energy sector by 2022, to the prevailing 36.3 Gw, India’s energy market represents a strong opportunity for UK companies.
FINANCIAL, LEGAL AND PROFESSIONAL SERVICES:
The financial services sector has been a crucial contributor to India’s GDP accounting for nearly 6% share in 2014-15. The audit, consulting and advisory services market, including those for professional services, in India is pegged at around £ 1 billion, and growing at 10% annually.
Indian Government is liberalising the world. The Insurance Laws (Amendment) Act which incorporates a key provision allowing foreign investors to extend stakes in local insurers from 26% to 49% was passed in March, 2015. Foreign Investments are to be allowed in Alternative investment. The excellence between differing types of investment (i.e. Foreign Portfolio Investments and Foreign Direct Investment) is to get replaced with composite caps which can create headroom and adaptability for overseas investors.
INFRASTRUCTURE:
India is projected to spend some US$1trillion by 2020 on a spectrum of infrastructure projects – roads, ports, airports, power (including nuclear) and urban regeneration/rail, new cities and towns.
In June, 2015 the Indian Government launched the 100 Smart City Mission (SCM) alongside two other major missions Atal Mission for Rejuvenation and concrete Transformation (AMRUT) and Housing for all by 2022. India’s ‘Smart City’ initiative is part of a bigger plan to develop industrial corridors like the Delhi-Mumbai Industrial Corridor (DMIC), the Chennai-Bangalore Industrial Corridor (CBIC) and therefore the Bangalore-Mumbai Economic Corridor (BMEC). Many industrial and commercial centres are expected to be recreated as Smart Cities along these corridors.
In September, 2015 the govt. Of India announced an inventory of 98 cities to be built as ‘smart cities’ in next 5 years allocating a budget of £ 9.8 billion in 2015. With the main target on developing smart cities and corporations looking to supply value-added and specialised services like technology consulting, networking, middleware, sector-specific applications, and systems integration, the initiative offers immense opportunities for UK businesses
LIFE SCIENCES AND HEALTHCARE:
Currently, on an upward growth curve, the industry is predicted to the touch £123 billion in revenues by 2018, up from £61 billion in 2013, demonstrating a CAGR of 15% for 2013–18. An increasingly affluent population is spending on private healthcare, and Indian pharm and biotech companies are increasing investments and growing internationally.
Indian government recently permitted FDI up to 100% under the automatic route for manufacturing of medical devices and therefore the liberalisation of the insurance industry in India also will boost healthcare insurance.
RETAIL, FOODS & DRINK, AND LOGISTICS:
The Indian retail sector is probably going to grow at a compound annual rate of growth (CAGR) of 13% to succeed in £624 billion by 2018, while online retail is estimated to grow fourfold to succeed in USD 14.5 billion for an equivalent period. The exponential growth of online retail are often attributed to key factors like increased internet penetration, proliferation of smart phones and credit cards, value-add services like ‘cash-on-delivery’ and most significantly , a dramatic shift in consumer attitudes and buying behaviour.
India allows 100% FDI in single-brand retail and up to 51% FDI in multi-brand retail, subject to certain conditions. 100% FDI is permitted under the automated route for the food processing sector and for wholesale trading businesses, inclusive of B2B e-commerce.
Online retail is predicted to be at par with the physical stores within the next five years and India’s e-commerce market is estimated to succeed in £60 billion by 2019. With organised retail penetration at 19% as of 2014, opportunities exist for UK retailers, food and drink producers, and logistics and other associated services.
SKILLS AND EDUCATION:
India’s young population needs the qualifications and skills to drive the economy deep into the 21st century. Over subsequent decade India will have a surplus manpower of 4-5 crore and there's a requirement to supply this youthful manpower with skills and skill to tackle global challenges. In July, 2015, the Indian Government launched the Skill India Campaign including the launch of the National Skill Development Mission and unveiling of the new National Policy for Skill Development and Entrepreneurship 2015. Targets and methods are in situ to supply vocational qualifications to 500 million, and to make 40 million new university places. Both by 2022
SPORTS:
The sports sector in India grew by 10% in 2014 to £ 480 million. The expansion and development of the Indian sport industry is creating opportunities within the areas of sporting goods and goods, sportswear, sports management and sports engineering professionals.
Role of Entrepreneurs in Economic Development
Role of Entrepreneurs in Economic Development – 7 Ways: Capital Formation, Improvement in Per Capita Income, Generation of Employment and a couple of others
Economic development essentially means a process of upward change whereby the important per capita income of a country increases over a period of time. Entrepreneur plays an important role in economic development. Entrepreneurs functions the catalysts within the process of industrialization and economic process. Technical progress alone cannot cause economic development, unless technological breakthroughs are put to economic use by entrepreneurs.
It is the entrepreneur who organizes and puts to use capital, labour and technology. Accordingly, “development doesn't occur spontaneously as a natural consequence when economic conditions in some sense are right. A catalyst is required and this needs entrepreneurial activity to a substantial extent, the range of activities that characterizes rich countries is often attributed to the availability of entrepreneurs.”
