BUSINESS ENVIRONMENT: Business environment may be defined as the total
surroundings which have a direct or indirect bearing on the business activities. In this
sense, the business environment refers to all the external factors which may influence
the functioning of the business. The external environment such as economic, socio-
cultural, political, technological, ecological, legal and regulatory, etc. in which the
business operates gives various kinds of opportunities to the business or may pose
threats or challenges to the business. On the other hand, the internal environment in
terms of its physical and psychological resources helps the management to cope and
adapt to the external environment. Thus, the survival and success of any business
depends upon both internal and external environmental factors. However, the term
'business environment' usually refers to the external factors and forces which are
outside the control of the firm and vary from country to country.
THE IMPORTANCE OF UNDERSTANDING THE BUSINESS ENVIRONMENT CAN BE
SUMMARIZED AS FOLLOWS:
1 Continuous environmental scanning helps in visualising the impact of the
socioeconomic and politico-legal changes at the national and international levels on its
business and take timely corrective steps.
2 It helps in identifying the opportunities for, and threats to, the business.
3 It helps in identifying firm's strengths and weaknesses in view of the technological
and global developments.
4 It helps in evaluating the present strategies, formulating long-term policies, and
developing future strategies.
5 It enables the firm to analyse competitors' strategies and formulate the necessary
counter strategies.
6 Lastly, it helps the firm to adapt to the prevailing conditions and, sometimes, even
influence the environment in order to make it congenial to the business.
TYPES OF BUSINESS ENVIRONMENT
Internal Environment : There are a number of internal environmental factors that
influence the strategic decisions in a business. Some of these factors are :
1. Value system and ethical standards which the organisation has adopted;
2. Mission, goals and objectives of the companies as they determine the priorities,
direction of development, philosophy, etc. of the business;
3. Organizational structure determining the extent of professionalization of
management, characteristics of available human resources like skill, morale,
commitments, attitudes, etc.;
4. Physical assets and facilities like nature of available technology, production capacity,
hold on distribution logistics, which has a direct bearing on marketing efficiency;
5. Financial factors such as financial position, composition of funds, sources of funds,
capital structure, financial policies, etc. of the company; and
6. Corporate image and brand equity which the company has created over the years.
External Environment: The external environment encompasses a variety of factors
which are largely beyond the control of individual firms and which may provide
opportunities and/or pose threats to an organisation. These factors happen to be
economic, demographic, political, legal, socio-cultural, technological and natural. They
constitute the real business environment which provide the opportunities and/or pose
threats to an organisation.
COMPONENTS OF EXTERNAL ENVIRONMENT
1. Micro Environment: Customers; Competitors; Marketing Intermediaries; Suppliers;
Workers and Unions; Publics.
2 Macro Environment: Economic Environment; Political and Legal Environment; Socio-
Cultural Environment; Demographic Environment; Technological Environment;
International Environment; Natural Environment
EMERGING SCENARIO OF BUSINESS ENVIRONMENT IN INDIA: Political Uncertainty;
Globalization; Economic Liberalisation; Technological Revolution; Outsourcing;
Emerging Rural Market; Stakeholders' Expectations.
ENVIRONMENTAL SCANNING: Every organisation must closely and thoroughly monitor
its relevant environment. The process by which the organisations monitor their
relevant environment to identify the opportunities that could benefit them and the
threats that should be avoided is known as environmental scanning, analysis or
appraisal. The whole process consists of tracing the source of any opportunity or threat
and break the whole into parts so as to examine its nature and inter- relationship.
The process of environmental scanning thus should achieve following three goals:
1.The scanning should provide a complete understanding of current and potential
changes taking place in the environment.
2.It should provide inputs for strategic decision making. Mere collection of information
or data is not enough. The information collected must be used for strategic decision
making.
3.It should facilitate and foster strategic thinking in the organisation. It should
challenge the current wisdom by bringing fresh viewpoints into the organisation.
Process of Environmental Scanning: Identification of key environmental variables;
Identification of sources of information for environmental Scanning; Approaches of
environmental scanning; Techniques of environmental scanning; Factors affecting
environmental scanning; Preparation of Environmental Threat and Opportunity Profile-
ETOP
CULTURE:
a.is characteristically the human product of social interaction; provides socially
acceptable patterns for meeting biological and social needs;
b. is cumulative, for it is handed down from generation to generation in a given society;
c. is meaningful to human beings because of its symbolic quality;
d. is learned by each person in the course of his development in a particular society;
e. is, therefore, a basic determinant of personality; and
f. depends for its existence upon the continued functioning of society but is
independent of any individual or group.
Culture consists of both material culture and non-material culture. Material culture
involves man-made things (eg. automobile, television, telephone, etc.)and man-made
alternations in the environment, Non-material culture includes such factors as
language,ideals, benefits, values, music, etc.
CRITICAL ELEMENTS OF SOCIO-CULTURAL ENVIRONMENT:
1 Social institutions and systems; 2 Social groups; 3 Social values and attitudes; 4 Social
responsibilities of Business; 5 Role and Responsibility of government
DUALISM IN INDIAN ECONOMY: The concept of dualism, when associated with an
economy, basically implies the existence of two contrasting societies within a country.
Indian economy that way can be characterised as dualistic economy. There are two
Indias within India. One India is very rich, affluent and enjoying all luxuries of life. In
contrast, the other India is extremely poor where people do not have an access to even
a single meal a day what to talk about a roof over their heads. A comparative analysis
of some of the stales of the country on the basis of four basic parameters, viz.., degree
of urbanization, per capita income, rate of unemployment, and population below the
poverty line, reveals the extent of dualism prevalent in the Indian economy. Some of
the reasons for uneven distribution of income in India are (i) inequalities in land
ownership and concentration of tangible wealth in the rural sector; (ii) private
ownership of industries, trade and business; (iii) urban bias in private investment; (iv)
inequity in creclit facilities provided by the banks and financial institutions, (v)
defective implementation of various industrial and economic policies of the
government leading to greater concentration of wealth and income in the hands of few
private individuals ; and (vi) corrupt practices of bureaucracy, politicians and
businessmen
SOCIAL RESPONSIBILITIES OF BUSINESS: Social responsibility of business refers to the
obligation of business enterprises to adopt policies and plans of action which are
desirable in terms of the expectations and interest of the society. It involves
consideration of social criteria along with economic criteria in conducting business
activities. The idea may be said to have arisen out of the growing public expectations
that the business firms should modify their singular pursuit of economic goals and help
the society in resolving social problems which may not be the direct outcome of
business operations but should be of concern to business as a major user of society's
resources.
