Dimensions of Political Environment

The Political Conditions in the country influence business activities in different ways. They provide opportunities for the business units to achieve heir goals. At the same time the political conditions pose challenges before the business enterprises. They have to adjust themselves to the political environment and use it to their benefit.

The dimensions of political environment

In any country, the political environment is characterized by the following dimensions:

 
The nature of the polity

The nature of the constitution of the country

The political system

The political awareness of the people and of the government

The laws passed by the government
 

1. The nature of the polity

The political systems in the world can be broadly classified into democracies and autocracies. Under democratic policy the govt. is elected by the people and is answerable to the people for every action or failure to take an action.

In a democracy, the govt. has to take the people into confidence before taking any important decision. The experts may be in favor of a particular activity but the govt. may not be able to take up that activity if it is opposed by a large no. of the people. We have the example of, the decision of the west Bengal govt. in respect of Tata motors. The company was required to shift its plants from west Bengal to some other place, suffering a heavy loss in the shifting.

An autocracy is a state in which the govt. does depend upon the support of the people in continuation in office. The autocracy may take the form of the monarchy of the military or some other type of a dictatorship. Under this type of govt., a decision taken by the govt. can be smoothly carried out even in preface of a strong opposition from some people. In China, any economic reform can be effectively carried through, because of the nature of Chinese govt. If the govt. s convinced of the utility and importance of a business enterprises, it can be carries to its logical end even in the face of opposition from certain sections of the community.

a. Single, two and multi party states

In a single party state like China, it is easy to implement any economic reform. If the party is convinced of the importance of a particular project it can be carries through.

In a two party state, the party enjoying support of the majority gets powered. It can easily carry through any economic reform or give patronage to any project or business enterprise.

In a multi party state, there is no guarantee that any single party would enjoy the support of the majority. Often, such a country is ruled by a coalition govt. in which more than one parties come together to form a govt. Sometimes, some parties support the govt. from outside. The parties adopt a common minimum program. Those projects and enterprises which fall into the framework of the common minimum program can be carries though. But those projects which are outside the common minimum program may find it difficult to work.

2. The nature of the constitution of the country

If a country has an unwritten constitution like that of England, every law passed by the parliament is equally important. The parliament is supreme. It can do or undo things. It can help any project which gets its approval.

In a country like India having written constitution, the authority of the parliament is limited to the clauses of the constitution. If a particular law passed by the parliament or a particular order issued by the executive is contradictory to any provision of the constitution, it can not be put into practice. Thus, the authority of the parliament to help business or to stop a particular business is limited by a provision of the constitution.

Unitary or Federal Constitution

Under unitary constitution or powers are concentrated in the hands for one central govt. There might be other administrative units but they derive their authority from the central govt. They do not have any independent powers.

Under a federal constitution, the powers of the govt. are divided between the central govt. and the state govts. The sources of income including taxes are also divided between the central govt. and the state govts. In India, the income tax on individuals and the corporation tax are with the central govt. whereas the sales tax and the excise duty on alcohol are with the state govt.

India has a federal constitution. It is possible that a particular project may be approved by the central govt. but they may not be implemented if it has an objection from the state govt. concerned. The business enterprises have also to take into consideration the tax structure of different states while selecting their location in a particular state. Different states may try to attract business activities to them by providing different incentives; this is beneficial to business enterprises because they can get maximum advantages because of the competition amongst the state govt. for attracting business units to them.

The India Constitution guarantees justiciable and non-justiciable rights to the people. The fundamental rights are justiciable whereas the rights incorporated in chapter 4 are non-justiciable. Any citizen can establish his fundamental rights by taking the help of the court of justice.

3. The Political System

India has a representative democracy based on adult franchise. All individuals who have completed the age of 18 years have a right to vote irrespective of their educational standards, income, possession of wealth, occupation etc. The govt. ahs to take into consideration the type of political system while taking any decision. A decision which may appear to be economically sound may not be taken if it has a strong opposition from the people. The population is divided into different groups on grounds of religion, sects, caste etc. Certain decisions may be opposed on religious grounds.

4. The political awareness of the people and the govt.

If the people have a high sense of awareness, the govt. is more responsive to the wishes of the people. n the other hand if the people are passive and indifferent, the govt. looses its democratic character. People having personality cult and a blind faith in certain things are not able to bring into practice the spirit of democracy. The people should be aware of their rights and also of their duties in the smooth functioning of a democracy.

5.  The laws passed by the govt.

In any modern state, the will of the people is expressed in the form of laws passed by the legislature. The executive is bound by the laws and individuals are an d institutions can be penalized only under the provisions of a law.

The constitution of the country is described as the law of laws. Any law which is contradictory to the constitution can be repealed.

In India, several laws have been passed for regulating business enterprises. Some prominent amongst them are the companies act which regulates the formation and management of joint stock companies and gives protection to the investors. The factories act regulates the working conditions in the factories. The workers remuneration is regulated by several acts such as the minimum wages act and the payment of bonus act. The industrial disputes act sets up machinery for resolving the disputes between management and workers. The competition act 2002 tries to protect and foster competition which is helpful to progress. The monopolies and restrictive trade practices act tries to control the growth of monopolies and prevent the use of restrictive trade practices. The foreign exchange management act regulates the buying and selling and possession of foreign exchange by individuals and foreign exchange dealers. Any business enterprise has to work within the legal framework set up by the state.