The entrepreneur is the key to the creation of latest enterprises that energize the economy and rejuvenate the established enterprises that make up the economic structure.
Entrepreneurs initiate and sustain the process of economic development within the following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the general public through the issues of industrial securities. Investment of public savings in industry leads to productive utilization of national resources. Rate of capital formation increases which is important for rapid economic process. Thus, an entrepreneur is that the creator of wealth.
2. Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like land, labour and capital into value and wealth within the sort of goods and services. They assist to extend net national product and per capita income within the country, which are important yardsticks for measuring economic growth.
3. Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an entrepreneur offers the simplest way for independent and honourable life. Indirectly, by fixing large and little scale business units they provide jobs to millions. Thus, entrepreneurship helps to scale back the unemployment problem in the country.
4. Balanced Regional Development:
Entrepreneurs in the public and personal sectors help to get rid of regional disparities in economic development. They found out industries in backward areas to avail various concessions and subsidies offered by the central and state governments.
Public sector steel plants and personal sector industries by Modis, Tatas, Birla’s et al. Have put the hitherto unknown places on the international map.
5. Improvement in Living Standards:
Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products. Production of products on mass scale and manufacture of handicrafts, etc., within the small scale sector help to enhance the standards of life of a common man. These offer goods at lower costs and increase variety in consumption.
6. Economic Independence:
Entrepreneurship is important for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries. Businessmen also export goods and services on a large scale and thereby earn the scarce foreign exchange for the country.
Such import substitution and export promotion help to make sure the economic independence of the country without which political independence has little meaning.
7. Backward and Forward Linkages:
An entrepreneur initiates change which features a chain reaction. Setting up of an enterprise has several backward and forward linkages. For example- the establishment of a steel mill generates several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the availability of steel, the plant facilitates the expansion of machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an environment of enthusiasm and convey a sense of purpose. They provide a company its momentum. Entrepreneurial behaviour is critical to the future vitality of each economy. The practice of entrepreneurship is as important to established firms because it is to new ones.
Economic development essentially means a process of upward change where by the per capita income of a country increases over an extended period of time.
The economic history of the presently developed countries like America, Germany, and Japan results in support the very fact that the economy is an impact that entrepreneurship is the cause the crucial role played by the entrepreneurs in the development of the western countries has made the people of under-developed countries too much aware of the importance of entrepreneurship for economic development.
Now people have begun to understand that for achieving the goal of economic development, it's necessary to extend entrepreneurship both qualitatively and quantitatively within the country. It's only active and enthusiastic entrepreneurs who fully explore the potentialities of the country’s available resources land, tech., capital, material etc.
The role of entrepreneurship in economic development varies from economy to economy depending upon its material resources, industrial climate and therefore the responsiveness of the form of government to the entrepreneurial function. The entrepreneurs contribute more in favourable opportunity conditions.
1. In underdeveloped/developing regions, because of lack of funds and skilled labour, the atmosphere is a smaller amount conducive for innovative entrepreneurs.
2. Under the conditions of paucity of funds and therefore the problem of imperfect market, the entrepreneurs are sure to launch their enterprises on a small scale. Also initiator entrepreneurs are preferred in such regions. Thus, initiations of innovations introduced in developed regions on a huge scale bring about rapid economic-development in underdeveloped/developing regions.
3. Further India aims at decentralized industrial structure to scale back regional imbalances in levels of economic development.
4. Generation of employment
5. Balanced regional development
6. Improvement in standard of living
7. Backward and forward linkages
8. Creator of wealth (securities, issues etc.).
Thus, small scale entrepreneurship in such industrial structure plays a crucial role to realize balanced regional development, generation /creator of wealth etc.
Important role that entrepreneurship plays within the economic development of our economy (India) are:
1. Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like land, labour and capital into national income and wealth within the form of goods and services. They assist increase Net National Product and Per Capita Income within the country.
2. Generation of Employment:
Entrepreneur generates employment both directly and indirectly. By starting their business they present a chance to others for work by offering jobs.
3. Balanced Regional Development:
Entrepreneurs help to remove the regional disparities within the economic development of areas. They found out industries in backward areas to avail various substitutes and bring up the development of that region.
4. Improvement in Living Standards:
Entrepreneur set up industries which introduce new products on a mass scale. They're at lower costs and this helps to enhance the quality of life of a common man.
5. Economic Independence:
Entrepreneurship is important for national self-reliance. Industrialists help to manufacture substitutes of imported products thereby reducing dependence on foreign countries. These businessmen also export products thereby earning exchange for the country.
Entrepreneurship doesn't emerge and grow spontaneously. There are various factors having both positive and negative influence on the expansion of entrepreneurship. (Positive influence implies facilitating and conducive conditions whereas negative influences ask factors inhibiting the emergence of entrepreneurship).
The Micro, Small and Medium Enterprises Development Act, 2006 aims at facilitating the promotion, development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto.
The Act is operational from 2nd October 2006.
