Economic Environment refers to all those economic factors, which have a bearing on the functioning of a business. Business depends on the economic environment for all the needed inputs. It also depends on the economic environment to sell the finished goods. Naturally, the dependence of business on the economic environment is total and is not surprising because, as it is rightly said, business is one unit of the total economy.

Economic environment influences the business to a great extent. It refers to all those economic factors which affect the functioning of a business unit. Dependence of business on economic environment is total — i.e. for input and also to sell the finished goods. Trained economists supplying the Macro economic forecast and research are found in major companies in manufacturing, commerce and finance which prove the importance of economic environment in business. The following factors constitute economic environment of business:

(a) Economic system
(b) Economic planning
(c) Industry
(d) Agriculture
(e) Infrastructure
(f) Financial & fiscal sectors
(g) Removal of regional imbalances
(h) Price & distribution controls
(i) Economic reforms
(j) Human resource and
(k) Per capita income and national income

The state became the encourager of savings and also an important investor and the owner of capital. Since the state was to be the primary agent of economic change, it followed that private sector activities had to be strictly regulated and controlled to conform to the objectives of state policy.

The growth strategy also meant, in the early years of planning, a relative neglect of public investments in agriculture. This negligence of agriculture sector was supported by the general view that the increase labour in the developing countries could only be absorbed in the industry, and that during the early stages of industrialization, it was necessary for agriculture to contribute in the establishment of modern industry by offering inexpensive work force. A faster development of industry was the central objective of planning. The above is a thumbnail sketch of the growth strategy followed by the planners in the past four decades.

The Economic Policies have depended upon the political policies of a political party. in this way political environment of a country has great impact on the business houses. The dominated role of public sector in our country is outcome of ‘socialist pattern of society’ adopted by the Congress Party. In short, important economic policies such as industrial policy, foreign capital policy, fiscal policy and import policy are often political decisions which established the great impact of political & legal environment on the business houses. A stable and dynamic political environment is indispensable for business growth.

The political institutions i.e. legislature, Executive and Judiciary plays important role in economic policies as well as in development of country whereas the legislature is vested with most vital powers like policy making, budget making and executive control. The decisions of the legislature affect each and every activity of business houses. Legislatures have to check that profit earning is not only justified but also whether the activities of business houses are in a manner beneficial to the society. The other important political institution is the ‘Executives of the actual law and policies enforcing agency. What the legislative made in their chamber actually come in force in the hands of executives. In the way the functions of executive also effects the economic development. Some times the legislature makes some policies but there is conflict between the executives and business houses about implementation. In case of such conflicts, the judiciary, the third important political institution resolves the conflicts. It is the power of the judiciary to settle legal disputes that effect business considerably. It is therefore necessary to discuss about the impact of political and legal environment on the economy.

Depending upon the nature and stage of development of the economy, the behavior of the private sector, the political philosophy, social attitudes, administration system etc. it is a universal phenomenon that state controls economy. In the modern era, two most powerful institutions in the society are ‘business’ and government which meet on common grounds or otherwise together they determine the public policy both foreign and domestic for a nation. But four corner development of a country is only possible if the government plays significant role in the economy of a country. Normally government plays for important roles in an economy and Government regulation of the economy may be broadly divided into two parts; direct and indirect control. The reservation of industries to small scale, public and cooperative sector, licensing system, import and export regulations, the subsidies for different sectors are some examples of regulatory measurements of the governments.

For the development of economy, state/government will have to assume direct responsibility to build up and strengthen the necessary development of infrastructure i.e. transport, power, finance, marketing and institutions for training and guidance along with other promotional activities.

A well planned economy may lead to a country on the path of development. State especially plays important role in planning economy. How to use resources the achieve the goal within the time frame set etc. are the basic needs for proper development of economy and proper planning is most important tool for the same.

Sometimes to boost-up the economic development government plays the role of entrepreneur. It establishes the business enterprises and bear the risks. Dominating trend of pubic sector is basic ingredient of under developed countries. But recently many governments have resorted to privatization.

