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BBA Business Environment June 2014 Solved Question Paper With Answers

6. Distinguish between capitalism and socialism.

Ans. Refer Capitalism is an economic system where resources (where monetary or otherwise) are privately owned. Socialism, on the other hand, is a system where goods are owned by the state or the public. In capitalism, everyone works for their own wealth, while in socialism, everyone works for wealth which is distributed equally to everyone.

7. What do you mean by fiscal policy? Discuss its objectives in underdeveloped economy.

Ans. Fiscal policy is considered to by an integral part of public finance as it deals with the effects of financial operations of the government on the various aspects of the functioning of the national economy, such as prices, employment, consumption, production, distribution of wealth, etc. It is also called budgetary policy. In simple words, it embraces the tax and expenditure policies of the government. Economists have defined the fiscal policy as a policy of government where it uses its options of raising revenue and incurring expenditure to produce desirable effects and avoid undesirable effects on various aspects of economy like national income, production and employment.

Section-C (BBA Detailed Answer Questions)

Note. Attempt any three questions out of the following five questions. Each question carries
15 mks. Answer is required in detail. (15 x 3 = 45)

8. Explain chief characteristics of the present industrial policy. How far it has been successful in the rapid industrial growth of the country?

Ans. The major objectives of the new policy are to build on the gains already made, correct the distortions or weaknesses that might have crept in, maintain a sustained growth in productivity and gainful employment, and attain international competitiveness. In pursuit of these objectives, the government announced a series of initiatives in the new industrial policy as outlined below:

(a) Abolition of Industrial Licensing: In a major move to liberalise the economy, the new industrial policy abolished all industrial licensing irrespective of the level of investment except for certain industries related to security and strategic concerns, and social reasons.
Now there are only 6 industries for which licensing is compulsory as amended in February 1999. These are alcohol, cigarettes, hazardous chemicals, drugs and pharmaceutials, electronics, aerospace and defense equipments, and industrial explosives.

(b) Public Sector’s Role Diluted : The number of industries reserved for the public sector since 1956 was seventeen. This number has now been reduced to three. They are: (i) arms, ammunitions and allied items of defence equipment, (ii) atomic energy and (iii) rail transport.

The main elements of government policy towards public sector undertakings (PSUs) are:

(i) Bring down government equity in all non-strategic PSUs to 26 per cent or lower, if necessary;

(ii) Restructure and revive potentially viable PSLJs;

(iii) Close down PS{Js which cannot be revived; and

(iv) Fully protect the interests of workers.

(c) Abolition of Phased Manufacturing Programmes: Devaluation of currency and increasing FDI led government to liberalise local content requirement for indigenous firms.

(d) MRTP Act: MRTP act has been amended to remove the threshold limits of assets in respect of MRTP companies and dominant undertakings.

The new industrial policy also states that the government will undertake review of the existing public enterprises in low technology, small-scale and non-strategic areas. Sick units will be referred to the Board for Industrial and Financial Reconstruction for advice about rehabilitation and reconstruction.

For enterprise remaining in th public sector it is stated that they will be provided a much greater degree -of management autonomy through the system of Memorandum of Understanding (M0U).

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