DEFINITION OF MICRO, SMALL & MEDIUM ENTERPRISES:
In accordance with the supply of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two categories:
a. Manufacturing Enterprises:
The enterprises engaged in the manufacture or production of products referring to any industry laid out in the first schedule to the industries (Development and regulation) Act, 1951). The Manufacturing Enterprise are defined in terms of investment in Plant & Machinery.
b. Service Enterprises:
The enterprises engaged in providing or rendering of services and defined in terms of investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under:
Manufacturing Sector | |
Manufacturing Sector | Investment in plant & machinery |
Micro Enterprises | Does not exceed 25 lakh rupees |
Small Enterprises | More than 25 lakh rupees but does not exceed 5 crore rupees |
Medium Enterprises | More than 5 crore rupees but does not exceed 10crore rupees |
| |
Service Sector | |
Enterprises | Investment in equipment’s |
Micro Enterprises | Does not exceed 10 lakh rupees: |
Small Enterprises | More than 10 lakh rupees but does not exceed 2 crore rupees |
Medium Enterprises | More than 2 crore rupees but does not exceed 5 core rupees |
AIM AND OBJECT OF THE ACT:
The Act aims at facilitating the promotion and development and enhancing the competitiveness of small and medium scale enterprises and seeks to:-
• Provide for statutory definitions of "small enterprise" and "medium enterprise".
• Provide for the establishment of a National Small and Medium Enterprises Board, a high-level forum consisting of stake holders for participative review of and making recommendations on the polices
ESTABLISHMENT OF BOARD:
"Board" means the National Board for Micro, Small and Medium Enterprises established under section 3 of the MSMED Act 2006.
The head office of the Board is at Delhi.
ESTABLISHMENT OF ADVISORY COMMITTEE:
The Central Government can by notification, constitute an Advisory Committee.
IS REGISTRATION OF MICRO, SMALL AND MEDIUM ENTERPRISES MANDATORY?
Registration of the micro or small or medium enterprises is replaced with the filling of Memorandum.
• The Registration of micro or small enterprises (both manufacturing and rendering of service) or medium enterprise engaged in providing or rendering of services is vital but discretionary or optional.
• However, a medium enterprise engaged in the manufacture or production of products has got to compulsorily register under the Act.
Taking into consideration the advantages available under the Act, it's recommended that each enterprise be it minor, small or medium must choose the registration.
REGISTRATION OF MICRO, SMALL AND MEDIUM ENTERPRISES
All classes of enterprises, whether Proprietorship, Hindu undivided family, Association of persons, Co-operative society, Partnership firm, Company or Undertaking, by whatever name called can apply for the registration and obtain qualified for the advantages provided under the Act.
Any person who intends to determine a micro, small or medium enterprise at his discretion may file the memorandum of micro, small or, because the case could also be , of medium enterprise with such authority as is also specified by the state government under sub-section(4) or the Central Government under sub-section (3) of the Act.
• Provisional Registration: Provisional registration is granted to a unit at its pre-investment period to enable it to require necessary steps to use for financial credit, land or an industrial set, water, power or telephone connections, etc.
• Permanent / Final Registration: A provisionally registered industrial unit when it's close to enter production is to use for grant of Permanent / Final Registration. An existing and functioning industrial unit is eligible to use for Permanent / Final Registration without going into provisional registration processes.
The Micro and small Enterprises should mention/get printed on their letter heads, supply order sheets, invoices, bills and other relevant documents, the MSMED Registration/Entrepreneurs Memorandum (EM) Number allotted by a competent authority, in order that there remains an identification of being an MSE supplier.
BENEFITS OF REGISTRATION OF MSM ENTERPRSES:
If a micro or small enterprise files a memorandum with District Industries Centre (DIC) of its area, then it stands to realize many benefits like:
• Easy finance availability from Banks, without collateral requirement;
• Protection against delay in payment from Buyers and right of interest on delayed payment;
• Preference in procuring Government tenders;
• Stamp Duty and Octroi benefits;
• Concession in electricity bills;
• Reservation policies for manufacturing/production through conciliation and arbitration;
• Reimbursement of ISO Certification Expenses;
• Moreover with the enactment of the Act, the interest on delayed payments to small scale and ancillary Industrial Undertaking Act, 1993 is repealed with effect from October 2, 2006.
Similarly, Medium enterprises enjoys the below mentioned benefits:
• Easy finance availability from Banks, without collateral requirement
• Preference in procuring Government tenders
• Reservation policies for manufacturing / production sector enterprises
• Time-bound resolution of disputes with Buyers through conciliation and arbitration
DISPUTES UNDER THE MSME DEVELOPMENT ACT
In case of disputes with reference to any amount due to delayed payment:
• The enterprises under the provisions of the Act may consult with the Micro and small Enterprises Facilitation Council which might further itself conduct conciliation in the matter
• and where the conciliation initiated isn't successful and stands terminated with none settlement between the parties the council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services.
• The Micro and small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have an equivalent jurisdiction to act as an Arbitrator or conciliator under this section during a dispute between the supplier located within the jurisdiction and a buyer located anywhere in India.
