Lecture 5 - Role of Government in Business | Business Environment - Business Basics PDF Download

 Page 1


 
Institute Of Lifelong Learning, University of Delhi                      1 
 
 
 
 
 
 
 
 
 
 
 
 
Paper: Business Environment 
Lesson: Role of the Government in Business 
Lesson Developer: Dr. C.S.Sharma
1
, Dr. R.K.Singh
2
 
College/Dept: Shri Ram College of Commerce
1
 
 Deputy Dean
2
, 
Reviewer: Prof. K.M.Upadhyay 
 
 
 
 
 
 
 
 
 
 
 
 
Page 2


 
Institute Of Lifelong Learning, University of Delhi                      1 
 
 
 
 
 
 
 
 
 
 
 
 
Paper: Business Environment 
Lesson: Role of the Government in Business 
Lesson Developer: Dr. C.S.Sharma
1
, Dr. R.K.Singh
2
 
College/Dept: Shri Ram College of Commerce
1
 
 Deputy Dean
2
, 
Reviewer: Prof. K.M.Upadhyay 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      2 
 
Lesson: Role of Government in Business 
Table of Contents 
 
1: Learning Outcomes 
2: Introduction 
3: Different Roles of Government in Business  
3.1: Regulatory Role 
3.2: Entrepreneurial Role 
3.3: Promotional Role 
3.4: Planning Role 
Summary  
Exercises 
Glossary 
References 
 
 
1. Learning Outcomes: 
 
After you have read this lesson, you should be able to: 
? appreciate the role of Government in Business 
? identify reasons for slow growth of Indian business sector 
? identify different types of role of Government  
o Regulatory Role 
o Entrepreneurial Role 
o Promotional Role 
o Planning Role 
 
 
 
 
 
 
Page 3


 
Institute Of Lifelong Learning, University of Delhi                      1 
 
 
 
 
 
 
 
 
 
 
 
 
Paper: Business Environment 
Lesson: Role of the Government in Business 
Lesson Developer: Dr. C.S.Sharma
1
, Dr. R.K.Singh
2
 
College/Dept: Shri Ram College of Commerce
1
 
 Deputy Dean
2
, 
Reviewer: Prof. K.M.Upadhyay 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      2 
 
Lesson: Role of Government in Business 
Table of Contents 
 
1: Learning Outcomes 
2: Introduction 
3: Different Roles of Government in Business  
3.1: Regulatory Role 
3.2: Entrepreneurial Role 
3.3: Promotional Role 
3.4: Planning Role 
Summary  
Exercises 
Glossary 
References 
 
 
1. Learning Outcomes: 
 
After you have read this lesson, you should be able to: 
? appreciate the role of Government in Business 
? identify reasons for slow growth of Indian business sector 
? identify different types of role of Government  
o Regulatory Role 
o Entrepreneurial Role 
o Promotional Role 
o Planning Role 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      3 
 
 
2. Introduction: 
In the world, Indian Economy is the fourth largest positioned economy on the basis of 
Purchasing Power Parity (PPP). The Industrial Policy initiated by the Government of India in 
1991 made India as an attractive destination for business and investment. Presently, Indian 
Economy is broadly divided into three categories namely Primary sector, Secondary sector 
and Tertiary sector. Primary Sector includes the production functions by utilizing natural 
resources like water, land, forest, mining etc. Secondary Sector includes the industrial 
activities like Manufacturing, Mining, Quarrying and Electricity, Gas and Water Supply. 
Tertiary Sector includes activities like Construction, Trade, Hotel, Transport and 
Communication, Finance, Insurance, Real Estate & Business Services and Community, Social 
& Personal Services. 
Business is the main component in building the economy by affirming the competitive, 
sustainable and community based environment for the country. It creates prosperity with a 
vision for economic and societal growth with a contribution to quality of life, generation of 
employment, reduction in poverty and distribution of income. However, as against these 
achievements, there are some inadequacies in Industrial policies which resulted in a gap that 
was projected by the Indian government and resulted in slow growth. Owing to following 
shortcomings rapid growth in Indian business sector could not occur.  
 
