Political Environment

1. Dr. Ashok D. Gaur
Assistant Professor
B. J. Vanijya Mahavidyalaya (BJVM)
Vallabh Vidyanagar
M-9409491392
Email: ask.gaur@gmail.com
Political Environment
B.Com.
Semester-V

2. Introduction
• The political environment includes factors
such as the characteristics and policies of the
political parties, the nature of the Constitution
and government system, and the government
environment encompassing the socio-
economic and business policies and
regulations. These factors may vary very
considerably between different nations,
between different provinces of the same
nation and also over time.

3. Functions of State

4. Economic Roles of Government
• As pointed out earlier, the government plays
an important role in almost every national
economy of the world.
• Governments normally play four important
roles in an economy, viz., regulation,
promotion, entrepreneur-ship, and planning

5. Regulatory Role
• Government regulation of the economy may be
broadly divided into direct controls and indirect
controls.
• Indirect controls are usually exercised through various
fiscal and monetary incentives and disincentives or
penalties. Certain activities may be encouraged or
discouraged through monetary and fiscal incentives
and disincentives. For instance, a high import duty may
discourage imports and fiscal and monetary incentives
may encourage the development of export-oriented
industries.
• The direct administrative or physical controls are more
drastic in their effect. The distinguishing characteristic
of direct controls is their discretionary nature. They can
be applied selectively from firm-to-firm and industry-
to-industry, at the discretion of the State.

6. Promotional Role:
• The promotional role played by the government
is very important in developed countries as well
as in the developing countries.
• In developing countries, where the
infrastructural facilities for development are
inadequate and entrepreneurial activities are
scarce, the promotional role of the government
assumes special significance. The State will have
to assume direct responsibility to build up and
strengthen the necessary development
infrastructures, such as power, transport, finance,
marketing, institutions for training and guidance
and other promotional activities.

7. Entrepreneurial Role:
• In many economies, the State also plays the
role of an entrepreneur — establishing and
operating business enterprises and bearing
the risks
• Since the 1980s many governments have
resorted to privatization, in varying degrees,
and have redefined the role of the public
sector.

8. Planning Role
• Especially in the developing countries, the State
plays a very important role as a planner.
• The importance of planning to a less developed
economy was often emphasised by Jawaharlal
Nehru, the chief architect of Development
Planning in India. He rightly observed: “Whatever
it may be in other countries, in underdeveloped
countries like ours, which have to develop fairly
rapidly, the time element is important and the
question is how to use our resources to the best
advantage

10. GOVERNMENT AND LEGAL
ENVIRONMENT
• Various types of Law are formed by Government
• Consumer Protection Act
• Environmental Law
• Prohibition Law
• Statuary Warning
• Competition Law
• Advertising law
• Industrial policy
• Monetary policy
• Fiscal Policy
• EXIM Policy

11. Political Institutions
Legislature:-
Parliament is the most powerful institution. Every aspect of business from its birth till death is
covered under the laws to ensure that not only profit is earned in a justified and fair way but
also to ensure that in the accomplishment of business interests the interest of each person is
fully protected and the profits of business are distributed in a manner beneficial to the society.
1.Policy making.
2.Law making.
3.Approval of budgets.
4.Executive control.
5.To act as a mirror of public opinion.
Executive:-
Government is the executor body of the laws which are framed by the legislature. The role of
the government is to shape, direct and control the business activities. The translations of the
objective of any laws to the reality depends as much upon the law itself as on its
implementation.
Judiciary:-
It is the power of the Judiciary to settle legal disputes that affect business considerably.
Disputes between employers and employees.
Disputes between employer and employer.
Disputes between employee and employee.
Disputes between employers and the public.
Disputes between employers and the government.

12. The Constitutional Environment
• WE, THE PEOPLE OF INDIA, having solemnly resolved
to constitute India into a SOVEREIGN SOCIALIST
SECULAR DEMOCRATIC REPUBLIC and to secure to all
its citizens:
• JUSTICE, social, economic and political; LIBERTY of
thought, expression, belief, faith and worship;
• EQUALITY of status and of opportunity;
• and to promote among them all FRATERNITY assuring
the dignity of the individual and the unity and integrity
of the Nation;
• IN OUR CONSTITUENT ASSEMBLY this twenty-sixth day
of November, 1949, do HEREBY ADOPT, ENACT AND
GIVE TO OURSELVES THIS CONSTITUTION

14. Classification of Directive Principles of State Policy (DPSP)
The Constitution of India does not formally classify the Directive Principles of State
Policy but for better understanding and on the basis of content and direction- they
can be classified into three categories: Socialistic Principles, Gandhian Principles,
and Liberal-Intellectual Principles.
Socialistic Principles
These principles contemplate the ideology of socialism and lay down the
framework of a democratic socialist state. The concept envisages providing social
and economic justice, so that state should achieve the optimum norms of welfare
state. They direct the state through- Article 38, Article 39, Article 39 A, Article 41,
Article 42, Article 43, Article 43 A and Article 47.
Gandhian Principles
These principles reflect the programme of reconstruction enunciated by Gandhi
during the national movement. In order to fulfil the dreams of Gandhi, some of his
ideas were included in DPSP and they direct the state through- Article 40, Article
43, Article 43 B, Article 46, Article 47 and Article 48.
Liberal-Intellectual Principles
These principles inclined towards the ideology of liberalism and they direct the
state through- Article 44, Article 45, Article 48, Article 48 A, Article 49, Article
50 and Article 51

16. Rational and Extent of state Intervention

20. Rational & Extent of State Intervention
Minimal Functions:-
Providing pure public goods.
Defense.
Law and order.
Property rights.
Public health.
Protecting the poor.
Disaster relief.
Intermediate Functions:-
Addressing externalities.
Basic education.
Environmental protection.
Consumer protection.
Insurance (health, life, pensions)
Unemployment.
Overcoming imperfect information.
Activist Functions:-
Coordinating private activities.
Cluster initiatives.
Assets redistribution.