Political Environment

The influence of political environment of business is enormous. The political system prevailing in a country decides, promotes, fosters, encourages, shelters, directs and controls the business activities of those countries. A political system which is stable, honest, efficient and dynamic and which ensure political participation of the people, and assures personal security to the citizens, is primary factor for growth of any business. Two basic political philosophies are in existence all over the world, viz., democracy and totalitarianism. In its pure sense, democracy refers to a political arrangement in which supreme power is vested in the people. Democracy may manifest itself in any of two fundamental manners. If each individual is given the right to rule and vote on every matter, the result is pure democracy which is not, however, workable in a complex society with a large constituency. Hence, the republican forms of organization follow whereby the public, in a democratic manner, elect their representatives who do ruling. In totalitarianism, also called authoritarianism, individual freedom is completely subordinated to the power of authority of the state and concentrated in the hands of one person or in a small group which is not constitutionally accountable to the people. Societies ruled by a pressure clique - political, economy or military - or by a dictator plus most oligarchies and monarchies belong to this category. The doctrine of fascism and erstwhile Russian Communism Russian Communism are example of totalitarianism. India is a democratic country.

Our political system comprises three vital institutions :-

1. Legislature

2. Executive or government

3. Judiciary

1. Legislature

Out of three, legislature is most powerful political institution vested with such powers as policy making, law-makings, budget approving, executive control and acting as mirror of public opinion. The influence of legislature on business is considerable. It decides such vital aspects as the type of business activities, the country should have, who should own them, what should be their size of operation, what should happen to their earnings and other related factors.

2. Government as Executive

Also called the ‘state’ the term government refers to “the centre of political authority having the power to govern those it serves”. For business consideration, we should know what government’s responsibilities to business are. Specifically, government’s responsibilities towards business are as follows:

a) Establishment and enforcement of law

b) Maintenance of order

c) Money and credit

d) Orderly growth

e) Infrastructure

f) Information

g) Assistance to small industries

h) Transfer of technology

i) Tariffs and Quotas

3. Judiciary

The third political institution is judiciary. Judiciary determines the manner in which the work of executives has been fulfilled. It settles the relationship between private citizens, on one hand, and between citizens and the government upon the other.

The power of the judiciary are of dual type :

i) The authority of the courts to settle legal disputes.

ii) Judicial review - the authority of the courts to rule on the constitutionality of legislation.

Political Environment