 
 
 
 
 
 
 
 
Page 4


 
Institute Of Lifelong Learning, University of Delhi                      1 
 
 
 
 
 
 
 
 
 
 
 
 
Paper: Business Environment 
Lesson: Role of the Government in Business 
Lesson Developer: Dr. C.S.Sharma
1
, Dr. R.K.Singh
2
 
College/Dept: Shri Ram College of Commerce
1
 
 Deputy Dean
2
, 
Reviewer: Prof. K.M.Upadhyay 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      2 
 
Lesson: Role of Government in Business 
Table of Contents 
 
1: Learning Outcomes 
2: Introduction 
3: Different Roles of Government in Business  
3.1: Regulatory Role 
3.2: Entrepreneurial Role 
3.3: Promotional Role 
3.4: Planning Role 
Summary  
Exercises 
Glossary 
References 
 
 
1. Learning Outcomes: 
 
After you have read this lesson, you should be able to: 
? appreciate the role of Government in Business 
? identify reasons for slow growth of Indian business sector 
? identify different types of role of Government  
o Regulatory Role 
o Entrepreneurial Role 
o Promotional Role 
o Planning Role 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      3 
 
 
2. Introduction: 
In the world, Indian Economy is the fourth largest positioned economy on the basis of 
Purchasing Power Parity (PPP). The Industrial Policy initiated by the Government of India in 
1991 made India as an attractive destination for business and investment. Presently, Indian 
Economy is broadly divided into three categories namely Primary sector, Secondary sector 
and Tertiary sector. Primary Sector includes the production functions by utilizing natural 
resources like water, land, forest, mining etc. Secondary Sector includes the industrial 
activities like Manufacturing, Mining, Quarrying and Electricity, Gas and Water Supply. 
Tertiary Sector includes activities like Construction, Trade, Hotel, Transport and 
Communication, Finance, Insurance, Real Estate & Business Services and Community, Social 
& Personal Services. 
Business is the main component in building the economy by affirming the competitive, 
sustainable and community based environment for the country. It creates prosperity with a 
vision for economic and societal growth with a contribution to quality of life, generation of 
employment, reduction in poverty and distribution of income. However, as against these 
achievements, there are some inadequacies in Industrial policies which resulted in a gap that 
was projected by the Indian government and resulted in slow growth. Owing to following 
shortcomings rapid growth in Indian business sector could not occur.  
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      4 
 
 
 
Figure 1: Reasons for Slow Industrial Growth 
 
1) Outdated Technology: 
In India, most of our framers even today rely primarily on monsoon for irrigation in 
agriculture. Also, technologies used in cottage or small scale industries are outdated and 
backward. New technology is costly and most of the time is imported from other countries 
which ultimately increases overhead cost of businesses. 
2) Difficulties in Obtaining Capital and Expansion of Funds: 
Low rate of capital formation results in slow production process, which further leads to low 
income and low saving and eventually leading to low investment, hence resulting into 
inadequate capital. Moreover, absence of orderly capital market in India causes complexity in 
IPOs for expansion of funds.  
Page 5


 
Institute Of Lifelong Learning, University of Delhi                      1 
 
 
 
 
 
 
 
 
 
 
 
 
Paper: Business Environment 
Lesson: Role of the Government in Business 
Lesson Developer: Dr. C.S.Sharma
1
, Dr. R.K.Singh
2
 
College/Dept: Shri Ram College of Commerce
1
 
 Deputy Dean
2
, 
Reviewer: Prof. K.M.Upadhyay 
 
 
 
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      2 
 
Lesson: Role of Government in Business 
Table of Contents 
 
1: Learning Outcomes 
2: Introduction 
3: Different Roles of Government in Business  
3.1: Regulatory Role 
3.2: Entrepreneurial Role 
3.3: Promotional Role 
3.4: Planning Role 
Summary  
Exercises 
Glossary 
References 
 
