Preface – Business Environment


A course on business environment, unlike other courses in economics, helps students relate to and analyse what they observe around them in terms of economic development and growth. It also gives them an excellent grounding to take sensible business decisions. It is, therefore, imperative that students clearly understand the dynamics of the interrelationship of economic concepts that accounts for a rapidly changing business environment. This can be achieved only when students are presented with the concepts of economics, against the backdrop of the latest developments in India and the world. My attempts to accomplish this in the classroom have been well received by all my students.

It is this appreciation from my students that inspired me to write this book. My students, most of whom were science and engineering graduates with no exposure to economics, impressed upon me for the need to write a book that would explain in simple and lucid language the theoretical background behind various economic problems, issues and activities. Driven by my students to undertake this mammoth task, I focused entirely on addressing their need to have a textbook that reinforces their classroom learning.

This book is designed to meet the requirements of postgraduate students of commerce, economics and management. It can also be used by students of professional programmes such as chartered accountancy, company secretary and cost and works accountancy. This book will also cater to the needs of those students who have a paper on Indian economy since it covers more than eighty per cent of the syllabus on the subject. I have tried to provide as many academic inputs as possible to ensure the book serves the interests of instructors as well.


The book has been divided into eight parts with a view to offering students a convenient and logically consistent build-up of knowledge on the subject.

Part I deals with the basics of the economic environment of business. It covers the fundamentals of the functioning of an economy; national income; business and its environment; natural resources; technology and development; human resource development; the impact of India’s population on the economy; and capital formation, savings and investment.

Part II explains economic systems such as capitalism, socialism, and mixed economy. Here, we also discuss the role of public policies—economic policy, monetary policy, fiscal policy and foreign trade policy—in governing business.

Part III focuses on issues relating to the economics of development and underdevelopment, the stages and strategies of economic growth, the role of the state in economic development, economic planning, the industrial and licensing policy (1951–1991), and the new economic policy. It concludes with a survey of the Indian economy.

Part IV explores the relationship between business and society. It turns the spotlight on labour and government, consumer protection, investor protection, environmental protection, corporate governance, corporate social responsibility, and business ethics, as practised in India.

Part V provides the details of economic legislations relating to business in India such as the MRTP Act, 1969; the Competition Act, 2002; FERA, 1973; FEMA, 1999; and IDRA, 1951.

Part VI deals with the structure of Indian industry and its relation with industry-related external agencies. Here, we also study the private sector and the public sector in India, the privatization of public sector enterprises, the joint sector in Indian industry, globalization, MNCs and foreign capital in India, India and intellectual property rights.

Part VII deals with the financial system. We begin by discussing money, its functions and value, the money market and progress to scrutinize commercial banks, the functions of the central bank, financial institutions, the Indian capital market, the Indian stock market, and SEBI.

Part VIII deals with international organizations such as the WTO, the World Bank group, and the IMF. These agencies play a decisive role in the business environment of the country.


Written in simple and lucid language, the book presents the subject matter logically, gradually guiding the reader from elementary to complex concepts. In the early chapters, important and difficult concepts have been explained with a number of illustrations from practical life. Once the foundation has been laid, the reader is guided towards further progress with a view to taking the student through more complex economic problems and issues. The book incorporates several features that make it a student-friendly book.

Exhaustive Coverage of Concepts: Designed to serve both as a textbook and a reference volume on the subject, the book provides an in-depth coverage of all conceivable topics on the subject.

Real-world Cases: The inclusion of cases, in relevant places, presents students with snapshots from the real world. These cases have been selected to enable readers appreciate the economic problems and issues that they are likely to face as administrators and mangers.

Summary: Each chapter includes a detailed summary to help students review the key points presented in the chapter.

Key Words: Key words highlight the important terms discussed in the chapter.

Discussion Questions: End-of-chapter discussion questions are designed to check the student’s comprehension of concepts presented in the chapter.

Suggested Reading: Each chapter includes a list of suggested readings for those who wish to know more about the topics discussed in the chapter.


The teaching and learning package includes PowerPoint lecture slides and a question bank, which can be downloaded from,_the book’s companion Web site.

PowerPoint Presentations: PowerPoint lecture slides are available for each chapter. These provide lecture outlines, important concepts and diagrams and additional material that can be used by instructors to deliver effective lectures. The lecture slides are accompanied by notes.

Question Bank: The question bank is designed to help students review the concepts presented in the book.


We have used the ISO 4217 code for the Indian currency—INR—in place of Rs in the book.

The terms million and billion have been used to represent large numbers in place of lakh and crore, commonly used in Indian English.