OVERVIEW OF INDIAN SOCIAL, POLITICAL AND ECONOMIC SYSTEMS Introduction Fundamentals of Agri-Business Management Type of Environment

1. OVERVIEW OF INDIAN SOCIAL, POLITICAL
AND ECONOMIC SYSTEMS
Indian leaders, notably the first Prime Minister Dr. Jawaharlal Nehru, who
implemented the concept of five year plans, believed that high economic growth
and more income amongst the poor population are the prime goals before the
newly independent nation. To achieve these goals, government was assigned
important role and since 1951, number of five year plans have played major role in
economic development of the country. Although there was considerable growth in
1950s, but it was a less than many other Asian countries. From 1951-79, the Indian
economy grew at an average rate of 3.1 percent a year at constant prices. In the
same period, growth in industrial sector was about 4.5 percent a year and for
agriculture sector, it was 3.0 percent. Many political leaders associated with
Independence movement were favoring socialistic pattern of development. They
were in favor of government intervention in the economy. They propagated
ownership by state for key industries
Introduction :-

2. Indian economic systems: India has a mixed economic system. Indian economy
comprises of traditional village farming, modern agriculture, handicrafts, modern
industries and new emerging social sector. Since 1991, government has adopted
liberalization policy. Restrictions on foreign trade and investment have reduced.
The economic growth rate is around and above 6% in the liberalized era since
1991. This has resulted in reduction in poverty by about 10 percent. India
possesses large number of educated youth, which has helped in economic
progress; and the country and India emerged as an important destination for
business process outsourcing services.
Looking from the system’s viewpoint, all business
organizations operate in an open system. It takes resources from the external
environment, carries out conversion process and gives output in the form of
goods or services to external environment.

3. Type of Environment
1. Economic Environment
2. Technological environment
3. Political Legal Environment
4. Demographic Environment
5. Socio Cultural Environment
6. Natural Environment

4. 1. Economic Environment
A close relationship exists between business and its
economic factors which include business cycles, inflation,
unemployment interest rates, income level of saving and
investments, fiscal, monetary and balance of payment
situations and overall growth activity. The economic factors
affect consumer purchasing power and spending pattern.
Economic environmental factors decide the growth
prospects of business houses. During recession, the demand
of goods and services decreases leading to slowdown of
business. The economic policies framed by the government
may either act as opportunity or threat for a business.

5. 2. Technological environment
Technology is the most dynamic force. Technology implies
systematic application of scientific or organized knowledge to
practical tasks. Technological development occurs at a very
fast pace. Business organizations have to keep pace with the
fast changing technology by adopting latest technology in
their production process. Technology has a profound impact
on life styles, consumption pattern and economy. The rate of
change in technology also acts as opportunity or threat for
existing business organizations. Technological development
leads to establishment of new industries at the same time.

6. 3. Political Legal Environment
This refers to influence exerted by all the three constitutional wings namely
legislature, executive and judiciary on business. Government frames legal rules and
regulations for smooth functioning of business organizations Subsidies, tariffs, import
quotas and deregulation of industries are some of the regulating forces imposed by
government for business organizations. The political environment includes role played
by government and other non government organizations (NGOs) influencing the
business activities.
The legislature, executive and judiciary either singly or in
combination shapes, direct, develops or controls the activities of business
organizations. In recent times there is growth of many NGOs which exert influence on
business organizations and compel them to adopt right practices in the larger interest
of all sections of society. The legal environment becomes more complicated as
business organizations expand globally and face government structures quite different
from those within their host country. A stable and dynamic political environment is
very essential for business growth.

7. 4. Demographic Environment
Demography is the study of human population
with respect to size, density, location, age, sex,
race, occupation and other statistics.
Demographic trends such as worldwide explosive
population growth, a changing age – education
and esthetic mix of population, changes in the
household pattern, geographical shifts in
population etc act as opportunity or threat to
business organizations.

8. 5. Socio Cultural Environment
These are most difficult uncontrollable factors to predict. It is
necessary for business organizations to understand and
appreciate the socio cultural values of society in which they
conduct their operations. The cultural environment is
composed of society’s basic values, perceptions,
preferences and behaviors, cultural values & beliefs is a mix
of concepts like quality, achievement, youthfulness,
efficiency, practicality, freedom, self actualization,
individualism, patriotism, religious beliefs, morality,
courage, ownership of responsibility, materialism etc. Each
country has a specific and unique socio-cultural
environment. Business organizations have to comply with
this unique socio cultural environment.

9. 6. Natural Environment
Business as an economic system that is established by
man but it is impacted upon by natural forces. Business
activities also influence the nature in positive and
negative ways. The ecosystem refers to natural system
and its resources that are required as inputs by
business organizations or that are affected by business
activities. In recent years the concepts & preserving the
natural environment or green marketing have
emerged. The natural resources are of renewable and
non renewable type. It is necessary for business
organizations to make efficient use of natural resources
for the benefit of mankind.