Evolution of Business Environment in India

Evolution of Business Environment in India From Pre-British period till Independence

CASTE SYSTEM IN INDIA The caste system developed in India over 3,000 years ago. There are four caste corresponding to their profession and occupation: • Brahmins (Priests) • Kshatriya (Warrior) • Vaishya (Merchants) • Shudra (Scheduled castes) • Each caste had its own specific occupation. • The occupation system in the pre -British era was almost hereditary. • Individual talent , aptitude , enterprising skills and abilities were accordingly groomed rights from their births.

Joint Hindu Family Business/ Hindu Undivided Family (HUF) • This type of business prevails only in India. • It is according to prevailing Hindu law. • The elder member of the family is known as the ‘ Karta’. • It is male dominated family business. • It is carried on from generation to generation. • Features of HUF: • Karta • Co-parceners • Liability • Management • Inheritance • Legal aspects • Women’s rights • Membership

Introduction • Evolution of business refers to origin and growth of business activities over a period of time. • Business activities started since the days of early civilization around 5000 B.C. • Exchanges of goods for goods is known as Barter System. • Barter System cannot be called business because there was no intention of making profits. • Actual business started from the time of Indus valley civilization.

Indus Valley Civilization (3300 BC to 1700 BC) • The first known civilization is the is the Indus valley civilization from where the roots of business actually started. • Its citizens practiced agriculture, domesticated animals, made sharp tools and weapons from copper, bronze and tin and traded with other cities. • Agriculture was the predominant occupation of the populace and satisfied a village's food requirements besides providing raw materials for hand based industries like textile, food processing and crafts. • Besides farmers, other classes of people were barbers, carpenters, doctors (Ayurvedic practitioners), goldsmiths, weavers etc.

Indus Valley Civilization (3300 BC to 1700 BC) Evidence of well laid streets, layouts, drainage system and water supply in the valley's major cities, Harappa, Mohenjo-Daro etc. reveals their knowledge of urban planning. Religion, especially Hinduism, played an influential role in shaping economic activities. The caste system restricted people from changing one's occupation and aspiring to an upper caste's lifestyle. Thus, a barber could not become a goldsmith and even a highly skilled carpenter could not aspire to the lifestyle or privileges enjoyed by a Kshatriya (person of a warrior class). This barrier to mobility on labor restricted economic prosperity to a few castes. In the joint family system, members of a family pooled their resources to maintain the family and invest in business ventures. The system ensured younger members were trained and employed in the family business and the older and disabled persons would be supported by the family.

Maurya Empire (321 BC to 185 BC) • During the Maurya Empire, there were a number of important changes and developments to the Indian economy. • It was the first time most of India was unified under one ruler. • With an empire in place, the trade routes throughout India became more secure thereby reducing the risk associated with the transportation of goods. The empire spent considerable resources building roads and maintaining them throughout India. • The improved infrastructure combined with increased security, greater uniformity in measurements, and increasing usage of coins as currency enhanced trade.

Maurya Empire (321 BC to 185 BC) • During this time, the Arthasastra ("science of the state") was written by the Chanakya, an adviser to Chandragupta Maurya. The Arthasastra is one of the most important ancient texts on economics, politics and administration. It was a treatise on how to maintain and expand power, obtain material gain, and administer an empire. It covers both theory and implementation and contains many clear and detailed rules regarding the governing of an empire. • Surplus of Indian manufactures, like shawls of Kashmir, steel and iron works, silk, and other textiles and handicrafts, agricultural products like pepper, cinnamon etc. were exported to Europe, the Middle East and South East Asia in return for gold and silver.

The Islamic Sultanates (1206 to 1596) • During this period, India was the richest classical civilization, with a flourishing international trade and the only known diamond mines in the world. • Muslim trading communities arrived in Kerala from the Arabian peninsula, through trade links via the Indian Ocean and they settled throughout the coastal South India. • Organized Banking started in India. Hundis (traditional form of bills of Exchange) were widely used in trade. • Important centres of trade and industry like Delhi, Lahore, Bombay, Ahmedabad etc. were developed with large population residing in these areas.

