ANS no 1

Business Environment

Introduction to Business

• Business is the organized efforts of enterprises to supply consumers with goods and
services for a profit.

• All businesses share the same purpose to earn Profits. However, the purpose of
business goes beyond earning profits.

Characteristics of Business environment

• Business environment is constantly changing process.

• Business environment is different for different business units.

• It has both long term and short term impact.

• Unlimited influence of external environment factors.

• It is very uncertain.

• Inter-related components.

• It includes both internal and external environment.

Environment

• Environment means surrounding

• Business environment means the factors and activities those surround the business and
affect or influence the business.

• However, the term business environment refers to the External Factors. The external
environment has two components ie business opportunities and threats to business.

• Similarly, the organizational environment has two components ie. strengths and
weaknesses of the organization. A SWOT analysis is thus the first step in strategy
formulation
 BUSINESS ENVIRONMENT

Macro Environment

Micro Environment

Internal Environment
Bankers and Mission / Objectives
financial institution Economic
Management Structure
Suppliers Political
Production Capabilities
Customers Business legal
Finance Capabilities
Competitors Decision Technological
Marketing Capabilities
Public Global
HR Capabilities
Mkt. Intermediaries Socio-Cultural
R&D Capabilities
Share holders natural
Technological Capabilities
Creditors Company image
Physical Assets & facilities

BY-K.C.MODAK

Internal Environment

• Vision

• Mission

• Objectives

• Management Structure

• Production Capabilities

• Marketing Capabilities

• Human Resources

• Financial Factors

• Company Image and Brand Equity

• R&D Capabilities
 • Physical Assets & facilities

Micro Environment(external)

1) Suppliers

Supply raw materials and other components (Inputs)

Importance

- Reliable supply – continuous supply for smooth functioning

2) CUSTOMERS

Different categories of customers

i. Industrial customers

ii. Wholesale customers

iii. Retail customers

iv. Government customers

v. Foreign customers

ii. Market intermediaries

i. Middlemen.

ii. Physical distribution Firms: (warehouses and transport firms)

iii. Marketing service agencies (Advertising agencies market research firms, media
firms, consulting firms)

iv. Financial intermediaries

iii. 4. Competitors:

i. The Threat of entry of new firms

ii. The Power of Buyers

iii. The Power of Suppliers

iv. The Power of Substitutes

v. The Intensity of Rivalry among existing firms

 5.Public

6.Share holders

7.Creditors

8.Bankers and financial institution

Macro Environment(external)

Economic environment

i. Economic policies

a) Budget

b) Industrial policy

c) Trade policy

d) Agricultural policy

e) Fiscal Policy

f) Monetary Policy

ii. Economic system- Capitalistic, Socilalitic, Mixed

Economic conditions-

 Growth strategy

 Industry

 Agriculture

 Infrastructure

 Money and Capital Markets

 Per capita and national income

 FDI norms

 Inflation rate

 Growth in spending power

 people in a pensionable age

  Recession or Boom

 GDP, Business Cycle, Unemployment, Inflation, Balance of Payment, Exchange rate

Policy, Interest Rate.

legal environment

Legislature - Labour Laws like Factories Act,, Industrial Disputes Act, Minimum Wages Act,
Payment of Wages Act, etc

MRTP Act, Law of Contracts, Companies act, FERA, Import & Export Control act, Tax
Laws

Judiciary - District, High Courts, Supreme Court,

• The constitution of a country

• Foreign Policy

• Laws governing business

• Flexibility and adaptability of laws

• The Judicial System

• Taxation Policy

• Trade regulations

• Unemployment law

• Health and safety

• Product safety

• Advertising regulations

• Product labeling

• labor laws

Political

• Political parties

• Political Stability

• Image of the country and its leaders

 • Political Belief of Government

• Political Strength of the Country

• Relation with other countries

• Defense and Military Policies

Socio cultural environment

• the buying and consumption habits of people,

• their language beliefs and values,

• customs and traditions,

• tastes and preferences,

• Education

• age distribution.

• education levels.

• income level.

