Indian Economy and Business Environment
This domain tests the structure of the economy, the 1991 reforms, planning and NITI Aayog, and the internal and external factors forming a firm's environment.
Structure
Sectors: primary (agriculture, mining), secondary (manufacturing), tertiary (services). Also organised/unorganised and public/private. Key measures: GDP, per capita income (GDP ÷ population), inflation, employment.
Reforms of 1991 - LPG
- Liberalisation: fewer licences and controls; MRTP replaced by the Competition Act, 2002; FERA replaced by FEMA.
- Privatisation: disinvestment and greater private participation.
- Globalisation: integration with world trade; EXIM policy and FDI liberalisation.
Planning
The Planning Commission (1950) was replaced by NITI Aayog in 2015; the Twelfth Five Year Plan (2012–17) was the last five-year plan.
Business environment
Internal: value system, mission and objectives, management structure, human resources. External: economic, social, political, legal, technological, natural and demographic. Micro factors are close to the firm (suppliers, customers, competitors); macro factors affect all firms.
Worked example
A cement company faces a rise in coal prices and a new GST rate. Coal price is an economic environment factor (input cost, macro level); GST is a legal factor fixed by government. The firm can hedge input costs but cannot change the tax rate - it must adjust prices and compliance.
Traps
Using liberalisation and privatisation as synonyms; thinking NITI Aayog still prepares old-style five-year plans; treating only external factors as the environment; quoting GDP as income per head.