DIMENSIONS OF SOCIAL RESPONSIBILITIES: Responsibility towards Shareholders
(Owners); Responsibility towards Employees; Responsibility towards Consumers;
Responsibility towards the Government; Responsibility towards the Community and
Public at large.
SOCIAL ACCOUNTING: Social accounting is the systematic assessment and reporting on
those aspects of a company's activities that have a social impact - the impact of
corporate decisions on environmental pollution, conservation of non-renewable
resources, maintenance of publi:, services, public safety, health and hygiene, education
and training and other social concerns. In this context, there is another term used
called 'social responsibility accounting; which refers to identification, measurement,
recording and reporting, for internal and external use, the relevant information
relating to the social activities of an enterprise.
APPROACHES TO SOCIAL ACCOUNTING AND REPORTING: Valuation of social costs and
social benefits; measuring the worth of social investments; developing social
indicators; social goal accounting and reporting; integral welfare approach; socio-
economic operating statement.
SOCIAL AUDIT: Social audit refers to the process involving a retrospective review of the
impact or contribution of a company to the recognized social dimensions. It may be
regarded as a tool of the socially responsible company and undertaken by itself or any
independent agency for the purpose of planning, control and accountability for its
performance of the corporate social activities. It may also involve attestation and
authentication of the information so as to reveal in true perspective, with greater
accuracy and reliability, the performance details.
POLITICAL ENVIRONMENT: political environment of business refers to the political
conditions, factors and forces,which have a bearing on business activities. Such factors
may include competing political ideologies, electoral majority of the party in power,
strength of the parliamentary opposition parties, internal dissensions within the ruling
party, insurgencies in border areas, as well as international power alignments and
alliances.
CRITICAL ELEMENTS OF POLITICAL ENVIRONMENT: Political system; Political processes;
Stability of the political structure; and Centre-State relations.
STATE AND SOCIAL PROCESS: In India, as in many other democratic states, the social
processes are closely inter-linked with the role of the state. There are social issues
which cannot be left unattended for all times, nor there be political solutions to every revenue to the Central and State Governments and locking up of ingestible funds of
such issue. For instance, the state in India could not have ignored such social issues as banks and financial institutions are of serious concern to the Government and the
secularism, establishing a uniform civil code, rights of minority communities, social society at large. A need was felt to enact in public interest a legislation to provide for
disparities, etc. timely detection of sickness in industrial companies and for expeditious determination
by a body of experts of the preventive, ameliorative, remedial and other measures that
ROLE OF GOVERNMENT: role of any government has been to maintain law and order, would need to be adopted with respect to such companies and for enforcement of the
protect the nation from external aggression, provide social security exercise control measures considered appropriate with utmost practicable dispatch."
over public activities, etc. These roles were in the context of providing basic Objectives of SICA: (a)securing timely detection of sick and potentially sick companies
infrastructure to business. But, in course of time, emphasis on planned economic owning industrial undertakings; (b) speedy determination by a board of experts of the
development and various other circumstances prompted the Government to play an preventive, ameliorative, remedial and other measures which need be taken in respect
active role in promoting and regulating the business activities. The role of Government of such companies; (c) expeditious enforcement of the measures so determined; and
has assumed four dimensions as under: a. Regulatory Role, b. Promotional Role, c.
(d) matters collected therewith or incidental thereto.
Entrepreneurial Role, and d. Planning Role.
Definition of Sick Industrial Company: The expression, 'sick industrial company7, is
defined under Section 3(1)(O) of the Act to mean an industrial company (being a
THE LEGAL AND ADMINISTRATIVE MEASURES which were enforced by the Ministries
company registered for not less than 5 years) which has at the end of any financial year
and Government Departments, the regulatory system was operated through several
accumulated losses equal to or exceeding its entire net worth. Thus, a company to
institutional agencies as advisory /regulatory /quasi-judicial authorities as follows:
qualify as sick industrial company must satisfy the following conditions: (a) It must be a
(a) The Planning Commission (an advisory body) to formulate development plans in
company as per Section 3 of the Companies Act, 1956. (b) It must be an industrial
consultation with central ministries and state governments;
company, i.e., it must own one or more industrial undertakings; (c) It must have been
(b) The Reserve Bank of India with statutory authority to regulate money and credit
in existence for not less than 5 years. (d) Its accumulated losses must not be less than
supply, commercial banking, and controlling foreign exchange operations;
its net worth.
(c) The MRTP Commission constituted under the Monopolies and Restrictive Trade
Practices Act) to investigate and regulate concentration of economic power, and
INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, I951: The Industries
monopolistic, restrictive and unfair trade practices;
(Development and Regulation) Act [IDRA] 1951, was enacted with a view to control
(d) Bureau of industrial Costs and Prices (an advisory body) to assist Government in the
and regulate the process of industrial development in the country and bring under
determination of fair prices and price fixation of industrial products; and
central control a number of important industries, the activities of which affect the
(e) Bureau of Public Enterprises to provide advisory management services to public
country as a whole The Act came into force on May 8, 1952. The objectives the Act
sector undertakings and assist ministries in project evaluation and implementation.
sought to accomplish were: (i) regulation of industrial investment and
production according to plan priorities and targets, (ii) protection of small
THE LAWS REGULATING THE BUSINESS ACTIVITIES, the important ones are as follows:
entrepreneurs against competition from large units, (iii) prevention of monopoly and
(a) Basic Business Laws : (i) Itldiarl Contract Act, 1872; (ii) Indian Sale of Goods Act,
concentration of ownership of industries, and (iv) balanced regional development with
1930; (iii) Partnership Act, 1932; (iv) Negotiable Instruments Act, I 940; and (v)
a view to reducing disparities in the levels of development in different regions of the
Arbitration Act, 1910.
economy. The important provisions of the Act relate to : 1) Registration and licensing
(b) Enviroiitnent Protection Laws : (i) Water (Prevention and Control of Pollution) Act,
of industrial undertakings; 2) Investigation into scheduled industries and industrial
1974; (ii) Air (Prevention and Control of Pollution) Act, 1981; and (iii) Environment
undertakings; 3) Take-over of management of industries undertakings; 4) Regulation of
Protection Act, 1986.
price, supply, distribution, etc.; and 5) Constitution of authorities concerned.
