THE CHANGING NATIONAL ECONOMIC SCENARIO AND THE IMPACT ON BUSINESS EDUCATION
India gained independence in 1947 paving the way for national leaders of the Indian Government to build an economically independent new India. Policies between 1950-70 were implemented with a sincere belief in the efficacy of the socialist philosophy and political democracy. Heavy investment by government in Steel plants, atomic energy, hydroelectric power and irrigation projects laid the foundation of a strong industrial edifice. The non-aligned movement at a time when the world was divided into two power blocks with cold war between the Super-powers, prevented India from becoming a satellite of any other nation and enabled it to protect Its economy and the Indian Population.
But too much of protection from the Govt. had its own disadvantages. Our quality standards were not in tune with international competition. It had produced more traders than industrialists. It was high time that Indian economy became more open and entered the international market,
In the recent past, India has witnessed changes in several critical factors strengthening its economy. With globalisation becoming the key word of the 90's, it seems to have paved the way for India's entry in world markets. Economic reforms have been initiated to facilitate stabilisation and structural -adjustments essential for the growth of the economy. The more significant reforms are reflected in the following economic policies-
(i) Fiscal policy
(ii) Monetary Policy
(iii) Trade and Exchange rate Policy.
(iv) Industrial Policy.
(v) International trade and related issues.
Fiscal Policy The major sources of revenue for the Central and State governments have been Income Tax, Excise duty and Customs duty. in order to keep fiscal deficits under control, direct tax rates have been moderated, indirect tax base has been widened to permit easy flow of goods & services across the country, and tax administration has been geared up for greater effectiveness in tax collection.
Monetary Policy The monetary policy during the eighties was mainly confined to the financing, of fiscal deficit of the Government at controlled interest rates. This led to mounting fiscal deficits leading to inflationary pressures. Moreover, with increasing government borrowings at, low interest
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rates, banks charged high rates for advances made to the commercial sectors. Even then the banks suffered from low profitability while trade and industry were subjected to increasing financial costs. As a result, much of the household savings flowed into the corporate sector which offered better returns than the public sector banks and public financial institutions.
Liberalisation of operations in the financial sector has now made government securities competitive form of investment in the capital market subject to same market discipline as other users of funds. Thus financial institutions including banks are no longer required to invest heavily in government borrowings. With increased availability of funds, they are in a better position to invest in the Commercial sector and other priority sector's of the economy.
The banking system has also been made more competitive with fresh guidelines regarding entry of private sector banks in the system.
For a healthy growth of the capital market and investor protection the Securities Exchange Board of India (SEBI) has been reconstituted as a corporate body.
Trade and Exchange Rate Policy The thrust of the new economic policy is directed towards creating a more competitive environment in the economy as a means of improving the productivity and efficiency of the system and Liberalised Exchange Rate Management System (LERMS) has been introduced for the purpose. LERMS has been responsible for revising the licensing system of import control and creating more favourable exchange rates for exports. With the delicensing of many import items, smuggling has reduced thereby moderating diversion of foreign exchange into illegal channel. This has led to greater competition in the domestic market and improved competitiveness of Indian producers in the international market.
Besides, the definition of trade has been widened to include exchange of services, intellectual property rights, and investment. The underlying concept implies dismantling of all barriers to assist free flow of goods, services and money.
Another major policy decision is the move towards full convertibility of the rupee in the international market.
Industrial Policy A number of structural reforms have been introduced in the industrial sector, such as
(i) Abolition of industrial licensing except for a short list;
(ii) promotion of foreign investment by granting permission to reputed Indian companies to float equity, abroad.
(iii) Inviting foreign investment in high priority industries.
With a view to creating a competitive environment in the economy to improve the productive efficiency of Industries, the roles of the public and private sectors have been redefined. Public enterprises will be mainly responsible for development of physical and social infrastructure, to initiate and administer programmes for the poor and disadvantaged.
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Manufacture of telecommunication equipments, mining and quarrying of minerals, oil and coal have been opened up to the private sector. Power generation is another sphere in which private sector investment is now permitted so as to supplement public sector efforts. As there is a move to foster greater competitiveness in the economy, steps are being taken to develop social safety nets so that workers do not suffer on account of the sickness of enterprises or their closing down. A National Renewal Fund has been operationalised in 1992-93 for compensating workers of public sector enterprises and providing technical and financial assistance for restructuring or modernising them.
International trade and related issues Bilateral and multilateral trade between countries for mutual benefit have received consid- erable attention in recent years. Various conferences have been held in the past under the auspices of the United nations and associated bodies to strengthen trade relations between nations. In this connection the role of GATT is worth mentioning.
The provisions of the International Trade Accord recently ratified by India have created a fair amount of dissent in the country. There are serious differences of opinion about the beneficial impact of these provisions in India. It will take some time to appreciate fully the far reaching implications of the final accord amongst over 120 countries. The accord is the result of seven years of negotiations on the trade related issues. The entire focus has been on liberalisation of trade. Trade has for the first time encompassed services also, like engineering, computer related agencies, travel agencies, intellectual property rights and investment.
It is expected that the World Trade Agreement would open up new vistas for Indian exporter's especially in agriculture, services, and government procurement sectors.
In order to successfully encash the opportunities thrown up in the dynamic environment, India, will have to initiate appropriate policy changes and strategies.
A curriculum on business studies to be need based, must be relevant, and practical and enable students to interact with the ever changing business environment. A business student must keep himself/herself abreast of latest happenings in the world of business and be able to express his/her ideas, opinions and reactions after studying their implications.
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