BBA 202-18

BUSINESS ENVIRONMENT

SUBJECT TEACHER – MS.SHIVANI

EMAIL ID- Shivani.j2935@cgc.ac.in
Unit I
Introduction to Business Environment: Nature and
Significance Business Environment. Components of
Business Environment, Techniques of Environment
Scanning. Economic Environment of Business:
Economic Systems. Economic Planning in India, Brief
idea of Industrial Policy, Fiscal policy, Monetary policy
and EXIM policy.
Course Objective: The objective of this paper is to acquaint students with the issues
of business environment in which corporate sector has to operate. It will also
familiarize them with the techniques available for scanning and monitoring the
environment. It also aims at providing some basic knowledge about international
environment pertaining to business.

Course Outcomes (COs):

CO1: To Identify and evaluate the complexities of business environment and their
impact on
the business.
CO2: To analyze about the relationships between Government and business and
understand
the political, economic, legal and social policies of the country .
CO3: To understand the current economic conditions in developing emerging
markets, and
evaluate present and future opportunities.
CO4: To be acquainted with prerequisite knowledge required to understand the
Probability
and applications of probability theory.
CO5: To understand the concept of the Industrial functioning and strategies to
overcome
challenges in competitive markets.
Introduction to Business Environment

A business can be established, but to successfully sustain a business, the business needs
resources like finance, for which it has to depend on financial institutions. Acceptance of
social norms, for which it has to depend on society. Proper market conditions, for which
it has to depend on the market. The sale of products/services, for which it has to depend
on the customers. The labour, for which it has to depend on society.
Then there are natural resources and raw material, for which it has to depend on
Nature. Also, the legal support of the government, for which it has to depend on
the government. There are many factors and dimensions that affect Business
Environment. These factors are many different components of a single concept
called Business Environment.

These factors which business depends upon aren’t standstill, they are very
dynamic and ever-changing. For example, trends, the trend of fidget spinners
gave the biggest big push the silicone mold industry has ever received.

The changing needs of customers and new innovations in the market are a part of
the business environment. The challenge for businesses in this technological era
is not to enter the market but to survive in the market. To survive in the market
means to adapt to the changes as fast as possible. To adapt to the changes means
to be aware of the business environment.
Meaning of Business Environment
The definition of Business Environment, “The sum total of all individuals, institutions
and other forces that are outside the control of a business enterprise but the
business still depends upon them as they affect the overall performance and
sustainability of the business.”

The forces which constitute the business environment are its suppliers, competitors,
consumer groups, media, government, customers, economic conditions, market
conditions, investors, technologies, trends, and multiple other institutions working
externally of a business constitute its business environment. These forces influence the
business even though they are outside the business boundaries.

For example, changes in taxes by the government can make the customers buy less. Here
the business would have to re-establish its prices to survive the change. Even though the
business had no involvement in initiating the change it still had to adapt to it in order to
survive or use the opportunity to make profits. Now let us discuss the importance of the
business environment.
Importance of Business Environment

(Source: LinkedIn)

On the basis of the foregoing discussion, it can be said that the Business Environment is
the most important aspect of any business. To be aware of the ongoing changes, not only
helps the business to adapt to these changes but also to use them as opportunities.
Business Environment presents threats as well as opportunities for any business. A good
business manager not only identifies and evaluates the environment but also reacts to
these external forces. The importance of the business environment can be neatly
understood if we consider the following facts:

1. Enables to Identify Business Opportunities

All changes are not negative. If understood and evaluated them, they can be the reason
for the success of a business. It is very necessary to identify a change and use it as a tool
to solve the solve the problems of the business or populous.

For example, Mr. Phanindra Sama was troubled by the ticket booking condition in India.
He used to travel a long distance to his travel agent to book his ticket but even after
traveling this distance he was not sure if his seat was confirmed. He saw the opportunity
to establish an app in the face of the problem and co-founded the online ticket booking
app called ‘redBus’.

2. Helps in Tapping Useful Resources

Careful scanning of the Business Environment helps in tapping the useful resources
required for the business. It helps the firm to track these resources and convert them into
goods and services.

3. Coping with Changes

The business must be aware of the ongoing changes in the business environment,
whether it be changes in customer requirements, emerging trends, new government
policies, technological changes. If the business is aware of these regular changes then it
can bring about a response to deal with those changes.

For example, when the Android OS market was blooming and the customers were
preferring Android devices for its easy interface and apps, Nokia failed to cope with the
change by not implementing Android OS on Nokia devices. They failed to adapt and lost
tremendous market value.

4. Assistance in Planning
This is another aspect of the importance of the business environment. Planning purely
means what is to be done in the future. When the Business Environment presents a
problem or an opportunity, it is up to the business to decide what plan would it have to
come up with in order to address the future and solve the problem or utilise the
opportunity. After analysing the changes presented, the business can incorporate plans to
counteract the changes for a secure future.

5. Helps in Improving Performance

Enterprises that are thoroughly scanning their environment not only deal with the
changes presented but also flourish with them. Adapting to the external forces help the
business to improve the performance and survive in the market.

Business Environment: Nature and

Significances of Business Environment
“Business Environment encompasses the -climate’ or set of conditions, economic,
social, political or institutional in which business operations are Conducted.”—Arthur
M. Weimer
“Environment contains the external factors that create opportunities and threats to the
business. This includes socio-economic conditions, technology and political
conditions.” – William Gluck and Jauch

‘‘Business environment is the aggregate of all conditions, events and influences that
surround and affect it.”—Keith Davis

“The environment of business consists of all those external things to which it is

exposed and by which it may be influenced directly or indirectly”. —Reinecke and
Schoell.

“The total of all things external to firms and industries that affect the function of the
organisation is called business environment.”—Wheeler

“Civilisations require challenges to survive. Thus environment also contains hostilities

and dangers that may be overcome by individuals and organisations.”—Arnold J.
Toynbee
On the basis of the above definitions, it is very clear that the business environment is a
mixture of complex, dynamic and uncontrollable external factors within which a
business is to be operated.

Nature of Business Environment:

ADVERTISEMENTS:

The nature of Business Environment is simply and better explained by the following
approaches:

(i) System Approach:

In original, business is a system by which it produces goods and services for the
satisfaction of wants, by using several inputs, such as, raw material, capital, labour etc.
from the environment.

(ii) Social Responsibility Approach:

In this approach business should fulfill its responsibility towards several categories of
the society such as consumers, stockholders, employees, government etc.