The Act also has provision that each reference made under this section shall be decided within a period of 90 days from the date of creating the reference.
Under section 19 of the Act, it's also been mentioned that no Application for setting aside any decree/award, made by the Council / referred Institution shall be entertained by any Court unless the appellant (not being the supplier) has deposited with its seventy-five percent of the quantity in terms of the decree/ award.
Further, as long as pending disposal of the appliance to set aside the decree, award or order, the court shall order that such percentage of the quantity deposited shall be paid to the supplier, because it considers reasonable under the circumstances of the case subject to such conditions because it deems necessary to impose.
PRECAUTIONS:
• Once the application is completed under MSEFC, there's no provision to withdraw the proceedings. Therefore, the customer should make sure the best ways to resolve the disputes, if any, instead approaching to MSEFC in the initial stages of dispute.
• The Buyers need to make sure that the customer doesn't owe any outstanding amount, including interest thanks to MSM Enterprises for quite 15 days. Otherwise, the customer must disclose this non-payment in the Annual Financials of the customer.
• The Act provides for the payment of interest at 3 times the bank rate by the customer in case of failure to form the payment within a maximum of 45 days from the date of receipt of products or services.
PART 3
Consumerism is a social and economic order that's based on the systematic creation and fostering of a desire to get goods or services in ever greater amounts. The term is usually associated with criticisms of consumption starting with thorstein veblen or, more recently by a movement called Enoughism.
Veblen’s subject of examination, the newly emergent middle class arising at the turn of the 20 th century, involves full fruition by the end of the 20 th century through the process of globalization.
It also may refer to a movement seeking to protect and inform consumers by requiring such practices as honest packaging and advertising, product guarantees, and improved safety standards. In this sense it's a movement or a collection of policies aimed toward regulating the products, services, methods, and standards of manufacturers, sellers, and advertisers within the interests of the customer .
Consumerism is:
1. a modern movement for the protection of the buyer against useless, inferior, or dangerous products, misleading advertising, unfair pricing, etc.
2. The concept that an ever-expanding consumption of products is advantageous to the economy.
3. The fact or practice of an increasing consumption of goods: a critic of American consumerism.
Consumerism is an organised movement of citizens and government to strengthen the rights and power of buyers in reference to sellers. It's the ideology and an idea which has come to remain in business literature. The buyer is exposed to several hazardous-physical, environmental and exploitation thanks to unfair trade practices.
He needs protection, as an example, against products which are unsafe for consumption like drugs and adulterated food products and products which can cause badly injury like defective electrical appliances.
He needs protection against malpractices and deceit by sellers.
He should have adequate rights and right of recourse to redressal measures against defaulting businessmen.
He must be protected against environmental pollution of air, water and noise and effective measures should be devised to keep the environment neat and clean.
The American Heritage Dictionary defines consumerism as “The movement seeking to guard and inform consumers by requiring such practices as honest packaging and advertising, product guarantees, and improved safety standards “ or alternatively – “The theory that a progressively greater consumption of products is economically beneficial”. It’s thus the other of anti-consumerism or of producerism.
i. Anti-consumerism is that the socio-political movement against consumerism. In this meaning, consumerism is that the equating of private happiness with the purchasing material possessions and consumption.
Ii. In relation to producerism, it's the assumption that buyers should dictate the economic structure of a society, instead of the interests of producers. It also can refer to economic policies that place an emphasis on consumption.
Effects of Consumerism:
Because consumption is so central to many economies, and even to the present forms of globalization, its effects therefore are seen around the world. How we consume, and for what purposes divers how we extract resources, create products and produce pollution and waste.
Issues concerning consumption hence also affect environmental degradation, poverty, hunger, and even the increase in obesity that's nearing levels almost like the official global poverty levels.
Political and economic systems that are currently promoted and pushed round the world in part to extend consumption also result in immense poverty and exploitation. Much of the world cannot and don't consume at the amount that the wealthier in the world do.
Indeed, the above U.N. Statistics highlight that very sharply. In fact, the inequality structured within the system is such as Richard Robbins says, someone has to buy the way the wealthier in the world consume.
Consumerism is economically manifested within the chronic purchasing of latest goods and services, with little attention to their true need, durability, product origin or the environmental consequences of manufacture and disposal.
Consumerism is driven by huge sums spent on advertising designed to make both a desire to follow trends, and therefore the resultant personal self-reward system supported acquisition. Materialism is one of the end results of consumerism.
Consumerism interferes with the workings of society by replacing the normal common sense desire for an adequate supply of life’s necessities, community life, a stable family and healthy relationships with a man-made ongoing and insatiable go after things and therefore the money to buy them with little regard for the true utility of what's bought.
An intended consequence of this, promoted by those that take advantage of consumerism, is to accelerate the discarding of the old, either due to lack of durability or a change in fashion.
Costs of Consumerism Economic:
The more consumerism spreads, the weaker is that the incentive to manufacture long-lasting, quality products, and therefore the greater the likelihood that cheaply made products will instead be imported from the lowest-wage, environmentally unregulated overseas manufacturer that mobile capital, ever seeking the very best return, can find.