(c) Corporate Laws : (i) Cotnpanies Act, 1956; (ii) Sick Industrial Companies (Special
Provisions) Act, (SICA) 1985; (iii) Industrial (Development and Regulation) Act, 1951;
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES (MRTP) ACT, 1969: To curb
(d) Securities Regulatory Laws : (i) Securities Contract (Regulation)Act, 1956; and (ii)
monopolistic and restrictive trade practices tendencies, the Government of India
Securities Exchange Board of India (SEBI) Act, 1992.
passed the Monopoly and Restrictive Trade Practices (MRTP) Act in 1969 and set up the
(e) Labour Laws : (i) Factories Act, 1948; (ii) Payment of Wages Act, 1936; (iii) Payrnent
MRTP Commission in 1970. Thus primarily, the objectives of the Act have been as
of Bonus Act, 1965; (iv) Workmen's Compensation Act
follows :
(f) Miscellaneous Regulatory Laws : (i) Standards of Weights and Measures Act, 1956;
(a) to prevent concentration of economic power to the common detriment and control
(ii) Patents Act, 1970; (iii) Trade Marks Act, 1999; (iv) Foreign Exchange Management
of monopolies;
Act, 1999;
(b) to prohibit monopolistic trade practices; and
(c) to prohibit restrictive trade practices and unfair trade practices.
COMPANY LAW: Company Law is primarily contained in the Companies Act, 1956
The MRTP Commission acts as the administrative authority for the MRTP Act. It has the
comprising of 777 Sections and fifteen schedules (including the amendments till date).
power to enquire and recommend action to the Central Government in case of
The provisions contained in the Act provide for: formation and registration of the
monopolistic trade practices, and can enquire as well as take action in case of
companies; contents of memorandum, articles and prospectus; procedure for
restrictive trade practices and unfair trade practices.
alteration of memorandum and articles of association; penalties for mis-statements in
Monopolistic Trade Practices: As per Section 2 (i) of the MRTP Act, 1969 any trade
prospectus; shares and share capital; various modes of acquiring membership,
practice shall amount to a monopolistic trade practice when it leads, or is likely to lead,
transferability, transmission, and forfeiture of shares; increase or reduction of share
to any of the following effects: (i) Unreasonably high price: (ii) Unreasonably high cost
capital; rights of members; requirements for holding general body meetings including
of the production of goods or the provision of services; (iii) Unreasonably high profits;
penalties for not holding; constitution of board of directors and their powers including
(iv) Prevention or reduction of competition; (v) Limited technical development; (vi)
restrictions thereon; remuneration payable to managerial persons; removal of
Limited capital investment; (vii) Deterioration in the quality of goods.
directors; accounts and audit; inspection and investigation; amalgamation,
reconstruction, mergers and takeovers prevention of oppression and mismanagement;
DISTINCTION BETWEEN MTP AND RTP: On going through the definitions of
and winding-up of companies.
'monopolistic trade practice' and 'restrictive trade
practice', one may find the two terms identical. The similarities between these two
THE MAJOR CHANGES THAT THE INDIAN CONIPANIES ACT, 1956 introduced over and
trade practices had been duly recognised by the Monopoly Enquiry Commission, but it
above the Act of 1913 related to (a) the promotion and formation of companies; (b)
insisted on maintaining the distinction and observed, " while monopolistic trade
capital structure of companies; (c) company meetings and procedures; (d) the
practice would also be a restrictive trade practice, we shall confine the words
presentation of company accounts, their audit, and the powers and duties of auditors;
'restrictive trade practice' to mean practices other than those pursued by monopolies
(e) the inspection and investigation of the affairs of the company; (f) the constitution of
which obstruct free plan of competitive forces or impede free flow of capital resources
board of directors, and the powers and duties of directors, managing directors and
into the stream of production or of finished goods in the stream of distribution at any
managers, and (g)the administration of company law.
point before they reach hand of the ultimate consumer."
FOREIGN DIRECT INVESTMENT: Foreign Direct Investment occurs when an investor
based in one country (the home country) acquires an asset in another country (the host COMPETITION COMMISSION OF INDIA: Duties of Commission: Under Section 18,
country) with the interest to manage it. The company investing in this country also Competition Commission has been charged with the following duties:
transfers assets such as technology, management and marketing. Further, the investing (a) to eliminate practices having adverse effect on Competition, (b) to promote and
company also seeks the power to exercise control over decision making in a foreign sustain competition, (c) to protect the interests of consumers, and {d) to ensure
enterprise -the extent of which has to vary according to its equity participation. freedom of trade carried by other participants in markets in India.

ESSENTIAL COMMODITIES ACT, 1955: The main purpose of the Essential Commodities
SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT (SICA). 1985: The ill-effects of Act, 1955 is to provide, in the interest of the general public, for the control of the
sickness of industrial companies, such as, loss of production, loss employment, loss of production, supply and distribution of, and trade and commerce in, essential
commodities. At present, only 18 essential commodities are covered under the Act.
Section 3 of the Act provides that if the Central Government is of opinion that it i
necessary or expedient so to do for (1) maintaining or increasing supplies of any
essential commodity, or (2) securing their equitable distribution and availability at fair
prices, or (3) securing any essential commodity for the defense of India or the efficient
conduct of military operations; it may, by order, provide for regulating, or prohibiting
the production, supply and distribution thereof and trade and commerce therein.
LABOUR LEGISLATION IN INDIA: Classified on the basis of their focus on particular
aspect of workers' interest, the various laws may be discussed as (a) laws relating to
factories and specific industries for health, safety and welfare of workplace (b) laws
relating to wages and bonus, (c) relating to social security, and (d) laws relating to
trade unions and industrial relations.
STRIKES AND LOCKOUTS: The Act has recognised the employees' right to strike which '
can be exercised after complying with certain conditions regarding service of notice,
etc. and only on the failure of conciliation proceedings. However, a strike by workmen
or lockout by an employer is prohibited and become's illegal under Section 23 of the
Act if it is commenced or declared:
(a) during the pendency of conciliation proceedings before a Board and seven days
after the conclusion of such proceedings;
(6) During the pendency of proceeding before a Labour Court or Tribunal and two
months after the conclusion of such proceedings;
(c) during the pendency of arbitration proceedings and two months after conclusion
thereof; and
(d) during any period in which settlement or award is in operation.
THE MAIN FUNCTIONS OF FINANCIAL MARKETS ARE :
I Providing facilities for interaction between investors and borrowers;
2 Providing pricing information resulting from the interaction between buyers and
sellers in the markets when they trade the financial assets;
3 Providing security or dealings in financial assets;
4 Ensuring liquidity by providing a mechanism for an investor to sell the financial
assets; and
5 Ensuring law cost of transactions and ready availability of necessary information.
DISTINCTION BETWEEN MONEY MARKET AND CAPITAL MARKET:
1 While money market relates to short-term funds, the capital market relates to long
term funds.
2 While money market deals with securities like treasury bills, commercial paper, bills
of exchange, deposit certificates etc., the capital market deals in shares, debentures,
bonds and government securities.
3 While participants in money market are commercial banks, non-banking finance
companies, indigenous bankers, etc., the participants in capital market are stock
brokers underwriters, mutual funds, financial institutions, and individual investors.
4 While money market is regulated by the Reserve Bank of India, the capital market is
regulated by the Central Government and Securities Exchange Board of India (SEBI).
5 While the main components of money market are call money market, acceptance
market and bill market, the main components of capital market are primary market
and secondary market.
CHARACTERISTICS OF A DEVDELOPED MONEY MARKET: Highly organised commercial
banking system; Preserve of a central bank; Continuous supply of short-term securities;
Existence of a number of sub-markets; Ample supply of funds.
INDIAN MONEY MARKET: The Indian money market is broadly divided into two parts
viz., the unorganised sector and the organised sector. The unorganised sector of the
money market consists of the indigenous bankers and the money lenders called
mahajans, seths, shroffs, chettiars, etc. who pursue the banking business on traditional
lines and their practices and operations vary from place to place. The organised sector,
on the other hand, comprises the Reserve Bank of India, the commercial banks (both
nationalized and private), the foreign exchange banks and the cooperative banks.
Main Constituents Indian money market: The main constituents of the Indian money
market are : (1) Call Money Market which deals with extremely short period loans
(called call loans) and has commercial banks as the major participants; (2) Treasury Bills
Market which helps in meeting the temporary deficits of the Central Government by
auction of 91-days bills by RBI; (3) Repo market which helps in collateralized short-term
borrowing and lending through sale/purchase operations in debt instruments; (4)
Commercial Bills Market which provides facility for discounting and rediscounting in
bills of exchange drawn by one business firm on the other. Somehow, this market is
not very active in India; (5) Certificate of deposit market which deals with CDs issued at
a discount by banks in multiples of Rs. 10 lakh with maturities varying from 15 days to
12 months; (6) Commercial Paper Market which deals with unsecured promissory
notes issued by companies in multiples of Rs.5 lakh with a minimum of Rs. 25 lakh
having a maturity period ranging from 3 months to 6 months; and (7) Money Market
Mutual Funds which enable small investors to participate in the money market.
REFORM MEASURES FOR INDIAN MONEY MARKET ARE : (1) deregulation of money
market interest rates; (2) introduction of new money market instruments such as 364-
days treasury bills, certificates of deposit, and commercial paper; (3) introduction of
repos and reverse repos; (4) introduction of money market mutual funds; and (5)
setting up of Discount and Finance House of India (DFHI) to operate as a regular lender
and borrower in the call money market.
CAPITAL MARKET: the institutional arrangement for raising long-term funds and
providing facilities for marketing and trading of securities. Broadly speaking, the capital
market in India is divided into gilt-edged market and corporate securities market. The
gilt-edged market refers to the market for government and semi-government
securities, backed by Reserve Bank of India, and the corporate securities market is the
market for shares and debentures of companies. This market is further divided into the
primary market and secondary market. The primary market deals with fresh issue of
securities and is also known as 'new issue market', whereas the secondary market
provides a place for purchase and sale of existing securities and is often termed as
'stock market' or 'stock exchange'.
THE PRIMARY CAPITAL MARKET: the primary capital market (or new issue market),
consists of an arrangement which facilitates the procurement of long-term funds
through fresh issue of various types of securities called capital market instruments. the
various types of securities through which the long term funds are usually raised are : (i)
equity shares, (ii) preference shares, (iii) deferred/founders' shares, and (iv)
debenture/bonds.
Methods of Making Capital Issue:1 Public issue through prospectus; 2 Offer for sale; 3
Private placement; 4 Book building; 5 Rights issue
THE SECONDARY CAPITAL MARKET: A secondary capital market popularly known as
stock exchange or stock market provides a place where different types of existing
securities (shares, debentures/bonds and government securities) can be bought and
sold on a regular basis. A stock exchange is organised as an association, a society or a
company with a limited number of members. It is open for transactions only to its
members, most of whom are brokers acting as agents for the buyers and sellers of
securities.
STOCK EXCHANGES IN INDIA: The first organised stock exchange in India was started in
Mumbai in 1875 known as Bombay Stock Exchange (BSE). It was followed by
Ahmedabad Stock Exchange in 1894 and Kolkata stock Exchange in 1908. NSE was
promoted by the leading financial institutions in India. It was incorporated in 1992 and
commenced operations in 1994. This stock exchange has corporate structure, fully
automated screen based trading, and nationwide coverage.
FUNCTIONS OF THE STOCK EXCHANGES: Provides ready and continuous market;
Provides information about prices and sales; Provides safety to dealings and
investment; Helps mobilisation of savings and capital formation; Barometer of
economic and business conditions; Better allocation of funds.
THE BASIC ADVANTAGES OF LISTING OF SECURITIES ARE:
1 It improves public image of a company and enhances its prestige and
creditworthiness.
2 It provides a continuous market for its securities and thus adds to their liquidity.
3 Banks and other financial institutions readily extend loan facilities to the company
and so also to investors on the strength of such securities.
4 It ensures disclosure of important financial information about the company on
regular basis.
5 It leads to wide distribution of shares which helps in mobilisation of resources in
future by way of further issues.
REGUALTION OF CAPITAL MAREKTS: In April 1988, the Securities Exchange Board of
India (SEBI) was set up as a non statutory body to regulate the capital market on the
strength of the Government of India. SEBI has also been entrusted with the main
responsibility of adopting suitable measures for protecting the interests of investors in
securities and promoting the development and regulation of stock market. Such
measures include the following:
1 Regulating the business in stock exchanges and any other securities market;
2 Registering and regulating the working of market intermediaries viz., registrars and
transfer agents, portfolio managers, underwriters, etc;
3 Restricting and regulating the working of collective investment schemes including
mutual funds;
4 Promoting and regulating self-regulatory organisations;
5 Prohibiting fraudulent and unfair trade practices in securities market;
6 Promoting investors education and training of intermediaries of securities markets;
7 Prohibiting insider trading in securities substantial acquisition of shares and takeover
of companies;
8 Levying fees other charges for the above purposes and perform such other functions
as may be prescribed.