• diet & nutrition.

• population growth

• life expectancies

• Religion

• Colour

• Blue: feminine and warm in Holland ; but masculine and cold in Sweden

• Green: favourite in Muslim world; but represents illness in Malaysia

• Red: popular in communist countries; but represents disaster in Africa

• White: death and mourning in China and Korea; but it expresses happiness in
some countries. Also it is the colour of bridal dress.

Socio cultural environment

• Attitude of people towards work and health.

 • Role of family.

• Marriage.

• Religion.

• Education

• Ethical issues

• Social responsibility of business

Natural environment

i. Natural resources.

ii. Weather and climatic conditions.

iii. Locational aspects.

iv. Nearness to port facilities.

Technological environment

• Internet

• E-commerce

• Social Media

• Nature of technology

• Scope for innovation

• Technology Helps in increased productivity

• Technology leads to introduction of new products and older products becoming

outdate

Importance of Business Environment

• An analysis of business environment helps to identify strength, weakness, opportunities

& threats. Analysis is very necessary for the survival and growth of the business
enterprise. The importance of business environment is briefly explained in an analysis
below.

(1) Identification of Strength: The analysis of the internal environment helps to identify
strength of the firm. For instance, if the company has good personal policies in respect of
promotion, transfer, training, etc than it can indicates strength of the firm in respect of
personal policies. This strength can be identified through the job satisfaction and
performance of the employees. After identifying the strengths the firm must try to
consolidate its strengths by further improvement in its existing plans & policies.

(2) Identification of Weakness: The analysis of the internal environment indicates not
only strengths but also the weakness of the firm. A firm may be strong in certain areas;
where as it may be weak in some other areas. The firm should identify sue weakness so
as to correct them as early as possible.

(3) Identification of Opportunities: An analysis of the external environment helps the

business firm to identify the opportunities in the market. The business firm should make
every possible effort to grab the opportunities as and when they come.

(4) Identification of Threats: Business may be subject to threats from competitors and
others. Therefore environmental analysis helps to identify threats from the environment
identification of threats at an earlier date is always beneficial to the firm as it helps to
defuse the same.

(5) Exploitation of Business Opportunities: Environment opens new opportunities for

the expansion of business activities. Study of environment is necessary in order to
discover and exploit such opportunities fully.

(6) Keeping Business Enterprise Alert: Environment study is needed as it keeps the
business unit alert in its approach and activities. In the absence of environmental changes,
the business activities will be dull and lifeless. The problems & prospects of business can
be understood properly through the study of business environment. This enables an
enterprise to face the problems with confidence and secure the maximum benefits of
business opportunities available.

(7) Keeping Business Flexible and Dynamic: Study of business environment is needed
for keeping business flexible and dynamic as per the changes in the environmental forces.
This will enable the development of business organization.

(8) Understanding Future Problems and Prospects: The study of business

environment enables to understand future problems and prospects of business in advance.
This enables business organizations to face the problems boldly and also take the benefit
of favorable situation.

(9)Making Business Socially Acceptable: Environment study enables businessmen to

expand the business and also make it acceptable to different social groups. Business
organizations can make positive contribution for maintaining ecological balance by
studying social environment.

(10) Ensures Optimum Utilization of Resources: The study of business environment is

needed as it ensures optimum use of resources available. For this, the study of economic
and technological environment is useful. Such study enables organization to take full
benefit of government policies, concessions provided, and technological developments
and so on.

(11) Ensures Survival and Growth: Business environment inform about suitable
changes to be affected in business policies. This helps the business organizations to grow
& prosper.