The Islamic Sultanates (1206 to 1596) Items of export consisted of silk, gold embroidered silk caps, finely designed clay pots and pans, guns, knives, scissors, sugar, oil, ivory, sandalwood, spices, diamonds and other precious gems. Items of import consisted of horses from Kabul & Arabia, dry fruits and precious stones. India enjoyed a favorable Balance of Trade position. Ship building industry was developed in coastal towns.

The Mughal Era(1525 to 1725) • In 1526, Babur, a Turco-persian came from the Khyber Pass and established the Mughal Empire in India which lasted for over 200 years. • During this period, Mughal India was the second largest economy in the world. • The annual revenue of Emperor Akbar's treasury in the year 1600 is estimated at £17.5 million, in contrast to the entire treasury of Great Britain in 1800, which totalled £16 million. • In 1617 emperor Jehangir granted permission to East India company to trade in India. Over a period of time the East India company with its influence got permits from Mughal emperor Farukh Siyar for duty free trade in Bengal in 1717.

The Mughal Era (1525 to 1725) • During emperor Aurangzeb’s tenure India became the world’s largest economy. Uniform customs and tax administrations was started throughout the kingdom. • During this period Malabar on the western coast of India became a important centre for foreign trade. • The items of exports comprised of textile fabrics, jewels, embroideries, woven and silk manufacturers, pepper and a few spices. • Items of import consisted of gold, horses, metals such as copper, tin, zinc, lead, silver, amber and precious stones. • Agriculture was the main occupation of the people in the country.

Marathas Empire (1750 to 1818) • During 1750 to 1775 the Maratha empire expanded to almost 34% of the Indian landscape. • The Marathas adopted the tax administration system. • Different Maharajas were fighting among themselves. • Slowly East India company conquered almost the whole of India.

Pre- British India • Before the advent of the Britishers Indian economy was like a ‘Golden Bird’. • It was an independent economy with its trade relations extending as far as Arabic nations and Rome. • The Indian economy was divided into province and kingdoms. • The village community and the subjects handed over every year to the ruler or to his nominee a share of the year’s produce. • India was one of the most advanced countries of the world upto 18th century.

British Rule in India • The Britishers entered India as traders through the route of East India Company and they ruled over India. • The land revenue system imposed by the Britishers looted the cultivators. • By the 1850s, the East India Company controlled most of the Indian sub-continent, which included present-day Pakistan and Bangladesh. • Their policy was summed up as Divide and Rule, taking advantage of the enmity festering between various princely states and social and religious groups. • The Indian Industries were destroyed. Raw materials from India was exported to England and finished products from England was imported to India and sold in Indian markets.

British Rule in India • Along with the Britishers, French and Dutch people also started developing their colonies in India in places such as Goa, Pondicherry, etc. • Britishers bribed the kings and the Emperors and illegally exercised control on their kingdoms. • India was officially a British colony and was divided into three administrative zones: • Bengal • Madras • Bombay

(1) 1757 to the end of the 18th century – the Mercantilist phase: • The artisans were charged high prices for the raw materials and the prices of the finished goods were also dictated. • The economic plunder took place in 3 main forms:- • Profit from oppressive land revenue policy, • Profit from monopolist trade, • Extractions made by the East India company’s official. • There was drain of wealth from India to England from 1883-1892 of Rs. 30 to Rs. 40 crore per annum as per the study made by Shri. Dadabhai Nowroji in 1897.

(2) During the 19th century – Period of Industrial Capital developed. • With the advent of Industrial Revolution in England many textile industries developed over there. • India was made the suppliers of raw materials for the fast growing textile industries in England, • Indian industries were destroyed and artisans were converted to the status of unemployed people. • People were forced to take up agriculture for their living. • British looted farmers and cultivators by imposing heavy land revenue system.

