Political and Legal Environment: Government, Regulation, Public Policy and Ease of Doing Business (India Focus) Questions

Question 1

Define political environment.

Accepted Answer

**Political environment** refers to the influence of **government**, political stability and policy direction on business.

Question 2

Define legal environment.

Accepted Answer

**Legal environment** is the set of **laws and regulations** that businesses must follow while operating.

Question 3

What is public policy?

Accepted Answer

**Public policy** means government’s planned actions to achieve national objectives (economic and social goals).

Question 4

What is regulation?

Accepted Answer

**Regulation** refers to rules imposed by government/regulators to guide business behaviour and protect public interest.

Question 5

What is Ease of Doing Business?

Accepted Answer

**Ease of Doing Business** refers to how simple, fast and transparent it is to start and run a business in a country.

Question 6

What is compliance?

Accepted Answer

**Compliance** means following applicable **laws, rules and standards** in business operations.

Question 7

Explain how government influences business (any three points).

Accepted Answer

Government influences business through:
- **policy making** (trade, industrial, investment policies)
- **taxation** (GST, corporate tax, duties)
- **public spending** (infrastructure creates demand/opportunities)
- licensing/permissions and regulatory enforcement

(Write any three with brief explanation.)

Question 8

State the importance of legal environment for business (any three points).

Accepted Answer

Legal environment is important because it:
- ensures **fair practices** and protects consumers
- provides a clear framework for contracts and dispute resolution
- protects workers’ rights and workplace safety
- reduces uncertainty by defining business boundaries

(Write any three.)

Question 9

Explain public policy and its types (economic and social) with examples.

Accepted Answer

**Public policy** is government’s planned action for national objectives.

Types:
- **Economic policy**: taxation, industrial/trade policy, investment reforms (e.g., tax reduction, export promotion).
- **Social policy**: education, health, labour welfare, environment and consumer protection (e.g., safety standards, pollution norms).

Both types affect business opportunities and compliance.

Question 10

Explain why regulation is necessary (any three reasons).

Accepted Answer

Regulation is necessary to:
- protect **consumers** (quality, safety)
- ensure **fair competition** (prevent monopoly/unfair practices)
- protect **workers** (wages, safety)
- protect **environment** (pollution control)

(Write any three.)

Question 11

Explain Ease of Doing Business and mention any three areas/indicators.

Accepted Answer

**Ease of Doing Business** measures how easily business activities can be done due to procedures and transparency.

Any three indicators:
- starting a business (time/registrations)
- paying taxes (simplicity/time)
- enforcing contracts (dispute resolution speed)
- getting credit
- trading across borders

(Write any three.)

Question 12

Explain the business–government relationship (supporter vs regulator) (any three points).

Accepted Answer

Business–government relationship has two sides:
- **Supporter**: government provides infrastructure, incentives/subsidies, and stable law & order.
- **Regulator**: government sets rules (tax, labour, safety, environment) and enforces compliance.
- **Policy maker**: policy changes can create opportunities or uncertainty, so firms must monitor and adapt.

Hence, firms should stay **compliant** and also use policy support schemes ethically for growth.

Question 13

Explain political and legal environment and show their impact on business with a table.

Accepted Answer

### **Political and Legal Environment: Meaning and Impact**

The **political environment** reflects government stability and policy direction, while the **legal environment** consists of laws/regulations that businesses must follow. Both strongly influence business risk, cost and opportunities.

| Basis | **Political** | **Legal** |
|---|---|---|
| Focus | policy direction, stability | laws, rules, compliance |
| Impact | uncertainty/opportunity from policy change | boundaries and standards for operations |
| Example | change in trade/tax policy | consumer protection / labour rules |

Thus, firms monitor political signals and maintain legal compliance to ensure smooth operations.

Question 14

Discuss compliance and consequences of non-compliance with a flowchart.

Accepted Answer

### **Compliance and Consequences of Non-Compliance**

**Compliance** means following all relevant **laws, rules and standards** (tax, labour, safety, consumer and environmental rules). It protects the firm from legal and reputational risk.

**Consequences of non-compliance**:
- **penalties/fines** and interest
- legal action and management liability
- license suspension/cancellation and possible shutdown
- loss of reputation and customer trust

```text
Rule/Law exists → Compliance system (policies + audits) → Safe operations
                ↓ (if ignored)
Non-compliance → Penalty + legal case → Operational disruption → Reputation loss
```

Therefore, compliance is not optional; it is a core requirement for sustainable business.

Question 15

Explain Ease of Doing Business and how reforms improve business performance (use a table/flowchart).

Accepted Answer

### **Ease of Doing Business (EoDB) and Impact of Reforms**

**Ease of Doing Business** means fewer procedures, less time, and more transparency in starting and operating a business.

| Reform area | How it helps business |
|---|---|
| start business | faster registration, lower compliance burden |
| pay taxes | simpler filing, less time/cost |
| enforce contracts | faster dispute resolution |
| get credit | easier access to loans |

```text
Simpler procedures → Lower time/cost → Faster decisions & investment → Higher productivity → Growth
```

Thus, EoDB reforms improve competitiveness by reducing delays and uncertainty.

Political and Legal Environment: Government, Regulation, Public Policy and Ease of Doing Business (India Focus)

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