(12) Maintaining adaptability to changes: Business environment guides the business

organization about socio-economic changes & the organization must accordingly adapt
these change. This enables the business organization to survive for a longer period.
Ans no 2

Technological environment

• Internet

• E-commerce

• Social Media

• Nature of technology

• Scope for innovation

• Technology Helps in increased productivity

• Technology leads to introduction of new products and older products becoming

outdate

Economic environment

iii. Economic policies

a) Budget

b) Industrial policy

c) Trade policy

d) Agricultural policy

e) Fiscal Policy

f) Monetary Policy

iv. Economic system- Capitalistic, Socilalitic, Mixed

Economic conditions-

 Growth strategy

 Industry

 Agriculture
  Infrastructure

 Money and Capital Markets

 Per capita and national income

 FDI norms

 Inflation rate

 Growth in spending power

 people in a pensionable age

 Recession or Boom

 GDP, Business Cycle, Unemployment, Inflation, Balance of Payment, Exchange rate

Policy, Interest Rate.

Demographic environment

• the buying and consumption habits of people,

• their language beliefs and values,

• customs and traditions,

• tastes and preferences,

• Education

• Age distribution.

• Education levels.

• Income level.

• Diet & nutrition.

• population growth

• life expectancies

• Religion

Changing External Environment and effect on business

Markets are changing all the time. It does depend on the type of product the
business produces, however a business needs to react or lose customers.

Some of the main reasons why markets change rapidly:

 Customers develop new needs and wants.

 New competitors enter a market.
 New technologies mean that new products can be made.
 A world or countrywide event happens e.g. Gulf War or foot and mouth
disease.
 Government introduces new legislation e.g. increases minimum wage.

Business and Competition

Though a business does not want competition from other businesses, inevitably
most will face a degree of competition.

The amount and type of competition depends on the market the business operates
in:

 Many small rival businesses – e.g. a shopping mall or city centre arcade –
close rivalry.
 A few large rival firms – e.g. washing powder or Coke and Pepsi.
 A rapidly changing market – e.g. where the technology is being developed
very quickly – the mobile phone market.

A business could react to an increase in competition (e.g. a launch of rival product)

in the following ways:

 Cut prices (but can reduce profits)

 Improve quality (but increases costs)
 Spend more on promotion (e.g. do more advertising, increase brand loyalty;
but costs money)
 Cut costs, e.g. use cheaper materials, make some workers redundant
Ans no 3
Corporate governance
Corporate governance broadly refers to the mechanisms, processes and relations by
which corporations are controlled and directed.[1]Governance structures identify the
distribution of rights and responsibilities among different participants in the corporation
(such as the board of directors, managers, shareholders, creditors, auditors, regulators,
and other stakeholders) and includes the rules and procedures for making decisions in
corporate affairs. Corporate governance includes the processes through which
corporations' objectives are set and pursued in the context of the social, regulatory and
market environment. Governance mechanisms include monitoring the actions, policies
and decisions of corporations and their agents. Corporate governance practices are
affected by attempts to align the interests of stakeholders.

Other definitions

Corporate governance has also been defined as "a system of law and sound approaches by
which corporations are directed and controlled focusing on the internal and external
corporate structures with the intention of monitoring the actions of management and
directors and thereby, mitigating agency risks which may stem from the misdeeds of
corporate officers."

In contemporary business corporations, the main external stakeholder groups are

shareholders, debt holders, trade creditors, suppliers, customers and communities affected
by the corporation's activities. Internal stakeholders are the board of directors, executives,
and other employees.

Much of the contemporary interest in corporate governance is concerned with mitigation of

the conflicts of interests between stakeholders.[7] Ways of mitigating or preventing these
conflicts of interests include the processes, customs, policies, laws, and institutions which
have an impact on the way a company is controlled. An important theme of governance is
the nature and extent of corporate accountability.

A related but separate thread of discussions focuses on the impact of a corporate

governance system on economic efficiency, with a strong emphasis on shareholders'
welfare. In large firms where there is a separation of ownership and management and no
controlling shareholder, the principal–agent issue arises between upper-management (the
"agent") which may have very different interests, and by definition considerably more
information, than shareholders (the "principals"). The danger arises that rather than
overseeing management on behalf of shareholders, the board of directors may become
insulated from shareholders and beholden to management. This aspect is particularly
present in contemporary public debates and developments in regulatory
policy.(see regulation and policy regulation).