(3)From Closing decade of 19th Century to 1947 –Finance Capitalism • The British capitalist retained a dominant control over banking systems and commerce in India. • The capital investment was undertaken by the Britishers in two main forms: • Through Direct private foreign investment in India in coal and mining companies, jute mills, tea, coffee & rubber plantations & sugar. • By ways of loans raised by the secretary of State in England on behalf of Indian government and by semi- public organizations for investment in railways, ports, irrigation, electricity and other sectors.

CONCLUSION • If the history of British rule in India was to be condensed to a single fact, it is this India was reduced to a status of feeder economy for Britain’s rapidly growing industrial sector. • India was looted and converted from riches to rags – with poverty, illiteracy, unemployment, diseases, famines, war, riots and internal conflicts etc. before Britishers finally left India in 1947.

Evolution of Business Environment in India from Independence till Globalization and Liberalization.

MAJOR DEVELOPMENTS IN INDIA’S BUSINESS ENVIRONMENT SINCE INDEPENDENCE TILL 1964. (Nehru Period) INTRODUCTION • The pre-independence period was a period of stagnation for the Indian economy. • Indian economy was rural and agricultural. • 85% of people lived in village. • 84% of the people were illiterate. • Government’s main aim was to make an economic policy. • Partition of India and Pakistan took place.

India got 91% of the total number of industries with Mineral Resources and Agricultural Raw materials. • Industries that were developed in India were iron, steel, jute and paper. • Employees State Insurance Corporation was established with other employee welfare laws in October 1948. • The factories act of 1948, Minimum wages act of 1948, The Employees Provident Fund Act of 1952 was passed. • On 26th January, 1950 the Constitution of Republic India came into force.

First five year plan was launched in April 1951. • The bad condition of economy after Nehru’s term, forced Indian’s to take foreign help. • In 1956, The Companies Act was passed. • Trade & Merchandise Marks Act was passed in 1958. • Second five year plan was launched in 1956. • Third five year plan was introduced in 1961. • In 1951, Government passed Industries Development & Regulation Act, Tariff Commission Act.

MAJOR DEVELOPMENTS IN INDIA’S BUSINESS ENVIRONMENT DURING INDIRA GANDHI PERIOD. • Indira Gandhi became the Prime Minister Of India. • Fourth five year plan was launched in 1969. • The Monopolies and Restrictive Trade Practices Act (MRTP) was passed in 1969. • Foreign Exchange Regulation Act (FERA) was passed in 1973. • Control of prices.

Urban consumers, agriculturists and organized sector employees got relief due to no increase in the prices of goods. • Fifth five year plan was launched in 1974. • The Mini- Plant fetish. • Indigenous availability and Essentiality. • 1/5th of the population was urban in 1995.

DEVELOPMENTS IN INDIA’S BUSINESS ENVIRONMENT DURING RAJIV GANDHI PERIOD TILL LIBERALIZATION AND GLOBALIZATION. • Rajiv Gandhi took over as Prime Minister in 1984. • Policy liberalizations began to be introduced. • Reduction in price controls and reduced corporate taxes. • Decline in foreign exchange.

Economic crisis occurred. • New Industrial policy, 1991. • The World Trade Organisation was established on 1st January 1995. • Since 1991 India has emerge as one of the wealthiest (rich) economies in the developing world.

GLOBALISATION. DEFINITION: “Globalisation may be defined as the process of integrating (combine) a country’s economy with the world economy, with a view to take benefit of the global opportunities for the country’s growth and development.” CHARACTERISTICS OF GLOBALISATION • Large scale production and marketing. • Inter-linking of economies of countries. • Competition • Interdependence of countries.

GLOBALISATION. CHARACTERISTICS OF GLOBALISATION • Benefits to participating countries • Competition • Domination (influence) of multi-national corporations and developed countries • Transfer of capital and technology • Acquisitions and Mergers • International Restrictions • Participation of global agencies • Trading Blocs

Evolution of Business Environment in India