(iii) Creative Approach:

As per this approach, business gives shape to the environment by facing the challenges
and availing the opportunities in time. The business brings about changes in the
society by giving attention to the needs of the people.

Significance of Business Environment:

Business Environment refers to the “Sum total of conditions which surround man at a
given point in space and time. In the past, the environment of man consisted of only
the physical aspects of the planet Earth (air, water and land) and the biotic
communities. But in due course of time and advancement of society, man extended his
environment through his social, economic and political function.”

In a globalised economy, the business environment plays an important role in almost

all business enterprises. The significance of business environment is explained with the
help of the following points:

(i) Help to understand internal Environment:

It is very much important for business enterprise to understand its internal
environment, such as business policy, organisation structure etc. In such case an
effective management information system will help to predict the business
environmental changes.

(ii) Help to Understand Economic System:

The different kinds of economic systems influence the business in different ways. It is
essential for a businessman and business firm to know about the role of capitalists,
socialist and mixed economy.

(iii) Help to Understand Economic Policy:

Economic policy has its own importance in business environment and it has an
important place in business. The business environment helps to understand
government policies such as, export-import policy, price policy; monetary policy,
foreign exchange policy, industrial policy etc. have much effect on business.

(iv) Help to Understand Market Conditions:

It is necessary for an enterprise to have the knowledge of market structure and changes
taking place in it. The knowledge about increase and decrease in demand, supply,
monopolistic practices, government participation in business etc., is necessary for an
enterprise.
Components Of Business Environment
The business environment can be categorised into two types based on the factors within
the control or outside the control of a business.

Internal Environment
The internal business environment constitutes several internal forces or elements within
the control of a business that influences its operations. These include:

• Value System: It is the ethical belief that guides the business towards achieving its
mission and objective. The value system includes all components that form a
business’s regulatory framework – organisational culture, climate, work processes,
management practices and organisational norms.
• Vision, Mission, and Objectives: The vision, mission, and objective of a business
relate to what it wants to achieve or accomplish in future. It is the reason why the
business exists.
• Organisational Structure: It outlines how the activities are directed within the
organisation to achieve its goals. It includes the rules, roles, and responsibilities,
along with how tasks are delegated and how the information flows among the
organisation’s levels.
 • Corporate Culture: It is a powerful system of shared norms and attitudes that
works as a homogenising factor for an organisation’s employees and gets
appropriated by them.
• Human Resources: Human resources form all the employees and other personnel
associated with the business. It forms the most valuable asset of the organisation
as success or failure depends on it.
• Physical Resources and Technological Capabilities: It includes tangible assets
and the technical know-how that play an essential role in ascertaining the
business’s competitive capability and future growth prospects.
External Environment
External components are those factors that a business cannot control. These exist
beyond a business’ jurisdiction and supervision limit. External components influencing a
business environment are further classified into two categories:

• Micro Environment
• Macro Environment
Micro Environment
Micro environment is the business’s immediate external environment that influences its
performance as it has a direct bearing on the firm’s regular business operations.
It includes factors outside of the business’s control but can be analysed and worked upon
by managing the business to prevent any business losses.

Micro factors include:

• Customers comprise the target group of the business.

• Competitors are other market players who target a similar target group and provide
similar offerings.
• Media is the channel the business use to market its offering to the customer.
• Suppliers include all the parties that provide the business with the resources it
needs to perform its operations.
• Intermediaries comprise the parties involved in delivering the offering to the final
customers.
• Partners are all external entities like advertising agencies, market research
organisations, consultants, etc., who conduct business with the organisation and
satisfy customer needs.
• Public includes any group with actual or potential interest in the business’s
operations or a group that affects its ability to serve its customers.
Macro Environment: PESTLE
The macro environment includes remote environmental factors that influence an
organisation. The extent of influence a macro element can have on a business is
significant as they usually affect the industry as a whole.
• These factors are classified under PESTLE: P – Political, E – Environmental, S –
Social, T – Technological, L – Legal, E – Economical.

• Political Factors comprise government policies, political stability, corruption in the

system, tax policies, labour laws, and trade restrictions that affect the business or the
industry.

• Economical Factors relate to the economy of the country. They include economic
growth, exchange rate, interest and inflation rates, etc.

• Social Factors comprise the demographics of the country. They include population
growth rate, age distribution, career attitudes, health consciousness, etc.

• Technological Factors pertain to innovation in technology that affects the

operations of the business. This refers to automation, research and development
activities, technological awareness, etc.

• Legal Factors are laws that affect business operations. They include business-
specific, industry-specific, and even state-specific laws.

• Environmental Factors comprise of all those that influence or are determined by

the environment a business operates in. It includes the weather, climate,
environmental policies, and even pressure from NGOs to care for the environment.
Techniques of Environmental Scanning
Different techniques of environmental scanning are described below:

1. Environmental Threat and Opportunity Profile Analysis

(ETOP)
ETOP is considered as a useful device that facilitates an assessment of information related to the
environment and also in determining the relative significance of external environment threats
and opportunities to systematically evaluate environmental scanning. By dividing the

different sectors such as politics , economy and finance etc

environment into different sections, the ETOP analysis helps in analyzing its impact on the
organization. The analysis is based on threats and opportunities in the environment.

2. Quick Environmental Scanning Technique Analysis

(QUEST)
QUEST is an environmental scanning technique that is designed to assist with organizational
strategies by keeping adheres to change and its implications. Different steps involved in this
technique are as follows:
▪ The process of environmental scanning starts with the
observation of the organization’s events and trends by
strategists.
▪ After observation, important issues that may impact the
organization are considered using environment appraisal.
▪ A report is created by making a summary of these issues and
their impact.
▪ In the final step, planners who are responsible for deciding
the feasibility of the proposed strategy, review reports.

3. SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities
and threats analysis of a business environment. Strengths and
weaknesses are an organization’s internal factor while threats
and opportunities are considered as external factors. So, the
process of SWOT analysis includes the systematic analysis of
these factors to determine an effective marketing strategy. It is a
tool that is used by the organization for auditing purposes to
find its different key problems and issues.
These are identified through internal and external environmental analysis.