Apart from the corporate responsibility of increasing the wealth of owners (share holders) the social responsibility of corporates is also being acknowledged. The areas in which the corporates world has acknowledge its social responsibility and established programs to deal with them are :

(i) Responsibility towards environment:
– Production of safe items
– Using biodegradable packages
– Educating consumers on Product use and disposal.
– Being truthful in advertising, and
– Establishing a procedure for dealing with consumer complaints

(ii) Responsibility towards employees:
– Providing fair compensation and Benefits
– Providing safe work environment
– Eliminating discrimination
– Providing opportunities for Personal and Professional development, and
– Having progressive human resource policies.

(iii) Responsibility towards Agencies:
– Fulfilling obligation under regulations and statutes of these agencies.
– Co-operating in planning and investigation, and
– Coordinating administrative activities with these agencies.

(iv). Responsibility towards Community:
– Progressive economic stability.
– Safeguarding Public Safety
– Protecting the environment, and
– Aiding in the development of Social and Cultural resources of the community through corporate Philanthropy.

(iv) Responsibility towards media:
It is also responsibility of the corporate world to be co-operated and truthful about the issues that affect public welfare.

The existence of a business totally depends on the society as a business takes so much from the society in which it exists; it becomes the responsibility of business to give some thing back to the society. By serving the society, the economic objectives of a business can be better achieved and the business also finds a motivated and satisfied work force.

Social responsibility is a very vast term and means many things. These include that a private enterprise has a responsibility towards the society that goes beyond the production of goods and services and earning profit. It also means that a corporation has a broader constituency to serve than the stock holders only and its relation with society is not only through the market. It also means that organization serve a wider range of human values than the traditional economic values that dominate the market place. Social responsibility of business means that the business organizations are more than economic institutions and thus they have responsibility to help the society in some of its most pressing needs. The concept of social responsibility received much attention during the 1960’s.While the old understanding between business and society was based on the view that economic growth was considered to be the drive for profits by private enterprises. The new understanding is based on the view that single minded pursuit of economic growth can produce some detrimental side effects that imposed social costs on certain segments of society or the society as a whole. The concept of social responsibility is basically and ethical concept and involves the changing notions of human welfare and emphasizes the concern about the social dimensions of business activity that have a direct connection with the quality of life in society. The word responsibility implies that business organizations have some kind of an obligation towards the society in which they operate.

Stress shows itself in a number of ways. Firstly it can affect individuals physically, behaviorally and psychologically. Secondly it can have organizational consequences.

Physical Consequences:
Out of the physical correlates of work stress, the most focused is that related to the cardiovascular system. Following are some of the physical consequences of stress. : Sleep difficulties, Loss of appetite, High blood pressure, High cholesterol level, Heart Disease, Strokes, Diabetes, and Ulcers.

Behavioral Consequences:
The behavioral consequences of stress are: Anger, Frustration, Anxiety, More irritability with family members, Depression, Feeling powerless, increased use of drugs or sleeping pills.

Psychological Consequences: Long term stress can manifest in the following psychological consequences; Serious depression, Accidents, Domestic violence, Suicidal behavior, Alcoholism.

Organizational Consequences:
Stress is a cause of concern in almost all the organizations. It is one of the prime factors that result in lagging productivity, rising cost, more errors, more absenteeism and higher employee turnover rate. Stressed employees are less creative and less effective decision makers. What about the risk an organization is exposed to when talented and loyal employees become ill, burnout and are consequently job disabled, or are faced into premature retirement?

Organizational consequences of jobs stress are those outcomes that are traditionally defined as employee’s effectiveness. Three of the most traditional criteria that are linked to work stress are work performance (quantity and quality), attendance (absenteeism) and membership (turnover): Absenteeism, High turnover, Low productivity, Rising costs, More errors, Less creativity, Low morale.