Unit 1 Business Environment and IB PYQ’s 6th Dec 2019 Shift 2

The Consumer Protection Act, 1986:

1. An important landmark in the history of consumer protection legislation in India is the consumer protection Act,1986, which provides for a system for the protection of consumer rights and the redressal of consumer disputes.
2. The Consumer Protection Act, 2019 received the assent of the President on 9th August 2019, and subsequently got notified on 20.07.2020. The old Act namely Consumer Protection Act, 1986 will be replaced by a new Act namely Consumer Protection Act,2019.

Consumer Disputes Redressal Agencies

1. A District Forum in each State and
2. A State Commission in each State and
3. A National Commission.

• The National Commission was established by the Central Government in August 1988.
• The responsibility for the establishment of the other two agencies.
• The prior approval of the Central Government rests with the respective State Governments.

Key Points

The District Forum shall consist of:

1. A person who is has been, or is qualified to be a District Judge nominated by the State Government who shall be its President,
2. A person of eminence in the field of education, trade or Commerce, and

3. A lady social worker.

• Each State Commission shall consist of a person who is or has been a Judge of a High Court, appointed by the State Government (who shall be its President) and two other members who shall be a person of ability, integrity, and standing and have adequate knowledge or experience of or have shown capacity in dealing with a problem relating to economic, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman.
• The National Commission shall consist of a person who is or who has been a Judge of Supreme Court, appointed by the Central Government (who shall be its President) and two other members who shall be a person of ability, integrity, and standing and have adequate knowledge or experience of or have shown capacity in dealing with problem-related to economic, law, commerce, accountancy, industry, public affairs or administration, one of whom shall be a woman.

Key Points

Below are the explanation for the correct match:

Functions of the World Trade Organisation:

At the heart of the Organisation are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations. The goal is to help producers of goods and services, exporters, and importers conduct their business. The WTO’s overriding objective is to help trade flow smoothly, frets, fairly, and predictably.

Key Points

With these objectives in mind, we can state the following six specific functions:

1. It shall facilitate the implementation, administration, and operation of the WTO trade agreements, such as multilateral trade agreements, plurilateral trade agreements.

2. It shall provide a forum for negotiations among its members concerning their multilateral trade relations.
3. It shall administer the ‘Understanding on Rules and Procedures’ so as to handle trade disputes.
4. It shall monitor national trade policies.
5. It shall provide technical assistance and training for members of the developing countries.

6. It shall cooperate with various international organizations like the IMF and the WB with the aim of achieving greater coherence in global economic policy-making.

The WTO was founded on certain guiding principles—non-discrimination, free trade, open, fair and undistorted competition, etc. In addition, it has special concern for developing countries.

Confusion Points

WTO does not assist in the establishment of a multilateral system of payments or to promote international monetary cooperation rather it cooperates with the various international organization in global economic policy-making.

The correct answer is – Both A) and R) true but R) is NOT the correct explanation of A)

Key Points

Assertion (A): Globalization refers to the free cross-border movement of goods, services, capital, information and people

Explanation:

1. Globalization is the interdependence and integration of the global economy to enhance the worldwide exchange of capital, goods, and services.
2. Tremendous economic growth and internationalization of business were not possible without globalization.
3. The world economy has witnessed a frequent shift in organizational structure, trade patterns, and culture.

Therefore, Assertion (A) is the correct statement.

Reason (R): Countries are consistently evolving innovative marketing barriers that are WTO compatible

Explanation:

1. The integration of national economies under the WTO framework has restrained countries from increasing tariffs and imposing explicit non-tariff trade barriers.
2. However, countries are consistently evolving innovative marketing barriers that are WTO compatible.
3. Such barriers include quality and technical specifications, environmental issues, regulations related to human exploitation, such as child labor, etc.
4. Innovative technical jargon and justifications are often evolved by developed countries to impose such restrictions on goods from developing countries, who find it very hard to defend against such measures.

Therefore, Reason (R) is the correct statement. However, any kind of trade barrier does not support the concept of globalization. Hence, Both A) and R) true but R) is NOT the correct explanation of A).

Bretton Woods Agreement and System:

1. Approximately 730 delegates representing 44 countries met in Bretton Woods in July 1944 with the principal goals of creating an efficient foreign exchange system, preventing competitive devaluations of currencies, and promoting international economic growth.
2. The Bretton Woods Agreement and System were central to these goals.
3. The Bretton Woods Agreement also created two important organizations—the International Monetary Fund (IMF) and the World Bank.
4. While the Bretton Woods System was dissolved in the 1970s, both the IMF and World Bank have remained strong pillars for the exchange of international currencies.

Therefore, in 1944 the Bretton Woods Agreement was signed by the delegates from 44 nations which led to the establishment of the IMF.

Socio-Cultural factors are the odd ones.

Key Points

Sociocultural factors are the larger scale forces within cultures and societies that affect the thoughts, feelings, and behaviors.

Such factors include:

• Attitudes
• Child-rearing practices
• Cross-cultural difference
• Cultural deprivation
• Cultural identity
• Culture change
• Discrimination
• Ethnic identity
• Ethnic values, etc

Important Points

Other options are pertaining to Economic Environment like:

1. Economic Policies: An economic policy is a course of action that is intended to influence or control the behavior of the economy. Examples of economic policies include decisions made about government spending and taxation, about the redistribution of income from rich to poor, and about the supply of money.