 
1. Learning Outcomes: 
 
After you have read this lesson, you should be able to: 
? appreciate the role of Government in Business 
? identify reasons for slow growth of Indian business sector 
? identify different types of role of Government  
o Regulatory Role 
o Entrepreneurial Role 
o Promotional Role 
o Planning Role 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      3 
 
 
2. Introduction: 
In the world, Indian Economy is the fourth largest positioned economy on the basis of 
Purchasing Power Parity (PPP). The Industrial Policy initiated by the Government of India in 
1991 made India as an attractive destination for business and investment. Presently, Indian 
Economy is broadly divided into three categories namely Primary sector, Secondary sector 
and Tertiary sector. Primary Sector includes the production functions by utilizing natural 
resources like water, land, forest, mining etc. Secondary Sector includes the industrial 
activities like Manufacturing, Mining, Quarrying and Electricity, Gas and Water Supply. 
Tertiary Sector includes activities like Construction, Trade, Hotel, Transport and 
Communication, Finance, Insurance, Real Estate & Business Services and Community, Social 
& Personal Services. 
Business is the main component in building the economy by affirming the competitive, 
sustainable and community based environment for the country. It creates prosperity with a 
vision for economic and societal growth with a contribution to quality of life, generation of 
employment, reduction in poverty and distribution of income. However, as against these 
achievements, there are some inadequacies in Industrial policies which resulted in a gap that 
was projected by the Indian government and resulted in slow growth. Owing to following 
shortcomings rapid growth in Indian business sector could not occur.  
 
 
 
 
 
 
 
 
 
 
Institute Of Lifelong Learning, University of Delhi                      4 
 
 
 
Figure 1: Reasons for Slow Industrial Growth 
 
1) Outdated Technology: 
In India, most of our framers even today rely primarily on monsoon for irrigation in 
agriculture. Also, technologies used in cottage or small scale industries are outdated and 
backward. New technology is costly and most of the time is imported from other countries 
which ultimately increases overhead cost of businesses. 
2) Difficulties in Obtaining Capital and Expansion of Funds: 
Low rate of capital formation results in slow production process, which further leads to low 
income and low saving and eventually leading to low investment, hence resulting into 
inadequate capital. Moreover, absence of orderly capital market in India causes complexity in 
IPOs for expansion of funds.  
 
Institute Of Lifelong Learning, University of Delhi                      5 
 
3) Lack of International Competitiveness 
Another issue causing slow industrial growth is lack of International competiveness which 
hampers the export quality. For any country, it is important to maintain foreign exchange for 
import of goods and this can majorly be achieved by proper export performance. Besides 
this, export also helps in continuous growth and rejuvenation of an economy.  
4) Disparities in Different Sections of the Country: 
After being the fourth largest economy on the basis of PPP, there are few sections in India 
which are living under the poverty line. The political and socio economic condition of India 
has broadened the inequality among rich and poor. The policies are making the rich richer 
and the poor poorer.  
5) Infrastructural Constraints: 
Lack of basic infrastructure facilities like proper education, communication, transportation 
and power has deteriorated the productivity of domestic industry. Problems like power 
breakdowns, delay in railways, poor conditioned roads, lack of water supply for agriculture 
have made business highly inefficient. 
All these factors have adversely affected the competiveness of domestic industry by 
increasing the overhead cost of the businesses.  Industrial policies in India are not designed 
for the prime motive of growth but also for rapid industrialization and modernization of the 
economy with sustainable growth.  Hence, the Government of India came up with different 
policies for financial development, better ownership, foreign collaboration and technology 
modernization.  
 
3. Different Roles of Government in Business 
Government performs many different roles in an economy. Conventionally, it was presumed 
that role of government is to sustain the law and order, protect a country from external 
attacks, provide social security, take care of public utilities and maintain peace within a 
nation. Government has command over all resources in an economy. Over time these roles 
have taken a concrete shape to bring about development and growth of an economy as well 
business. The vision has been to improve international competitiveness, rapid modernization