Government and Legal Environment

Submitted to: Name : Abhinav

Dr. Jasbir Singh Enr. No. : 00614905011

Class : BBA(TTM)

4th Sem

Government in every country creates laws and regulations to ensure proper functioning of the economy. These formal rules and procedures together with informal rules (customs, traditions, norms, etc.) regulate and guide business activities. When the government regulatory and legal environment is positive, business and industry prosper. But if these environment are negative, business suffers. For example, laws or their improper enforcement may discourage creation of wealth. Frequent changes in Government policies and laws create uncertainty and risk for businessmen.

Changes in Government policies create opportunities for some and threats for others. For example, reduction in controls over foreign investment has created tremendous opportunity for multinationals. But this has created serious threat to many Indian companies by way of cut throat competition.

Many countries today law to regulate competition in the public intrest. Elimination of unfair competition and dilution of monopoly power are the important objective of these regulation.

Certain changes in government policies such as the industrial policy, fiscal policy, tariff plan etc. may have profound impact on business. Some policy developments create opportunities as well as threats.

In other words, a development which brightens the prospects of some enterprises may pose a threat to some others. For example, the industrial policy liberalizations In India have opened up new opportunities and threats.

They have provided a lot of opportunities to a large no. of enterprises to diversify and to make their product mix better. But they have also given rise to serious threat to many existing products by way of increased competition; many seller’s markets have given way to buyers market. Even product which are seldom advertised have come to be promoted very heavily.

This battle for the market has provided a splendid opportunity for the advertising industry.

Role of Government in Business

Regulatory Role

1. By regarding the countries, person or business firm through the several policies and act.E.g. Industrial licensing policy, MRTP(Monopoly Restricted Trade Practices)

2. By regulating the conduct of business firm through laying down general standard.

E.g. 8 hours of week, prohibition, of child labor etc.

3. Regulating and result of business that is profit and dividend through limiting the profit utility, Ceiling of dividend, high tax imposition on exess profit , etc.

4. By regulating the relationship between various parts of business.

5.Government regulation of the economy broadly divided into direct control

and indirect control.

Promotional Role

1. The promotional role played by the government is very important in developed country as well as developing countries. Following are the main objectives behind the promotional role of the government.

2. To assist and develop industrial, agricultural labor and consumer interest.3. By providing various fiscal monetary and other incentive government can

promote overall economic development.E.g. Tax holiday for 5 years, tax free dividend etc.

4. By establishing financial institution such as IFC, ICICI, IDBI, SFC, etc.

Entrepreneurial Role

In many countries, states also play the role of an entrepreneur where state establish the business and bear the risk. The government act as on entrepreneur because of the following reason:

1. To balance economic ups and down such as inflation and deflation.2. To take over an profitable business to services are required to general

public3. To prevent the wastage of natural resources.4. To prevent monopoly or oligopoly.

Planning RoleEspecially in developing countries, the states place a very important role as a planner. The need for economic planning is implied in the famous scarcity definition of economics. Hence proper planning is required for optimum allocation of scare resources.

LEGAL ENVIRONMENT AFFECT THE BUSINESS

Some of the major laws affecting business in India are given below:

Constitutional and administrative lawThe constitution of India, which came into effect from January 26, 1950, is the lengthiest written constitution in the world. Although its administrative provisions are to a large extent based on the Government of India Act 1935, it also contains various other provisions that were drawn from other constitutions in the world at the time of its creation. It

provides details of the administration of both the Union and the States, and codifies the relations between the Federal Government and the State Governments. Also incorporates into the text are a chapter of fundamental rights of citizens, as well a chapter on directive principles of state policy.

Criminal lawThe Indian Penal Code formulated by the British during the British Raj in 1860, forms the backbone of criminal law in India.The Code of Criminal Procedure, 1973 governs the procedural aspects of the criminal law.In Feb 2011, the Supreme Court of India ruled that criminal defendants have a constitutional right to counsel.Capital punishment in India is legal. The last execution was conducted in 2012, when Ajmal Kasab was hanged for the terrorist attack in Mumbai in 2008.

Contract LawThe main contract law in India is codified in the Indian Contract Act, which came into effect on Sep 1, 1872 and extends to all India except the state of Jammu & Kashmir. It governs entrance into contract, and effect of breach of contract. It is popularly known as Mercantile Law of India. Originally Indian Sales of Goods Act and Partnership Act were part of Indian Contract Act. Contract Act is the main and most used Act of legal agreements in India.

Company Law

The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, set out the responsibilities of companies, their director and secretaries.The Companies Act 1956 is administrated by the Government of India through the Ministry of Corporate Affairs and the offices of Registrar of Companies, Official Liquidators, Public Trustee, Company Law Board, Etc. the Registrar of Companies (ROC) handles incorporation of new companies.

Industries Development and regulation Act 1951In order to provide the Central Government with the mean to implement its industrial policies, several legislations have been enacted and amended in response to the changing environment.The Industries (Development and Regulation) Act, 1951 which seeks to regulate industrial pattern and prices. The Act empowers the Government to order investigation (a) if there is an unjustifiable increase in the price of products of an industry, (b) when there is a marked deterioration in the quality or (c) if there is unjustifiable fall in the volume of production.However, small industrial undertaking and ancillary units are exempted from the provision of this Act.

Consumer Protection Act 1986Consumer Protection Act 1986 is an act of Parliament of India enacted in 1986 to protect interests of consumers in India. It makes provision for the establishment of consumer councils and other authorities for the settlement of consumers disputes and for matters connected therewith.

Labour Law

Indian labour laws are among the most restrictive (for the employer) and complex in the world according to the World Bank.

Tax LawIndian Tax law is an extremely complex body of law, with several different taxes levied by different government. Income Tax is levied by the central government under the Income Tax Act, 1961. Customs and excise duties are also levied by the central government.

Environment (Protection) ActAn Act to provide for the protection and improvement of environment and for matters connected there with:Whereas the decisions were taken at U.N Conference on the human environment held at Stockholm in June, 1972 in which India participated to take appropriate steps for the protection and improvement of human environment;The following are the rules to regulate environmental protection:(a) The standard of quality of air, water or soil for various areas and

purpose;(b) The maximum allowable limits of concentration of various

environmental pollutants for different areas.(c) The procedure and safeguards for the handling of hazardous

substance.(d) The prohibition and restriction on the location of industries and the

carrying on process in different areas;(e) The prohibition and restriction on the handling of hazardous

substances in different areas.