ASSIGNMENT

Course Code : MMPC – 003

Course Title : Business Environment

Assignment Code : MMPC – 003/TMA/ JULY/2023

Coverage : All Blocks

1. Discuss the controllable factors that exist within internal environment of an organization.

Ans:
2. “With increase in agricultural production, the active role of middlemen in the marketing of

agricultural commodities has increased.” Elaborate upon such middlemen in agricultural

sector.

Ans: Agriculture fulfils the basic need of human kind by producing food. About a century ago,

farmer used to produce food commodities mostly for self-consumption or for exchange with

others (cash or kind) mostly in the same village or nearby places. They were primarily selfreliant.
But,now production environment has changed considerably from self- reliance to

commercialization. Technological advancement in the form of high yielding varieties, use of

fertilizers, insecticides, pesticides, farm mechanization has led to a substantial increase in

farm production and consequently the larger marketable and marketed surplus. The improved

production is accompanied by the increasing urbanization, income, changing life style & food

habits of the consumers and increasing linkages with the overseas market. Today consumers

are not limited to rural areas where food is produced. Further, increasing demand for
processed or semi-processed food products requires value addition in the raw agricultural

produce. These developments require movement of food commodities from producer to

consumers in the form of value added products. Agricultural marketing brings producers and

consumers together through a series of activities and thus becomes an essential element of the

economy. The scope of agricultural marketing is not only limited with the final agricultural

produce. It also focuses supply of agricultural inputs (factors) to the farmers.

Definitions of Agricultural Marketing

The term agricultural marketing is composed of two words- agriculture and marketing.

Agriculture, generally means growing and/or raising of crops and livestock while, marketing

encompasses a series of activities involved in moving the goods from the point of production

to point of consumption. Many scholars have defined agricultural marketing and incorporated

essential elements of time, place, form and passion utility. Some of the definitions of

agricultural marketing are given below;

❖ Human activity directed at satisfying the needs and wants through exchange process

(Phillip Kotler).

❖ Performance of business activities that directs the flow of goods and services from

producers to users (American Marketing Association).

❖ The study of agricultural marketing comprises all the operations, and the agencies

conducting them, involved in the movement of farm produced foods; raw materials and

their derivatives, such as textiles, from the farms to the final consumers, and the effect of

such operations on the farmers, middlemen and consumers (Thomsen). This definition

does not include the input side of agriculture.

❖ Agricultural marketing is a process which starts with a decision to produce a saleable

farm commodity, involves all the aspects of market structure or system, both financial

and institutional, based on technical and economic considerations, and includes pre- and

post-harvest operations, assembling, grading, storage, transportation and distribution

(National Commission on Agriculture, 1976).

Key aspects of agricultural marketing

❖ Agricultural marketing comprising of all activities involved in supply of farm inputs to

the farmers and movement of agricultural products from the farms to the consumers.

❖ The agricultural marketing system includes two major sub-system viz. product marketing

and input (factor) marketing. The product marketing sub-system includes farmers,

village/primary traders, wholesalers, processors, importers, exporters, marketing

cooperatives, regulated marketing committees and retailers. The input sub-system

includes input manufacturers, distributors, related associations, importers, exporters and

others who make available various farm production inputs to farmers.

❖ The agricultural marketing system is understood and developed as a link between the

farm and non-farm sectors. A dynamic and growing agriculture sector requires fertilizers,

pesticides, farm equipments, machinery, diesel, electricity, packing material and repair

services which are produced and supplied by the industry and non-farm enterprises. The

expansion in the size of farm output stimulates forward linkages by providing surpluses

of food and natural fibres which require transportation, storage, milling or processing,

packing and retailing to the consumers. These functions are performed by the non-farm

enterprises. Further, if the increase in agricultural production is accompanied by a rise in

real incomes of farm families, the demand of these families for non-farm consumer

goods goes up as the proportion of income spent on non-food consumables and durables

tends to rise with the increase in real per capita income. Several industries, thus find new

markets for their products in the farm sector.

