Important to be studied for Business Environment

Questions Covered

1. Important Features of Indian Economy2. Balance of Payments3. FISCAL Policy4. MONETARY AND FISCAL POLICIES AND THEIR OBJECTIVES5. GLOBALISATION6. TRIPS and TRIMS7. What is sustainable development? What are the steps taken inIndia

for sustainable development? Is judicial activism as exhibited by NGO’s and Independents in India Helping Environmental Protection?

8. CSR (CORPORATE SOCIAL RESPONSIBILITY)9. Monetary & Fiscal policy:10.FEMA & FERA11.Role of Medium and small scale industries in our economy is vital-

Analyze the statement in details12.Details on Current Status on Indian Economy on any two sectors13.What was the objectives of MRP Act 1969. Also discuss the recent

amendments done in MRTP Act14.What is Family Managed Business and discuss the threats for long

term survival? What are the suggested ways out for FMB’s?15.Technology Transfers16.What is corporate governance? What is the current state of

implementation of corporate governance practice in India?

Q 1. Important Features of Indian Economy

The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP).

Agriculture is the back bone of Indian economic. 60% of India’s population are on the below poverty line. Mineral resources are not fully utilized.  India is termed as developing economic by modern views.

India was the 19th-largest merchandise and the 6th largest services exporter in the world in 2013.

The important features of Indian economic:1. Low per capita income:India’s economy is characterized by low per capital income. India per capital income is very low as compared to the advanced countries. For example the capital income of India was 460 dollar, in 2000 where as their capita income of U.S.A in 2000 was 83 times than India.

2. Heavy Population Pressure:The Indian economy is facing the problem population explosion. It is clearly evident from the total population of India which was 102.67 cores in 2001 census. It is the second highest populated country China being the first. India’s population has reached 110 cores. The failure to sustain the living standard makes the poor and under developed countries poor and under developed.

3. Pre-dominance of Agriculture:Occupational distribution of population in India clearly reflects the backwardness of the economy. One of the basis characteristics of an under developed economy is that agriculture contributes a very large portion in the national income and a very high proportion of working population is engaged in agriculture.

4. Unemployment:There is larger unemployed and under employment is another important feature of Indian economy. In under developed countries labor is an abundant factor. It is not possible to provide gainful employment the entire population. There deficiency of capital formation.

5. Poor Technology:The level of technology is a common factor in under developed economy. India economy also suffers from this typical feature of technological backwardness. The techniques applied in agriculture industries mining and other economic fields are primitive in nature.

6. Under utilization of Resources:India is a poor land. So our people remain economically backwards for the lack of utilization of resources of the country.

7. Price instability:Price instability is also a basis feature of Indian economy. In almost all the underdeveloped countries like India there is continuous price instability. Shortage of essential commodities and gap between consumption aid productions increase the price persistently.

8. Mixed Economy:Indian Economy is a unique blend of public and private sector, i.e. a mixed economy. In its entire plan period, the government has invested 45% capital in public sector. However major sources and resources of production are still in the hands of private sector (approximately 80%). After liberalization, Indian Economy is going ahead as a capitalist economy or market economy.------------------------------------------------------------------------------------------------------2. Balance of Payments

The balance of payments (BoP or BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency.[1]

Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.[2] These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BOP accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency, typically the domestic currency for the country concerned.

Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.

When all components of the BOP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign

investments, by running down central bank reserves or by receiving loans from other countries.

The term "balance of payments surplus" (or deficit – a deficit is simply a negative surplus) refers to the sum of the surpluses in the current account and the narrowly defined capital account (excluding changes in central bank reserves). Denoting the balance of payments surplus as BOP surplus, the relevant identity is

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3. FISCAL PolicyMeaning and Objectives:

Fiscal policy means the use of taxation and public expenditure by the government for stabilisation or growth.

Arthur Smithies defines fiscal policy as “a policy under which the government uses its expenditure and revenue programmes to produce desirable effects and avoid undesirable effects on the national income, production and employment.”

Though the ultimate aim of fiscal policy in the long-run stabilisation of the economy, yet it can be achieved by moderating short-run economic fluctuations. In this context, Otto Eckstein defines fiscal policy as “changes in taxes and expenditures which aim at short-run goals of full employment and price-level stability.”

The following are the objectives of fiscal policy: 1. To maintain and achieve full employment. 2. To stabilise the price level. 3. To stabilise the growth rate of the economy. 4. To maintain equilibrium in the balance of payments. 5. To promote the economic development of underdeveloped countries.---------------------------------------------------------------------

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Q. Fiscal Policy

Meaning of Fiscal Policy

The fiscal policy is concerned with the raising of government revenue and incurring of government expenditure. To generate revenue and to incur expenditure, the

government frames a policy called budgetary policy or fiscal policy. So, the fiscal policy is concerned with government expenditure and government revenue

Fiscal policy has to decide on the size and pattern of flow of expenditure from the government to the economy and from the economy back to the government. So, in broad term fiscal policy refers to "that segment of national economic policy which is primarily concerned with the receipts and expenditure of central government." In other words, fiscal policy refers to the policy of the government with regard to taxation, public expenditure and public borrowings.

The importance of fiscal policy is high in underdeveloped countries. The state has to play active and important role. In a democratic society direct methods are not approved. So, the government has to depend on indirect methods of regulations. In this way, fiscal policy is a powerful weapon in the hands of government by means of which it can achieve the objectives of development.

Main Objectives of fiscal policy in India

The fiscal policy is designed to achieve certain objectives as follows:-

1. Development by effective Mobilization of Resources

The principal objective of fiscal policy is to ensure rapid economic growth and development. This objective of economic growth and development can be achieved by Mobilization of Financial Resources.

The central and the state governments in India have used fiscal policy to mobilize resources.

The financial resources can be mobilised by:-

Taxation: Through effective fiscal policies, the government aims to mobilize resources by way of direct taxes as well as indirect taxes because most important source of resource mobilization in India is taxation.

Public Savings: The resources can be mobilised through public savings by reducing government expenditure and increasing surpluses of public sector enterprises.

Private Savings: Through effective fiscal measures such as tax benefits, the government can raise resources from private sector and households. Resources can be mobilised through government borrowings by ways of

treasury bills, issue of government bonds, etc., loans from domestic and foreign parties and by deficit financing.

2. Efficient allocation of Financial Resources

The central and state governments have tried to make efficient allocation of financial resources. These resources are allocated for Development Activities which includes expenditure on railways, infrastructure, etc. While Non-development Activities includes expenditure on defense, interest payments, subsidies, etc.

But generally the fiscal policy should ensure that the resources are allocated for generation of goods and services which are socially desirable. Therefore, India's fiscal policy is designed in such a manner so as to encourage production of desirable goods and discourage those goods which are socially undesirable.

3. Reduction in inequalities of Income and Wealth

Fiscal policy aims at achieving equity or social justice by reducing income inequalities among different sections of the society. The direct taxes such as income tax are charged more on the rich people as compared to lower income groups. Indirect taxes are also more in the case of semi-luxury and luxury items, which are mostly consumed by the upper middle class and the upper class. The government invests a significant proportion of its tax revenue in the implementation of Poverty Alleviation Programs to improve the conditions of poor people in society.

4. Price Stability and Control of Inflation

One of the main objectives of fiscal policy is to control inflation and stabilize price. Therefore, the government always aims to control the inflation by reducing fiscal deficits, introducing tax savings schemes, Productive use of financial resources, etc.

5. Employment Generation

The government is making every possible effort to increase employment in the country through effective fiscal measure. Investment in infrastructure has resulted in direct and indirect employment. Lower taxes and duties on small-scale industrial (SSI) units encourage more investment and consequently generate more employment. Various rural employment programs have been undertaken by the Government of India to solve problems in rural areas. Similarly, self employment

scheme is taken to provide employment to technically qualified persons in the urban areas.

6. Balanced Regional Development

Another main objective of the fiscal policy is to bring about a balanced regional development. There are various incentives from the government for setting up projects in backward areas such as Cash subsidy, Concession in taxes and duties in the form of tax holidays, Finance at concessional interest rates, etc.

7. Reducing the Deficit in the Balance of Payment

Fiscal policy attempts to encourage more exports by way of fiscal measures like Exemption of income tax on export earnings, Exemption of central excise duties and customs, Exemption of sales tax and octroi, etc.

The foreign exchange is also conserved by providing fiscal benefits to import substitute industries, imposing customs duties on imports, etc.

The foreign exchange earned by way of exports and saved by way of import substitutes helps to solve balance of payments problem. In this way adverse balance of payment can be corrected either by imposing duties on imports or by giving subsidies to export.

