Write a short note on Economic Environment.

Answer – The economic environment includes the economy's structure, stage of development, income distribution, inflation, interest and exchange rates, infrastructure and fiscal, monetary and industrial policies. Higher disposable income can raise demand; higher interest rates can discourage borrowing and investment.

India's economic reforms beginning in 1991 emphasised liberalisation, privatisation and globalisation. Liberalisation reduced unnecessary licensing and controls. Privatisation increased the role of private enterprise and included disinvestment in public enterprises. Globalisation strengthened integration with the world through trade, investment, technology and flows of knowledge.

Effects on business: increased competition; more demanding customers; rapid technological change; a greater need for change and human-resource development; market orientation rather than production alone; and reduced budgetary support to some public-sector enterprises. Firms consequently need better quality, efficiency, innovation and customer service.