MBAR-102(Organization Behaviour) JNU Jaipur

Internal Assignment No. 1  MBA-102

Q. 1.        Answer all the questions:

(i)          “Management is a continuous process”. Elucidate the statement.

Answer- Management is q continues process not one time action. Managers identify problems and try to solve them by taking appropriate action on a regular basis. Thus, management is known as a continues process.
A basic management function involving formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources. > The planning process (1) identifies the goals or objectives to be achieved, (2) formulates strategies to achieve them, (3) arranges or creates the means required, and (4) implements, directs, and monitors all steps in their proper sequence.

(ii)     Enumerate the steps of  control process.

ANSWER- Control as a management function involves the following steps:

1. Establishing Standards:

Standards are criteria against which results are measured. They are norms to achieve the goals. Standards are usually measured in terms of output. They can also be measured in non-monetary terms like loyalty, customer attraction, goodwill etc.

2. Measuring Performance

Measurement involves comparison between what is accomplished and what was intended to be accomplished. The measurement of actual performance must be in the units similar to those of predetermined criterion. The unit or the yardstick thus chosen be clear, well-defined and easily identified, and should be uniform and homogenous throughout the measurement process.

3. Comparing the Actual Performance with Expected Performance

This is the active principle of the process. The previous two, setting the goals and the measurement format are the preparatory parts of the process. It is the responsibility of the management to compare the actual performance against the standards established.

4. Correcting Deviations:

The final element in the process is the taking corrective action. Measuring and comparing performance, detecting shortcomings, failures or deviations, from plans will be of no avail if it does point to the needed corrective action.

(iii)          Distinguish between “Line” and Line and staff organization.

ANSWER- Line organization is the most oldest and simplest method of administrative organization. According to this type of organization, the authority flows from top to bottom in a concern. The line of command is carried out from top to bottom. This is the reason for calling this organization as scalar organization which means scalar chain of command is a part and parcel of this type of administrative organization. In this type of organization, the line of command flows on an even basis without any gaps in communication and co-ordination taking place.

Line and staff organization is a modification of line organization and it is more complex than line organization. According to this administrative organization, specialized and supportive activities are attached to the line of command by appointing staff supervisors and staff specialists who are attached to the line authority. The power of command always remains with the line executives and staff supervisors guide, advice and council the line executives. Personal Secretary to the Managing Director is a staff official.

(iv)            Write a short note on: a) Locus of Control and b) Machiavellianism

(A)Locus of Control- Locus of Control as a principle was originated by Julian Rotter in 1954. It considers the tendency of people to believe that control resides internally within them, or externally, with others or the situation.Note that, like other preferences, this is a spectrum. Some people have a wholly internal or external locus of control, but many will have some balance both views, perhaps varying with situation. For example some may be more internal at home but more external at work.

(B)Machiavellianism- In business, Machiavellian behavior describes someone who is willing to exploit the weaknesses of others to get ahead. He is highly competitive and expects others to take advantage of him. He is ambitious and willing to take risks, especially if those risks are likely to cost others instead of himself. He pretends to be more giving than he is and usually only gives to charity if others see it or if it helps him get ahead. Machiavellian behavior is named for Niccolo Machiavelli, the 16th century author of the book entitled "The Prince."

(v)              Compare and contrast Maslow’s need hierarchy theory of motivation with herzberg’s two factor theory of motivation.

ANSWER- Maslow's hierarchy of needs is a description of the needs that motivate human behavior. In 1943, Abraham Maslow proposed five different kinds of human needs, beginning with the most basic: survival. Physiological needs, such as food and shelter, are followed by needs related to safety. Next, there are needs of love and belonging. Fourth, humans have needs of esteem, such as the need for being respected. The final need in the hierarchy is the need for self-actualization (fulfilling one's potential). The hierarchy suggests that basic needs must be met prior to less basic needs; for example, a starving person will seek food before self-actualization.

Based on Herzberg’s Motivation-Hygiene Model, an important development in the field of motivation was the distinction between motivational factors and the mere maintenance (or hygienic) factors.

