Government Policies for Business Growth

Introduction

A nation’s code of conduct is critical to the functioning of any country. The “policy” is nothing more than a code. The primary goal of any government policy for business growth is to improve the country’s operational strategy and economic growth.

Government Policies for Business Growth

It is noted that government policies for business growth have a wide-ranging impact on business. A government policy affects almost every aspect of business, from production to finance to marketing. A company’s life cycle is permeated with the present policies and laws. In addition, there is also the fact that both federal and state-level policies impact business.

Business Growth in India

As a result of the country’s independence in 1947, India’s business sector has been reinvigorated. The first industrial policy was introduced in 1948, showing how highly the government regarded stimulating industrial activity and economic growth as urgent. Economic planning was initiated in 1951 with the First Five Year Plan launch.

As outlined in the Industrial Policy Resolution 1956, direct government ownership of businesses was to be implemented through departmental undertakings, statutory corporations, and government companies in sectors where private investment was either unable or unwilling to occur.

During the first three to four decades after independence, India’s economy was dominated by the public sector. In addition, licenses were required for the establishment of industrial units. To maintain a smooth operation in India, many industrial and labour laws were enacted. 

A new era of economic policies in India emerged in the 1990s (specifically in 1991), commonly referred to as the era of liberalisation and privatisation. Taken all at once, the economic policies represent a shift in emphasis away from central planning toward what is known as neo-liberal economics, which places a greater emphasis on market mechanisms to address current economic and social issues.

Business Growth Strategies

1. Internal Strategies

To be effective, organisations must keep tabs on and make sense of their surroundings. Furthermore, they must develop effective strategies internally to reach their goals.

Classifications of internal responses that a company can choose from :

• Administrative Response – 

Administrative responses are the most common responses of organisations to the environment. As a result of this administrative response, businesses will have to alter their operations to adapt to the changing conditions.

• Competitive response –

For-profit companies are often associated with competitive environmental responses, but non-profits and governmental organisations can also use this term to describe their actions. By gaining a leg up on the competition, these strategies aim to improve the organisation’s overall performance. 

• Collective response – 

Increased coordination with other organisations is one-way organisations can deal with environmental dependence and uncertainty. Negotiating, contracting, co-opting, or forming joint ventures are examples of collective responses to interdependencies among organisations.

2. Strategic Responses that Take a Holistic Approach

There are so many interrelationships between a business organisation and its various environments that it can be difficult to tell where one ends and the other begins. For a holistic approach, a company must examine a large-scale set-up with plenty of competitors and all other external factors, macro and micro, including internal factors.

• Least Resistance – Some businesses can survive simply by adapting to their changing surroundings. Their primary function is to keep track of the mission’s objectives. They are extremely docile and rely solely on the signals from the environment to guide their actions. Despite their lack of ambition, they are content with their current situation.
• Proceed with caution – Businesses that take an intelligent interest in adapting to the changing external environment are at the next level. They are interested in keeping tabs on environmental changes, analysing their effects on their objectives and activities, and then implementing their findings in the form of targeted strategies, strength, stability, and survival. They consider the external environment to be extremely complex and turbulent.
• Dynamic response – The highest level of response is businesses that believe that they have some measure of control over the external environmental forces. Feedback loops in these systems are incredibly flexible and potent. They don’t just see and avoid danger; they turn danger into opportunity. They are acutely aware of their abilities and threats that come from the outside.

Government Policies for Business growth

1. Liberalisation –

Removal or loosening of restrictions implies liberalisation. To achieve this, licensing and permits are being eliminated, regulations are loosened, approvals are being streamlined, and legislative and administrative restrictions on business are gradually relaxed. Before the 1990s, the policy regime was characterised by various facts.

Restrictions that had already been imposed seemed to have outlived their purpose. Liberalisation could be described as expanding and improving economic freedom for the private sector systematically. 

2. Privatisation – 

As a management strategy, privatisation involves the transfer of government-owned institutions to private ownership. There are times when privatisation is advantageous because of the increased scope and scope for innovation it provides and the savings it can bring. It seeks to hold the production and service systems accountable and improve their quality.

There are three main types of privatisation: 

• Delegation: The government retains responsibility, but private enterprise handles the delivery of products and services fully or partially. Involvement from the government is present.
• Divestment: The government gives up some of its stake in the company and sells the majority stake overtime to several different private entities.
• Displacement: As the private sector grows, it gradually supplants the government-run organisation. Privatisation is encouraged if the private sector can challenge a government monopoly through deregulation. 
• Disinvestment: Selling a portion of a public company’s stock to private investors.

3. Globalisation – 

The free flow of people, goods, and services across borders is meant by globalisation. Unification and integration are the watchwords of this movement’s management. Furthermore, it can be viewed as a strategy to open the global economy and boost trade globally. As a result, countries previously closed to foreign investment and trade are now open to the world.

4. Foreign Direct Investment (FDI) –

When an investor from another country (a foreign country) invests in a company in our country, that is what is meant by foreign direct investment (FDI). An investor can now be an individual, a company, or any other type of business. In most cases, a foreign investor acquires the company’s assets or establishes business operations to acquire a controlling interest in the company. 

5. Foreign Institutional Investors (FII)- 

An investment of funds or a collection of investors, foreign institutional investors (FIIs) are a type of FII. A foreign-registered fund does not have its headquarters in the country it intends to invest in. Investment banks, hedge funds, mutual funds, pension funds, insurance companies, and mutual funds are the most common institutional investors. FII refers to foreign investors who invest money in India’s financial sector. They have a significant impact on the growth of our economy. They put a lot of money into the venture.

6. Investment from India Abroad (OFDI) –

India has benefited from the globalisation policy in inward and outward FDI or OFDI. Also, Indian businesses invest abroad. Bharti Airtel, for example, invested 978.92 million dollars in February 2020. PVR Cinemas, a leading multiplex chain, planned to open a branch in Mauritius in November 2019.

Conclusion

In addition to the private sector companies, many government companies were known as Public Sector Undertakings. India’s government shifted policy in 1991 after decades of adhering to an economy controlled by the central government. LPG was a common term for this policy change (Liberalisation, Privatization, and Globalization). The stock market rose as a result of this policy change. Large amounts of money have been invested in India’s economy through FDI (Foreign Direct Investment). With these policy adjustments, the Indian economy underwent an evolutionary shift.