9 Calling for information from, and undertaking inspection, conducting inquiries and'
audit of stock exchanges, intermediaries and self regulatory organisations in securities
market.
10 Performing such functions and exercising such powers under the provisions of SCR
Act as may be delegated to it by the Central Government.
INITIAL PUBLIC AFTER (IPO), HAVE TO SATISFY THE FOLLOWING CONDITIONS:
Companies not barred from accessing the capital market; Filing of offer document;
Application for listing; Issue of securities in dematerialized form.
PRE-ISSUE OBLIGATIONS: Due diligence exercise; Payment of fee; Documents to be
submitted; Appointment of lead merchant banker; Underwriting; Draft Offer Document
to be made public; Pre-issue advertisement; Dispatch of issue material; No complaints
certificate; Collection centres I Agents; Advertisement for rights post issues;
Appointment of compliance officer; Abridged Prospectus.
POST-ISSUE OBLIGATIONS: Post-issue monitoring reports; Redressal of investor
grievances; Coordination with intermediaries; Underwriters; Bankers to an issue; Post-
issue advertisements; Basis of allotment; Other responsibilities.
REGULATORY FRAMEWORK FOR CONTROLLING STOCK MARKET OPERATIONS: The
attention of the government was drawn from time to time to the ills of stock
exchanges as a result of which the Securities Contracts (Regulation) Act was passed in
1956 to regulate and control stock market operations in the wider interest of the
financial market institutions and the investors. The Act came into effect from February
20, 1957. It provides, inter alia, for: (a) recognition of stock exchanges, (b) general
control over their trading methods and practices, (c) regulation of contracts and
options in securities, and (d) listing of securities.
POWERS OF CENTRAL GOVERNMENT FOR CONTROLLING STOCK MARKET OPERATIONS:
1 Grant and withdrawal of recognition to any stock exchange;
2 Approval of rules and bye-laws of stock exchanges;
3 Direct stock exchange to make or amend rules and by e-laws in certain cases;
4 Call for periodical returns and specific information from stock exchanges;
5 Conduct inquiries on the members or on the stock exchange;
6 Suspend business of stock exchange;
7 Supersede the governing body of the stock exchange; and
8 Regulation of listing of securities.
CORPORATE TAKEOVERS: Combination or merger of enterprises in which one acquires
the assets and liabilities of another in exchange for cash or shares and/or debentures is
generally known as merger through acquisition, absorption or takeover. This is widely
regarded as a strategy of external growth. It may involve a cooperative friendly
approach on the part of the combining firms, or take place through a bid to take over
of one firm by another with a hostile approach. Usually it is expected that profitable
growth companies would mainly attract takeover bids. But, quite often, various other
considerations underlie the decision of company to
go in for takeover of other companies. The benefits expected to be derived are: (a)
economies of large scale operation; (b) diversification of activities for stability and
higher profits; (c) securing necessary working plant and equipment more quickly than
building up capacity internally and also to secure access to scarce raw materials and
distribution network; (d) possibility of easy market in the context of competition
involving product differentiation and the operating efficiency and financial resources of
competitors; and (e) acquiring requisite managerial competence to implement the
growth process.
THE MAJOR PROVISIONS OF THE TAKEOVER CODE ARE AS FOLLOWS:
1 Any acquirer holding more than 5 per cent of the shares in a company must disclose
the shareholding to the company and all stock exchanges where the scrip is listed.
2 It is mandatory for the acquirer to make a public offer when the holding of 10 percent
of equity is crossed and there is change in control.
3 For the purpose of consolidation of holdings, acquirers holding not less than 10 per
cent but not more than 51 per cent equity are allowed 'creeping acquisition' upto 2 per
cent in any period of 12 months. Any purchase for a holding of more than 51per cent
will have to be in a transparent manner through a public tender offer.
4 An acquirer, including persons presently in control of the company, should make a
public offer to acquire a minimum of 20 per cent in case the conditions for mandatory
public offer are valid.
6 The 'Chain Principle' will be applicable requiring a public offer to be made to
shareholders of each company when several companies are acquired through the
acquisition of one company.
7 Disclosure requirement would include disclosure of additional details on financial
arrangement for implementing the offer, future plans of the acquirer of the target
company, etc. Misleading information will be deemed to be a violation of disclosure
requirement and attract penal action.
8 Conditional offers is allowed subject to either a mandatory acceptance of 20 per cent
equity with differential pricing, or with a deposit of 50 per cent of the value of the offer
in cash to be deposited in an escrow account, in cases where the bidder does not want
to be saddled with the 20 per cent acquisition.
9 During the offer period, the board of the target company is precluded from inducting
any person belonging to the acquirer, or transfer shares in his name until all formalities
relating to the offer have been duly completed.
REQUISITES OF GOOD CORPORATE GOVERNANCE: For good corporate governance we
expect management to provide appropriate direction, achieve goals set for the
organisation, provide transparency, remain accountable for their actions, and protect
the interests of all stakeholders. This requires, as underlined by experts and various
committees on corporate governance, the system to ensure the following.
1 There is a properly structured broad, capable of taking independent and objective
decisions, put at the helm of affairs.
2 The broad has adequate number of non-executive and independent directors.
3 The board is aware of the concerns of all stakeholders and has an effective machinery
to subserve their concerns.
4 The board takes well-informed and well-considered decisions and adopts transparent
procedures and practices.
5 There exists a proper system consisting of clearly and adequately defined roles,
authority and responsibility of the chief executive, executive directors and managerial
personnel in key positions.
6 There is a proper system for guiding, monitoring, reporting and control.
7 The board effectively and regularly monitors the functioning of the management
team and the implementation of the key decisions.
8 The board remains in an effective control of company's affairs.
STEPS TAKEN FOR GOOD GOVERNANCE: Board of Directors and its Composition; Audit
Committee; Remuneration of Directors; Board Procedure; Management Discussion and
Analysis Report; Shareholders / Investors Grievances Committee and other
shareholders' issues; Report on Corporate Governance; Certificate of Compliance.