Internal environment analysis/ scanning

Different factors are considered while analyzing the internal environment of an organization like
the structure of the organization, physical location, the operational capacity and efficiency of the
organization, market share, financial resources, skills and expertise of employees, etc.
Strengths: The strength of any organization is related to its core competencies i.e. efficient
resources or technology or skills or advantages over its competitors. For example, the marketing
expertise of a firm can be its strength. Apart from this, an organization’s strength can be:
▪ Strong customer relations
▪ Market leader in its product or services
▪ Sound market image and reputation
▪ Smooth cash-flows
Weaknesses: A weakness or limitation of an organization is related to the scarcity of its resources
or skill-set of staff or capabilities that creates an adverse effect on its performance. For
example, limited cash-flow and high cost are considered as a financial weakness of the
organization. Similarly, other weaknesses can be:
▪ Poor product quality
▪ Low productivity
▪ Unrecognized brand name or poor brand image

External environment analysis/scanning

Different factors that are considered while scanning the external environment of the
organization like Competitors, customers, suppliers, technology, social and economic factors,
political and legal issues, market trends, etc.

Opportunities: An opportunity of the organization’s environment is considered as its most

favorable situation. These are the circumstances that are external to the business and can
become an advantage to the organization. For example, different opportunities for a firm can be:
▪ Social media marketing
▪ Mergers & acquisitions
▪ Tapping new markets
▪ Expansion in International market
▪ New product development
Threats: Threats of an organization are current or future unfavorable situations that may occur
in its external environment. For example, below are a few major threats for a firm:
▪ A new competitor in the market
▪ The slow growth of the market
▪ Changing customer preferences
▪ Increase in the bargaining power of consumers
▪ Change in regulations or major technical changes

4. PEST Analysis
PEST technique for a firm’s environmental scanning includes analysis of political, economic,
social, and technical factors of the environment.
a) Political/ Legal factors: Different factors like changes in tax policy, availability of raw material,
etc. creates a direct effect on a business. So organizations are required to constantly monitor tax-
related policy changes as an increase in tax may increase the heavy financial burden on them.
Similarly, different laws like “Consumer protection act” also play an important role in an
organization’s operation activities as it is important to abide by the act.
More examples can be foreign trade policy, political changes, regulations in competition, trade
restrictions, etc. also considered as different political/ legal factors that exist in the external
business environment.
b) Economic factors: Different economical Factors like the unemployment rate, inflation, cost of
labor, economic trends, disposable income of consumers, monetary policies, etc. play an
important role in environmental scanning.
For example, in the case of high unemployment, a company may decrease the prices of its
products or services and in opposite situation i.e. when the unemployment rate is low then
prices can be high. This happens because if more customers are unemployed then by lowering
the prices, an organization can attract them.
c) Social / Cultural factors: Attitude, trends, and behavioral aspects of society also create an
impact on the functioning of the organization. Studying and understanding the lifestyle of
consumers is very much required to target the right audience and to offer the right product or
services based on their preferences.
For example, Issues and policies related to the environment like pollution control are also being
considered by organizations to ensure that it operates in an environment-friendly atmosphere.
Taking care of the cultural aspect of different countries while doing business at the international
level, is also an important factor.
d) Technological Factors: Technological factors affect the way firms produce products and
services as well as market them. Like, “processes based on new technologies” is one of the
important factors of a technological environment. To maximize profits, production should be
handled most cost-effectively and this, technology has an important contribution.
For example, an increase in computer and internet-based technology is playing a major role in
the way organizations are distributing and marketing their products and services. Also, different
advancements in technologies like automation of the manual process and use of machinery
based on more advanced and latest technologies, more investment in research & development by
organizations have increased their efficiency by increasing production in less time, cost-
reduction and better investment in the long run.

What is an Economic Environment of Business?

The economic environment of business denotes the external conditions and factors that impact
the operations, growth, and profitability of businesses. It includes the overall state of the economy,
including factors such as economic policies, market conditions, and socio-cultural influences.

In simple terms, the economic environment sets the stage in which businesses operate. It includes things
like government regulations, tax planning, interest rates, consumer spending habits, and competition in the
market. These factors can directly affect a company’s ability to succeed and thrive.
Elements of the Economic Environment

Understanding the elements of the economic environment is important for businesses, as they help shape
the conditions in which businesses operate. By paying attention to these factors, businesses can better
understand their customers, adapt to changes, and make informed decisions to thrive in the marketplace.
Let us have a look at the different elements of the economic environment in detail.
1. Economic Policies: These are rules and decisions made by the government that affect businesses,
such as taxes, regulations, and trade agreements. Economic policies provide a framework for
businesses to operate within.
2. Market Conditions: This refers to the state of the market where businesses sell their products or
services. It includes factors like the demand for goods, competition, prices, and how much people are
willing to spend. Market conditions can impact a business’s success.
3. Consumer Behavior: This element focuses on how people make choices as consumers. It includes
factors like their preferences, buying habits, and how much money they have to spend.
Understanding consumer behavior helps businesses tailor their products and marketing strategies.
4. Technological Advancements: This refers to new inventions and innovations that can change how
businesses operate. It includes things like new software development, machinery, or processes that
can make businesses more efficient or create new opportunities.
5. Macroeconomic Indicators: These are big-picture measurements that provide insights into the
overall health of the economy. Examples include the total value of goods and services produced
(Gross Domestic Product or GDP), the prices of goods and services (inflation), and the number of
people employed. These indicators help businesses understand the broader economic landscape.
 6. Socio-Cultural Factors: This element looks at the social and cultural influences on businesses. It
includes things like population trends, cultural norms, and social values. Socio-cultural factors shape
consumer preferences and can affect how businesses operate.
7. Global Economic Factors: This refers to the impact of the global economy on businesses. It
includes factors like international trade, exchange rates, and political events in other countries. Global
economic factors can create both opportunities and challenges for businesses.

Factors Affecting the Economic Environment of Business

Macroeconomic factors refer to the broad economic conditions and variables that influence the overall
performance and behavior of an economy as a whole. These factors are typically measured and analyzed
on a national or regional level and provide insights into the state of the economy, its growth prospects, and
the interactions between different economic agents.

Microeconomic factors refer to the individual economic variables and factors that influence the behavior and
decisions of individual consumers, households, and firms within an economy. Unlike macroeconomic factors
that focus on the overall economy, microeconomic factors analyze the specific units or agents within the
economy and their interactions.
Understanding and managing both macroeconomic and microeconomic factors is essential for businesses to
navigate the economic environment effectively and make informed decisions.