Herzberg’s research was conducted on about 200 engineers and accountants working in several firms in the Pittsburgh area of USA. The maintenance factors are necessary only to maintain a reasonable level of satisfaction among the employees. If these factors are absent, then most of the employees are dissatisfied. But these factors themselves do not motivate the employees. For that purpose motivational factors only work.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 2.        “Management is the art of getting things done through other people.” Explain the importance of management in the light of this statement.

ANSWER- Management is the process by which human efforts are coordinated and combined with other resources to accomplished organizational goals and objectives. Mary Parker Folett defines management as “the art of getting things done through people.”

Yes, of course it is the art of getting things done through people. A good management requires a good manager in directing or leading his subordinates, as well as a good subordinate in doing things in a right way in order to meet the goal and objectives of the organization. It is also said that management requires an understanding of the economic principle of the division of labor, which breaks down into subtasks, and the coordination of effort, which recognize the subtasks into an efficient and effective whole. The managers do not do the work themselves. They get the work done through the workers. The workers should not be treated like slaves. They should not be trickled, threatened or forced to do the work. A favorable work environment should be created and maintained.

Furthermore, it’s not really about time management because this focuses on the fact that we are spending our time productively. It’s not about being productive; it’s about accomplishing the goals by our staff (people) that we set out. So, it’s not about time management, it’s about goal management; putting the goals in order, figuring out what are the requirements to accomplish those goals, and then moving forward with those goals. Take the focus off managing your time and turn that focus towards accomplishing those goals we set out for our organization.

Q. 3.        What do you mean by learning? Discuss the elements which form the part of learning process.

ANSWER- Learning is a key process in human behaviour. All living is learning. If we compare the simple, crude ways in which a child feels and behaves, with the complex modes of adult behaviour, his skills, habits, thought, sentiments and the like- we will know what difference learning has made to the individual.

1. Attention:

Attention is like a filter (not quite as this article shows, but this is a good enough metaphor)  that limits the amount of information that enters or remains in our memory (storage). It is the amount of time we can concentrate on a task without becoming distracted. It has its own limitations, mainly its span.

2. Connections / associations / consolidation

This part of the memory formation in learning is widely discussed by many people – specialists and layman ‘practitioners’ alike, and various people may call it various ways: Deep Processing, chunking, Creating a construct

In a nutshell, in order to learn more effectively, you need to organise information into meaningful groups: chunks, concepts, whatever it is called. These pieces of organised and connected information can vary in size and complexity. The more connections between the information we are trying to learn and what we already know, the better.

3. Emotions

Emotions affect our cognitive processes, and learning in particular, in a variety of ways. The effects vary depending on the type of emotions (positive vs negative vs stress) and the step in the learning process (encoding/storage/retrieval). But overall, an emotional stimulus affects our ability to pay attention, because it immediately becomes the focus of our attention, narrowing our ability to see/hear/feel/process anything else.

4. Spaced repetition

In order to really move the newly acquired knowledge from short-term memory into the long-term storage, we need to beat the forgetting curve pictured above.

Internal Assignment No. 2

Paper Title:                         Organization Behaviour

Q. 1.        Answer all the questions:

(i)                   Define coordination

ANSWER- Co-ordination is the unification, integration, synchronization of the efforts of group members so as to provide unity of action in the pursuit of common goals. It is a hidden force which binds all the other functions of management. According to Mooney and Reelay, “Co-ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of common goals”. According to Charles Worth, “Co-ordination is the integration of several parts into an orderly hole to achieve the purpose of understanding”.

Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management. Co-ordination is the essence of management and is implicit and inherent in all functions of management.

(ii)     “Controlling is looking back.” Comment.

ANSWER- Controlling is looking back as it is like a post-mortem of past activities to find out deviations from the standards established. In fact, the objective of controlling is to check the factors responsible for poor performance in the past, so that such mistakes are not repeated in future and the organisation can achieve its predetermined objectives.