Imports may create some loudly touted jobs, but their main product is quiet but spectacular profits for transnational corporations that export our employment while importing inferiority products and selling them here for a small or no reduction in price.
“Free trade” laws are promoted in order that American corporations can export pollution finally regulated here and import tariff-free goods back to the US from their foreign subsidiaries in whatever Sweatshop Republic they will find the most cost effective workers.
NAFTA is a codified example of this policy administered at a national level. Newer attempts at promoting other trade agreements are thwarted by citizen activism.
First, consumer luxuries have gotten democratized during this decade:
Products that were considered for a few began to reach larger and larger masses of consumers — from colas to shampoos to ready wear to mobile to airlines. Categories that started within the 90s began to expand their footprint and became a section of mass life.
Consumption and consumerism reached more people than it did within the 90s. Social inequity continues to be a part of India’s economic, but the capitalistic principle that “open up from the top to some, and therefore the benefits will flow down to many” has come true. Consumerism is actually mass!
Along with this, has come a culture of upgrade and step movement instead of lifetime ownership and gradual movement.
Technology, mobile handsets especially , made consumers get wont to constant change — buying a replacement product even when the old one was “functional”, thus breaking the barrier of the “replace when it’s broke” mind-set. Then this extended to other categories in life — from clothes to televisions to homes.
Every Indian market presents a chance to marketers to get consumers to move up. As technology improves and consumers’ income increases, the willingness and propensity of consumers to form leaps from unbranded to branded and pay significant premia is additionally increasing. There’s not “lifetime ownership”, but “lifetime consumer value’!
Third, there has been a shift from product to services and experiences:
And this is often taking place across categories. Coffee has become Cafes; beauty products are transiting into Parlors — and this is often going into small towns too with local “aunties” sensing business opportunities opening parlors and beauty counseling centres at home — and home videos have become multiplexes. And in every case, it provides marketers a chance to extract more value.
The great Indian middle class and rise in Indian consumerism:
McKinsey global has released its India consumer research and here are a couple of key insights from the report:
a) Indian income will triple over following two decades.
b) Over following two decades, the country’s middle class will grow from about 5 percent of the population to quite 40 percent and make the world’s fifth-largest consumer market.
c) In 2005, private spending reached about 17 trillion Indian rupees ($372 billion), accounting for quite 60 percent of India’s GDP, so in this respect the country is closer to developed economies like Japan and therefore the USA than are China and other fast-growing emerging markets in Asia.
d) India remains the least urbanized of the emerging Asian economies. Today only 29 percent of Indians live in cities.
India Shining:
a. Extremely rural poverty has declined from 94 percent in 1985, to 61 percent in 2005.
b. In 1985, 93 percent of the population lived on a household income of but 90,000 rupees a year by 2005, that proportion had been cut nearly in half, to 54 percent.
c. The growth that has pulled many people out of poverty is additionally building a huge middle class which will be concentrated in India’s urban areas.
d. If India can achieve 7.3 percent annual growth over subsequent 20 years, 465 million more people are going to be spared a life of extreme deprivation
e. About 400 million Indian city dwellers a group nearly 100 million people larger than the present population of the USA will belong to households with a comfortable standard of living.
Consumer Spending in India:
Discretionary spending in India will rise from 52 percent of total private spending today to 70 percent in 2025.
a. By 2025 India’s wealthiest citizens will total 24 million, quite the present population of Australia. By that year too, India’s affluent class are going to be larger than China’s comparable segment, projected at about 19 million people
b. Spending on purchases that improve the economic prospects and quality of life of an individual or family health, education, transport, and communications will soar and eventually command a greater share of consumption than they are doing elsewhere.
c. Despite India’s fondness for cricket and “Bollywood” movies, recreational products and services will take a smaller slice of household spending there than in other countries.
d. Transportation, already the most important category of expense after food, will take a bigger portion of household budgets in coming years, exceeding its share altogether of our benchmark countries. The very best growth will come from car purchases. Categories like clothing and household goods are expected to post slower annual growth relative to overall consumption
INTRODUCTION
A consumer is the one who assumes to be treated like a King as they carry business to the vendor. Previously “consumer was requested to beware” but lately fingers are pointed to seller “let seller be beware” as thanks to policies introduced, authorities’ laws, consumer protection, NGO and thus the increased competition within the market.
Consumer Protection may be a term given to a exercise wherein we'd like to guard the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All round the world, mechanisms are pondered upon so as to uphold the satisfaction of the consumer.
The Consumer Protection Act was passed in 1986 and it came into force from 1 July, 1987. The main objectives of the Act are to supply better and every one round protection to consumers and effective safeguards against differing types of exploitation like defective goods, deficient services and unfair trade practices. It also makes provisions for easy, speedy and cheap machinery for redressed of consumer's grievances.
SALIENT FEATURES
• It applies to all goods, services and unfair trade practices unless specifically exempted by the Central Government.
• It covers all sectors-private, public or co-operative.