Macroeconomic Factors:

1. Government Policies: This includes fiscal policies (like taxes and government spending) and
monetary policies (controlled by central banks) that can influence the overall economic environment.
2. Global Events: Events on a large scale, such as international trade agreements, geopolitical
conflicts, or global economic crises, can impact the business environment.
3. Technology Changes: Technological advancements like automation, the internet, and artificial
intelligence can transform entire industries and markets.
4. Natural Disasters: Large-scale disasters like earthquakes, hurricanes, or pandemics can disrupt
economies and affect multiple businesses.
5. Currency Exchange Rates: Changes in the value of a country’s currency can impact international
trade and the cost of imports and exports for businesses.
6. Consumer Confidence: The confidence of consumers in the economy can influence their spending
habits and, consequently, business performance.

Microeconomic Factors:
 1. Market Demand: The specific demand for a business’s products or services in a particular market,
which can vary based on customer preferences and trends.
2. Supply and Demand: The balance between the availability of goods or services and customer
demand, which can affect prices and business performance.
3. Competition: The number and strength of competitors in a specific industry or market, which can
influence pricing, market share, and profitability.
4. Labor Market: The availability of skilled workers, wage levels, and labor regulations in a particular
area impact a business’s ability to hire and retain talent.
5. Consumer Behavior: The purchasing patterns of consumers can affect a business’s sales
and marketing strategies.
6. Supplier Relationships: The quality, reliability, and cost of suppliers can have a direct impact on a
business’s supply chain and production costs.
7. Regulatory Environment: Local regulations, permits, and licenses that affect business operations
and compliance with laws.

Examples of Macroeconomic and Microeconomic in Economics Environment

for Business
 • Microeconomic Factor
Imagine a small independent clothing boutique located in a busy shopping center. A microeconomic
factor that could significantly impact the boutique’s performance is the sudden increase in the cost of
raw materials and production due to a supply chain disruption. If the suppliers of textiles and other
materials experience shortages or increased costs, the boutique may have to raise its prices, which
could lead to a decrease in sales as price-sensitive customers seek cheaper alternatives.

• Macroeconomic Factor
Consider a local luxury car dealership in a city known for its economic prosperity. A macroeconomic
factor that might affect this business is a nationwide recession. During such a recession, potential
customers might postpone their plans to purchase luxury vehicles due to economic uncertainty. This
can result in a sharp decline in sales for the dealership, as even affluent individuals may become
more cautious about their spending and opt for more affordable vehicle options or delay purchases
altogether.

Conclusion
The economic environment of business is a complex mix of various factors, divided into macroeconomic and
microeconomic categories.
These factors include elements like market demand, competition, and consumer behavior.

For businesses to thrive, they must carefully monitor and adapt to both macro and microeconomic factors.
For instance, a disruption in the supply of materials can affect a business’s pricing and sales (a
microeconomic concern). Simultaneously, a national economic recession can lead to challenges, even for
high-end businesses, as consumers become more cautious in their spending habits (a macroeconomic
issue).

By understanding and responding to these economic factors, businesses can make informed and
economical decisions.
What is an economic system? Definition and meaning
An economic system is an organized way in which a country allocates resources and distributes goods and
services across the whole nation or a given geographic area. It is includes the combination of several
institutions, entities, agencies, decision-making processes and patterns of consumption that make up the
economic structure of a specific community. Hence it is a type of social system.

An economic system defines how all the entities in an economy interact. Defining them today is much more
complicated than it used to be. Ancient systems were relatively simple – trade was carried out using
barter and there were very few treaties and rules of engagement.
Economic system defines goods and services are produced, distributed and at what price. There are three main types: a
market, mixed or planned economy.

Economic systems today are complex

In ancient societies, people only exchanged what they had for what they wanted or needed. Today,
however, in monetary economies, the setting is much more sophisticated.

We currently live in a society where massive corporations have a strong influence on how business is done.
Agreements and treaties are negotiated and signed every day, and governments have made many laws
concerning trade, which means we require a much more comprehensive definition of what an economic
system is.

Different Types describes an economic system as an organized manner in which a particular government
has chosen to allocate its country’s goods and services.

Systems in today’s economies are about much more than simple trade. They define our society’s values and
its political structure.

Every economic system looks at three or four basic questions:

• What to produce.
• How to produce and how much.
• Who receives production’s output.
• How change is going to be effected and accommodated.

The structure of each economic system seeks to answer these three or four questions. The system sets the
rules of play for all the players in an economy, and defines how they can interact with one another.
The study of economic systems looks at how their various
components are interlinked, how information flows between
them, and their social relations, including the structure of
management and property rights.
The analysis of economic systems used to focus on two
extremes – planned and market economies, and on the
differences between socialism and capitalism.
Today the classification of economic systems has expanded to
include other models and topics that do not conform to those
traditional extremes. Globally, the currently dominant form of
economic organization is based on varying versions of a
market-oriented mixed economy.
There are three
main types of economic systems. Most countries across the world are market economies.

Three main economic systems

In this world there are three main types of economic systems. Governments and their leaders claim to have
their own peculiar systems, but they are all basically mixed economies. Economic systems can be basically
classed into three categories.

Market economy: here prices are determined by levels of supply and demand, instead of central and or
local government. Market forces determine what is produced, how much is produced, how it is distributed,
plus the prices of goods and services.

All decisions regarding investment and salaries are also driven by market forces in a market economy.

In a market economy, the government plays a minor role and only lays down the rules so that businesses
can thrive. An outdated word for this type of economy is Capitalism.

Planned economy: all decisions regarding production, distribution, salaries, investment and prices are
made by a central authority – usually the government. The closest examples to this type of economy today
are North Korea and Cuba (to a lesser extent).

In a planned economy, also known as a centralized economy, controlled economy or command economy,
central government has planners who make all the decisions.

According to economists, the most fundamental difference between a market and planned economy is the
existence of private property, i.e. it exists in the free market and does not in the command economy.
Mixed Economy: market economies sometimes get into trouble, at which point the government feels
compelled to intervene. Sometimes, when lawmakers believe some players are being exploited unfairly, or
the level playing field for business is under threat, the government may become involved.

Similarly, the leaders of a command economy may decide that more investment is required, and the only
way to accomplish this is by allowing more freedom.

The moment the government of a command economy loosens its grip, or that of a market economy begins
to intervene, they integrate some aspects of the other. When this occurs, the result is a kind of hybrid
system – a mixed economy.