Economic analysis has resulted in a literature on the subject. One source defines corporate
governance as "the set of conditions that shapes the ex post bargaining over the quasi-
rents generated by a firm." The firm itself is modelled as a governance structure acting
through the mechanisms of contract. Here corporate governance may include its relation
to corporate finance.

Principles of corporate governance

Contemporary discussions of corporate governance tend to refer to principles raised in

three documents released since 1990: The Cadbury Report (UK, 1992), the Principles of
Corporate Governance (OECD, 1998 and 2004), the Sarbanes-Oxley Act of 2002 (US,
2002). The Cadbury and OECD reports present general principles around which businesses
are expected to operate to assure proper governance. The Sarbanes-Oxley Act, informally
referred to as Sarbox or Sox, is an attempt by the federal government in the United States
to legislate several of the principles recommended in the Cadbury and OECD reports.

 Rights and equitable treatment of shareholders: Organizations should respect the

rights of shareholders and help shareholders to exercise those rights. They can help
shareholders exercise their rights by openly and effectively communicating information
and by encouraging shareholders to participate in general meetings.
 Interests of other stakeholders: Organizations should recognize that they have legal,
contractual, social, and market driven obligations to non-shareholder stakeholders,
including employees, investors, creditors, suppliers, local communities, customers, and
policy makers.
 Role and responsibilities of the board: The board needs sufficient relevant skills and
understanding to review and challenge management performance. It also needs
adequate size and appropriate levels of independence and commitment.
 Integrity and ethical behavior: Integrity should be a fundamental requirement in
choosing corporate officers and board members. Organizations should develop a code
of conduct for their directors and executives that promotes ethical and responsible
decision making.
 Disclosure and transparency: Organizations should clarify and make publicly known
the roles and responsibilities of board and management to provide stakeholders with a
level of accountability. They should also implement procedures to independently verify
and safeguard the integrity of the company's financial reporting. Disclosure of material
matters concerning the organization should be timely and balanced to ensure that all
investors have access to clear, factual information.
Q. 4 Describe fiscal and monetary policy

Fiscal Policy

under which government uses it’s expenditure and revenue programs to produce desirable effects
and avoid undesirable effects on national income, production and employment.

Objectives of Fiscal Policy

 Development of Country

 Economic Development & Growth

 Reduction of Disparities of Income

 Expansion of Employment

 Price Stability

Instruments of Fiscal Policy

INCOME

It refers to the income or receipts from public

TAX REVENUE

• Personal Income Tax

• Corporate Tax
• Service Tax
• Excise Duties
• Custom Duties
• Toll Tax

• House Tax

• Entertainment Tax

• Road Tax
 • Wealth Tax

• Sales Tax

• Value Added Tax

NON - TAX REVENUE

Fees

License Fees

Price of public goods & services

Fines

Penalties

EXPENDITURE

It refers to the expenditure incurred by the government

Two major categories:

Development expenditure

Non development expenditure

Development Expenditure

• Development of Public Enterprise

• Development of Infrastructure

• Social Welfare

Non - Development Expenditure

• Unproductive expenditures are termed as non development expenditures.

Types of Fiscal Policy policy

– Neutral

– Expansionary

– Contractionary

• Collecting more taxes to finance more spending indicates a neutral stance

• Spending more and financing it by borrowing and taxes would indicate a fiscal expansion

• Collecting more taxes without increase in spending indicates fiscal contraction.

MONETARY POLICY

• The Monetary and Credit Policy is the policy statement, traditionally announced twice a
year, through which the Reserve Bank of India seeks to ensure price stability for the
economy.

These factors include - money supply, interest rates and the inflation. In banking and
economic terms money supply is referred to as M3 - which indicates the level (stock) of legal
currency in the economy.

Besides, the RBI also announces norms for the banking and financial sector and the
institutions which are governed by it.

How is the Monetary Policy different from the Fiscal Policy?

• The Monetary Policy regulates the supply of money and the cost and availability of credit
in the economy. It deals with both the lending and borrowing rates of interest for
commercial banks.