❖ The marketing system should be such as may bring about the overall welfare to all the

segments (producers, consumers, middlemen and traders) society. Government act as a

watch-dog in ensuring the interest of all the groups associated in the marketing.

❖ The subject of agricultural marketing includes marketing functions, agencies, channels,

efficiency and costs, price spread and market integration, producer’s surplus, government

policy and research, training and statistics on agricultural marketing and imports/exports

of agricultural commodities.

❖ The overall objective of agricultural marketing in a developing country like India is to

help the primary producers viz. the farmers in getting the remunerative prices for their

produce and to provide right type of goods at the right place, in the right quantity and

quality at a right time and at right prices to the processors and/or ultimate consumers on

the other.

The starting point of this discussion is a broad review of the historical changes in the role of middlemen
in the market place. An important argument is that middlemen always fulfill important marketing
functions in the marketing system, and that the roles they take complement those of other market
actors. The three main roles, in which middlemen actually follow different business logic and perform
widely different functions, are highlighted. These roles include middleman as a trader, middleman as a
distributor and middleman as a provider.

The middleman as trader

Middlemen as traders offer to their customers an assortment of products acquired from various sources
(fig 2). The assortment offered to the customers by the middleman is different from what can be offered
by each of the firms supplying the middleman. The middleman offers thus an own ‘product/service’ in
which the various suppliers’ products are just but components. The business, like any business, depends
on developing and maintaining exchange relationships with customers – and suppliers –for which it
competes with others.

The middleman trader exercises the essential entrepreneurial functions of exploring and creating market
exchange opportunities and bears the risk entailed in this task. It operates in two markets- helping
customers access resources needed and the holders of resources to reach the users. The middleman has
an important function in the economy of the gap bridging activities in the market network. By creating a
different bundle of resource elements offered to customers the middleman takes on the function “to
economize” on costs of bridging the supplier-customer gap i.e. lowering transaction costs. Historically, a
middleman as a trader bought and sold all types of products and carried out all the basic commercial
functions. He was an exporter, wholesaler, importer, retailer, ship owner, banker and insurer. Even
though a trader middleman may do a bit of product sorting and packaging, his distinctive trait is that he
does not transform resources physically to any significant extent.

The middleman as distributor

The role of middlemen as distributor represents the dominating view on intermediaries in the marketing
literature which takes a manufacturer’s perspective. Middlemen are considered ‘business firms that help
the company find customers or close sales with them’. They hold inventories and ‘push’ the products,
which are crucial marketing activities when speculation rules the game. The distributor role maintains
the basic characteristic of the middleman as a trader but the emphasis shifts. In this case, the inputs are
given, identified and provided through the manufacturer. The figure (fig 3) illustrating the role of the
middleman as a distributor is to some extent extreme as it reflects the perspective of one manufacturer.
Of course, most distributors represent more than one manufacturer.

The middleman is dependent on individual manufacturers for developing exchange relationships with
customers, but many of the middlemen as distributors continue to fulfill the assortment function and
serve several more or less differentiated manufacturers. The middleman as a distributor has been the
view of the role of an intermediary for a long time.

The middleman as provider

In this case the logic of the middleman’s business is derived from a customer/user perspective (fig 4). In
this view the middleman is part of the user’s supply network, rather than a manufacturer’s channel.
Using Bucklin (1965), speculation is replaced by postponement as the main business logic for the
middleman and the whole market network. The “supply chain perspective” mirrors the changes in the
allocation of the business functions in the overall network of market relationships. The current concern
with supply chain management both in practice and theory indicates that the emergence of the
middleman as a provider is not a marginal phenomenon and concerns numerous middleman businesses.
Supply chain management perspective is not applicable only to the user- manufacturer but to user -tout
court. This perspective of a middleman is not new-it has only been more or less obscured by the
dominant paradigm of middleman as a distributor. The middleman here is considered not to be a hired
link in a chain forged by a manufacturer, but rather an independent market, the focus of a large group of
customers for whom he buys.

3. Discuss the major recommendations of Narasimham Committee which was set up in 1991 to analyze
the falling efficiency of the indian banking sector.