8. Capital Formation

The objective of fiscal policy in India is also to increase the rate of capital formation so as to accelerate the rate of economic growth. An underdeveloped country is trapped in vicious (danger) circle of poverty mainly on account of capital deficiency. In order to increase the rate of capital formation, the fiscal policy must be efficiently designed to encourage savings and discourage and reduce spending.

9. Increasing National Income

The fiscal policy aims to increase the national income of a country. This is because fiscal policy facilitates the capital formation. This results in economic growth, which in turn increases the GDP, per capita income and national income of the country.

10. Development of Infrastructure

Government has placed emphasis on the infrastructure development for the purpose of achieving economic growth. The fiscal policy measure such as taxation generates revenue to the government. A part of the government's revenue is invested in the infrastructure development. Due to this, all sectors of the economy get a boost.

11. Foreign Exchange Earnings

Fiscal policy attempts to encourage more exports by way of Fiscal Measures like, exemption of income tax on export earnings, exemption of sales tax and octroi, etc. Foreign exchange provides fiscal benefits to import substitute industries. The foreign exchange earned by way of exports and saved by way of import substitutes helps to solve balance of payments problem.

4. MONETARY AND FISCAL POLICIES AND THEIR OBJECTIVES

Monetary Policy

Meaning and Objectives:Monetary policy is the process by which monetary authority of a country,

generally a central bank controls the supply of money in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth.[1] In India, the central monetary authority is the Reserve Bank of India (RBI). is so designed as to maintain the price stability in the economy.

Other objectives of the monetary policy of India, as stated by RBI, are: Price Stability

Price Stability implies promoting economic development with considerable emphasis on price stability.

Controlled Expansion Of Bank CreditOne of the important functions of RBI is the controlled expansion of bank credit and money supply with special attention to seasonal requirement for credit without affecting the output.

Promotion of Fixed InvestmentThe aim here is to increase the productivity of investment by restraining non essential fixed investment.

Restriction of InventoriesOverfilling of stocks and products becoming outdated due to excess of stock often results is sickness of the unit. The main objective of this policy is to avoid over-stocking and idle money in the organization.

Promotion of Exports and Food Procurement Operations

Desired Distribution of CreditThis policy decides over the specified percentage of credit that is to be allocated to priority sector and small borrowers.

Equitable Distribution of CreditThe policy of Reserve Bank aims equitable distribution to all sectors of the economy and all social and economic class of people

Weapons Open Market Operations

An open market operation is an instrument of monetary policy which involves buying or selling of government securities from or to the public and banks.

Cash Reserve RatioCash Reserve Ratio is a certain percentage of bank deposits which banks are required to keep with RBI in the form of reserves or balances .Higher the CRR with the RBI lower will be the liquidity in the system and vice-versa

Statutory Liquidity RatioEvery financial institution has to maintain a certain quantity of liquid assets with themselves at any point of time of their total time and demand liabilities. These assets can be cash, precious metals, approved securities like bonds etc. The ratio of the liquid assets to time and demand liabilities is termed as the Statutory liquidity ratio.

Credit CeilingIn this operation RBI issues prior information or direction that loans to the commercial banks will be given up to a certain limit.

Repo Rate and Reverse Repo RateRepo rate is the rate at which RBI lends to commercial banks generally against government securities. Reduction in Repo rate helps the commercial banks to get money at a cheaper rate and increase in Repo rate discourages the commercial banks to get money as the rate increases and becomes expensive. Reverse Repo rate is the rate at which RBI borrows money from the commercial banks.

----------------------------------------------------------------------------------------------5. GLOBALISATION

Globalization (or globalisation) is the process of international integration arising from the interchange of world views, products, ideas and other aspects of culture.[1][2] Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.

The term globalization has been increasingly used since the mid-1980s and especially since the mid-1990s.[6] In 2000, the International Monetary Fund (IMF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge.[7] Further, environmental challenges such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are linked with globalization.[8] Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.

1.Trade:Developing countries as a whole have increased their share of world trade —from 19 percent in 1971 to 29 percent in 1999. For instance, the newly industrialized economies (NIEs) of Asia have done well, while Africa as a whole has fared poorly. The composition of what countries export is also important. The strongest rise by far has been in the export of manufactured goods. The share of primary commodities in world exports — such as food and raw materials — that are often produced by the poorest countries, has declined. 2.Capital movements:Globalization sharply increased private capital flows to developing countries during much of the 1990s. It also shows that:-the increase followed a particularly “dry” period in the 1980s;-net official flows of “aid” or development assistance have fallen significantly since the early 1980s; and-the composition of private flows has changed dramatically. Direct foreign investment has become the most important category. Both portfolio investment and bank credit rose but they have been more volatile, falling sharply in the wake of the financial crises of the late 1990s. 3. Movement of people:Workers move from one country to another partly to find better employment opportunities. The numbers involved are still quite small, but in the period 1965-90, the proportion of labour forces round the world that was foreign-born increased by about one-half. Most migration occurs between developing countries. But the flow of migrants to advanced economies is likely to provide means through which global wages converge. There is also the potential for skills tube transferred back to the developing countries and for wages in those countries Tories. 4. Spread of knowledge (and technology):Information exchange is an integral, often overlooked, aspect of globalization. For instance, direct foreign investment brings not only an expansion of the physical capital stock, but also technical innovation. More generally, knowledge about production methods, management techniques, export markets and economic

policies is available at very low cost, and it represents highly valuable resource for the developing countries.

Advantages of Globalisation: Employment

Considered as one of the most crucial advantages, globalization has led to the generation of numerous employment opportunities. Companies are moving towards the developing countries to acquire labor force.

EducationA very critical advantage that has aided the population is the spread of education. With numerous educational institutions around the globe, one can move out from the home country for better opportunities elsewhere..

Product QualityThe onset of international trade has given rise to intense competition in the markets. The product quality has been enhanced so as to retain the customers.

Cheaper PricesGlobalization has brought in fierce competition in the markets. Since there are varied products to select from, the producer can sustain only when the product is competitively priced. 'Customer is the King', and hence can dictate the terms to a very large extent.

CommunicationInformation technology has played a vital role in bringing the countries closer in terms of communication. Every single information is easily accessible from almost every corner of the world.

Disadvantages of Globalisation Health Issues

Globalization has given rise to more health risks and presents new threats and challenges for epidemics. A very customary example is the dawn of HIV/AIDS. Having its origin in the wilderness of Africa, the virus has spread like wildfire throughout the globe in no time.

Loss of CultureConventionally, people of a particular country follow its culture and traditions from time immemorial. With large number of people moving into and out of a country, the culture takes a backseat.

Uneven Wealth DistributionIt is said that the rich are getting richer while the poor are getting poorer. In the real sense, globalization has not been able to reduce poverty. Instead it has led to the accumulation of wealth and power in the hands of a few developed economies.

Environment DegradationThe industrial revolution has changed the outlook of the economy. Industries are using natural resources by means of mining, drilling, etc. which puts a burden on the environment.

MonopolyMonopoly is a situation wherein only one seller has a say in a particular product or products. It is possible that when a product is the leader in its field, the company may begin to exploit the consumers. As there exists no close competitors, the leader takes full advantage of the sale of its product, which may later lead to illegal and unethical practices being followed. Monopoly is disastrous as it widens the gap between the developed and developing countries.

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6. TRIPS and TRIMSTRIPS

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO) that sets down minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.

The TRIPS agreement introduced intellectual property law into the international trading system for the first time and remains the most comprehensive international agreement on intellectual property to date.

TRIPS Requirements:TRIPS require member states to provide strong protection for intellectual property rights. For example, under TRIPS:

Copyright terms must extend at least 20 years, unless based on the life of the author

Copyright must be granted automatically, and not based upon any "formality," such as registrations, as specified in the Berne Convention.

Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.

National exceptions to copyright (such as "fair use" in the United States) are constrained by the Berne three-step test

Patents must be granted for "inventions" in all "fields of technology" provided they meet all other patentability requirements (although exceptions for certain public interests are allowed and must be enforceable for at least 20 years.

Exceptions to exclusive rights must be limited, provided that a normal exploitation of the work and normal exploitation of the patent is not in conflict.

No unreasonable prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.

Legitimate interests of third parties have to be taken into account by patent rights (Art 30).

In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPS signatories under the principle of national treatment TRIPS also has a most favored nation clause.

TRIMSThe Agreement on Trade Related Investment Measures (TRIMs) are

rules that apply to the domestic regulations a country applies to foreign investors, often as part of an industrial policy. The agreement was agreed upon by all members of the World Trade Organization. The agreement was concluded in 1994 and came into force in 1995. The WTO wasn't established at that time, it was its predecessor, the GATT (General Agreement on Trade and Tariffs.

Policies such as local content requirements and trade balancing rules that have traditionally been used to both promote the interests of domestic industries and combat restrictive business practices are now banned.

