Economic and Financial Environment

The economic environment comprises the nature and structure of the economy, the stage of economic development, economic resources, the level of income, economic policies, distribution of income, etc. The main components of economic environment are as follows:

(i) The nature of economic system – capitalist, socialist or mixed economy.

(ii) Economic structure – Occupational distribution of labour force, structure of national output, capital formation, investment pattern, composition of trade, balance/imbalance between different sectors.

(iii) Economic policies – industrial policy, export-import policy, monetary policy, fiscal Policy, etc.

(iv)  Organisation and development of the capital market- banking system, securities markets, etc.

(v)  Economic indices – gross national product, per capita income, rate of savings and investment, price level, balance of payments position, etc.

(vi)  Economic infrastructure and stage of development of the economy.

(vii) Product markets and factors markets- degree of competition.