CORPORATE GOVERNANCE CODE UNDERCLAUSE 49
I: Board of Directors: (a) Composition of the board; (b) Compensation to non-executive
directors; (c) Board procedure; (d) Code of conduct
II: Audit Committee:(a) Qualified and independent audit committee; (b) Meetings; c)
Powers; (d) Role; (e) Review of information
III: Subsidiary Companies: (a) At least one independent director of holding company is
to be a member of the board of directors of an unlisted Indian subsidiary company.(b)
The Audit Committee of the holding company shall review the financial statements of
the unlisted subsidiary company, in particular, its investments.(c) The minutes of the
board meetings of the unlisted subsidiary company have to be placed at the board
meeting of the listed holding company.
IV: Disclosure: (a) Basis of related party transactions (b) Treatment different from that
prescribed in the accounting standard (c) Risk management and minimization
procedures (d) Application of funds raised through public, rights issue, etc (e)
Remuneration of the directors (f) Management discussion and analysis report (h)
Appointment /reappointment of a director (i) Details of non-compliance by the
company, penalties, strictures (j) Information on website
V: Shareholders Investors Grievance Committee
VI: CEO/CFO Certification
VII: Report on Corporate Governance
VIII: Compliance Certificate
INDIA-AN UNDERDEVELOPED ECONOMY: The Indian economy is characterised as an
underdeveloped economy. Though it no longer suffers from stagnation as it did under
the British, the development since independence has not been spectacular. One fourth
of the population still lives in conditions of misery, and poverty remains a chronic
malady. A good amount of national resources still remain unutilized. In fact, almost all
characteristic features of an underdeveloped economy are still present in the Indian
economy. Let us analyse its basic characteristics: Low per capita income; Occupational
pattern-predominance of agriculture; Rapid population growth; Chronic
unemployment; Deficiency of capital; Maldistribution of wealth / assets; Poor quality
of human capital; Low level of technology
ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT: Economic growth refers to
increases over time in the real output of goods and services. Output is generally
measured by gross or net national product (GNP) or national income. Growth in output
can be achieved by the use of larger inputs like land, labour and capital or by increase
in the efficiency of their use. The study of economic growth is mainly concerned with
enlarging the productive capacity of the economy. Dividing GNP by the total
population gives us another measure of growth, i.e. per capita GNP. Similarly, dividing
GNP by the working population provides us a measure of the productivity, i.e., output
per unit of labour. Economic development is a more comprehensive term. It implies
not only a larger output of goods and services, i.e., a sustained increase in gross
national product but also technical and institutional changes by which it is obtained
and distributed. Economic development brings about changes in the composition of
output, i.e., the relative shares of agriculture, industry and services in GNP and changes
in the labour force (change in the occupational structure). It also means development
of infrastructural facilities, both economic and social. Thus, while economic growth
merely involves a stress on quantitative measures such as gross national product and
real output per capita, economic development implies economic growth along with
changes in the distribution of gross national product and in the socio-economic
structure. It stresses qualitative changes besides quantitative improvements in the
economy
SAVINGS AND INVESTMENT: Of all the factors that determine the rate of growth in a
country, the rate of capital formation is considered to be the most important factor.
This involves saving and investment which not only raises the productive capacity but
creates a sound base for further development. While preparing an estimate it is
customary to divide the economy into three sectors. These are: a) Household sector
which comprises individual and economic units run on an individual, partnership or
non-corporate basis; b) Corporate sector which includes the joint stock companies; and
c) The Government sector which includes the administrative departments and the
enterprises run under state control.
OBJECTIVES LAID DOWN FOR SETTING UP PUBLIC SECTOR ENTERPRISES:
1 To promote rapid economic development through the creation and expansion of
infrastructure;
2 To promote the development of heavy and basic industries to provide an industrial
base to the economy;
3 To create employment opportunities;
4 To promote redistribution of income and wealth;
5 To promote balanced regional development;
6 To promote exports on one side and import substitution on the other; and
7 To encourage the development of small and ancillary industries.
MEANING OF ECONOMIC PLANNING: it has been used in four different senses. In the
first sense, the term economic planning implies that there is an economic system in
which each production unit does production according to the plan given to it by the
central authority. In such a situation, the commodity to be produced and the inputs to
be used in production are decided by the planning authority. In the second sense,
economic planning involves laying down the targets for some enterprises, both pubic
as well as private. This type of planning may at best be called partial or piece meal
planning. Such economic planning is sometimes adopted in capitalist economies where
the state does not take an overall view of the economy. In the third sense, economic
planning refers to setting up not only the macro economic targets but also the targets
for various sectors of the economy. The allocation of resources by the government is
done accordingly. Moreover, the government is actively engaged in productive
activities through public sector enterprises. In such an institutional setting of the Indian
economy, there are two principal components of economic planning : 1 The
government mobilizes financial resources, both domestic and foreign, to undertake
such projects which, on account of high linkages with the private sector, induce
productive activities in the latter: 2 The government implements such monetary and
fiscal policies which are expected to stimulate private economic activity and thereby
the overall economic growth.
RATIONALE FOR ECONOMIC PLANNING: Failures of market mechanism; Need to strike
a changed equation with developed countries; Ensuring social justice; Mobilisation and
allocation of resources.
NATURE OF INDIAN ECONOMIC PLANNING: economic planning is of two types (1)
collectivist planning or economic planning by direction, and (2) indicative planning or
economic planning by inducement. The collectivist planning has been an integral part
of a socialist economy, whatever its model. Indicative planning has been practiced in a
number of western countries before they decided to abandon the objective of a
welfare state. We in India also adopted the second type of economic planning but with
certain modifications
THE LONG-TERM GOALS OF ECONOMIC PLANNING IN INDIA: Upto the Seventh Five
Year Plan, economic planning in this country was guided by the following long-term
goals : Economic growth - approximately 5 per cent per annum increase in the Net
National Production (NNP); Self-reliance; Full employment; Reduction in income
inequalities; Poverty elimination; Modernisation.
INDUSTRIAL POLICY RESOLUTION, 1956: After completing the First Five Year Plan, the
need was felt for a new industrial policy resolution conforming to broader goals of
economic planning. Accordingly, the second Industrial Policy Resolution was passed in
April, 1956. It laid down the following objectives to be achieved through this policy:
1 to accelerate economic growth and speed up the industrial development;
2 to develop heavy industries and capital goods industries;
3 to expand public sector;
4 to prevent growth of monopolies and concentration of economic resources and
power; and
5 to reduce income and wealth inequalities.