Trade Related Investment Measures is the name of one of the four principal legal agreements of the WTO trade treaty.

TRIMs are rules that restrict preference of domestic firms and thereby enable international firms to operate more easily within foreign markets.

----------------------------------------------------------------------------------------------7. What is sustainable development? What are the steps taken inIndia for sustainable development?Is judicial activism as exhibited by NGO’s and Independents in India Helping Environmental Protection?

As per the definition coined by United Nations Division for Sustainable Development, it is “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

Another definition is “Sustainability’ implies that the activities are ecologically sound, socially just, economically viable and humane, and that they will continue to be so for future generations.”

Emphasis in both cases in on “Future Generations” which means that in our quest for development, we have to keep a perspective which goes beyond our lifetime and keep the future of human race as a whole in mind as well.

Sustainable development implies economic growth together with the protection of environmental quality, each reinforcing the other. The essence of this form of development is a stable relationship between human activities and the natural world, which does not diminish the prospects for future generations to enjoy a quality of life at least as good as our own.

Sustainable development is a socio-ecological process characterized by the fulfillment of human needs while maintaining the quality of the natural environment indefinitely.

The linkage between environment and development was globally recognized in 1980,

when the International Union for the Conservation of Nature published the World Conservation Strategy and used the term "sustainable development."

The concept came into general usage following publication of the 1987 report of the Brundtland Commission — formally, the World Commission on Environment and Development which coined what was to become the most often-quoted definition of sustainable development as development that "meets the needs of the present generation without compromising the ability of future generations to meet their own needs”.

The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability, social political sustainability. Sustainable development has three dimensions, economic, environmental, and social. If sustainability is to occur, it must meet needs of all these three dimensions. However, the most important factor in sustainability of development is Environmental.

Environmental Sustainability:We are greatly dependent on natural resources for our sustenance. Starting

from some thing as basic as air for breathing, to fossil fuels for energy generation, most of the natural resources can sustain only a limited rate of use and abuse. While some resources are completely non-renewable, others can renew only at limited rate.

Environmental issue can also be subdivided into following categories: - 1. Energy; 2. Forests; 3. Water: 4. Land/Industrial Development; 5. Air/Atmosphere pollution and Climate Change.

EnergyFossil fuels are examples of non-renewable resource. Forests can berenewed

but at a very slow rate. As per the current estimates, world stock of fossilfuels will last 50 years at the most. And therefore, unless alternate sources of energy are discovered, we may land into energy crisis.

Some signs of same are already visible. Therefore, development of a viable alternate to fossil fuels before fossil fuels get exhausted is the biggest challenge facing us today. France had turned to Nuclear Energy to meet its power generation needs. Its 80% of power generation is nuclear against world average of just 6%. India is attempting to expand its basket of nuclear energy.

Otherwise, sun is the cheapest, most sustainable, most widely available and cleanest source of energy available. But the real problem is that we are yet to find an economical method of large scale storage of energy.

Use of fossil fuels is having another impact on the environment, i.e., increasing level of oxides of carbon like CO2and Carbon Mono Oxide. While deteriorating the quality ofair for breathing, it is also causing global warming.

Global warming is leading to melting of glaciers in Arctic and Antarctic regions as also in higher mountains. Manylow lying areas in the world are feared to be inundated/submerged/lost by increase in sea level.

Forests Ruthless destruction of forests for wood, farming and

Industrial/economic development is damaging the ecology and leading to climatic changes like rainfall pattern, CO2level in air, global warming, Flash floods, etc. Unless efforts are taken to ensure adequate forest cover, we may have irreversible catastrophic changes in climate.

Water“Water water everywhere, not a drop to drink” is a situation that

seafarers often face. But it may be a situation that cities like Mumbai and Chennai may have to face in the near future.

Water resources are getting polluted at increasing rate. Mithiriver in Mumbai, Yamuna in Delhi and Ganga in Kanpur have turned into stinking sewers. In addition, because of inadequate irrigation facilities, there is over dependence on ground water for irrigation. There aremany countries like India, where there is over exploitation of ground water and thus water table is falling at the alarming rate.

Warnings have already been issued by world bodies about impending water crisis in India, may be just two decades hence. We have to learn to use, conserve and enhance our fresh water resources. Ways to recharge the ground water are necessary lest we leave our future generation thirsty.

LandEntire land mass available on earth has already been explored and

there is no more possibility of any new land mass. World population which today stands at about 6 billion in growing and we need to provision space of living, water and food for them. We cannot afford to waste any land mass due to any nuclear accidents like Chernobyl. Nor can we afford to lose existing land mass due to effects of global warming like melting of glaciers and polar ice cap.

But more importantly, we cannot even afford to waste any land as a result of careless Industrial Development. Liquid pollutants as a result of Industrial Development of a region are cause of concern. Certain industries discharge highly toxic chemical wastes and release them either to rivers or to open fields from where ground water gets polluted causing diseases in the local population. Careless discharge of cement dust from Cement Factories is affecting crop yield in the surrounding areas due to soil damage by cement dust. Smoke and Oxides of Carbon, like CO2 and Carbon MonoOxide are in any case almost inevitable products of any production process.

Fact of the matter is that there are very few production industries which do not have any adverse impact on environment. And the cost of reducing those impacts is fairlyhigh and can make the entire process economically unviable. Rich countries aretherefore shifting away fromproduction to knowledge based industries.

Air/Atmospheric Pollution/ Climatic Changes

These are the issues which are interlinked. One leads to other. Emissions from fossil fuels cause air pollution. Increased concentration of air pollutants is partly responsible for Global warming along with CFC/Halon gases which have been identified as the major sources of climatic changes/Global warming. CFC gases have a tendency to deplete the Ozone layer, and thus increased level of UV rays causing global warming and skin cancer incidences.

Halon gases are being replaced with other environment friendly gases. However, Kyoto treaty, which was supposed to limit CO2 emission, is awaiting ratification by some major offenders since 1988.

Sustainable EconomicDevelopmentSustainable economic development is one which is based on policies,

methods and resources which can be sustained for a long term and do not get exhausted in near future. Take for instance, economic development based on natural products, like wood. If the exploitation rate is faster than renewal rate of jungles, there will be no jungles left after some time and the source of economic development will dry up.

Middle East economy is currently based on export of petroleum oil. But this is not a perpetual source and will dry up after some time. Therefore, most of these governments are investing the funds in other economic activities which can be sustained even after oil revenue is not there.

Sustainable Social DevelopmentAny economic and environmental development has to be broad based. All

segments of the society need tobe taken into account. If an economic or environmental development creates wide gap between two sections of society, or severely impacts a relatively large section, it will cause social upheavals like it happened in Russia in 1917. Such economic upheavals have capacity to nullify all the gains made till that day.

Thus, sustainable development is demand of the day. We need it not only for us but for our future generations.

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8. CSR (CORPORATE SOCIAL RESPONSIBILITY)

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders.

CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics

is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment.

The evolution of corporate social responsibility in India refers to changes over time in India of the cultural norms of corporations ‘engagement of corporate social responsibility(CSR), with CSR referring to way that businesses are managed to bring about an overall positive impact on the communities, cultures, societies and environments in which they operate.

The fundamentals of CSR rest on the fact that not only public policy but even corporate should be responsible enough to address social issues. Thus companies should deal with the challenges and issues looked after to a certain extent by the states.

Among other countries India has one of the richest traditions of CSR. Much has been done in recent years to make Indian Entrepreneurs aware of social responsibility as an important segment of their business activity but CSR in India has yet to receive widespread recognition. If this goal has to be realized then the CSR approach of corporate has to be in line with their attitudes towards mainstream business- companies setting clear objectives, undertaking potential investments, measuring and reporting performance publicly.

The Four Phases of CSR Development in India The history of CSR in India has its four phases which run parallel to India's historical development and has resulted in different approaches towards CSR. However the phases are not static and the features of each phase may overlap other phases.

The First Phase In the first phase charity and philanthropy were the main drivers of CSR.

Culture, religion, family values and tradition and industrialization had an influential effect on CSR. In the pre-industrialization period, which lasted till 1850, wealthy merchants shared a part of their wealth with the wider society by way of setting up temples for a religious cause

Moreover, these merchants helped the society in getting over phases of famine and epidemics by providing food from their godowns and money and thus securing an integral position in the society.

With the arrival of colonial rule in India from 1850s onwards, the approach towards CSR changed. The industrial families of the 19th century such as Tata, Godrej, Bajaj, Modi, Birla, Singhania were strongly inclined towards economic as well as social considerations. However it has been observed that their efforts towards socials well as industrial development were not only driven by selfless and religious motives but also influenced by caste groups and political objectives.