• It provides for establishment of consumer protection councils at the central, state and district levels to market and protects the rights of consumers and three-tier quasi-judicial machinery to affect consumer's grievances and disputes.
• It provides a statutory recognition to the six rights of consumers.
THE MAIN OBJECTIVES OF THE CONSUMER PROTECTION ACT
- Providing better and every one round protection to consumer.
- Providing machinery for the speedy redressal of the grievances.
- Creating framework for patrons to hunt redressal.
- Providing rights to consumers.
- Safeguarding rights of Consumers.
- To ensure fair, competitive and responsible markets that employment well for consumers and promote ethical business practices.
- To promote and protect economic interest of consumers.
- To improve access to information that consumers require, to form knowledgeable choices consistent with their individual needs.
- To protect consumer from hazards.
DEFINITIONS
CONSUMER:
WHO MAY BE A CONSUMER?
The Consumer Protection Act says that consumer means a person who:
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of credit, and includes any user of such goods aside from the one that buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of credit when such use is formed with the approval of such person, but doesn't include an individual who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of credit, and includes any beneficiary of such services aside from the one that hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the primary mentioned person;
Examples:
1. A jeep was purchased to run it as a taxi. The question was whether the customer of the jeep was a consumer under the Act. The Rajasthan State Commission held that to use the jeep as a taxi with the thing to earn profits was a billboard purpose, and therefore, the consumer/user wasn't a consumer within the meaning of the Act.
CONSUMER OF SERVICES - an individual may be a consumer of services if he satisfies the subsequent criteria:
SERVICES ARE HIRED OR AVAILED OF - The term ‘hired’ has not been defined under the Act. Its Dictionary meaning is - to acquire the utilization of services at a price. Thus the term ‘hire’ has also been utilized in the sense of ‘avail’ or ‘use’. Accordingly it's going to be understood that consumer means a person who avails or uses any service.
Example:
A goes to a doctor to urge himself treated for a fracture. Here A is hiring the services of the doctor. Thus he's a consumer.
What constitutes hiring has been a problem to be addressed in many consumer disputes. If it's established that a specific act constitutes hiring of service, the transaction falls within internet of the consumer Protection Act, and vice-versa.
Examples:
A passenger getting railway reservation after payment is hiring service for consideration.
A landlord neglected and refused to supply the agreed amenities to his tenant. He filed a complaint against the landlord under the consumer.
COMPLAINANT:
An aggrieved consumer seeks redressed under the Act through the instrumentality of complaint. It doesn't mean that the consumer can complain against his each and each problem. The Act has provided certain grounds on which complaint are often made. Similarly, relief against these complaints is often granted within the set pattern.
WHAT CONSTITUTES A COMPLAINT [SECTION 2(1) (C)]?
Complaint may be a statement made in writing to the National Commission, the State Commission or the District Forum by an individual competent to file it, containing the allegations intimately, and with a view to get relief provided under the Act.
WHO CAN FILE A COMPLAINT [SECTIONS 2(B) &12]?
At the outset it's clear that an individual who are often termed as a consumer under the Act can make a complaint. To be specific on this account, following are the persons who can file a complaint under the Act:
• A consumer; or
• Any voluntary consumer association registered under the businesses Act, 1956 or under any other law for the nonce effective
• The Central Government or any government,
• One or more consumers, where there are numerous consumers having an equivalent interest.
WHAT A COMPLAINT MUST CONTAIN [SECTION 2(1)(C)]
A complaint must contain any of the subsequent allegations:
• An unfair trade practice or a restrictive trade practice has been adopted by any trader.
Example: A sold a six months old car to B representing it to be a replacement one. Here B can make a complaint against A for following an unfair trade practice.
• The goods bought by him or agreed to be bought by him suffer from one or more defects.
Example: A bought a computer from B. It had been not working properly since day one. A can make a complaint against B for supplying him a defective computer.
• The services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect.
Example: A hired services of an advocate to defend himself against his landlord. The advocate didn't appear whenever the case was scheduled. A can make a complaint against the advocate.
• A trader has charged for the products mentioned within the complaint a price in more than the worth fixed by or under any law for the time being effective or displayed on the products or any package containing such goods.
Example: A bought a sack of cement from B who charged him Rs. 100 over and above the reserve price of the cement declared by the government. Here A can make a complaint against B.
WHEN A COMPLAINT CAN'T BE FILED
A complaint on behalf of the general public which consists of unidentifiable consumers can't be filed under the Act.
Example: A complaint was filed on the idea of a newspaper report that passengers travelling by flight from Calcutta to Delhi on May 13, 1989 were made to remain at the airport and therefore the flight was delayed by 90 minutes causing great inconvenience to the passengers. It had been held that such a general complaint can't be entertained.
No passenger who boarded that plane came forward or authorized the complainant to form the complaint -
• A complaint by a private on behalf of general public isn't permitted
• An unregistered association cannot file a complaint under the Act.
Example: The complainant was an association formed within the Gulf and was unregistered in India. It had been held that since the petitioner wasn't a voluntary organization registered under any law effective in India, cannot come within clause (d) of section 2(1) of the Act and hence can’t file a complaint.