(iii) “Human Behavior is generally caused and predictable.” Explain

ANSWER- This concept refers to the fact that human behaviour is not a spontaneous and unpredictable process, rather it can be scientifically analysed and pre-empted because humans follow psychological patterns, and most actions we take are the result of a cause-and-effect reaction.It could be argued that everything we do, every action we take, has a biological or social stimulus - a cause for each action.In this way, understanding the causes of actions we are likely to commit makes human behaviour somewhat predictable.

(iv)               Write a short note on application of perception in organization.

ANSWER- A perception is a belief held by a person, or many people, based upon how they see the world around them. the process of selecting, organising and interpreting information in order to make sense of the world around us the dynamic and complex way in which individuals select information  from the environment, interpret and translate it so that a  meaning is assigned which will result in a pattern of behaviour or thought Often the main aspects of perception in an organisation is how an individual views others, as this can be a major point in how that person will behave within the business. It is also a aspect of how an individual is motivated within an organisation. This is why in organisations there needs to be a way of making sure employees fit before being hired and then when they are hired their first perceptions of others need to be good.

(v)                 What do you mean by group cohesiveness?

ANSWER- Group cohesiveness is one of the characteristic features of the groups, which is very important from behaviouristic point of view. Cohesiveness is the degree to which the group members are attracted to each other and are motivated to stay in the groups. Cohesiveness defines the degree of closeness that the members feel with the groups. It is understood as the extent of liking each member has towards others in the group and how far everyone wants to remain as a member of the group.

“Cohesiveness refers to the extent of unity ‘in the group and is reflected in members’ conformity to the norms of the group, feeling of attraction for each other and wanting to be co-members of the group.” Attraction, cohesiveness and conformity are all intertwined. The more the members feel attracted to the group, the greater will be the group cohesiveness. The greater the cohesiveness, the greater the influence of the group members to persuade one another to conform to the group norms. The greater the conformity, the greater the identity of the members to the group and the greater the group cohesiveness.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 2.        Discuss the 14 principles of management as given by Henry Fayol.

ANSWER- Fayol's principles are listed below:

Division of Work – When employees are specialized, output can increase because they become increasingly skilled and efficient.

Authority – Managers must have the authority to give orders, but they must also keep in mind that with authority comes responsibility.

Discipline – Discipline must be upheld in organizations, but methods for doing so can vary.

Unity of Command – Employees should have only one direct supervisor.

Unity of Direction – Teams with the same objective should be working under the direction of one manager, using one plan. This will ensure that action is properly coordinated.

Subordination of Individual Interests to the General Interest – The interests of one employee should not be allowed to become more important than those of the group. This includes managers.

Remuneration – Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial compensation.

Centralization – This principle refers to how close employees are to the decision-making process. It is important to aim for an appropriate balance.

Scalar Chain – Employees should be aware of where they stand in the organization's hierarchy, or chain of command.

Order – The workplace facilities must be clean, tidy and safe for employees. Everything should have its place.

Equity – Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness where appropriate.

Stability of Tenure of Personnel – Managers should strive to minimize employee turnover. Personnel planning should be a priority.

Initiative – Employees should be given the necessary level of freedom to create and carry out plans.

Esprit de Corps – Organizations should strive to promote team spirit and unity.

Q. 3.        Describe the ways in which people may overcome the negative consequences of stress.

ANSWER- For many people, possibly even you, esteemed reader, stress is a fact of life. Whether from problems on the job, concerns about money, health or relationships, stress is all too common.

What you may not know is that chronic stress is at the root of numerous other health problems.

It is amazing to think about the physical impact stress has on you. When you feel stressed your body reacts as if it were being physically threatened—your digestion shuts down, your heart rate increases, your muscles tense. In addition, your cholesterol levels rise and your blood thickens preparing to clot (in case you might be injured). Your cortisol levels skyrocket.

These responses are there to help you survive in the natural world. Ironically, stress in the modern world contributes to most of our chronic degenerative diseases. These include some of the leading causes of death in the modern world.