The Second Phase In the second phase, during the independence movement, there was

increased stress on Indian Industrialists to demonstrate their dedication towards the progress of the society. This was when Mahatma Gandhi introduced the notion of "trusteeship", according to which the industry leaders had to manage their wealth so as to benefit the common man. "I desire to end capitalism almost, if not quite, as much as the most advanced socialist. But our methods differ. My theory of trusteeship is no make-shift, certainly

no camouflage. I am confident that it will survive all other theories." this was Gandhi's words which highlight his argument towards his concept of "trusteeship".

Gandhi's influence put pressure on various Industrialists to act towards building the nation and its socio-economic development. According to Gandhi, Indian companies were supposed to be the "temples of modern India". Under his influence businesses established trusts for schools and colleges and also helped in setting up training and scientific institutions. The operations of the trusts were largely in line with Gandhi's reforms which sought to abolish untouchability, encourage empowerment of women and rural development.

The Third Phase The third phase of CSR (1960–80) had its relation to the element of "mixed

economy", emergence of Public Sector Undertakings(PSUs) and laws relating labour and environmental standards.

During this period the private sector was forced to take a backseat. The public sector was seen as the prime mover of development. Because of the stringent legal rules and regulations surrounding the activities of the private sector, the period was described as an "era of command and control". The policy of industrial licensing, high taxes and restrictions on the private sector led to corporatemalpractices.

This led to enactment of legislation regarding corporate governance, labour and environmental issues. PSUs were set up by the state to ensure suitable distribution of resources (wealth, food etc.) to the needy. However the public sector was effective only to a certain limited extent. This led to shift of expectation from the public to the private sector and their active involvement in the socioeconomic development of the country became absolutely necessary.

In 1965 Indian academicians, politicians and businessmen set up a national workshop on CSR aimed at reconciliation.They emphasized upon transparency, social accountability and regular stakeholder dialogues. In spite of such attempts the CSR failed to catch steam.

The Fourth Phase In the fourth phase (1980 until the present) Indian companies started

abandoning their traditional engagement with CSR and integrated it into a sustainable business strategy. In 1990s the first initiation towards globalization and economic liberalization were undertaken. Controls and licensing system were partly done away with which gave a boost to the economy the signs of which are very evident today.

Increased growth momentum of the economy helped Indian companies grow rapidly and this made them more willing and able to contribute towards social cause. Globalization has transformed India into an important destination in terms of production and manufacturing bases of TNCs are concerned. As Western markets are becoming more and more concerned about and labor and environmental standards in the developing countries, Indian companies who export and produce goods for the developed world need to pay a close attention to compliance with the international standards.

9: Monetary & Fiscal policy:As most of economists feel that the most horrible economic problem

which India is facing currently is inflation. To come out of these problems RBI and ministry of finance and other relevant government and regulatory entities are taking various initiatives which are as follows;

RBI MONETORY POLICYWith the introduction of the Five year plans, the need for appropriate

adjustment in monetary and fiscal policies to suit the pace and pattern of planned development became imperative. The monitory policy since 1952 emphasized the twin aims of the economic policy of the government:

• Spread up economic development in the country to raise national income and standard of living, and

• To control and reduce inflationary pressure in the economy.

This policy of RBI since the First plan period was termed broadly as one of controlled expansion, i.e.; a policy of “adequate financing of economic growth and at the same time the time ensuring reasonable price stability”. Expansion of currency and credit was essential to meet the increased demand for investment funds in an economy like India which had embarked on rapid economic development. Accordingly, RBI helped the economy to expand via expansion of money and credit and attempted to check in rise in prices by the use of selective controls.

OBJECTIVES OF MONITORY POLICY• PRICE STABILITY • MONITORY TARGETTING • INTEREST RATE POLICY • RESTRUCTURING OF MONEY MARKET • REGULATION OF FOREIGN EXCHANGE MARKET

WEAPONS OF MONITORY POLICYCentral banks generally use the three quantitative measures to control the

volume of credit in an economy, namely: • Raising bank rates • Open market operations and • Variable reserve ratio

However, there are various limitations on the effective working of the quantitative measures of credit control adapted by the central banks and, to that extent, monetary measures to control inflation are weakened. In fact, in controlling inflation moderate monetary measures, by themselves, are relatively ineffective. On the

other hand, drastic monetary measures are not good for the economic system because they may easily send the economy into a decline.

In a developing economy there is always an increasing need for credit. Growth requires credit expansion but to check inflation, there is need to contract credit. In such a encounter, the best course is to resort to credit control, restricting the flow of credit into the unproductive, inflationinfected sectors and speculative activities, and diversifying the flow of credit towards the most desirable needs of productive and growth-inducing sector. It should be noted that the impression that the rate of spending can be controlled rigorously by the contraction of credit or money supply is wrong in the context of modern economic societies. In modern community, tangible, wealth is typically represented by claims in the form of securities, bonds, etc., or near moneys, as they are called. Such near moneys are highly liquid assets, and they are very close to being money. They increase the general liquidity of the economy. In these circumstances, it is not so simple to control the rate of spending or total outlays merely by controlling the quantity of money. Thus, there is no immediate and direct relationship between money supply and the price level, as is normally conceived by the traditional quantity theories. When there is inflation in an economy, monetary restraints can, in conjunction with other measures, play a useful role in controlling inflation.

FISCAL POLICYFiscal policy is another type of budgetary policy in relation to taxation, public

borrowing, and public expenditure. To curve the effects of inflation and changes in the total expenditure, fiscal measures would have to be implemented which involves an increase in taxation and decrease in government spending.

During inflationary periods the government is supposed to counteract an increase in private spending. It can be cleared noted that during a period of full employment inflation, the aggregate demand in relation to the limited supply of goods and services is reduced to the extent that government expenditures are shortened.

Along with public expenditure, governments must simultaneously increase taxes that would effectively reduce private expenditure, in an effect to minimise inflationary pressures. It is known that when more taxes are imposed, the size of the disposable income diminishes, also the magnitude of the inflationary gap in regards to the availability of the supply of goods and services.

In some instances, tax policy has been directed towards restricting demand without restricting level of production. For example, excise duties or sales tax on various commodities may take away the buying power from the consumer goods market without discouraging the level of production. However, some economists point out that this is not a correct way of combating inflation because it may lead to a regressive status within the economy.

As a result, this may lead to a further rise in prices of goods and services, and inflation can spread from one sector of the economy to another and from one type of goods and services to another. Therefore, a reduction in public expenditure, and an increase in taxes produces cash surplus in the budget.

Keynes, however, suggested aprogramme of compulsory savings, such as deferred pay as an anti-inflationary measure. Deferred pay indicates that the

consumer defers a part of his or her wages by buying savings bonds (which, of course, is a sort of public borrowing), which are redeemable after a particular period of time, this is sometimes called forced savings. Additionally, private savings have a strong disinflationary effect on the economy and an increase in these is an important measure for controlling inflation.

Government policyshould therefore, include devices for increasing savings. A strong savings drive reduces the spendable income of the consumers, without any harmful effects of any kind that are associated with higher taxation. Furthermore, the effects of alarge deficit budget, which is mainlyresponsible for inflation, can be partially offset by covering the deficit through public borrowings.

Fiscal policy by itself may not be very effective in combating inflation; therefore a combination of fiscal and monetary tools can work together in achieving the desired outcome.

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10 . FEMA & FERA

The Foreign Exchange Management Act (FEMA) was an act passed in the winter session of Parliament in 1999 which replaced Foreign Exchange Regulation Act. This act seeks to make offenses related to foreign exchange civil offenses. It extends to the whole of India.FEMA, which replaced Foreign Exchange Regulation Act(FERA), had become the need of the hour since FERA had become incompatible with the pro-liberalization policies of the Government of India. FEMA has brought a new management regime of Foreign Exchange consistent with the emerging framework of the World Trade Organization (WTO). It is another matter that the enactment of FEMA also brought with it the Prevention of Money Laundering Act2002, which came into effect from 1 July 2005.

Unlike other laws where everything is permitted unless specifically prohibited, under this act everything was prohibited unless specifically permitted. Hence the tenor and tone of the Act was very drastic. It required imprisonment even for minor offences. Under FERA a person was presumed guilty unless he proved himself innocent, whereas under other laws a person is presumed innocent unless he is proven guilty.

Switch from FERA The period in 1974, a period when India’s foreign exchange reserve position

wasn’t at its best. A new control in place to improve this position was the need of the hour. FERA did not succeed in restricting activities, especially the expansion ofTNCs (Transnational Corporations). The concessions made to FERA in 1991-1993 showed that FERA was on the verge of becoming redundant.