With the exception of North Korea, every country in the world has a mixed economy. Even Cuba has
elements of a mixed economy – it has a huge black market which the government semi tolerates.

Small, ancient societies that depended on hunting and subsistence farming had Traditional Economies.
Some small societies today still have this type of economy, such as a traditional Inuit village in North
America or a tribe in the Amazon rainforest.

a mixed economy is:

“An economic system in which both the private enterprise and a degree of state monopoly (usually in public
services, defense, *infrastructure, and basic industries) coexist. All modern economies are mixed where the
means of production are shared between the private and public sectors.”

* Infrastructure refers large structures and services without which our society as we know it could not
function properly – including roads & railway networks, tunnels, bridges, sanitation, water, power generation
and generation, etc.
Economic Planning In India – Five Year Plans
The term economic planning is used to describe the long term plans of the government of India to develop
and coordinate the economy with efficient utilization of resources. Economic planning in India started after
independence in the year 1950 when it was deemed necessary for economic growth and development of the
nation.

Long term objectives of Five Year Plans in India are:

• High Growth rate to improve the living standard of the residents of India.
• Economic stability for prosperity.
• Self-reliant economy.
• Social justice and reducing the inequalities.
• Modernization of the economy.
The idea of economic planning for five years was taken from the Soviet Union under the socialist influence
of first Prime Minister Pt. Jawahar Lal Nehru.

The first eight five year plans in India emphasised on growing the public sector with huge investments in
heavy and basic industries, but since the launch of Ninth five year plan in 1997, attention has shifted
towards making government a growth facilitator.

An overview of all Five Year Plans implemented in India is highlighted below:

 List of Five Year Plans in India [1951-2017]

Five Year Years Assessment Objective

Plans

First Five 1951- Targets and objectives more or less Rehabilitation of refugees, rapid agricultural
year Plan 1956 achieved. With an active role of the development to achieve food self-sufficiency in
state in all economic sectors. Five the shortest possible time and control of inflation.
Indian Institutes of Technology (IITs)
were started as major technical
institutions.

Second 1956- It could not be implemented fully due The Nehru-Mahalanobis model was
Five year 1961 to the shortage of foreign exchange. adopted.‘Rapid industrialisation with particular
Plan Targets had to be pruned. Yet, emphasis on the development of basic and
Hydroelectric power projects and five heavy industries Industrial Policy of 1956
steel mills at Bhilai, Durgapur, and accepted the establishment of a socialistic
Rourkela were established. pattern of society as the goal of economic policy.

Third Five 1961- Failure. Wars and droughts. Yet, ‘establishment of a self-reliant and self-
year Plan 1966 Panchayat elections were started.• generating economy’
State electricity boards and state
secondary education boards were
formed.

Plan 1966- A new agricultural strategy was crisis in agriculture and serious food shortage
Holidays – implemented. It involved the
Annual 1969 distribution of high-yielding varieties required attention
Plans of seeds, extensive use of fertilizers,
exploitation of irrigation potential and
soil conservation measures.

Fourth 1969- Was ambitious. Failure. Achieved ‘growth with stability’ and progressive
Five year 1974 growth of 3.5 percent but was marred achievement of self-reliance Garibi HataoTarget:
Plan by Inflation. The Indira Gandhi 5.5 pc
government nationalized 14 major
Indian banks and the Green
Revolution in India advanced
agriculture.

Fifth Five 1974- High inflation. Was terminated by the ‘removal of poverty and attainment of self-
year Plan 1979 Janta govt. Yet, the Indian national reliance’
highway system was introduced for
the first time.

Sixth Five 1980- Most targets achieved. Growth: 5.5 ‘direct attack on the problem of poverty by
year Plan 1985 pc.Family planning was also creating conditions of an expanding economy’
expanded in order to prevent
overpopulation.

Seventh 1985- With a growth rate of 6 pc, this plan Emphasis on policies and programs that would
Five year 1990 was proved successful in spite of accelerate the growth in foodgrains production,
Plan severe drought conditions for the first increase employment opportunities and raise
three years consecutively. This plan productivity
introduced programs like Jawahar
 Rozgar Yojana.

Annual 1989- It was the beginning of privatization No plan due to political uncertainties
Plans 1991 and liberalization in India.

Eighth 1992- Partly success. An average annual Rapid economic growth, high growth of
Five year 1997 growth rate of 6.78% against the agriculture and allied sector, and the
Plan target 5.6% was achieved. manufacturing sector, growth in exports and
imports, improvement in trade and current
account deficit. to undertake an annual average
growth of 5.6%

Ninth Five 1997- It achieved a GDP growth rate of Quality of life, generation of productive
year Plan 2002 5.4%, lower than the target. Yet, employment, regional balance and self-
industrial growth was 4.5% which was reliance.Growth with social justice and equality.
higher than targeted 3%. The service growth target 6.5%
industry had a growth rate of 7.8%.
An average annual growth rate of
6.7% was reached.

Tenth Five 2002 It was successful in reducing the To achieve 8% GDP growth rate,Reduce poverty
year Plan –2007 poverty ratio by 5%, increasing forest by 5 points and increase the literacy rate in the
cover to 25%, increasing literacy country.
rates to 75 % and the economic
growth of the country over 8%.

Eleventh 2007- India has recorded an average Rapid and inclusive growth.Empowerment
Five year 2012 annual economic growth rate of 8%, through education and skill development.
Plan farm sector grew at an average rate Reduction of gender inequality.Environmental
of 3.7% as against 4% targeted. The sustainability.
industry grew with an annual average
growth of 7.2% against 10% targeted. To increase the growth rate in agriculture,
industry, and services to 4%,10% and 9%
resp. Provide clean drinking water for all
by 2009.
Twelfth 2012- Its growth rate target was 8%. “faster, sustainable and more inclusive growth”.
Five year 2017 Raising agriculture output to 4 percent.
Plan Manufacturing sector growth to 10 %

The target of adding over 88,000 MW of

power generation capacity.