NEW INDUSTRIAL POLICY, 1991: The New Industrial Policy announced on July 1991
deregulated the Industrial economy in a big way. It was .an attempt in line with the
liberalization measures already undertaken by the government during 1980s. It was
aimed at attaining the following objectives: a)to build future industrial development on
gains already made; b) to correct distortions and weaknesses that must have
developed over time in the industrial structure; c) to maintain a sustained growth in
industrial productivity and employment; and d) to attain international
competitiveness,
FISCAL POLICY: Fiscal policy refers to the policy of the government with regard to
taxation, public expenditure and public borrowing with specific objectives in view.
While the developed countries attempt to achieve economic stability through fiscal
policy, the goal of developing countries is to achieve economic growth with social
justice. In particular, it aims at:
1)Improving growth performance : The fiscal policy improves growth performance of
an economy in two ways : (a) by improving the resource mobilization, and (b) by
influencing the efficiency of resource allocation
2)Ensuring social justice : There are extreme inequalities in income and wealth in India.
While the vast mass of population suffers deprivation, a small number of people
possess huge financial resources and other assets. In an egalitarian society such
inequalities are not to be allowed. The fiscal policy can do a lot to reduce these
inequalities.
Thus, by a judicious mix of tax policies and public expenditure polices, the government
can help in reducing income inequalities.
MONETARY POLICY: The monetary policy refers to a system of regulating the supply of
money and control of the cost and availability of credit of the central bank of the
country through the use of deliberate and discretionary action for achieving the
objectives of general economic policy. The main objectives of monetary policy are: a)
Price stability; b) Healthy balance in balance of payments; c) Full employment and
maximum feasible output; and d) High rate of economic growth.
SMALL SCALE INDUSTRIES: Most of the small scale industrial units are small in size and
have limited financial resources. The entrepreneur himself is the owner and performs
all managerial functions. In some cases he may admit a partner who may contribute
part of the capital or provide technical assistance in running the business. At times,
they may also adopt corporate form of organisation, but their number is negligible and
most of them are private limited companies. Thus, personal character of organisation
and management remains the main feature of small scale sector. It is observed that
majority of the small scale entrepreneurs lack formal education and training, and have
limited financial resources. They usually depend upon their own funds and borrowings
from friends and relatives.
ADVANTAGES OF SMALL SCALE INDUSTRIES:
(a) The employment argument: This argument is based on the assumption that small
enterprises are labour intensive and create more employment per unit of capital
employed.
(b) The equality argument: This argument suggests that the income generated in a
large number of small enterprises is dispersed more widely in the community than the
income generated in a few large enterprises.
c) The latent resources argument : This argument suggest that small enterprises I are
able to tap latent and unutilized resources, encourage the growth of a class of small
entrepreneurs which is more dynamic and efficient, and bring idle savings into
productive investment.
(d) The decentralization argument: This argument impresses the necessity of regional
dispersal of industries. It is observed that large enterprises are mostly concentrated in
metropolitan cities. To prevent congestion in large cities the industrialisation must
penetrate into smaller towns and remote corners of the country. This is possible by
setting up small enterprises and promoting industrial growth in semi-urban and rural
areas.
SMALL SCALE UNIT refer to an industrial undertaking in which the investment in plant
and machinery, whether held on ownership terms or on lease or on hire-purchase,
does not exceed rupees one crore. A unit with an obligation to export at least 30% of
its annual production by the end of the third year from the date of commencement of
production and having investment ceiling as prescribed for small scale undertakings,
i.e., upto Rs. 1 crore in plant and machinery, is termed as export oriented small scale
industrial unit.
ANCILLARY INDUSTRIAL UNDERTAKING refers to an industrial undertaking which is
engaged or is proposed to be engaged in the manufacture or production of parts,
components, sub-assemblies, tooling or intermediaries or the rendering of services and
undertaking supplies or renders or proposes to supply or render, not more than 50% of
its production or services, as the case may be, to one or more other industrial
undertakings and whose investment in plant and machinery, whether held on
ownership terms or on lease or on hire-purchase, does not exceed rupees one crore.
SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO) PROVIDES THE FOLLOWING
SERVICES
1) It gives advice to the government in the formulation of polices.
2) It provides techno-economic and managerial consultancy as well as common
facilities and extension services.
3) It facilitates technology upgradation, modernisation, quality improvement and
infrastructure.
4) It helps in the development of human resources through training and skill
upgradation.
5) It coordinates the policies and programmes for the development of small scale
industries as ancillaries to large and medium scale industries.
6) It conducts entrepreneurship development programmes through the SISIs and their
branches.
7) It provides export market information, export consultancy and organizes training
courses and seminars for promoting exports.
GOVERNMENT POLICY TOWARDS SMALL SCALE SECTOR: On August 6, 1991 the
Government announced a separate industrial policy for the small scale sector for the
first time. Its main features are:
1 To allow equity participation upto 24 per cent by other industrial undertakings
including foreign companies
2 To encourage complimentarity in production programmes of large and small
enterprises
3 To accord priority to small and tiny sector in allocation of indigenous raw materials
4 To provide easier access to institutional financed
5 To recognize SIDO as the nodal agency to support SSI in export promotion
6 To encourage sale of SSI products under common brand names
7 To widen the scope of the National Equity Fund to cover projects upto Rs. 10 Lakh for
equity support
8 To enlarge the Single Window Loan Scheme to cover projects upto Rs. 20 lakh with
working capital margin upto Rs. 10 lakh and channelizing composite loan through
commercial banks
9 To allow private industry to set up industrial estates
10 To include industry related service enterprises as small scale industries
11 To enhance the investment limit in plant.md machinery from Rs. 2 lakh to Rs. 5 lakh
in respect of tiny enterprises irrespective of their location
12 To give priority to SSIs in Government Purchase Programme
13 To give relaxation in certain provisions bf labour laws
14 To introduce a Limited Partnership Act to enhance the supply of risk capital
PROGRAMMES FOR PROMOTION OF SMALL SCALE INDUSTRIES: Reservation of items
for production; Reservation of items for exclusive purchasing from the small scale
sector; Incentives in backward areas; Central excise duty exemption; Programme on
environment and quality management; Industrial Estates Programme
GROWTH OF SMALL SCALE SECTOR: The growth in small scale sector can be measured
in terms of (i) industrial units, (ii) production volume, (iii) employment, (iv) amount of
investment, and (v) "volume of exports.
