AKTU MBA 2 SEM/ BUS.ENV/ UNIT 2

1. ROLE OF GOVERNMENT
IN BUSINESS
ENVIRONMENT
DR ANURAG KUMAR ASSOCIATE PROFESSOR,
DEPARTMENT OF BUSINESS ADMINISTRATION , ABES
EC GHAZIABAD
DR ANURAG KUMAR ASSOCIATE PROFESSOR

2. BUSINESS ENVIRONMENT
Role of Government in Business
Government plays four important roles in an
economy :
• Regulatory Role
• Promotional Role
• Entrepreneurial Role
• Planning Role
DR ANURAG KUMAR ASSOCIATE PROFESSOR

3. BUSINESS ENVIRONMENT
Role of Government in Business
Regulatory Role: Government’s role in business
may extend from entry into business to final
results of a business. The reservation of
industries for small scale, licensing system etc
regulate the entry.
Regulations of products/ promotional activities
etc amount to conduct of business.
Results of business may be regulated by
measures such as ceiling on profit margins,
dividends etc.DR ANURAG KUMAR ASSOCIATE PROFESSOR

4. BUSINESS ENVIRONMENT
Role of Government in Business
Government regulation of the economy may broadly
be classified into Direct Control and Indirect Control.
Indirect Control: May be exercised through various fiscal
and monetary incentives or penalties e.g. High import
duty may discourage imports and tax incentives may
encourage exports.
Direct Control: Direct administrative and physical
control is discretionary in nature i.e. they can be applied
to specific industries or firms e.g. licensing. The process
may be simplified in case of small scale industries and in
case of some industries may be prohibitive e.g. arms
and ammunition.
DR ANURAG KUMAR ASSOCIATE PROFESSOR

5. BUSINESS ENVIRONMENT
Role of Government in Business
Promotional Role
Promotional role of the government assumes greater
significance in countries like India, where
infrastructure in inadequate and entrepreneurial
activity is scarce.
The government sets up infrastructure projects like
power generation, roads, finance transport etc. The
government also sets up institutions for providing
training and guidance for setting up industries like
DIC, NIESBUD, NSIC, SIDO, EDI etc, and also provides
fiscal and monetary incentives for setting up
industries.DR ANURAG KUMAR ASSOCIATE PROFESSOR

6. BUSINESS ENVIRONMENT
Role of Government in Business
Entrepreneurial Role
In mixed economies the government also plays the role of
entrepreneur by setting up and operating businesses and
bearing the risks.
A number of factors have contributed to the development of
Public Sector , such as Socio political factors, dearth of private
entrepreneurship, unprofitable sectors, prevention of
exploitation of consumers etc.
Public sector, generally dominated in capital intensive
industries like Steel, Petroleum, railways, arms & ammunition
etc. The role of public sector is being redefined now, and is
considerably less.
DR ANURAG KUMAR ASSOCIATE PROFESSOR

7. BUSINESS ENVIRONMENT
Role of Government in Business
Planning Role
The government plays a very important role as a
planner. Government attempts to make optimum
utilisation of scarce resources by directing resources
from one use to another. NITI AAYOG, VARIOUS
TRADE POLICY,etc indicate the role of planning by the
government.
These plans provide guidelines for the growth and
expansion of industries and the economy in general.
It also earmarks priority sectors like education,
agriculture etc.DR ANURAG KUMAR ASSOCIATE PROFESSOR

8. The state must provide the following facilities to attain
economic and industrial development.
• Become Self-sufficient
• Reduce Cost of Production
• Provide for Shortage of Capital and Manage the Workforce
• Invest in Human Capital and Promote Education
• Support Agriculture
• Check Disparity in Wealth and Income
• Adopt Suitable Monetary and Fiscal Measures
• Proper Allocation and Stabilization
• Efficiency–Equity Trade-off
• Merit Goods
DR ANURAG KUMAR ASSOCIATE PROFESSOR

9. • Infrastructure and Institutional Development
• Minimizing Insecurity in Doing Business
• Bureaucratic Delays
• Import- and Export-related Aid
• Protection to Business and Making It More Competitive
and Contestable
• Upgradation of Technology and Focus on Innovation
• Structural Factors to be Made Pro-business
• Creation of New Value System in Business
DR ANURAG KUMAR ASSOCIATE PROFESSOR