Ans: History of Narasimham Committee 1991

India nationalized most of its banks during the 1960-1970s. This halted the balance of payments crisis of
the economy where India had to retrieve gold from the International Monetary Fund (IMF) to lend funds
to meet its financial debts, which initiated economic liberalization in India in 1991.

By the late 1980s, Indian Government took many measures to remodel the country’s financial system as
many drawbacks and rigidities had developed serious concerns in the Indian banking system. Two
Narasimham committees were set up in the 1990s to satisfy the banking requirements.

The Narasimhan Committee 1 (Committee on the Financial System – CFS) was set up by Manmohan
Singh on 14 August 1991,

The Narasimhan Committee 2 (Committee on Banking Sector Reforms) was set up by P. Chidambaram in
December 1997.

The Committee presented its report to the Finance Minister in November 1991 which was put forward in
Parliament on 17 December 1991. The Narasimham-II Committee was assigned with the improvement
assessment of the enactment of the banking reforms since 1992. In April 1998, M. Narasimham
submitted the report of the Committee to Finance Minister Yashwant Sinha on Banking Sector Reforms
(Committee-II).

Recommendations of Narasimham Committee 1

The Narasimham Committee 1 report presents the following recommendations on the financial system:
Reduction in SLR and CRR – During 1991, both Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio
(CRR) were extremely high. Due to this, bank resources were not available for government use. The
committee recommended reducing the SLR and CRR from 38.5 percent to 25 percent and from 15
percent to 3 to 5 percent, respectively.

Reorganization of the Banking sector – The Narasimham Committee 1 recommended reduction in the
number of public sector banks. The committee suggested mergers and acquisitions increase the bank’s
efficiency. The Committee recommended nationwide the national recognition of 8 to 10 banks.

Establishment of the ARF Tribunal – During the 1991 economic crisis, banks’ bad debts and Non-
Performing Assets (NPA) were concerning. The committee recommended setting up an Asset
Reconstruction Fund (ARF) to take over the proportion of bad and doubtful debts from banks and
financial institutions.

Removal of Dual Control – At that point, the banking sector in India was regulated by the RBI and the
Ministry of Finance. The committee proposed RBI be the sole primary regulator of banking in India.

Stop the Directed Credit Program – The committee recommended eliminating government interest rate
controls as they were not profitable.

Interest Rate Determination – The committee highlighted that the interest rates should be determined
based on market forces and not by the Government, which was earlier the case.

More Freedom to Banks – To improve the workings of banks, the Narasimham Committee 1
recommended that every bank be free and autonomous to carry out its work. Over-regulation and over-
administration should be avoided, and the selection of the Chief Executive and board of directors should
be made solely on merit.

It recommended a three tier banking structure in India through establishment of three large banks with
international presence, eight to ten national banks and a large number of regional and local banks. This
proposal had been severely criticized by the RBI employees union.The Committee recommended the use
of mergers to build the size and strength of operations for each bank.However, it cautioned that large
banks should merge only with banks of equivalent size and not with weaker banks, which should be
closed down if unable to revitalize themselves. Given the large percentage of non-performing assets for
weaker banks, some as high as 20% of their total assets, the concept of "narrow banking" was proposed
to assist in their rehabilitation.
There were a string of mergers in banks of India during the late 90s and early 2000s, encouraged strongly
by the Government of India in line with the committee's recommendations.However, the recommended
degree of consolidation is still awaiting sufficient government impetus.

Banking Sector Reforms in India

Banking sector reforms in India refer to the various policy measures and initiatives undertaken to
enhance the efficiency, stability, and competitiveness of the banking industry in the country. These
reforms aim to strengthen the financial system, improve governance and risk management practices,
promote financial inclusion, and facilitate economic growth.

Banking Sector Reforms Since 1991

The banking sector reforms in India after 1991 aimed to liberalize and modernize the banking system,
enhance efficiency, and promote financial stability. Several committees were formed to recommend
measures and suggest reforms. Let’s discuss the key committees and their recommendations:

Narsimham Committee I (1991)

• Headed by M. Narasimham, former RBI Governor.

