Even after New Economic Policy 1991, foreign companies found it extremely difficult to cut through the bureaucratic red tape to get permits for doing business in India. Identify the dimension of business environment which posed a hurdle for foreign companies.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Political environment
Option (1) Technological environment — Incorrect. It is about new methods and inventions. Permits and red tape are not technology.
Option (2) Social environment — Incorrect. It is about customs, values and beliefs of society, not about permits.
Option (3) Political environment — Correct. It includes the attitudes of government officials towards business, which can have a negative impact. Red tape in getting permits is such an attitude.
Option (4) Economic environment — Incorrect. It is about economic conditions and policies such as income, savings and interest rates. The hurdle here is the officials’ attitude, not an economic condition.
NCERT (2026-27 Edition): “(iv) Political Environment: Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. The significance of political conditions in business success lies in the predictability of business activities under stable political conditions. On the other hand, there may be uncertainty of business activities due to political unrest and threats to law and order. Political stability, thus, builds up confidence among business people to invest in the long term projects for the growth of the economy. Political instability can shake that confidence. Similarly, the attitudes of government officials towards business may have either positive or negative impact upon business.” |