Government and Legal

Environment

Submitted to:

Name

Dr. Jasbir Singh

00614905011

Abhinav
Enr. No. :

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 sellers 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 public
3. To prevent the wastage of natural resources.
4. To prevent monopoly or oligopoly.

Planning Role
Especially 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 law

The 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 law
The 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 Law
The 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 1951

In 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 1986

Consumer 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 Law
Indian 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) Act

An 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.