• The Monetary Policy aims to maintain price stability, full employment and economic
growth.
 • The Monetary Policy is different from Fiscal Policy as the former brings about a change
in the economy by changing money supply and interest rate, whereas fiscal policy is a
broader tool with the government.

• The Fiscal Policy can be used to overcome recession and control inflation. It may be
defined as a deliberate change in government revenue and expenditure to influence the
level of national output and prices.

What are the objectives of the Monetary Policy?

• The objectives are to maintain price stability and ensure adequate flow of credit to the
productive sectors of the economy.

Stability for the national currency (after looking at prevailing economic conditions), growth in
employment and income are also looked into. The monetary policy affects the real sector through
long and variable periods while the financial markets are also impacted through short-term
implications.

INSTRUMENTS OF MONETARY POLICY

• 1. Bank Rate of Interest

• 2. Cash Reserve Ratio

• 3. Statutory Liquidity Ratio

• 4. Open market Operations

• 5. Margin Requirements

• 6. Deficit Financing

• 7. Issue of New Currency

• 8. Credit Control

• Money supply and the economy

• Money supply also effects the economy on three sides. One, money supply is used to control
the inflation in an economy. On the demand side, whenever money supply in the economy
increases, consumer-spending increases immediately in the economy because of increased
money in the system. But supply can’t vary in the short – term, so there is a temporary mismatch
of demand & supply in the economy which exerts an upward pressure on inflation. This argument
assumes that demand drives supply, which is generally the case. On the supply side, due to an
increase in demand, supply can only be increased by capacity additions. This causes the cost of
production to rise & that is reflected in inflation.

• Two, money supply also has a direct relationship with the growth of an economy. Until an
economy reaches full – employment level, the economy growth is the difference between money
supply growth rate & the inflation, other things being equal. When an economy reaches full
employment level, the growth in money supply is set off by a growth in inflation, other things
being equal. This happens because output can’t rise after full employment & therefore inflation
increases one for one with the money supply.

• Three, money supply also has a relationship with interest rates. One variable can be used to
control the other. Both can’t be controlled simultaneously. If the RBI wants to peg the interest rate
at a certain level, it has to supply whatever money is demanded at that level of interest rate. If it
wants to fix the money supply at a certain level, the demand & supply of money will determine the
interest rates. Usually it is easier for RBI to control the interest rates through its open market
operations (OMO). So, the money supply is allowed to vary but RBI controls it by playing around
with interest rates through its OMO.
Qno. 5 Write short notes on

1. Globalization
Globalization (or globalisation) is the process of international integration arising from the
interchange of world views, products, ideas and other aspects of culture.Advances in
transportation and telecommunications infrastructure, including the rise of the telegraph and its
posterity the Internet, are major factors in globalization, generating further interdependence of
economic and cultural activities.

Though scholars place the origins of globalization in modern times, others trace its history long
before the European age of discovery and voyages to the New World. Some even trace the
origins to the third millennium BCEIn the late 19th century and early 20th century, the
connectedness of the world's economies and cultures grew very quickly.

The term globalization has been increasingly used since the mid-1980s and especially since the
mid-1990s. In 2000, the International Monetary Fund (IMF) identified four basic aspects of
globalization: trade and transactions, capital and investment movements, migration and
movement of people, and the dissemination of knowledge.Further, environmental challenges
such as climate change, cross-boundary water and air pollution, and over-fishing of the ocean are
linked with globalization. Globalizing processes affect and are affected by business and work
organization, economics, socio-cultural resources, and the natural environment.

Economic globalization is the increasing economic interdependence of national economies

across the world through a rapid increase in cross-border movement of goods, service,
technology and capital. Whereas the globalization of business is centered around the diminution
of international trade regulations as well as tariffs, taxes, and other impediments that suppresses
global trade, economic globalization is the process of increasing economic integration between
countries, leading to the emergence of a global marketplace or a single world market.Depending
on the paradigm, economic globalization can be viewed as either a positive or a negative
phenomenon. Economic globalization comprises the globalization of production, markets,
competition, technology, and corporations and industries. Current globalization trends can be
largely accounted for by developed economies integrating with less developed economies by
means of foreign direct investment, the reduction of trade barriers as well as other economic
reforms and, in many cases, immigration.