On the U.S. Centers for Disease Control 2002 list of the 10 most frequent causes of death, 8 of them have a very clear relationship with stress, either directly or indirectly.

Everything on this list except Alzheimer’s and kidney disease relate to stress one way or another. Looking at this list, if someone says, “It’s just stress,” you can tell that they don’t realize stress, especially long-term stress, is deadly. They might as well say, “It was only a truck that hit me.”

In addition, if stress goes on too long, brain chemistry imbalances take place. People experience lower levels of both stimulating and calming neurotransmitters, as well as those related to pain relief.

What You Can Do

Fortunately, we now understand how to managing stress. The basics are simple.

1. Breathe: What could be simpler? Unfortunately, most people don’t know how to breathe well, or if they do, they don’t remember to practice. Correct breathing triggers a relaxation response in the entire body, freeing you from many of the negative effects of stress. Stress-relieving examples – yoga, qigong, meditation.

2. Eat: If you think that food has no effect on stress, think again. The quantity, quality and ratios of proteins, carbohydrates and fats in your diet have a huge impact on your body, either helping relieve or helping aggravate stress. Stress-relieving examples – eating whole, fresh, natural foods, avoiding processed and concentrated foods.

3. Move: Exercise is an incredibly effective stress-reducer. The exact best type of exercise will vary from person to person. Stress-relieving examples – walking, sports, weight-lifting.

4. Think: How you think about the events in your life does truly have a profound effect on how your body reacts to them. In this short description we don’t have room to discuss all the various ways you might change this, so just become aware that if you think about things in a different way, your body will react differently. Stress-relieving examples – listening to positive self-programming audio tapes, turning off the news before sleeping, meditation.

By including these simple activities in your daily life you’ll overcome much of the worst effects of stress and live a longer, happier life.

MBA-101 Behavior Organization JNU jaipur

Internal Assignment No. 1

I)                    Name two elements of internal environment affecting business

Organizational and operational:-

These are a part of the operational and administrative procedures. This includes disorganized or inaccurate recordkeeping. Interruptions to your supply chain and outdated or faulty IT systems are also factors you should evaluate. If you do not overcome these, your customers might see you as unreliable. You can also lose all your data.

Innovation:-

Your business needs innovation in order to keep up with competitors. It is essential to get one step ahead. Innovation could come in the form of marketing. It could also be through promotional initiatives in the marketing plan, stafft raining, and welfare. Embracing new technology is the best way to keep up with technological advancements.

II)                 What in multinational enterprise?

Ans. A multinational enterprise is organizations that own or control production or services facilities in one or more countries other than the home country. For example, when a corporation that is registered in more than one country or that has operations in more than one country may be attributed as MNC. Usually, it is a large corporation which both produces and sells goods or services in various countries

III)               Give two suggestions to the problems of small scale industries

a.       Arrangements may be made by the government to ensure the supply of trained and professional managers for the small scale sector.

B .Provide special incentives for encouraging larger flow of Venture

(IV) Define Privatization

Ans. Privatization is the process of transferring ownership of a business, enterprise, agency, public service, or public property from the public sector (a government) to the private sector, either to a business that operates for a profit or to a non-profit organization. It may also mean government outsourcing of services or functions to private firms,   e. g .revenue collection, law enforcement, and prison management.

(V) What do you understand by Fiscal policy?

Ans. Fiscal policy is the use of government revenue collection (taxation)and expenditure (spending) to influence the economy, or else it involves the government changing the levels of taxation and governments pending in order to influence aggregate demand and the level of economic activity. The two main instruments of fiscal policy are changes in the level and composition of taxation and government spending  in various  sectors

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)             

Q.1 Explain Monetary policy & its effect on business

Monetary policy consists of the decisions made by a government concerning the money supply and interest rates. In the United States, the Federal Reserve (the Fed) determines and implements monetary policy.

The effects of monetary policy on business are manifold. Though in a direct sense it affects only domestic business enterprises, foreign business entity who has an interest and stake in domestic market also gets affected to an extent. for simplicity, I am explaining three major impact on domestic business units.