After the amendment of FERA in 1993, it was decided that the act would become the FEMA. This was done in order to relax the controls on foreign exchange in India, as a result of economic liberalization. FEMA served to make transactions for external trade (exportsand imports) easier – transactions involving current account for external trade no longer required RBI’s permission. The deals in Foreign Exchange were to be ‘managed’ instead of ‘regulated’.

The switch to FEMA shows the change on the part of the government in terms of foreign capital.

Need for its management The buying and selling of foreign currency and other debt instruments by

businesses, individuals and governments happens in the foreign exchange market. Apart from being very competitive, this market is also the largest and most liquid market in the world as well as in India.

It constantly undergoes changes and innovations, whichcan either be beneficial to a country or expose them to greater risks. The management of foreign exchange market becomesnecessary in order to mitigate and avoid the risks. Central bankswould work towards an orderly functioning of the transactions which can also develop their foreign exchange market.

Main Features - Activities such as payments made to any person outside India or receipts

from them, along with the deals in foreign exchange and foreign security is restricted.

- FEMA gives the central government the power to impose the restrictions. - Restrictions are imposed on people living in India who carry out transactions

in foreign exchange, foreign security or who own or hold immovable property abroad.

- Without general or specific permission of the Reserve Bank of India, FEMA restricts the transactions involving foreign exchange or foreign security and payments from outside the country to India – the transactions should be made only through an authorized person.

- Deals in foreign exchange under the current account by an authorized person can be restricted by the Central Government, based on public interest.

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Or

Q. FEMA / FERA

FERA and FEMA - Comparison SIMILARITIES DIFFERENCES CHANGES / PROGRESSION FROM FERA TO FEMA - A STEP AHEAD

SimilaritiesThe similarities between FERA and FEMA are as follows:

The Reserve Bank of India and central government would continue to be the regulatory bodies.

Presumption of extra territorial jurisdiction as envisaged in section (1) of FERA has been retained.

The Directorate of Enforcement continues to be the agency for enforcement of the provisions of the law such as conducting search and seizure

Differences between FERA and FEMA Sr. No

DIFFERENCES FERA FEMA

1 PROVISIONS FERA consisted of 81 sections, and was more complex

FEMA is much simple, and consist of only 49 sections.

2

FEATURES Presumption of negative intention (Mens Rea ) and joining hands in offence (abatement) existed in FEMA 

These presumptions of MensRea and abatement have been excluded in FEMA

3

NEW TERMS IN FEMA

Terms like Capital Account Transaction, current Account Transaction, person, service etc. were not defined in FERA.

Terms like Capital Account Transaction, current account Transaction person, service etc., have been defined in detail in FEMA  

4

DEFINITION OF AUTHORIZED PERSON

Definition of "Authorized Person" in FERA was a narrow one ( 2(b)

The definition of Authorized person has been widened to include banks, money changes, off shore banking Units etc. (2 ( c )

5 MEANING OF "RESIDENT" AS COMPARED WITH INCOME TAX ACT.

There was a big difference in the definition of "Resident", under FERA, and Income Tax Act

 

The provision of FEMA, are in consistent with income Tax Act, in respect to the definition of term" Resident". Now the criteria of "In India for 182 days" to make a person resident has been brought under FEMA. Therefore a person who qualifies to be a non-resident under the income Tax Act, 1961 will also be considered a non-resident for the purposes of application of FEMA, but a person who is considered to be non-resident under FEMA

may not necessarily be a non-resident under the Income Tax Act, for instance a business man going abroad and staying therefore a period of 182 days or more in a financial year will become a non-resident under FEMA.

6

PUNISHMENT Any offence under FERA, was a criminal offence , punishable with imprisonment as per code of criminal procedure, 1973

Here, the offence is considered to be a civil offence only punishable with some amount of money as a penalty. Imprisonment is prescribed only when one fails to pay the penalty.

7

QUANTUM OF PENALTY.

The monetary penalty payable under FERA, was nearly the five times the amount involved.

Under FEMA the quantum of penalty has been considerably decreased to three times the amount involved.

8

APPEAL An appeal against the order of "Adjudicating office", before " Foreign Exchange Regulation Appellate Board went before High Court

The appellate authority under FEMA is the special Director (Appeals) Appeal against the order of Adjudicating Authorities and special Director (appeals) lies before "Appellate Tribunal for Foreign Exchange." An appeal from an order of Appellate Tribunal would lie to the High Court. (sec 17,18,35)

9

RIGHT OF ASSISTANCE DURING LEGAL PROCEEDINGS.

FERA did not contain any express provision on the right of on impleaded person to take legal assistance

FEMA expressly recognizes the right of appellant to take assistance of legal practitioner or chartered accountant (32)

10 POWER OF SEARCH AND SEIZE

FERA conferred wide powers on a police officer not below the rank of a Deputy Superintendent of Police to

The scope and power of search and seizure has been curtailed to a great extent

make a search 

A Step ahead from FERA to FEMAEnactment of FEMA has brought in many changes in the dealings of Foreign Exchange, as compared to FERA. Some of them are restrictive, and some has widened the scope.However some of the relevant progresses made, from FERA to FEMA, are as follows:Withdrawal of Foreign ExchangeNow, the restrictions on withdrawal of Foreign Exchange for the purpose of current Account Transactions, has been removed. However, the Central Government may, in public interest in consultation with the Reserve Bank impose such reasonable restrictions for current account transactions as may be prescribed.FEMA has also by and large removed the restrictions on transactions in foreign Exchange on account of trade in goods, services except for retaining certain enabling provisions for the Central Government to impose reasonable restriction in public interest.

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11: Role of Medium and small scale industries in our economy is vital- Analyze the statement in details

Small and medium enterprises (SMEs), particularly in developing countries, are the backbone of the nation's economy. They constitute the bulk of the industrial base and also contribute significantly to their exports as well as to their Gross Domestic Product (GDP) or Gross National Product (GNP).

INDIA'S SME SCENARIO: India has nearly three million SMEs, which account for almost 50 percent of

industrial output and 42 percent of India’s total exports. A special role for SMEs was earmarked in the Indian economy with the advent

of planned economy from 1951 and the subsequent industrial policy followed by government.

By and large, SMEs developed in a manner, which made it possible for them to achieve the objectives of: 1. High contribution to domestic production 2. Significant export earnings 3. Low investment requirements 4. Operational flexibility 5. Low intensive imports 6. Capacity to develop appropriate indigenous technology 7. Import substitution 8. Technology-oriented industries 9. Competitiveness in domestic and export markets

However, as a result of globalization and liberalization, coupled with WTO regime, SMEs have been passing through a transitional period. With enhanced competition from China and a few low cost centers of production from abroad many units have of late been facing a tough time.

However, those SMEs who had a strong technological base, international business outlook, competitive spirit and willingness to restructure themselves withstood the current challenges and came out successful to make their own contribution to the Indian economy.

It is the most important employment-generating sector and is an effective tool for promotion of balanced regional development. These account for 50percent of private sector employment and 30 to 40 percent of value-addition in manufacturing. It produces a diverse range of products (about 8000 odd items), including consumer items, capital and intermediate goods.

However, the SMEs in India, which constitute more than 80 percent of the total number of industrial enterprises and form the backbone of industrial development, are as yet, in technological backwaters vis-á-vis advances in science and technology. These suffer from problems of suboptimal scales of operations and technological obsolescence.

It is these features of SMEs that make them an ideal target for technological up gradation through technological cooperation with foreign and local enterprises, with R&D institutions and centres of technology development.

Poor financial situations and low levels of R&D, poor adaptability to changing trade trends, non-availability of technically trained human resources, lack of management skills, lack of access to technological information and consultancy services and isolation from technology hubs, etc. are some of the reasons why these SMEs are not being able to surge ahead.

SME‘s CONTRIBUTION TO INDIAN ECONOMY: Growth of the Indian economy has accelerated to 8% and efforts are on to

further propel it to 10%. Undoubtedly, all the segments of the economy, viz. agriculture, industry and services have to improve their contribution to the economy.

Growth of small and medium enterprises (SMEs) is a sine qua non for the growth of industry, exports and other segments of the economy. Furthermore, promotion of entrepreneurship is also vital for sustenance and upward movement of the current growth trajectory of the economy.

The SME sector acts as a catalyst in upholding and encouraging the creation of the innovative spirit and entrepreneurship in the economy, thereby helping in laying the foundation for rapid industrial development. Moreover, the sector also serves the vital objectives of employment generation and balanced regional development.

Globalization and liberalization of the Indian economy have also brought a host of opportunities for the industrial sector, particularly the SME segment. While SMEs have responded to competition reasonably satisfactorily, there is scope for increasing their export potential, domestic market share and developing them as serious players in the global value chain.

