“Government-Business” relationship iN INDIA

Government and businesses are the two most powerful institutions in any society. The two together determine public policy, both domestic and foreign, for a country. The policies, practices and regulations of the government influence to a large extent the nature, growth and functioning of the business system.  In a situation of political stability business flourishes and businessmen venture to take greater risks. In the same way the ideology of the ruling party determines the nature and extent of economic development. If the ruling party believes in socialism, government control and ownership of business will grow. For example, public sector dominated development strategy in India until 1990. Major economic policies of a nation such as industrial policy, fiscal policy, monetary policy, and foreign trade policy are often based on political considerations. Several political decisions have strategic implications for business and industry.  For example, the philosophy of Bhartiya Janta Party government forced Coca Cola and IBM to leave India in 1977. Since then the clock has turned a full circle. Now multinationals are welcome in almost all types of industries in India.

Changes in the nature and extent of government intervention in business matters lead to changes in the pattern of industrial growth. When public sector was in a dominant position and industrial licensing was widely applicable, scale of operations and the location of projects were decided by the government. After liberalization in 1991 businessmen are free to take such decisions.

Business and industry in turn exercise a significant influence on the government and on its policies and programmes. It was the Foreign Exchange crisis which necessitated economic liberalization in 1991 in India.

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