1.       By changing say interest rate (one of many policy instruments available to RBI i.e. Repo, CRR,SLR etc.), Monetary policy can affect the amount of liquidity in the system. Say RBI increases Repo Rate. The borrowing cost of commercial banks will now go up and they will pass the same to their borrowers. Generally an industry needs loan from Banks to expand its business or any kind of investment. Now since loan has become more costlier, it will negatively affect their investment decision.

2.       Continuing from above scenario of increased Repo: Apart from this direct effect on business entity, there is also another effect which plays through consumers. The people who are working in different business industries are also consumers of different goods in market. If a business industry shuns its investment decision, it means it is not generating extra employment which could have been there if the business had hired people for its new investment or increase the salary of existing ones for their increased effort. So because of this lost increase in income of the people who are employed or loss of employment opportunities, spending (hence demand for various goods and service) of these people will not increase. In this way it can affect the demand for a wide range of products and affect many business industries.

3.       Also stocks can be traded as goods by consumers on exchange. As mentioned in the previous point, monetary policy can affect one’s income and hence demand for various goods, so stock price can also vary based on the demand and thus market capitalization of a business can change.

Q.2 What is International Trade? Explain various Trade Reforms related to foreign trade announced in India in recent times.

International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events. Political change in Asia, for example, could result in an increase in the cost of labor, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in the cost of labor, on the other hand, would result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be exposed to good sand services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks , currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in acountry's current account in the balance of payments

The new foreign trade policy 2015-2020 is kept ready to make necessary shape after forming new Government, on 1st of April, 2015. However, the validity of Foreign Trade Policy 2015-2020 will be with effect from the first notification at the time of declaration of FTP 2015-20. The FTP 2015-20 comes in to force with effect from 01st April 2015.Changes in schemes and incentives are expected in new Foreign Trade Policy 2015-20.However, the status quo might be maintained under some of the schemes. The priorities of policies taken by new government also are likely to be incorporated in new Foreign Trade Policy 2015-2020 (FTP 2015-20).The new Foreign Trade Policy 2015-2020 (FTP 2015-20) is made product wise and location wise and tried to maximize the foreign trade from the country. Although some exporters could not make benefit out of Foreign Trade Policy of 2009 -14, those exporter scan contact local office of Director General of Foreign Trade DGFT to get assistance. Pre policy suggestions to Foreign Trade Policy 2015-2020 (FTP 2015-20)have been sent from different government departments concerned, Export Promotion Councils, Commodity Boards, Manufacturer’s associations, Traders forum, and other export promotion agencies of government and non  government to the concerned authorities to shape new Foreign Trade Policy 2015-2020. Customs and Banking related matters also have been updated after discussing all concerned to mold Foreign Trade Policy 2015-2020 (FTP 2015-20) in such a way to safeguard exporters of the county by resolving their previous issues under Foreign Trade Policy

IV)Top of Form

V)Bottom of Form

Internal Assignment No. 2

Q. 1.        Answer all the questions:

(i)            Name two elements of external environment affecting business.

ANSWER- An organization must have the ability to examine and make changes based on internal and external environmental factors that affect its performance. The use of tools to analyze these environmental factors is the key to a successful organization.

External environmental factors are events that take place outside of the organization and are harder to predict and control. External environmental factors can be more dangerous for an organization given the fact they are unpredictable, hard to prepare for, and often bewildering. Some examples of external environmental factors are:

1. Changes to the economy                     2.    Threats from competition

3.       Political factors                                     4.   Government regulations

4.       The industry itself

(ii)           What do you understand by globalization?

ANSWER- Globalization refers to the changes in the world where we are moving away from self-contained countries and toward a more integrated world. Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.

Market globalization is the decline in barriers to selling in countries other than the home country. This change will make it easier for your company to begin selling products internationally, since lower tariffs keep consumer prices lower and fewer restrictions when crossing borders makes it easier for a company to enter a foreign market. It also means that companies must consider other cultures when developing their business strategies and potentially adjust the product and marketing messages if they aren't appropriate in the target country. This may not be an issue in the camera industry, but a hamburger company entering India would definitely need to revisit their product and strategies to be successful!