• A complaint after expiry of limitation period isn't permitted. A complaint can't be filed after the lapse of two years from the date on which the explanation for action arise unless the Forum is satisfied about the genuineness of the rationale for not filing complaint within the prescribed time.
Example: supplied defective machinery to B on 12-1-1998. B filed a suit against A on 10-3-2001. It had been not admitted before the Forum for the rationale that the time available to form complaint lapsed.
• Dismissal of frivolous and vexatious complaints - Since the Act provides for a cheap procedure (Court fees isn't charged in consumer)
DEFECT - SECTION 2(1)(F)
The Act provides that, “defect” means any fault, imperfection or shortcoming within the quality, quantity, potency, purity or standard which is required to be maintained by or under any law of the nonce effective under any contract, express or implied or as is claimed by the trader in any manner whatsoever in reference to any goods.
This is an exhaustive definition. It means the Act recognizes only those defects which are covered by the definition. Any sort of defect not mentioned here won't be entertained by Consumer Forums. Moreover the defect has got to be in reference to goods only, i.e., if an item doesn't fall within the definition of ‘Goods’, no defect are often complained therein. However, the coverage of this definition is extremely wide.
Examples:
1. An autoclave burst and caused injury to the user. It had been held to be a producing defect
2. Failure to handover registration book alongside jeep purchased by complainant may be a defect.
3. Where laboratory test report showed that beverage wasn't fit human consumption, it had been held defective
4. Rape seed oil adulterated with toxic substances, which led to paralysis of limbs and other disabilities, has been considered as defective
5. Electric household appliances which aren't in accordance with the standards prescribed by ISI, being unsafe are defective
6. Gas Cylinder with excessive gas is flawed goods
7. Development of cracks of half inch to 3 and a half inch in walls and mosaic floor during a flat after occupation from a Housing Board
8. A supplied white marble to B. Afterward the colour of the marble changed. B sued a alleging supply of defective marble. It had been held that A should have expressly told B that the marble wouldn't retain its colour when polished. Within the absence of such assertion, it's deemed that A made B to know that the marble would retain its white colour and when the colour changed, it comes within the scope of ‘defect’ in goods under the Act
9. A sold a stolen car to B. B wanted to sue A for defect within the title of the car. Here B cannot sue A under the consumer Protection Act because the defect in title of products wouldn't constitute defective goods as defined under the Act.
SERVICE AND DEFICIENCY [SECTION 2(1)(O) AND (G)]
When a service is found deficient by a consumer, he can make a complaint under the Act. Thus the prime requirement is that the matter must fall within the definition of service, and it must entail a deficiency as per the norms given by the Act.
WHAT ARE OFTEN TERMED AS A SERVICE - SECTION 2(1) (O)
The Act provides that “service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or loading or both, housing construction, entertainment, amusement or the purveying of news or other information, but doesn't include the rendering of any service free of charge or under a contract of private service.
The definition provides a list of eleven sectors to which service may pertain so as to come under the purview of the Act. The list of those sectors isn't an exhaustive one. Service could also be of any description and pertain to any sector if it satisfies the subsequent criteria:
1. Service is formed available to the potential users, i.e., service not only to the particular users but also to those that are capable of using it.
2. It shouldn't be freed from charge, e.g., the medical service rendered freed from charge in Government hospital isn't a service under the Act;
3. It shouldn't be under a contract of private service.
When we mention ‘service’ under the consumer Protection Act, we take it as a daily commercial transaction. Thus the services rendered under the contract of private service are specifically excluded from the definition.
The expression ‘contract of private service’ isn't defined under the Act. In common parlance, it means - a contract to render service during a private capacity to an individual. For instance, where a servant enters into an agreement with a master for employment, or where a landlord agrees to provide water to his tenant, these are the contracts of personal service. The thought is that under a private service relationship, an individual can discontinue the service at any time consistent with his will; he needn't approach Consumer Forum to complaint about deficiency in commission.
There is a difference between ‘contract of private service’ and ‘contract for personal service’. Just in case of ‘contract of private service’, the service seeker can order or require what's to be done and the way it should be done. Sort of a master can tell his servant to bring goods from a specific place. But during a ‘contract for private service’, the service seeker can tell only what's to be done. How the work is going to be done is at the wish of the performer. Like when an individual gives a suit to the tailor for stitching, he doesn't tell him which method he should use to stitch it.
Note: That it's ‘contract of private service’ is excluded from the definition of service, ‘contract for private service’ is recognized as service under the Act.
It doesn't make a difference whether the service provider may be a Government body or a personal body. Thus albeit a statutory corporation provides a deficient service, it are often made liable under the Act.
Example:
A applied for electricity connection for his mill to Rajasthan State Electricity Board. The Board delayed in releasing the connection. It had been held deficient in performing service.
