Economic Environment in India and SWOT Analysis

Economic environment consists of various macro level factors, which have an association with the means of production and distribution of wealth and affect the country’s business and industry. Various aspects of economic environment affecting business are:
•    economic structure,
•    economic planning,
•    economic policies,
•    economic indices and
•    infrastructural factors.
The three economic structures are capitalist, socialist and mixed economy system. Economic policies like monetary, industrial and fiscal policy creates opportunities for businesses. Economic indices like national income, per capita income and value of exports and imports helps in policy formulation of the nation. In 1991 government of India formulated and implemented the new industrial policy.
The new industrial policy advocated:
•    liberalisation which is freeing the Indian industries from the hassles of licensing system,
•    privatisation which is reducing the role of public sector and
•    globalisation which is encouraging foreign private participation in India’s industrial development.
The major impact on the Indian business and industry are increasing competition, more demanding customers, rapidly changing technological environment, necessity for change, market orientation, etc. SWOT analysis refers to a strategic planning method used to evaluate the strengths, weaknesses/limitations, opportunities and threats involved in a project or a business venture. Strength refers to inherent capacities which an enterprise can use to gain over its competitors, weakness are limitations creating a strategic disadvantage relative to others, opportunities are favorable conditions which help the enterprise to improve its performance and threats are unfavorable conditions which can cause damage or risk to the enterprise.

 

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  • Q1

    How has the new government policy resulted in an increase in the competition?

    Marks:1
    Answer:

    The new government policy has allowed the foreign firms to easily do business in India, which has eventually increased the competition for Indian firms especially in service industries like telecommunications, airlines, insurance etc.

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  • Q2

    Identify the economic reform that aims at encouraging foreign private participation in India's industrial development.

    Marks:1
    Answer:

    Globalisation is the economic reform that aims at encouraging foreign private participation in India's industrial development.

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  • Q3

    List any one objective of economic reforms in India.

    Marks:1
    Answer:

    The main objective of economic reforms in India is to connect the indian economy with the world economy.

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  • Q4

    What are the different aspects of economic environment affecting the business?

    Marks:2
    Answer:

    Different aspects of economic environment affecting the business are:

    • Economic structure
    • Economic Planning
    • Economic Policies
    • Economic Indices
    • Infrastructural factors

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  • Q5

    Give any two measures adopted in the liberalisation.

    Marks:1
    Answer:

    • Reducing custom duties and tariff rates
    • Permit banks to fix lending rates

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