• The committee suggested measures to strengthen the banking system, including reducing
government interference, increasing the role of the RBI in supervising banks, and enhancing
transparency.

• It recommended the reduction of statutory liquidity ratio (SLR) and cash reserve ratio (CRR),
which were high reserve requirements for banks, to improve their liquidity.

• The committee also recommended the recapitalization of weak banks, the strengthening of bank
management, and the introduction of prudential norms.

4. What is Foreign Aid? Explain different types of the foreign aid which are provided by

developed nations to the least developed nations.

Ans: The term foreign aid refers to any type of assistance that one country voluntarily transfers to
another, which can take the form of a gift, grant, or loan. Most people tend to think of foreign aid as
capital, but it can also be food, supplies, and services such as humanitarian aid and military assistance.
Broader definitions of aid include any assistance transferred across borders by religious organizations,
non-governmental organizations (NGOs), and foundations. U.S. foreign aid usually refers to military and
economic assistance provided by the federal government provides to other countries.

Foreign aid is any type of assistance that one country voluntarily transfers to another, which can take the
form of a gift, grant, or loan.

Countries may provide aid through capital, food, supplies, and services such as humanitarian aid and
military assistance.

Developed nations may provide developing nations with foreign aid after a natural disaster, times of
conflict, or during an economic crisis.

The United Nations requires advanced countries to spend at least 0.7% of their gross national income on
international aid.

The United States is the most generous, according to the Organisation for Economic Co-operation and
Development.

Understanding Foreign Aid

As noted above, foreign aid is any type of assistance that one country's government provides to another
nation, usually from developed to developing nations. Governments may issue aid in the form of:

Money

Food and supplies

Medical assistance including doctors and supplies

Humanitarian aid such as relief workers

Training services including agricultural training

Health care

Education

Assistance with infrastructure building

Activities related to peacebuilding

Governments may make agreements with the countries to which they provide assistance. For instance, a
developed nation may agree to provide grants to those in need after a natural disaster or during times of
conflict, whether they provide any type of capital or humanitarian aid. Or a government may agree to
issue loans to an allied nation that experiences economic uncertainty with special repayment provisions.

Foreign Aid Definition

Foreign aid or international aid refers to the voluntary transfer of resources like money, goods like food,
drugs, weapons, or technical services, and training from a developed country to a developing one in the
form of a loan. Governments or international or non-governmental organizations provide it to address
issues like terrorism, environmental degradation, pandemics, etc.

Different types of foreign aid assist countries with poor humanitarian and economic conditions or those
suffering from natural disasters or war. Other objectives of international loans may include healthcare
and infrastructure

development and diplomatic relations. OECD’s Official Development Assistance (ODA) is one such
assistance that supports the development of societies and reduction of poverty.

Types Of Foreign Aid

Foreign aid can take several forms and originate from various sources. It can come as food, human
resources, or even weapons, but with/from agreements. The following are the most popular forms of
international aid agreements:
#1 – Bilateral Aid

It is the most common type of international aid, often provided by a developed country to an
underdeveloped one through a bilateral agreement. One side determines the conditions for granting the
money, while the other agrees with them. Bilateral grants are the primary sources of ODA. The two main
reasons for this kind of agreement are geopolitical (and hence, strategic) and to assist during a
humanitarian crisis such as an earthquake, tsunami, or other natural disasters.

#2 – Multilateral Aid

It includes funds raised by a group of countries via an international organization to assist developing
nations. Most of the time, the capital is used to aid the world’s poorest countries, alleviate hunger, and
improve humanitarian conditions. One of the most influential organizations engaged in multilateral aid is
the World Bank.

#3 – Military Aid

Military aid, unlike bilateral and multilateral, is not about charity. It is all about selling and buying
weapons and signing defense contracts. Countries amid a crisis frequently seek international assistance
in obtaining weaponry to combat their adversaries. The United States is the most well-known provider of
military aid. It accounts for roughly 30% of overall US foreign aid. However, countries like Russia are also
known for it.
#4 – Voluntary Aid

Voluntary aid is a charity mainly carried out by non-governmental organizations (NGOs) and is not
necessarily linked to governments. The well-known ‘Doctors Without Borders’ project, for example,
sends doctors to countries with poor health conditions to better the lives of the residents.