Objectives of Economic Planning in India

The following were the original objectives of economic planning in India:

• Economic Development: This is the main objective of planning in India. Economic Development of India is measured
by the increase in the Gross Domestic Product (GDP) of India and Per Capita Income
• Increased Levels of Employment: An important aim of economic planning in India is to better utilise the available
human resources of the country by increasing the employment levels.
• Self Sufficiency: India aims to be self-sufficient in major commodities and also increase exports through economic
planning. The Indian economy had reached the take-off stage of development during the third five-year plan in
1961-66.
 • Economic Stability: Economic planning in India also aims at stable market conditions in addition to the economic
growth of India. This means keeping inflation low while also making sure that deflation in prices does not happen. If
the wholesale price index rises very high or very low, structural defects in the economy are created and economic
planning aims to avoid this.
• Social Welfare and Provision of Efficient Social Services: The objectives of all the five year plans as well as plans
suggested by the NITI Aayog aim to increase labour welfare, social welfare for all sections of the society.
Development of social services in India, such as education, healthcare and emergency services have been part of
planning in India.
• Regional Development: Economic planning in India aims to reduce regional disparities in development. For
example, some states like Punjab, Haryana, Gujarat, Maharashtra and Tamil Nadu are relatively well developed
economically while states like Uttar Pradesh, Bihar, Orissa, Assam and Nagaland are economically backward.
Others like Karnataka and Andhra Pradesh have uneven development with world class economic centres in cities
and a relatively less developed hinterland. Planning in India aims to study these disparities and suggest strategies to
reduce them.
• Comprehensive and Sustainable Development: Development of all economic sectors such as agriculture, industry,
and services is one of the major objectives of economic planning.
• Reduction in Economic Inequality: Measures to reduce inequality through progressive taxation, employment
generation and reservation of jobs has been a central objective of Indian economic planning since independence.
• Social Justice: This objective of planning is related to all the other objectives and has been a central focus of
planning in India. It aims to reduce the population of people living below the poverty line and provide them access to
employment and social services.
• Increased Standard of Living: Increasing the standard of living by increasing the per capita income and equal
distribution of income is one of the main aims of India’s economic planning.

History of Economic Planning In India

Economic planning in India dates back to pre-Independence period when leaders of the freedom movement
and prominent industrialists and academics got together to discuss the future of India after Independence
which was soon to come. Noted civil engineer and administrator M. Visvesvaraya is regarded as a pioneer
of economic planning in India. His book “Planned Economy for India” published in 1934 suggested a ten
year plan, with an outlay of Rs. 1000 crore and a planned increase of 600% in industrial output per annum
based on economic conditions of the time.

The Industrial Policy Statement published just after independence in 1948 recommended setting up of
a Planning Commission and following a mixed economic model. Here are the major milestones related to
economic planning in India:

• Setting up of the Planning Commission: 15 March 1950

• First Five Year Plan: 9 July 1951
• Dissolution of the Planning Commission: 17 August 2014
• Setting up of NITI (National Institution for Transforming India) Aayog: 1 January 2015
Setting up the NITI Aayog was a major step away from the command economy structure adopted by India till
1991. The Planning Commission’s top down model of development had become redundant due to present
economic conditions and NITI Aayog approaches economic planning in a consultative manner with input
from various state governments and think tanks.

While preparing for the UPSC Exam, Economic Planning should be approached in a systematic manner.
The major achievements of economic planning in India remain an important part of the UPSC Syllabus. The
strategy of economic planning in India under the Planning Commission as well the NITI Aayog are important
as well. As a rule, IAS aspirants should focus on:
 • Objectives of Economic Planning In India
• Major Achievements of Economic Planning in India
• The Planning Commission and Five Year Plans
• NITI Aayog Action Agenda and Annual Reports
• Sustainable Development Goals
• Economic Reforms in India and Various Government Programmes
• Current Affairs related to all of the topics mentioned above

Frequently Asked Question On Economic Planning in India

Q1

Q. What is meant by economic planning?

The term economic planning is used to describe the long term plans of the government of India to develop and coordinate
the economy with efficient utilization of resources.
Q2

Q. What is the main aim of economic planning in India?

The basic objective of economic planning is that there is equal distribution of resources, the goals set are completed within
specific period of time, Increase the production and employment and also reduce the population growth.
Q3

Q. When did economic planning started in India?

Economic planning in India started after independence in the year 1950 when it was deemed necessary for economic
growth and development of the nation.
Q4

Q. What is history of economic planning in India?

In 1934, Sir M. Visvesvaraya had published a book titled “Planned Economy in India”, in which he presented a constructive
draft of the development of India in next ten years. His core idea was to lay out a plan to shift labor from agriculture to
industries and double up National income in ten years.
Q5

Q. What are the features of economic planning in India?

Few Features of Economic Planning in India are:

• Definite Objective:
• Central Planning Authority:
• Democratic Character:
• Only an Advisory Role of Planning Commission:
• Comprehensiveness:
• Planning for Consumption

Q6

Q. Who plays major role in economic planning in India?

Planning Commission, agency of the government of India established in 1950 to oversee the country’s economic and social
development, chiefly through the formulation of five-year plans.
Q7

Q. Who is the father of Indian economy?

Sir Mokshagundam Visvesvaraya is known as the Father of Indian Economic Planning.
Q8

Q. Who presented the first Five Year Plan in India?

The first five year plan was presented in the parliament by Prime Minister Jawaharlal Nehru in December 1951.
Q9

Q. What are the major failure of economic planning in India?

The most important failure of Indian planning is the growth of unemployment rate. It means the planning process did not
able to create gainful employment opportunities both in the organized and unorganized sectors. Rise in Price level –
Another major failure of Indian planning is the inflation.
Q10

Q. How many types of economic planning are there?

There are two types of economic planning: (1) collectivist planning, also known as economic planning by direction, and (2)
suggestive planning, also known as economic planning by inducement.
Q11
Q. Which was the last Five Year Plan in India?
12th Five Year Plan of the Government of India (2012–17) was India’s last Five Year Plan. With the deteriorating global
situation, the Deputy Chairman of the Planning Commission Mr Montek Singh Ahluwalia has said that achieving an average
growth rate of 8 per cent in the next five years is not possible.
Q12

Q. Which plan is called rolling plan?

Rolling Plan was the sixth five year plan introduced by the Janata Government for the time period 1978-83, after removing
the fifth five year plan in 1977-78.
Q13

Q. Who is the father of five years plan?

The first five year plan was introduced by Joseph Stalin in the USSR in 1928.

Industrial Policy
Industrial Policy is the set of standards and measures set by the Government to evaluate the progress of the
manufacturing sector that ultimately enhances economic growth and development of the country.