PROBLEMS OF SMALL SCALE SECTOR: The problems of small scale industries may be
broadly classified into two categories as internal and external problems. The internal
problems are: absence of technical knowhow, old and obsolete plant and machinery
and production methods, locational disadvantages, poor debt collection, low quality
and ineffective marketing methods etc. The external problems, on the other hand, are:
non availability of raw materials, power shortage, infrastructural bottlenecks, lack of
coordination among promotional agencies, labour unrest, etc.
LIBERALISATION: refers to measures adopted for removing the excessive regulatory
framework of controls and licences which acted as shackles on free enterprise.
PRIVATISATION: Privatisation is the process of transferring ownership and operation of
the state-owned or public sector undertakings to the private sector. It can take three
forms: (1) ownership measures; (2) organisational measures; and (3) operational
measures.
GLOBALISATION: The basic purpose of globalisation is to integrate the Indian economy
with the world economy. Globalisation primarily refers to the four basic components
as follows: 1) Free flow of trade of goods and services across national boundaries; 2)
Free flow of capital across national boundaries; 3) Free flow of technology among
nations states; and 4) Free flow of labour among various countries of the world.
SPECIAL ECONOMIC ZONES AND 100% EXPORT ORIENTED UNITS: These Zones are
specifically delineated duty free enclaves. They are deemed to be foreign territory for
the purposes of trade operations, duties and tariffs. SEZ units may be set up for
manufacture of goods and rendering of services. The goods and services going into the
SEZ area from the domestic area are treated as exports and goods & services coming
from the SEZ area to the domestic area are treated as imports. The SEZ units are
entitled to avail all assistance and facilities provided in the policy for this purpose.
Units are established for exporting entire production except permissible sales in the
domestic tariff area under 100% EOU scheme in any part of the country. Electronics
Hardware Technology Parks (EHTPs) and Software Technology Parks (STPs) are also
created for exporting their entire production except permissible sales in the domestic
tariff area. These units also get the facilities and assistance provided under the EXIM
Policy.
DUTY EXEMPTION / REMISSION SCHEME: The duty exemption scheme enables duty
free import of inputs required for export production. An advance licence is issued for
physical export, intermediate supplies and deemed exports under this scheme.
The duty remission scheme enables post export replenishment/ remission of duty on
inputs used in the export product.
BALANCE OF PAYMENTS: refer to an accounting record of all transactions between the
residents of one country and the residents of the rest of the world over a given period
of time. The study of balance of payment is very important for policy makers and
business communities. Moreover, it also reflects the competitive strengths and
weaknesses of a country in the global markets.
The balance of payments is divided into three types of accounts. These are as follows:
i) The current account: The current account records the transactions relating to the
exports and imports of goods and services and unilateral transfers like government and
private gifts and grants.
ii) The capital account: The capital account records the transactions, which leads to
changes in foreign financial assets and liability of the country.
iii) The reserve account: The reserve account records the reserve assets. These reserve
assets are the holdings of the foreign currency, special drawing rights and gold by
central bank of a country. They are used to settle the deficits and surpluses
DISEQUILIBRIUM OF THE BALANCE OF PAYMENTS: When the country keeps on
importing goods and services to meet its developmental requirements and export
earnings are not sufficient to meet these growing demands of imports, the reserve is
drawn to make these deficits. The continuous deficits result is the disequilibrium of the
balance of payments. The main causes of the disequilibrium include (a) continuous
deficits on current account balance. The main causes of the disequilibrium include (a)
continuous deficits on current account balance, (b) declining surpluses on account of
invisibles, (c) burden of external servicing, and (d) dwindling prospects of concessional
aid, etc.
EXPORT IMPORT POLICY: The EXlM policy focuses on facilitation and promotion of
exports and liberalization of imports. The principal objectives of the EXlM policy 2002-
07 are:
a.To facilitate sustained growth in exports to attain a share of at least 1% of global
merchandise trade.
b.To stimulate sustained economic growth by providing access to essential raw
materials, intermediates, components, consumables and capital goods required for
augmenting production and providing services.
c.To enhance the technological strength and efficiency of Indian agriculture, industry
and services.
d. To provide consumers with good quality goods and services at internationally prices
while at the same time creating a level playing field for the domestic producers.
ROLE OF EXPORT- IMPORT BANK OF INDIA: Export- Import Bank of India was set up in
1982 for the purpose of financing, facilitating and promoting foreign trade in India. It is
the principal financial institution in the country for coordinating working of institutions
engaged in financing exports and imports. The major functions of EXIM Bank are as
follows: Finance; Services; Research and Analysis
CURRENT ACCOUNT TRANSACTIONS: As stated earlier, current account transactions
refer," to transactions other than capital account transactions. These include (i)
payments due in connection with foreign trade, other current business services and
short term banking and credit facilities in the ordinary course of business; (ii) payment
due as interest on loans and on net income from investments; (iii) remittances for
living expenses of parent, spouse and children residing abroad; and (iv) expenses in
connection with foreign travel, education and medical care of parents, spouse and
children.
CAPITAL ACCOUNT TRANSACTIONS: Capital account transactions refer to transactions
which alter the assets and liabilities outside India of persons resident in India or assets
and liabilities in India of persons resident outside India.
THE GENERAL AGREEMENT ON TRADE AND TARIFFS (GATT) was drawn up in 1948 as a
framework for international trading system, and international trade relations among
member nations continued to be guided by GATT since then. Its primary objective was
liberalisation of trade restrictions so as to bring about all round prosperity. The
conventions of rules required that (i) any change in tariff, or other type of commercial
policy of a member country should not be undertaken without consultation with other
parties to the agreement; and (ii) member countries should work towards reduction of
tariffs and barriers to international trade, which should be negotiated within the
framework of GATT.
IPR UNDER THE AGREEMENT ON TRADE RELATED ASPECTS OF INTELLECTUAL
PROPERTY RIGHTS (TRIPS): Patent or Patent Rights; Trade Mark; Copyright: Industrial
designs; Trade secrets; Geographical indication
WHAT IS AN INVENTION: the term invention is defined as any new and useful (i) art
process, method or manner of manufacture; (ii) machine, apparatus or other article;
(iii) substance produced by manufacture; and includes any new and useful
improvement of any of them.
THE FUNCTIONS OF THE W.T.O ARE: (i) to facilitate and provide the framework for
implementation, administration and operation of the Multilateral and Plurilateral
Trade Agreements; (ii) To provide a forum for negotiations among members; (iii) To
administer the understanding on rules and procedures governing the settlements of
disputes; (iv) to administer the Trade Review Mechanism; and (v) To co-operate with
the IMF and IBRD and its affiliated agencies in global economic policy making.