#5 – Humanitarian Aid

It is often given to countries struck by a natural disaster. It is a more short-term aid and involves several
nations, NGOs, or private entities donating resources and services during a crisis.

One recent example is the rebuilding of the Notre Dame cathedral in France. After the fire, the French
government received money from entities worldwide to help rebuild the famous cultural symbol.

Another example is the U.S. government foreign aid spending over $1.5 billion on emergency health and
humanitarian needs in other nations during the COVID-19 outbreak.

#6 – Tied Aid

It works similarly to bilateral aid. However, the contract states that the entire loan amount must be spent
on a specified country. Most of the time, it is either the donor country or its group of allies.

This type of aid is known as a form of protectionism. The government of the developed country donates
the capital to another. But the recipient can only spend it on improving the economy of the donor.

# 7 – Project Aid

It intends to assist with specific projects. A country may, for example, assist another in the construction
of a school or a hospital in a region. In this scenario, the funds help support the project. The funding may
or may not originate from a single source.

5. Write short notes on the following:

i.  National Income

Ans: National income is the total value of all the final services and goods produced in an economy
during a specific period of time. It includes both the public and private sectors and encompasses
everything from haircuts to housing, from medical care to national defence. National income is also
commonly referred to as gross domestic product (GDP).

National income is the money value of all the final services and goods produced in an economy
during a given period of time. It includes the incomes of all factors of production, such as rent,
wages, profits, and interest.

The main concepts of national income are:

Gross Domestic Product (GDP): This is the market value of all final services and goods produced
within a country in a given period of time.

i.  Underwriters

Ans: What is underwriter and its types?

Underwriting is the process of researching, evaluating and quantifying a financial risk. The role of an
underwriter is to assess financial risks, rates and rules for a loan or investment. Underwriters work in
the financial sector for commercial or investment banks, insurance companies, brokerages or
mortgage lenders.

i.  Atmanirbhar Bharat

Ans: Atmanirbhar Bharat[a], which translates to 'self-reliant India',[8] is a phrase the Prime
Minister of India Narendra Modi and his government used and popularised in relation to the
country's economic development plans. The phrase is an umbrella concept for the Modi
government's plans for India to play a larger role in the world economy, and for it to become more
efficient, competitive and resilient.

Modi has used the English phrase since 2014 in relation to national security, poverty and digital
India. The first popular use of the phrase in Hindi was Atmanirbhar Bharat Abhiyan (Self-Reliant India
Mission) during the announcement of India's COVID–19-pandemic-related economic package in
2020. Since then, the phrase has been used by the Ministry of Consumer Affairs, Food and Public
Distribution, the Ministry of Education and the Ministry of Defence in press releases, statements and
policies. The government has also used the phrase in relation to India's new National Education
Policy and the 2021 Union Budget of India. The concept under Modi's premiership has been adapted
from earlier uses of the phrase in the Indian sub-continent.
The swadeshi movement was one of India's most successful pre-independence movements. The
concept of self-reliance has been used by the country's former Planning Commission in multiple five-
year plans between 1947 and 2014. Commentators have noted India has been enacting policies and
building institutions that promote self-reliance since its independence. Private companies and their
products have been considered as examples of self-reliance in sectors such as beverages,
automotives, cooperatives, financial services and banking, pharmaceuticals and biotechnology.

i.  Balance of Payments (BoP)

Ans: The balance of payments (BOP) is the method by which countries measure all of the
international monetary transactions within a certain period. The BOP consists of three main
accounts: the current account, the capital account, and the financial account. The current account is
meant to balance against the sum of the financial and capital account but rarely does.

Globalization in the late 20th century led to BOP liberalization in many emerging market economies.
These countries lifted restrictions on BOP accounts to take advantage of the cash flows arriving from
developed foreign nations, which in turn boosted their economies.