(iii)          What is monetary policy?

ANSWER-  Monetary policy is how central banks manage liquidity to create economic growth. Liquidity is how much there is in the money supply. That includes credit, cash, checks and money market mutual funds. The most important of these is credit. It includes loans, bonds and mortgages. 

In India, monetary policy of the Reserve Bank of India is aimed at managing the quantity of money in order to meet the requirements of different sectors of the economy and to increase the pace of economic growth.

For instance, liquidity is important for an economy to spur growth. To maintain liquidity, the RBI is dependent on the monetary policy. By purchasing bonds through open market operations, the RBI introduces money in the system and reduces the interest rate.

(iv)          What is Disinvestment?

ANSWER- In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital expenditures. Some people use the term divestiture, or to divest when discussing disinvestment.

For example is a consumer products company selling off a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company's financial position by reducing its debt.

(v)           What is International Trade?

ANSWER- International trade is the exchange of goods and services between countries. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events. Political change in Asia, for example, could result in an increase in the cost of labor, thereby increasing the manufacturing costs for an American sneaker company based in Malaysia, which would then result in an increase in the price that you have to pay to buy the tennis shoes at your local mall. A decrease in the cost of labor, on the other hand, would result in you having to pay less for your new shoes.

Trading globally gives consumers and countries the opportunity to be exposed to goods and services not available in their own countries. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies, and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments.

Q. 2.        Explain various challenges to disinvestment programme.

ANSWER- While over the years many countries have implemented successfully the strategy of disinvestment and privatisation of public sector units (PSUs), this tool of public policy still continues to remain elusive and contentious in India. Unfortunately, in India the process of disinvestment has remained stalled for the past over two years. Most strident opposition to disinvestment is from the Left allies of the United Progressive Alliance Government.

Reviving privatisation policy-But proponents of reform think that such criticism should not deter the Government from reviving its disinvestment policy, and they think the time is ripe to do so.

Economic resurgence- It is essential that the Government sends a powerful message of its ability to push through some challenging reforms such as disinvestment and/or strategic sale of PSUs. The opportunities afforded by the excellent valuations, based on the performance of many profit-making PSUs, must be leveraged.

Capital raising activity on rise- Capital raising activities of the private corporate sector are on the rise and in the coming year major companies together are expected to raise a whopping Rs. 100,000 crorefrom the capital market. Why should profit-making PSUs shy away or be denied the opportunity of raising new equity and in the process also divest a part of the existing equity capital is a moot question.

Expanding equity base- Is the issue of expanding the equity base of the economy on a continuous basis, given that now there is a robust capital market infrastructure and the need to make available an increased quantity of quality equity to investors. In fact, a reactivated disinvestment programme will provide a powerful thrust to spread the equity culture and strengthen the capital market.

Q. 3.        What is Foreign Direct Investment? Explain its importance. Explain government policies regarding FDI.

ANSWER- Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies. The key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business.
FDI has a major role to play in India’s economic development. The total FDI inflow in our country was US$27 billion in 2010-11. Over the past few years, many sectors have seen the growth of foreign investment. The Government is also coming out with new reforms to promote more and more of this investment.

Investment policy of India can be broadly classified into two periods – 1948-1990 and 1991 onward. Till 1990, there were only restricted policies and regulated inflows. But from 1991 onward, India witnessed liberalization of foreign investment laws.

The Government announced in 1991, a list of industries in which Foreign Direct Investment would be automatically allowed up to 51 percent (Foreign Equity).

These industries ranged from the capital goods and metallurgical sector to the entertainment, electronic, food processing and service sectors with significant export potential. Hotels and tourist-related areas were also allowed foreign equity holdings by international trading companies of up to 51 percent.

In order to accelerate the progress of the power sector, 100 per cent foreign equity participation was allowed for setting up power plants. Such equity participation allowed free repatriation of profits and other incentives.