The government takes measures to encourage and improve the competitiveness and capabilities of various firms

Objectives of Industrial Policy

 1. To maintain steady growth in productivity.
2. To create more employment opportunities.
3. Utilize the available human resources better
4. To accelerate the progress of the country through different means
5. To match the level of international standards and competitiveness

Industrial Policy in India

The various industrial policy introduced by the Indian government are as follows:

Industrial Policy Resolution, 1948

• It declared the Indian economy as Mixed Economy
• Small scale and cottage industries were given the importance
• The government restricted foreign investments
• Industries were divided into 4 categories
• Exclusive monopoly of central government(arms and ammunitions, production of atomic energy and
management of railways)
• New undertaking undertaken only by state(coal, iron and steel, aircraft manufacturing, ship building,
telegraph, telephone etc.)
• Industries to be regulated by the government(Industries of basic importance)
• Open to private enterprise, individuals and cooperatives(remaining)

Industrial Policy Resolution, 1956 (IPR 1956)

 • This policy laid down the basic framework of Industrial Policy
• This policy is also known as the Economic Constitution of India

It is classified into three sectors

• Schedule A – which covers Public Sector (17 Industries)

• Schedule B – covering Mixed Sector (i.e. Public & Private) (12 Industries)
• Schedule C – only Private Industries
This has provisions for Public Sector, Small Scale Industry, Foreign Investment. To meet new challenges,
from time to time, it was modified through statements in 1973, 1977, and 1980.

Industrial Policy Statement, 1977

• This policy was an extension of the 1956 policy.
• The main was employment to the poor and reduction in the concentration of wealth.
• This policy majorly focused on Decentralisation
• It gave priority to small scale Industries
• It created a new unit called “Tiny Unit”
• This policy imposed restrictions on Multinational Companies (MNC).

Industrial Policy Statement, 1980

• The Industrial Policy Statement of 1980 addressed the need for promoting competition in the domestic market,
modernization, selective Liberalization, and technological up-gradation.
• It liberalised licensing and provided for the automatic expansion of capacity.
 • Due to this policy, the MRTP Act (Monopolies Restrictive Trade Practices) and FERA Act (Foreign Exchange
Regulation Act, 1973) were introduced.
• The objective was to liberalize the industrial sector to increase industrial productivity and competitiveness of the
industrial sector.
• The policy laid the foundation for an increasingly competitive export-based and for encouraging foreign investment
in high-technology areas.
Aspirants can refer to the links below for UPSC preparation:

Index of Industrial Production Department of Industrial Policy & Promotion (DIPP)

Industrial Sickness New Economic Policy

Public Sector Undertakings in India Core Sectors of the Indian Economy

New Industrial Policy, 1991
The New Industrial Policy, 1991 had the main
objective of providing facilities to market forces
and to increase efficiency.

Larger roles were provided by

• L – Liberalization (Reduction of government control)
• P – Privatization (Increasing the role & scope of the private
sector)
 • G – Globalisation (Integration of the Indian economy with the world economy)
Because of LPG, old domestic firms have to compete with New Domestic firms, MNC’s and imported items

The government allowed Domestic firms to import better technology to improve efficiency and to have
access to better technology. The Foreign Direct Investment ceiling was increased from 40% to 51% in
selected sectors.

The maximum FDI limit is 100% in selected sectors like infrastructure sectors. Foreign Investment promotion
board was established. It is a single-window FDI clearance agency. The technology transfer agreement was
allowed under the automatic route.

Phased Manufacturing Programme was a condition on foreign firms to reduce imported inputs and use
domestic inputs, it was abolished in 1991.

Under the Mandatory convertibility clause, while giving loans to firms, part of the loan will/can be converted
to equity of the company if the banks want the loan in a specified time. This was also abolished.

Industrial licensing was abolished except for 18 industries.

Monopolies and Restrictive Trade Practices Act – Under his MRTP commission was established. MRTP Act
was introduced to check monopolies. The MRTP Act was relaxed in 1991.

On the recommendation of the SVS Raghavan committee, Competition Act 2000 was passed. Its objectives
were to promote competition by creating an enabling environment.
To know more about the Competition Commission of India, check the linked article.

Review of the Public sector under this New Industrial Policy, 1991 are:

• Public sector investments (Disinvestment of Public sector)

• De-reservations –Industries reserved exclusively for the public sector were reduced
• Professionalization of Management of PSUs
• Sick PSUs to be referred to the Board for Industrial and financial restructuring (BIFR).
• The scope of MoUs was strengthened (MoU is an agreement between a PSU and concerned ministry).

.What is Fiscal Policy?

Fiscal Policy deals with the revenue and expenditure policy of the Govt. The word fiscal has been derived
from the word ‘fisk’ which means public treasury or Govt funds.

Latest Update about Fiscal Policy of India:

1. The Union Budget 2021 has signalled the emphasis on the Development Financial Institutions (DFIs) in the pursuit
of long-term infrastructure creation for the revival of the economy.
2. The establishment of the Dispute Resolution Committee (DRC) has been proposed in the Union Budget 2021 that
can help provide quick relief to taxpayers in tax disputes.

Objectives of Fiscal Policy

The following are the objectives of the Fiscal Policy:
 1. Higher Economic Growth
2. Price Stability
3. Reduction in Inequality
The above objectives are met in the following ways:

1. Consumption Control – This way, the ratio of savings to income is raised.

2. Raising the rate of investment.
3. Taxation, infrastructure development.
4. Imposition of progressive taxes.
5. Exemption from the taxes provided to the vulnerable classes.
6. Heavy taxation on luxury goods.
7. Discouraging unearned income.

What are the components of Fiscal Policy?

There are three components of the Fiscal Policy of India:

1. Government Receipts
2. Government Expenditure
3. Public Debt
Aspirants should note that all the receipts and expenditures of the government are credited and debited from
the following:

1. Consolidated Fund of India

2. Contingency Fund of India
 3. Public Account of India

What is Fiscal Consolidation?

The measures that are taken to improve the fiscal deficit comes under the process of fiscal consolidation.
Through fiscal consolidation, the government tries for:

1. Improvement in revenue receipts

2. Better alignment in the public expenditure

Download notes PDF of Fiscal Consolidation from the linked article.

The government introduced the FRBM Act aiming for fiscal consolidation. Read about it below:

Fiscal Responsibility and Budget Management Act (FRBMA), 2003

The objective of this FRBM Act is to impose fiscal discipline on the government.