In 1944, 44 nations attended the Bretton Woods Conference with a purpose of stabilizing world
currencies and establishing credit for international trade in the post World War II era. While the
international economic order envisioned by the conference gave way to the neo-liberal economic
order prevalent today, the conference established many of the organizations essential to
advancement towards a close-knit global economy and global financial system, such as the
World Bank, the International Monetary Fund, and the International Trade Organization.

As an example, Chinese economic reform began to open China to globalization in the 1980s.
Scholars find that China has attained a degree of openness that is unprecedented among large and
populous nations, with competition from foreign goods in almost every sector of the economy.
Foreign investment helped to greatly increase product quality and knowledge and standards,
especially in heavy industry. China's experience supports the assertion that globalization greatly
increases wealth for poor countries. As of 2005–2007, the Port of Shanghai holds the title as the
world's busiest port.

As another example, economic liberalization in India and ongoing economic reforms began in
1991. As of 2009, about 300 million people – equivalent to the entire population of the United
States – have escaped extreme poverty. In India, business process outsourcing has been
described as the "primary engine of the country's development over the next few decades,
contributing broadly to GDP growth, employment growth, and poverty alleviation".
2. WTO
The World Trade Organization (WTO) is an organization that intends to supervise and liberalize
international trade. The organization officially commenced on 1 January 1995 under the
Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which
commenced in 1948.The organization deals with regulation of trade between participating
countries by providing a framework for negotiating and formalizing trade agreements and a
dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which
are signed by representatives of member governments :fol.9–10 and ratified by their parliaments.
Most of the issues that the WTO focuses on derive from previous trade negotiations, especially
from the Uruguay Round (1986–1994).

The organization is attempting to complete negotiations on the Doha Development Round, which
was launched in 2001 with an explicit focus on addressing the needs of developing countries. As
of June 2012, the future of the Doha Round remained uncertain: the work programme lists 21
subjects in which the original deadline of 1 January 2005 was missed, and the round is still
incomplete.The conflict between free trade on industrial goods and services but retention of
protectionism on farm subsidies to domestic agricultural sector (requested by developed
countries) and the substantiation of the international liberalization of fair trade on agricultural
products (requested by developing countries) remain the major obstacles. These points of
contention have hindered any progress to launch new WTO negotiations beyond the Doha
Development Round. As a result of this impasse, there has been an increasing number of
bilateral free trade agreements signed. As of July 2012, there were various negotiation groups in
the WTO system for the current agricultural trade negotiation which is in the condition of
stalemate.
WTO's current Director-General is Roberto Azevêdo, who leads a staff of over 600 people in
Geneva, Switzerland. A trade facilitation agreement known as the Bali Package was reached by
all members on 7 December 2013, the first comprehensive agreement in the organization's
history.

Role of WTO

Among the various functions of the WTO, these are regarded by analysts as the most
important:

 It oversees the implementation, administration and operation of the covered

agreements.
 It provides a forum for negotiations and for settling disputes.

Additionally, it is the WTO's duty to review and propagate the national trade policies, and to
ensure the coherence and transparency of trade policies through surveillance in global
economic policy-making. Another priority of the WTO is the assistance of developing, least-
developed and low-income countries in transition to adjust to WTO rules and disciplines
through technical cooperation and training.

(i) The WTO shall facilitate the implementation, administration and operation and further the
objectives of this Agreement and of the Multilateral Trade Agreements, and shall also
provide the frame work for the implementation, administration and operation of the
multilateral Trade Agreements.

(ii) The WTO shall provide the forum for negotiations among its members concerning their
multilateral trade relations in matters dealt with under the Agreement in the Annexes to this
Agreement.

(iii) The WTO shall administer the Understanding on Rules and Procedures Governing the
Settlement of Disputes.

(iv) The WTO shall administer Trade Policy Review Mechanism.