SME s represents the largest proportion of the manufacturing sector in every country. In India, 95 percent of the industrial units are in small- scale sector with 40 percent addition in the manufacturing sector and 6.29 percent contribution to the Indian Gross Domestic Product

SME Current Issues

i. Lending Facilities to SMEs- The lending to the SME sector grew by 69% between 2000-01 and 2005-06.

But there exists a stark disparity amongst small players and big players within the SMEs sector. Loans to bigger companies are growing at a faster pace than loans to the SSI sector.

By the end of 2006, the proportion of SSI loans to total loanshas remained small at 6.4%.The Small Industries Development Bank of India (SIDBI) was set up in 1990 under the Act of Indian Parliament as the principal financial institution for promotion, financing, development of industry in the small sector and coordinating the financial activities of other institutions engaged in similar activities.

ii. Marketing Next to finance, marketing is the big problem area for small entrepreneurs.

The survival of small entrepreneurs very much depends on sound marketing techniques.

Marketing as a profession has not yet developed in the SME sector. Professional agencies are not engaged by small entrepreneurs on account of paucity of funds. The concept of marketing is not known to the majority of small entrepreneurs. For majority, marketing means advertisement or personal contacts. There are many ad-hoc initiatives taken by the Government to promote marketing of products/services of small units but no concrete action plan has been chalked out or targets made.

iii. Technological Up gradation Modernization, technological and quality up gradation has assumed great

significance in the present day context. With the inflow of latest technology reducing the cost of production and the increasing competition from within and outside, the small scale sector will have to attach more importance and pay attention to the areas of technology up gradation and modernization.

However, due to lack of information on the areas of technology up gradation, entrepreneurs who have plans for technical up gradation are not to go ahead.

iv Sickness in SSI Sector A host of developmental schemes launched by the Government for solving the problems of small scale industries have yet to achieve their goals to arrest sickness in SSI sector. The plight of existing small scale industries is visible in many industrial complexes wherein the industrial sheds have been converted into allied activities like showrooms, banquet halls, restaurants, etc. There seems to be some issue in the implementation part of the developmental schemes.

v. Removal of Inspector Regime and Simplification of Procedures One of the major grievances of the small scale sector is that the frequent

inspections by multiple government agencies are a source of harassment. At present, 55 inspectors of different levels are visiting the small scale units, which is a cause ofmajor concern to the small scale units. It is suggested that the government should stream line the inspection procedure.

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12. Details on Current Status on Indian Economy on any two sectors

Economic Survey

A flagship annual document of the Ministry of Finance, Government of India, Economic Survey 2013–14 reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.

With detailed statistical data covering all aspects of the economy—macro as well as sectoral—the report provides an overview of the following issues:

1. State of the Indian economy2. Challenges, policy responses, and medium-term outlook3. Fiscal policy and monetary management4. Financial intermediation and the role of markets5. External sector, balance of payments, and trade6. Agriculture, industrial development and services sector7. Energy, infrastructure, and communications8. Human development, climate change and public programs9. India and the Global Economy

Service Sector

India’s services sector that remained resilient even during and immediately after the global financial crisis buckled under the pressure of continued global and domestic slowdown, resulting in sub-normal growth in the last two years. However, early shoots of revival are visible in 2014-15 with signs of improvement in world GDP growth and trade also reflected in pick-up in some key services like IT, aviation, transport logistics, and retail trading. Different indices and estimates also indicate an expansion in India’s services business.

The services sector with an around 57 per cent contribution to the gross domestic product (GDP), has made rapid strides in the last few years and emerged as the largest and fastest-growing sector of the economy. Besides being the dominant sector in India’s GDP, it has also contributed substantially to foreign investment flows, exports, and employment. India’s services sector covers a wide variety of activities that have different features and dimensions. Some services like IT and telecommunications are very sophisticated, involving high technology and expertise, while some are simple like those of barbers and plumbers. Some services like transport have high linkages with the industrial sector and some like tourism have high employment linkages. Some services like railways and port fall under the definition of infrastructure, while some like construction fall under the definition of industry.

The growth of the services sector is closely linked to FDI inflows into this sector and the role of transnational firms. In the context of FDI, the ambiguity in classifying the different activities under the services sector continues. However, the combined FDI share of financial and non-financial services, construction development, telecommunications, computer hardware and software, and hotels and tourism can be taken as a rough estimate of the FDI share of services, though it could include some non-service elements. This share is 45 per cent of the cumulative FDI equity inflows during the period April 2000-March 2014.

India’s share in world services exports, which increased from 0.6 per cent in 1990 to 1.1 per cent in 2000 and further to 3.3 percent in 2013, has been increasing faster than its share in world merchandise exports. While the growth rate of services exports of India has been higher than that of the world for all the years since 1996 (except 2009), in 2013 this has been reversed.

Going forward, the year 2014-15 seems to augur well for the services sector with expansion in business activity in India as also indicated by some indices. There are also signs of revival in growth of the aviation sector with the announcement of new players like Air Asia and Tata-SIA Airline after a turbulent period of withdrawals and losses by some airlines. Indications of revival in world GDP and trade growth in general and of developed countries in particular, could help in revival of the tourism and shipping sectors. With a stable government in place and growing optimism which could translate into investment and growth, some quick reforms and removal of some barriers and obsolete regulations in the services sector could help.

Energy, Infrastructure and Communications Sector

As the growth of the economy in general and the manufacturing sector in particular is largely dependent on creation of suitable infrastructure, the policy focus in India has been on infrastructure investment. Such investment has increased manifold over time with increased private-sector participation in the country. The Twelfth

Five Year Plan has also laid special emphasis on infrastructure development as quality infrastructure is important not only for sustaining high growth but also ensuring that the growth is inclusive.

Availability of quality infrastructure is key for the growth of industry and services. From the infrastructure development perspective, while important issues like delays in regulatory approvals, problems in land acquisition and rehabilitation, and environmental clearances need immediate attention, time overruns in the implementation of projects continue to be one of the main reasons for underachievement in many of the infrastructure sectors. According to the Ministry of Statistics and Program Implementation (MOSPI) Flash Report for February 2014, of 239 central-sector infrastructure projects costing Rs. 1000 crore and above, 99 are delayed with respect to the latest schedule and 11 have reported additional delays with respect to the date of completion reported in the previous month. The additional delays in respect to projects relating to the petroleum, power, steel, and coal sectors are in the range of 1 to 26 months. The total original cost of implementation of these 239 projects was about Rs. 7, 39,882 crore and their anticipated completion cost is likely to be Rs.8, 97,684 crore, implying an overall cost overrun of Rs.1, 57,802 crore (21.3 percent of the original cost). The expenditure incurred on these projects till February 2014 was Rs.4, 10,684 crore, which is 45.7 per cent of the total anticipated cost.

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13. What was the objectives of MRP Act 1969. Also discuss the recent amendments done in MRTP Act

The principal objectives sought to be achieved through the MRTP Act are:

i) prevention of concentration of economic power to the common detriment;

ii) control of monopolies;

iii) prohibition of Monopolistic Trade Practices (MTP);

iv) prohibition of Restrictive Trade Practices (RTP);

v) Prohibition of Unfair Trade Practices (UTP).

The Monopolies and Restrictive Trade Practices Act, 1969, was enacted to prevent the concentration of economic power to common detriment, control of monopolies, prohibition of monopolistic and restrictive trade practices and matters connected therewith

Prevention of concentration of Economic power under this enactment, any undertaking producing one fourth or more of any type of goods and having assets of more than Rupees One Crore, is required to obtain clearance for any scheme of expansion. Initially, for the purpose of computing the total goods produced by the undertaking, goods that were exported were also taken into account. By an amendment in 1980, those goods, which are exported, are no longer taken into account while computing the total goods produced. This was in view of the objective of the enactment to control such practices within India

Monopolistic trade practices Section 2 (i) of the Act defines monopolistic trade practice while Section 31 provides for investigation into such practices by the MRTP Commission, either on reference by the Central Government or on receipt of information as to the carrying on of such activities by any such undertaking.

Monopolistic Trade Practices such as maintenance of prices and profits at unreasonable levels, arbitrary price increases, high expenditure on advertisement and high power salesmanship to maintain the undertaking in a monopoly situation, limiting technical detriment to common detriment or allowing quality of goods to deteriorate, are some of the situations which would call for investigation and action under this enactment.

Monopolistic trade practices that may be permitted The Central Government may permit such practice if satisfied that it is necessary for defense purposes, to ensure maintenance of supply of essential goods/services or to give effect to any terms of an agreement to which the Central Government is a party.