It means fiscal policy should be conducted in a disciplined manner or a responsible manner i.e. government
deficits or borrowings should be kept within reasonable limits and the government should plan its
expenditure in accordance with its revenues so that the borrowing should be within limits.

Read in detail about the FRBM Act in the linked article.

Along with the FRBM Act, also read about the NK Singh Committee on Fiscal Deficit from the linked article.
Fiscal Federalism
It refers to the distribution of resource between centre and states.

The distribution of taxes between centre and states is mentioned in the 7th schedule of the Indian
constitution.

There are 3 lists where the taxes are distributed

• Union List
• State List
• Concurrent List

Some related topics to fiscal policy are linked below:

Fiscal Deficit Central Board of Direct Taxes (CBDT)

Value-Added Tax (VAT) Goods and Services Tax (GST)

Minimum Alternate Tax (MAT) Tax Policy Council & Tax Policy Research Unit

Difference Between Monetary Stimulus and Fiscal Difference Between Monetary Policy and Fiscal
Stimulus Policy
Export and Import Bank of India (EXIM)
The Export and Import Bank of India, popularly known as the EXIM Bank was set up in
1982. It is the principal financial institution in India for foreign and international trade. It
was previously a branch of the IDBI, but as the foreign trade sector grew, it was made
into an independent body.

The main function of the Export and Import Bank of India is to provide financial and
other assistance to importers and exporters of the country. And it oversees and
coordinates the working of other institutions that work in the import-export sector. The
ultimate aim is to promote foreign trade activities in the country.

Browse more Topics under Organizations Facilitating Business

• Government as a Business Facilitator

• RBI
• SEBI
• Competition Commision of India (CCI)
• IRDAI
• IFCI
• SIDBI
• NABARD
The management of the EXIM bank is done by a board, headed by the Managing
Director. There are 17 other Directors on the board. The whole paid-up capital of the
bank (100 crores currently) is subscribed by the Central Government exclusively.

Functions of the EXIM Bank

Let us take a look at some of the main functions of Export and Import Bank of India
bank:

1. Finances import and export of goods and services from India

2. It also finances the import and export of goods and services from countries other
than India.
3. It finances the import or export of machines and machinery on lease or hires
purchase basis as well.
4. Provides refinancing services to banks and other financial institutes for their financing
of foreign trade
5. EXIM bank will also provide financial assistance to businesses joining a joint
venture in a foreign country.
6. The bank also provides technical and other assistance to importers and exporters.
Depending n the country of origin there are a lot of processes and procedures
involved in the import-export of goods. The EXIM bank will provide guidance and
assistance in administrative matters as well.
7. Undertakes functions of a merchant bank for the importer or exporter in transactions
of foreign trade.
8. Will also underwrite shares/debentures/stocks/bonds of companies engaged in
foreign trade.
9. Will offer short-term loans or lines of credit to foreign banks and governments.
10. EXIM bank can also provide business advisory services and expert knowledge to
Indian exporters in respect of multi-funded projects in foreign countries

Importance of the EXIM Bank

Other than providing financial assistance, the Export and Import Bank of India bank is
always looking for ways to promote the foreign trade sector in India. In the early 1990s,
EXIM introduced a program in India known as the Clusters of Excellence.

The aim was to improve the quality standards of our imports and exports. It also has a
tie-up with the European Bank for Reconstruction and Development. It has agreed to co-
finance programs with them in eastern Europe.
In order to promote exports EXIM bank also has schemes such as production equipment
finance program, export marketing finance, vendor development finance, etc.

Monetary policy
Monetary policy is adopted by the monetary authority of a country that controls either the interest rate
payable on very short-term borrowing or the money supply. The policy often targets inflation or interest rate
to ensure price stability and generate trust in the currency.

The monetary policy in India is carried out under the authority of the Reserve Bank of India.

What are the main objectives of monetary policy?

Simply put the main objective of monetary policy is to maintain price stability while keeping in mind the
objective of growth as price stability is a necessary precondition for sustainable economic growth.

In India, the RBI plays an important role in controlling inflation through the consultation process regarding
inflation targeting. The current inflation-targeting framework in India is flexible.
3,482

What role does the Monetary Policy Committee play?

The Reserve Bank of India Act, 1934 (RBI Act) was amended by the Finance Act, 2016, to provide for a
statutory and institutionalized framework for a Monetary Policy Committee, for maintaining price stability,
while keeping in mind the objective of growth. The Monetary Policy Committee is entrusted with the task of
fixing the benchmark policy rate (repo rate) required to contain inflation within the specified target level.

The Government of India, in consultation with RBI, notified the ‘Inflation Target’ in the Gazette of India dated
5 August 2016 for the period beginning from the date of publication of the notification and ending on March
31, 2021, as 4%. At the same time, lower and upper tolerance levels were notified to be 2% and 6%
respectively.

What are the instruments of monetary policy?

Some of the following instruments are used by RBI as a part of their monetary policies.

• Open Market Operations: An open market operation is an instrument which involves buying/selling of securities
like government bond from or to the public and banks. The RBI sells government securities to control the flow of
credit and buys government securities to increase credit flow.
• Cash Reserve Ratio (CRR): Cash Reserve Ratio is a specified amount of bank deposits which banks are required
to keep with the RBI in the form of reserves or balances. The higher the CRR with the RBI, the lower will be the
liquidity in the system and vice versa. The CRR was reduced from 15% in 1990 to 5 % in 2002. As of 31st
December 2019, the CRR is at 4%.
• Statutory Liquidity Ratio (SLR): All financial institutions have to maintain a certain quantity of liquid assets with
themselves at any point in time of their total time and demand liabilities. This is known as the Statutory Liquidity
Ratio. The assets are kept in non-cash forms such as precious metals, bonds, etc. As of December 2019, SLR
stands at 18.25%.
• Bank Rate Policy: Also known as the discount rate, bank rates are interest charged by the RBI for providing funds
and loans to the banking system. An increase in bank rate increases the cost of borrowing by commercial banks
which results in the reduction in credit volume to the banks and hence the supply of money declines. An increase in
 the bank rate is the symbol of the tightening of the RBI monetary policy. As of 31 December 2019, the bank rate is
5.40%.
• Credit Ceiling: With this instrument, RBI issues prior information or direction that loans to the commercial bank will
be given up to a certain limit. In this case, a commercial bank will be tight in advancing loans to the public. They will
allocate loans to limited sectors. A few examples of credit ceiling are agriculture sector advances and priority sector
lending.