(v) With a view to achieving greater coherence in global economic policy making, the WTO
shall cooperate, as appropriate, with the international Monetary Fund (IMF) and with the
International Bank for Reconstruction and Development (IBRD) and its affiliated agencies.

The above five listings are the additional functions of the World Trade Organization. As
globalization proceeds in today's society, the necessity of an International Organization to
manage the trading systems has been of vital importance. As the trade volume increases,
issues such as protectionism, trade barriers, subsidies, violation of intellectual property
arise due to the differences in the trading rules of every nation. The World Trade
Organization serves as the mediator between the nations when such problems arise. WTO
could be referred to as the product of globalization and also as one of the most important
organizations in today's globalized society.

The WTO is also a center of economic research and analysis: regular assessments of the
global trade picture in its annual publications and research reports on specific topics are
produced by the organization. Finally, the WTO cooperates closely with the two other
components of the Bretton Woods system, the IMF and the World Bank

3. Planning Commission

The Planning Commission is an institution in the Government of India, which

formulates India's Five-Year Plans, among other functions. It is located at Yojana Bhawan,
Sansad Marg, New Delhi. It was established in accordance with article 39 of the constitution
which is a part of directive principles of state policy.

In his first Independence Day speech, in 2014, Prime Minister Narendra Modi announced
scrapping of Planning Commission.

Organisation

The composition of the Commission has undergone a lot of change since its inception. With
the prime minister as the ex officio Chairman, the committee has a nominated Deputy
chairman, who is given the rank of a full Cabinet Minister. Presently the post of Deputy
Chairman of the Commission is vacant, after the new Government in the Center.

Cabinet Ministers with certain important portfolios act as ex officio members of the
Commission, while the full-time members are experts of various fields like Economics,
Industry, Science and General Administration.

Present ex officio members of the Commission, are Finance Minister, Agriculture Minister,
Home Minister, Health Minister, Chemicals and Fertilisers Minister, Information Technology
Minister, Law Minister, HRD Minister and Minister of State for Planning.[5]

The Commission works through its various divisions, of which there are two kind:
 General Planning Divisions
 Programme Administration Divisions

The majority of experts in the Commission are economists, making the Commission the
biggest employer of the Indian Economic Services.

Functions

The Planning Commission's functions as outlined by the Government's 1950 resolution are
following:

1. To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting those
are related resources which are found to be deficient in relation to the nation's
requirement.
2. To formulate a plan for the most effective and balanced utilisation of country's
resources.
3. To define the stages, on the basis of priority, in which the plan should be carried out
and propose the allocation of resources for the due completion of each stage.
4. To indicate the factors that tend to retard economic development.
5. To determine the conditions which need to be established for the successful
execution of the plan within the incumbent socio-political situation of the country.
6. To determine the nature of the machinery required for securing the successful
implementation of each stage of the plan in all its aspects.
7. To appraise from time to time the progress achieved in the execution of each stage
of the plan and also recommend the adjustments of policy and measures which are
deemed important vis-a-vis a successful implementation of the plan.
8. To make necessary recommendations from time to time regarding those things
which are deemed necessary for facilitating the execution of these functions. Such
recommendations can be related to the prevailing economic conditions, current
policies, measures or development programmes. They can even be given out in
response to some specific problems referred to the commission by the central or the
state governments.

From a highly centralised planning system, the Indian economy is gradually moving towards
indicative planning where the Planning Commission concerns itself with the building of a
long-term strategic vision of the future and decide on priorities of nation. It works out
sectoral targets and provides promotional stimulus to the economy to grow in the desired
direction. It also plays an integrative role in the development of a holistic approach to the
policy formulation in critical areas of human and economic development. In the social
sector, schemes that require co-ordination and synthesis like rural health, drinking water,
rural energy needs, literacy and environment protection have yet to be subjected to
coordinated policy formulation. It has led to multiplicity of agencies. The commission has
now been trying to formulate an integrated approach to deal with this issue. The Planning
Commission has asked the States to hike the power tariff to save the ailing power sector. It
also called upon the States to utilise the power subsidy for improvement to essential
services like drinking water supply, education and health for promoting inclusive growth.