Recent Amendments done in MRTP Act

RECENT POLICY CHANGES FROM 1991 ONWARDS INCLUDE:

1. DEREGULATION AND SIMPLIFICATION OF LICENSING AND APPROVAL PROCEDURES

2. EXEMPTION OF A LARGE NUMBER OF INDUSTRIES FROM LICENSES, APPROVALS AND QUOTAS

3. NEW ECONOMIC ADJUSTMENT MEASURES

4. DIVESTITURE AND SALE OF GOVERNMENT ASSETS

5. GRADUAL DECLINE IN THE INTERVENTIONIST ROLE OF THE PUBLIC SECTOR

6. PRIVATISATION/DISINVESTMENT

7. ENCOURAGING COMPETITION

8. SIZE CONCEPT GIVEN UP

9. CURBS ON GROWTH OF MONOPOLY COMPANIES DELETED

10.MERGER CONTROL REMOVED

11.MORE EMPHASIS ON PROHIBITION OF RTPs, UTPs AND MTPs

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14. What is Family Managed Business and discuss the threats for long term survival? What are the suggested ways out for FMB’s?

Family Managed Business

The concept of the family-owned business is as old as that of commercial enterprise itself. Worldwide- as in India, family-owned businesses have survived multiple generations, have grown to become multi-billion dollar corporations, and have continued to make significant contributions to the economy.

The oldest family-owned business still in operation is the Japanese construction company Kongo Gumi, founded in 578 ad. It is currently managed by the 40th generation! There are more than 100 family businesses that are more than 200 years old. Many family businesses have attained considerable size too: The largest company in the world, Wal-Mart, is a family business. Some of the largest businesses in the world, and in India, are family businesses. Worldwide, there are around 200 family businesses with annual revenues of at least $2 billion (Rs 8,800 crore) each.

Family-owned businesses play a crucial role in the economy of most countries. Much of the retail trade, the small-scale industry, and the service sector is run by family businesses. Worldwide, family-managed businesses employ half the world's workforce and generate well over half the world's GDP. In India, it is estimated that 95 per cent of the registered firms are family businesses.

In India, family-owned businesses have played and will continue to play a central role in the growth and development of the country.

Most commercial enterprises are born as family-owned and family-managed businesses. A large number of family-owned and managed enterprises remain that way-planets in the family-centric planetary system. A smaller number, on the other

hand, need access to public equity capital and in the process become non-family owned. Others could remain family-owned but professionally-managed, either due to lack of interest on the part of the family or due to practical necessity.

The contributions of FMB’s to Indian Economy can be as under:-

Spirit of entrepreneurship: Family businesses have kept the spirit of enterprise alive especially through the 40 years of quasi-socialism. The spirit survived onerous taxation and repeated government attempts to undo supposed 'concentration' of economic power. Today, as India competes in an increasingly globalised economy, family businesses are playing a major role in turning the engines of growth.

Philanthropy: Indian family businesses have played a significant role in giving back to the community. To the average Indian, names of large Indian business groups are synonymous with philanthropic efforts in education, environment, health, culture and heritage conservation. And it is not just the large groups that have been active-numerous foundations engaged in charitable work are supported by scores of small and medium family enterprises.

Also, family businesses in India (and elsewhere) have several inherent advantages that provide them with unique strengths:

Trust lowers transaction costs: It is a well-documented fact that 'trust' lowers transaction costs, corruption, and bureaucracy. Trust can be a source of significant competitive advantage to a family business. In India, family businesses have often revolved around large joint families. The families of Palanpuri Jains from western India, who have established commercial colonies in diamond centres as dispersed as Tel Aviv, Antwerp, Mumbai, London and New York. Today these families account for roughly 50 per cent of all purchases of rough diamonds in the world.

Small, nimble, and quick to react: Family businesses, both small and large, tend to be quick to react to threats as well as opportunities. There are fewer decision-making gates and constituencies to deal with. Very often, the survival of the family depends on the survival of the business. This results in sharp and decisive action in the face of threats that could be potentially fatal for the business.

Information as a source of advantage: Many family businesses are private enterprises. This is an advantage since a private company can see the strengths and weaknesses of its public competitor and act accordingly while the converse is not true. Further, private companies can have private strategies to which analysts and the competition are not privy. And, private family businesses have the freedom to pursue truly long-term strategies that are not constrained by 'quarterly reporting'.

However, continued success for the family businesses is not guaranteed and family businesses that prosper on to 2020 will have three clear characteristics:

•The highest standards of corporate governance;

•Modern management and technology; and

•Long-term, performance-focussed strategies.

Corporate governance and the family business: Family businesses that can clearly distinguish between family interest and company interest-and make hard decisions when the two are in conflict-will emerge winners. Good corporate governance in family business should promote the long-term good of the company and not necessarily of the majority or minority stakeholders. It is well understood that neglecting or bypassing the interests of stakeholders like shareholders, employees, vendors, customers, consumers, the government, or the society at large is likely to adversely affect the long-term interests of the company. Good corporate governance entails a strong performance ethic framework leading to a true meritocracy. It is essential for family businesses to acknowledge the distinction between ownership and management: Only qualified family members should be engaged in the management of the business and there should be clear roles and rules of engagement for both owner-managers and professional managers. Above all, the perception of fairness should reign. Prof. John L. Ward, an international expert on family businesses at the Kellogg School of Management, confirms that family businesses with "effective governance practices are more likely to do strategic planning and to do succession planning. On an average, they grow faster and live longer".

Modern management and technology: Family businesses should strive to hire the best people, and be capable of recruiting and retaining outside professional talent. In a competitive world, the inability to professionalise management can lead to family businesses being shut out of sectors that require complex management, scale and constant technological improvements. Family businesses should be willing to seek and acquire assistance when required. The ego must not stand in the way improving the organisation's capabilities. The successful family businesses will seek collaboration-be it with consultants or with other firms-to imbibe new strategies and skills. In addition, family businesses will need to constantly seek and embrace the latest technology and productivity enhancing techniques such as improvements in information technology, communications,tqm, Six Sigma, et al.

Long-term, performance-focussed strategies: One of the potential strengths of family businesses is its ability to draw up plans focussed on creating long-term value. Family businesses normally tend to build 'long-term strategies' that assume that today's business model and assets will not be valuable tomorrow. Long-term strategy goes beyond survival and means investing in technical capabilities,

employees, R&D, brand building, and acquisition of customer knowledge. A family business can choose to measure its success in terms of years and decades, not merely quarter by quarter. The smarter FMBs will use this as an advantage to create truly long-term strategies, which may not necessarily yield results in the short-term.

For Indian family businesses, the path to sustained excellence is one that requires willingness to change, learn and excel.

Eg of successful FMB’s:

M V Subbiah, 66-year-old doyen of the Rs 5,266 crore Chennai-based Murugappa group of companies, was instrumental in turning a family-run business into a modern, professionally managed entity before handing it over to Gen Next. Subbiah, whose fourth-generation family business is a $1 billion, 23,000-employee conglomerate with interests in sugar, fertilizer, steel tubes, roller chains, financial services and more, said almost all family members work for some part of the company or help run its charitable enterprises, which include schools and hospitals.

Other Eg include the Tata’s, Birla’s and Bajaj’s.

Reasons for failures of FMB

Ownership:The ownership issue is not discussed or resolved or agreed in the beginning. Succession plans are never discussed let alone being planned. When the patriarch passes away suddenly, many families do not even know the assets and their whereabouts. Everyone assumes that he or she is an owner in the business. In the initial explosive growth stage there is great unity and a sense of purpose and everything is hunky dory. Ownership is taken as a birthright and everyone demands equal share. It is not based on contribution to the business.

Accountability:As the business grows rapidly and haphazardly, family members are brought in with no job descriptions or KRAs at senior positions. They neither have the qualifications nor the experience. The result is no one is accountable for a specific job. They are there because they are the trusted members of the family. Every one does every job and tries to please key members of the family. The focus is to maintain the status quo and strict family control. As the business grows and jobs get complicated, the need for formal managerial and leadership training emerges. At this stage many fail.

Human Resources: Family run enterprises very rarely have a HRD strategy. All key positions are manned by family members. The members may not be qualified or having adequate experience and maturity. In some large family managed enterprises, young well qualified members of the family are brought in to senior positions. Family managed enterprises have no performance appraisals for family

members. Salaries are fixed based on family needs and not on real contributions. These results in frustration in the limited senior professionals such organizations employ and either they leave or general apathy sets in. Family managed organizations very rarely put outsiders in positions where the company secrets reside. There is an atmosphere of fear, mistrust and distrust. This invariably results in frustrations leading to poor performance. The above drives even highly healthy and profitable family managed companies to their knees and eventual collapse.

The problems mentioned above are fairly common all around the world, irrespective of cultural differences, as human beings will remain human and have their failings. They are not insurmountable, as we have very successful, large family owned organizations like Wal Mart and DuPont in USA and a number of family owned organizations in UK, Europe and India.

