This document discusses key factors that influence a country's business environment and economic growth, including: 1. The rate of saving and investment (FI) which indicates a country's business potential and need for domestic or foreign investment. 2. Characteristics of the business environment like total external forces, specific/general forces, inter-relatedness, dynamic nature, uncertainty and complexity. 3. An overview of the Indian business environment, including its mixed economy nature, colonial history, sectors driving growth like services, IT and e-commerce, and co-existence of public and private sectors.

1. Rate of saving &
investment
MOD-1

2. 1
• It signifies business potential.
• It shows the degree of fiscal imbalance.
• FI = rate of saving - rate of investment.
• If FI>0 - country’s business potential is less
progressive & it should find proper sectors to
invest in domestic or foreign.
• If FI<0 - country’s business potential is viable
& it is receiving ample foreign investments.

3. 2
• Record low of investment by India- 29.6%- mar
2017
• All time high ROI by India- 41.2% sep 2011
Saving rate Investment rate
China 44% 46.45%
India 30.1% 31%
Mongolia 45% 41.3%
Qatar 45% 60.3%

4. Characteristics of business
environment
I. TOTALITY OF EXTERNAL FORCES-
The environment can be seen as a sum total of
all forces acting upon business entity.
These forces may not show up in a fixed interval
of time but in a given period of time we’ve to
summarize the forces to calculate its impact.

5. ii) Specific & general forces-
Internal environment is also known as specific type
of forces, because these can be determined
under a particular scale. These forces are clear,
assumable & easily controllable.
External environment can be called as general
forces because these are uncontrollable in
nature and can happen due to general changes
in business policies & regulations.

6. iii) inter-relatedness-
All the business elements are inter-related with
each other. i.e. if one force changes
subsequently it affects others in a good or bad
way.
iv)Dynamic nature-
It shows variability of all business elements. i.e.
not a single entity is fixed. Every aspect
changes with time or with introduction of an
innovation.

7. V) Uncertainty –
Since all the variables are dynamic, it has hard to
assume a certain value of them.
Vi) Complexity –
The process of analysis conducted to know the
effectiveness of business variables will always
be complex.
Ex- regression, correlation, exponential
smoothing technique etc.

8. Indian business environment
This sector of syllabus will focus on nature of
the economy, what are the various dimensions
of growth and how to tackle with future
economic crisis etc.
It is the world's sixth-largest economy by
nominal GDP

9. • Nature-
Currently India’s economy is an under-developed &
mixed economy i.e. it is a combination of both
socialistic & capitalist kind of market.
Our economical progress is inefficient because of
-high population
-low per capita income
-colonial rule

10. Colonial rule
• The policy or practice of a wealthy or powerful
nation's maintaining or extending its control
over other countries, especially in establishing
settlements or exploiting resources.

11. • India has one of the fastest growing service
sectors in the world with an annual growth
rate above 9% since 2001, which contributed
to 57% of GDP in 2016-17.
• The IT industry continues to be the largest
private-sector employer in India.

12. • India is the third-largest start-up hub in the
world with over 3,100 technology start-ups in
2014–15.
• India ranks second worldwide in farm output.
• One of the world’s fastest growing e-
commerce markets.
• The Indian automobile industry is one of the
largest in the world with an annual production
of 21.48 million vehicles

13. Growth of Indian economy
i) Significant changes in sectoral distribution.
It represents productive segments those who
add positively to the economy.
At first agriculture was the only contributive
segment but later industries and service
sectors started fledging their wings.

14. ii) Development in the infrastructure-
Infrastructure provides necessary foundation for
development.
Creation of SEZ’s, energy stations, telecom
sectors have been created by effective use of
infrastructures.

15. iii) Progress in the banking & financial sector-
Organization of money & capital market has
improved, specialized industrial financing
institutions have been set up.
Modern banks have reached in small towns &
villages
The growth of commercial banks & co-operative
credit societies has been really spectacular.

16. iv) Private ownership & productions-
This concept is a generalized form of
privatization. Here private brands are free to
operate their business without any kind of
Govt. intervention.
The contribution of public sector in our national
output is <25%. So private sectors remains
pervasive in this country.

17. • V) pre-dominance of market-
India has a reputation of high market purchase
power. Our market consist of a many potential
buyers which actually favors the new business.
Hence our market attracts foreign investors to
spread their business within our market,
which adds more to FDI.

18. • Co-existence of public sector with private
sector-
Ever since private sector grew stronger, it tried to
gain monopoly in market & to keep them in
check public sector refined their policies &
went on to have a partnership with them.
Combining resources was an innovative yet risky
phase for government due to mismatch of
working policy but with time it became stable.
Ex- banks, security services & employment of ex-
servicemen.

19. Laissez faire
• It is an economic system in which transactions
between parties are free from government
intervention such as regulation, privileges,
tariffs & subsidies.

20. Economic factors
• i) Business cycle-
It shows a pattern of our dynamic economy.
.

21. • Boom / prosperity- this section of economy is
considered suitable for
• new business openings
• ideal factors facilitating production
• fair rate of return to the scale

22. • Recession-
This is an early sign of declining economy, It
exists for relatively shorter time.
During this period liquidation happens in the
stock market, bank loans & investments.
Prices fall & a sharp reduction in aggregate
demand can be seen.

23. • Depression-
It is the enhanced/amplified form of recession.
It directly affects production & a sharp fall
happens.
Wastages increase, corrosion in demand
increases.

24. • Recovery-
• It starts when forces that work to restore the
normal price relations & cost-price relations
starts operating effectively.
• This is the obvious outcome when every
efforts are directed towards betterment of
economy.

25. ii) inflation-
India faced its highest inflation rate in 1974, the
reason was oil crisis & continuous war with
china (‘62) & Pakistan(‘65).
It is commonly defined as a persistent &
appreciable rise in general level of prices.

26. • iii) conditions in foreign trade-
Foreign trade accounted for 49% of India's GDP
in 2016.

27. Year Export import Trade Deficit

28. exports

29. imports

30. Non economic factors
• i) Human resources-
India has 2nd largest reservoir of capable human
resource.
Which is more important than soils, minerals,
forests, etc. because it requires less care &
conservation.

31. • ii) Political freedom-
This is a part of political environment.
It has a control over both foreign & domestic
trade.
Lowering the political bar will allow investors to
invest in various profitable segments in the
market.
Ex- Company’s act, Industrial policies act, etc.

32. iii) Technological factors-
This is the major non-economic factor which
affects the economy widely.
Countries having advance technologies add
significantly to the output.
It encourages innovation & creativity, saves time
& reduce wastages.

33. Forces shaping competitive business
environment
• Internal & external Forces-
(previously described)
-Threat of new substitutes
-Threat of new entrants
-Phase of business cycle

34. Market & Non-market stakeholders of
business
• Stakeholders-
These are the people who have an interest in
the success & potential failure of a company,
because they may have invested in the
industry or associated directly/indirectly in the
business operations etc.

35. • Market shareholders-
They generally have a financial stake in the
company like employees, share holders,
partners, owners etc.
without their support, the company would
immediately be in financial ruin.

36. `
• Non-market stakeholders-
They are based outside of the organization &
have no vested financial interest in the
company.
Ex- General public, political groups, media
outlets etc.