Some other sectors/professionals/services which aren't laid out in the definition of service but which are considered by the consumer Forums as service sectors from time to time are listed below: Advocates, Airlines, Chartered Accountants, Courier, Chit Fund, Education, Gas Cylinder/LPG, Medical services, Postal services, Railways, Investment related services, and Telephone services.
Thus, the test is - whether the person against whom the complaint is formed performs a service for consideration which is sought by a possible user.
DEFICIENCY
WHAT IS MEANT BY “DEFICIENCY” IN SERVICE - SECTION 2(1) (G)
The Act provides that, “deficiency” means any fault, imperfection, shortcoming or inadequacy within the quality, nature and manner of performance which is required to be maintained by or under any law for the time being effective or has been undertaken to be performed by an individual in pursuance of a contract or otherwise in reference to any service.
Reading the above definition by breaking it into elements, we get
(a) “Deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance
Examples:
1. A boarded a train. The compartment during which he and his wife travelled was during a bad shape-fans not working, shutters of windows weren't working, rexin of the upper was badly torn and there have been rusty nails which caused some injuries to the wife of A. A made a complaint against the railway department. It had been held that the complaint constituted ‘deficiency in service’ and therefore the compensation of Rs. 1500 was awarded to A
2. Dr. A treated P under Allopathic system, though he himself was a Homoeopathic practitioner afterward for wrong treatment. The Commission held it as deficiency in commission -
3. A booked a car for B and promised to deliver it within one month of booking. The car wasn't delivered even after four months. Here A might be held responsible for deficiency in commission.
UNFAIR TRADE PRACTICE
Unfair trade practice refers to the utilization of varied deceptive, fraudulent, or unethical methods to get business. Unfair trade practices include misrepresentation, false advertising or representation of an honest or service, tied selling, false free prize or gift offers, deceptive pricing, and noncompliance with manufacturing standards. Such acts are regarded unlawful by statute via Consumer Protection Law, which exposes recourse for consumers by way of way of compensatory or exemplary damages. An unfair trade practice is usually mentioned as a “deceptive trade practice” or an “unfair business practice.”
Understanding Unfair Trade Practices
Unfair trade practices are commonly seen within the purchase of things and services by consumers, tenancy, insurance claims and settlements, and debt collection. Most states’ unfair trade practices statutes were originally enacted between the 1960s and 1970s. Since then many nations have adopted these laws to stop unfair alternate practices. Consumers who are victimized should examine the unfair trade practice statute in their nation to work out whether or not they have an explanation for action.
Unfair trade practices are usually seen within the purchase of products and services with the help of consumers, tenancy, insurance claims and settlements, and debt collection.
UNFAIR PRACTICES
• An act is unfair when it meets the subsequent criteria:
• It causes or is probably going to cause widespread injury to consumers.
• It can't be reasonably avoided by way of consumers.
• It isn't outweighed by countervailing benefits to consumers or to the competition.
• Deceptive Practices
• An act or practice is deceptive when it meets the subsequent criteria:
• A representation, omission, or practice misleads or is probably going to mislead the consumer.
• A consumer’s interpretation of the representation, omission, or exercise is taken into account reasonable under the circumstances.
• The misleading representation, omission, or practice is material.
RESTRICTIVE TRADE PRACTICE
A restrictive trade practice is defined under Section 2(1) of the consumer Protection Act, 1986. The section covers all the price related deceit that the traders may indulge in to maximize their profits.
Restrictive trade practices are targeted at the consumers who are burdened with restriction and unjustified costs through the practices of the trader. The trader manipulates the worth or the conditions of delivery of the merchandise which ends up in restrictive trade practice. This affects the availability of products and services within the market and includes:
• A likely or definite rise within the price of a commodity thanks to the delay of the trader to supply the great or service.
• A compulsion to get, hire or avail any good or service so as to get the other good or service.
Example Restrictive Trade Practices:
A trader accumulates his stock of food grains so as to extend the worth of the grains within the market in order that he can sell it at a better price.
In order to shop for a television from trader X, one must buy a table first.
Three tier consumer grievances machinery under the consumer protection act
1. District Forum:
District forum consists of a president and two other members. The president is often a retired or working judge of District Court. They’re appointed by using government. The complaints for goods or services worth Rs 20 lakhs or less are often filed during this agency. The agency sends the products for testing in laboratory if required and provides decisions on the idea of facts and laboratory report. If the aggrieved party isn't cosy by the jurisdiction of the district forum then they will file an appeal against the judgment in State Commission inside 30 days by depositing Rs. 25000 or 50% of the penalty amount whichever is a smaller amount.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of Supreme Court. All of them are appointed by government. The complaints for the products really worth quite Rs 20 lakhs and fewer than Rs 1 crore are often filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the products for testing in laboratory if required. Just in case the aggrieved party isn't satisfied with the judgment then they will file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is a smaller amount .
3. National Commission
The national commission consists of a president and 4 member’s one among who shall be a lady. They’re appointed by Central Government. The complaint is often filed in National Commission if the worth of products exceeds Rs 1 crore.
If aggrieved party isn't satisfied with the judgment then they will file a grievance in Supreme Court within 30 days.
Basis | District | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