CASE STUDY: WIPRO

Wipro Corporation, based in Bangalore is a family business run by Mr Azim Premji. This is a business house founded by his father and handed down to him. Though the company has become a Pvt Ltd Company and listed in the stock exchanges, Indian as well as some foreign, Mr Premji has divested only about sixth of the stocks and still owns over 83% of the shares. It was initially a consumer product company manufacturing oils, soaps, talcum powder etc but diversified into IT and computer.

Mr Ajim Premji was sent to Stanford University USA for his graduation in electrical engineering. This tactical and farsighted decision of his father paid off handsomely in subsequent years. Wipro, under the guidance of Mr Premji, was one of the first brick and mortar old technology manufacturing based companies to spot the potential in computer and IT field and exploit it. Today, it is counted among the front runners in the IT and computer industry in the world. So much so, that the original business of consumer products has gone into the background and very few even know about it.

Despite having the complete control over the company, Mr Premji has turned the business from Family business to corporate one. He hires the best talent available any where. Wipro is also rated as one of the best employers in the country. But his business is so far completely insulated from his family. His two sons are unknown entities to Wipro employees. While one is busy earning a MBA degree in US, other is busy helping his mother run a charitable trust (Azim Premji Foundation) funded by his father.

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15. Technology Transfers

Technology transfer is the process by which technology or knowledge developed in one place or for one purpose is applied and exploited in another place for some other purpose.

The term "technology transfer" historically has been associated with federal activities; however, the process is not restricted to the government. The most common form of technology transfer occurs between federal laboratories and nonfederal organizations such as private industry, academia, and state and local governments.technology transfer is the process by which existing knowledge, facilities, or capabilities developed under federal research and development (R&D) funding are utilized to fulfill public and private needs.Technology transfer can also occur between federal agencies, although the primary emphasis is on transfers to all types of nonfederal organizations, but not necessarily from a federal facility to another party. There are opportunities that exist for technology to be transferred from outside organizations into the federal government to benefit the laboratories' missions.Technology transfer can be described as market pull or technology push. Technology transfer occurs as a result of market pull when a need or problem causes companies to seek federal technology. Technology push occurs when innovations or inventions are used to create new markets or consumer needs. The overall objective is to get federally developed R&D out to the marketplace for commercialization; however, the opportunity exists for government to bring technology developed by industry into the federal R&D arena for further research, development, and commercialization to benefit all potential partners.The various forms of technology transfer can be simple or complex depending on the resource (e.g., agency/laboratory), user (e.g., industry), and interface (e.g., mechanism) that connects the two and moves the technology from one organization to another. Examples of processes include:

Technology developed for nongovernment applications Secondary applications of technology developed specially for government

applications Transfer of mission-related technology between government organizations Technical assistance Collaborative R&D between government and nongovernment entities Commercial transfer of technology for use in government applications

Examples of forms of transfer technology include:

Commercial transfer - transfer of knowledge or technology from government to commercial organizations for potential or new/improved technologies

Exporting resources - collaborative agreements or volunteer services that provide expertise to outside organizations

Importing resources - a cooperative effort that brings outside technology (pull) into the agency/laboratory to enhance its mission

Dual-use - development of technologies that have "dual" or commercial/government applications

Scientific dissemination - the multidirectional sharing of government, industry, and academic publications (i.e., conference papers, working papers, etc.)

The long-term goal of technology transfer is to sustain economic growth in the foreseeable future through the development and commercialization of new technologies. In the global economy, the wealth of one nation is directly affected by its relationship with other nations. With the wealth of knowledge and expertise the U.S. has in its scientists and engineers, the U.S. is positioned to compete in the global marketplace. Federal technology transfer programs are intended to make the most of R&D and the expertise found in both government and nongovernment organizations.UTRS has been involved with technology transfer since its inception. Our technology transfer team provides support to clients in government, industry, and academia. Our expertise has enabled our clients to take advantage of the technological and economic benefits of technology transfer, including:

Leveraging scarce R&D budget dollars Maximizing return on R&D expenditures Access to state-of-the art or unique expertise, technology, resources, and

facilities Rapid commercialization of new products or processes Increased productivity, competitiveness, and cost-effectiveness Patent, licensing, and royalty opportunities

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16. What is corporate governance? What is the current state of implementation of corporate governance practice in India?

Corporate governance is about maximizing shareholder value legally, ethically and on a sustainable basis, while ensuring fairness to every stakeholder – the Company’s customers, employees, investors vendor-partners, the government of the land and the community. Thus, corporate governance is a reflection of a Company’s culture, policies, its relationship with the stakeholders, and its commitment to values.

Corporate governance had its origins in the 19th century, arising in response to the separation of ownership and control following the formation of joint stock

companies. The owners or shareholders of these companies, who were not involved in day-to-day operational issues, required assurances that those in control of the Company, the directors and managers, were safeguarding their investments and accurately reporting the financial outcome of their business activities. Thus, shareholders were the original focus of corporate governance.

"Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance"

"Corporate governance - which can be defined narrowly as the relationship of a company to its shareholders or, more broadly, as its relationship to society

"Corporate governance is about promoting corporate fairness, transparency and accountability"

Indian Scenario

In India, the industry, rather than the government, provided the initial impetus for corporate governance reform. Driven by a desire to make Indian businesses more competitive and respected globally, the Confederation of Indian Industries (CII) published a voluntary Code of Corporate Governance in 1998, one of the first major codes in Asia. The Securities and Exchange Board of India (SEBI) followed by setting up the Kumar Mangalam Birla Committee on Corporate Governance. The recommendations of the committee in December 1999 formed the basis for Clause 49 of the Listing Agreement.

In addition, the Department of Company Affairs, Government of India, constituted a nine-member committee under the chairmanship of Mr. Naresh Chandra, former Indian ambassador to the U.S., to examine various corporate governance issues.

SEBI instituted a committee under the chairmanship of Mr. N. R. Narayana Murthy in 2004 which recommended enhancements in corporate governance. SEBI has incorporated the recommendations made by the Narayana Murthy Committee on Corporate Governance report in Clause 49 of the Listing Agreement. The revised Clause 49 was made effective from January 1, 2006.

Details on Indian Scenario

The CII Code

More than a year before the onset of the Asian crisis, CII set up a committee to examine corporate governance issues, and recommend a voluntary code of best

practices. The committee was driven by the conviction that good corporate governance was essential for Indian companies to access domestic as well as global capital at competitive rates. The code was voluntary, contained detailed provisions, and focused on listed companies.

Kumar Mangalam Birla committee report and Clause 49

While the CII code was well-received and some progressive companies adopted it, it was felt that under Indian conditions a statutory rather than a voluntary code would be more purposeful, and meaningful. Consequently, the second major corporate governance initiative in the country was undertaken by SEBI. In early 1999, it set up a committee under Kumar Mangalam Birla to promote and raise the standards of good corporate governance. In early 2000, the SEBI board had accepted and ratified key recommendations of this committee, and these were incorporated into Clause 49 of the Listing Agreement of the Stock Exchanges.

The Naresh Chandra committee report on corporate governance

The Naresh Chandra committee was appointed in August 2002 by the Department of Company Affairs (DCA) under the Ministry of Finance and Company Affairs to examine various corporate governance issues. The committee submitted its report in December 2002. It made recommendations in two key aspects of corporate governance: financial and non-financial disclosures: and independent auditing and board oversight of management.

Narayana Murthy committee report on corporate governance

The fourth initiative on corporate governance in India is in the form of the recommendations of the Narayana Murthy committee. The committee was set up by SEBI, under the chairmanship of Mr. N. R. Narayana Murthy, to review Clause 49, and suggest measures to improve corporate governance standards. Some of the major recommendations of the committee primarily related to audit committees, audit reports, independent directors, related party transactions, risk management, directorships and director compensation, codes of conduct and financial disclosures.

An important proposal which has been implemented is the mandatory portion on Corporate Governance in the annual report of the company, with a detailed compliance report on Corporate Governance. Non compliance of any mandatory requirement i.e. which is part of the listing agreement with reasons there of and the extent to which the non-mandatory requirements have been adopted should be specifically highlighted.

In addition, the company shall obtain a certificate from the auditors of the company regarding compliance of conditions of corporate governance as stipulated in the clause and annexe the certificate with the directors’ report, which is sent annually

to all the shareholders of the company. The same certificate shall also be sent to the Stock Exchanges along with the annual returns filed by the company.

Whilst the issues promulgated by the various committees above caters for the various mandatory requirement highlighted by Organisation for Economic Development and Growth (OECD), implementation of the same in spirit has led a lot to be desired. Typical area of concern would be the Annual report which requires confirmation on compliance to corporate governance, wherein it is met today more as a statutory requirement than using to convey or increase investor confidence on corporate governance.

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