2. Economic Planning: Economic planning is a resource allocation system based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism.

3. Macroeconomic scenario: As the term implies, macroeconomics looks at the overall, big-picture scenario of the economy. Put simply, it focuses on the way the economy performs as a whole and then analyzes how different sectors of the economy relate to one another to understand how the aggregate functions.

Foreign Exchange Management Act – FEMA

1. The main objective for which FEMA was introduced in Indian was to facilitate external trade and payments.
2. In addition to this, FEMA was also formulated to assist the orderly development and maintenance of the Indian forex market.
3. FEMA outlines the formalities and procedures for the dealings of all foreign exchange transactions in India.
4. These foreign exchange transactions have been classified into two categories — Capital Account Transactions and Current Account Transactions.

Key Points

Foreign Exchange Means Foreign Currency and Includes:

1. Deposits, credits, and balances payable in any foreign currency
2. Drafts, traveler’s cheques, letters of credit, or bills of exchange expressed or drawn in Indian currency but payable in any foreign currency.
3. Drafts, traveler’s cheques, letters of credit, or bills of exchange drawn by banks, institutions, or persons outside India but payable in Indian Currency.

Important Points

• According to FEMA, foreign exchange includes drafts drawn by banks outside India and payable in Indian currency but it does not include any drafts drawn by banks outside India and payable in foreign currency.

Rules and regulations have been implemented to control how businesses operate. These laws protect consumers and also preserve competition between businesses. Businesses that do not obey any of the business laws will face fines or penalties.

Key Points

Environment Protection law

Purpose of this Act

• The act is umbrella legislation and enabling law that provides a framework for the Government to coordinate activities between central and state authorities established through various ancillary provisions.
• The act also prohibits the companies from emitting any environmental pollutants more than the standards that have been prescribed in the act.
• Consequently, the Central Government has framed the Environment (Protection) Rules of 1986 that lay down various standards that the industries are expected to follow.
• This includes emission standards, noise standards, and other such standards, such as national ambient air quality standards.
• This act also confers powers upon State and Central Pollution Control Boards to enforce these standards.

Occupational Health and Safety Laws:

The basic aim of the concerned law-making and amending authorities is to devise laws that provide safety standards to protect the basic needs of workers and take care of their welfare. These laws are flexible enough to create rather than destroy jobs, and increase the overall wellbeing of workers. The main objectives of OHS related legislation are:

1. Providing a system of incentives to employers and employees so that they achieve higher health and safety standards.
2. Establishing and developing research and development capabilities in emerging areas of risk and effective control measures.
3. Reducing the incidence of work-related injuries, fatalities, and diseases.
4. Reducing the cost of workplace injuries and diseases.
5. Increasing community awareness regarding areas related to OHS.

Competition Laws

The Competition Act (“Act”) is not intended to prohibit competition in the market. What the Act primarily seeks to regulate, are the practices that have an adverse effect on competition in the market(s) in India. In addition, the Act intends to promote and sustain competition in markets, protect consumer interests, and ensure freedom of trade in the market(s) in India. At the heart of the Act are various activities that will be prohibited as being anticompetitive. The activities comprise:

1. Anti-competitive arrangements;
2. Abuse of dominant position; and
3. Mergers and acquisitions that have an appreciable adverse effect on competition in India.

Confusion Points

In India business organization is not affected by Incorporation and Bankruptcy laws rather it is affected by Insolvency and Bankruptcy Code, 2016.

The following are its features:

1. The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India that seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
2. The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December 2015. It was passed by Lok Sabha on 5 May 2016 and by Rajya Sabha on 11 May 2016.
3. The Code received the assent of the President of India on 28 May 2016.
4. The bankruptcy code is a one-stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
5. The code aims to protect the interests of small investors and make the process of doing business less cumbersome.

Corporate Social Responsibility (CSR):

1. Corporate social responsibility (CSR) is a type of business self-regulation with the aim of being socially accountable.
2. There is no one “right” way companies can practice CSR; many corporate CSR initiatives strive to positively contribute to the public, the economy or the environment.
3. In today’s socially conscious environment, employees and customers place a premium on working for and spending their money with businesses that prioritize CSR.

Key Points

The responsibility towards consumers that Corporate Social Responsibility includes is as follows:

• To provide goods of standard quality
• To charge fair prices i.e., to supply goods at reasonable prices even when there is a seller’s market
• To provide prompt and courteous after-sale services
• To handle consumer complaints and grievances quickly.
• To avoid unfair trade practices like adulteration, black marketing, and hoarding.

Confusion Points

Reasonable chances and the proper system for accomplishment and promotion also improving the efficiency of the business operation are the management responsibilities.

Therefore, to supply goods at reasonable prices even when there is a seller’s market and to provide an opportunity for being heard and redress genuine grievances are part of Corporate Social Responsibility (CSR) to consumers.

Drivers of Globalization:

1. Economic globalization stands for the economic interconnectedness of countries with the global economy as a whole.
2. This interdependence relates both to the exchange of factors of production (labor, capital, technologies, know-how) and the exchange of products (material goods and services, finished and unfinished products, consumer and capital goods).

Therefore, population mobility especially of labor and Financial flows are important drivers of globalization.

Important Points

In my opinion, there are three main drivers for economic globalization and its different characteristics such as trade, international capital markets, currency markets, migration, and more: