Tuesday, September 10, 2019

M.Com Previous Year Solved Papers: Business Environment' 2011 (August - Incomplete))

2011 (August)
Paper: 101
Full Marks: 80
Time: 3 hours
Answer all questions. The questions are of equal value.
1.       (a) Highlight the relevance of government and business.
(b) Highlight the relevance of foreign investment and India.
2.       (a) Are controls under planning in India effective? Justify.
(b) Draw out the differences between restrictive trade practices and unfair trade practices under MRTP Act. (THIS ACT IS NOW ABOLISHED SO NO QUESTION EXPECTED)
Ans: Monopolistic Trade Practices (MTP’S):

A monopolistic trade practice is essentially a trade practice which represents the abuse of the market power in the production or marketing of goods, or in the provision of services, by charging unreasonably high prices, preventing or reducing competition, limiting technical development, deteriorating product quality, or by adopting unfair or deceptive practices. Two tests will determine whether a trade practice is an MTP or not:
i)        abuse of market power, and
ii)       Unreasonableness in any practice.
Thus, the following are MTPs:
1.       Maintaining the prices of goods or charges for any services at an unreasonable level.
2.       Limiting technical development or capital investment to the common detriment.
3.       Unreasonably preventing or lessening competition.
4.       Allowing quality of goods produced, supplied or distributed or any service rendered to deteriorate.
5.       Increasing unreasonably the cost of production of any goods or charges for provision or maintenance of services.
6.       Increasing unreasonably the selling price of goods, or charges at which the services may be provided.
7.       Increasing unreasonably the profits that are derived from the production, supply or distribution of any goods or the provision of any services.
8.       Preventing or lessening competition in the production, supply or distribution of any goods or in the provision or maintenance of any services by adopting unfair methods of unfair practices.
Restrictive Trade Practices (RTP):
A trade practice which restricts or reduces competition may be termed as restrictive trade practice. The following are the RTPs as described by section 33(1) of the MRTP Act:
(a) Refusal to deal with persons or classes of persons: Any agreement which restricts or it likely to restrict by any methods, the persons or classes of persons to whom goods are sold or from whom goods are bought.
(b) Tie-in sales or full line forcing: Any agreement requiring purchaser of goods, as a condition of such purchase, to purchase some other goods.
(c) Exclusive dealing agreement: Any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of seller or any other goods.
(d) Collective price fixation and tendering: Any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or terms and conditions agreed upon between the sellers or purchaser.
(e) Discriminatory Dealings : Any agreement to grant or allow concession or benefits, including allowances, discounts, rebate or credit, in connection with or by reason of dealings.
(f) Re-sale price maintenance: Any agreement to sell goods on condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.
(g) Restriction on output or supply of goods: Exclusive distributorship, territorial restriction and market sharing.
(h) Control of manufacturing process.
(i) Price control arrangements.
(j) Governmental recognition of practice as restriction.
(k) Residual restriction trade practices: Any agreement to enforce the carrying out of any such agreement as is referred to in the foregoing classes.
Differences between MTPs and RTPs
1. Market power is sought to be misused.  Stress is on abusing market power.
1. Competition is sought to be curbed. Stress is on preventing competition from its free play.
2. Commission can conduct enquiry on either reference from the Central Government, or on its own knowledge or information.
2. Commission can conduct enquiry on any of five bases :
a)    a complaint from 25 or more consumers or dealers,
b)    reference from Central Government,
c)     reference from the State Government,
d)    the application of the Director General or
e)    On its own knowledge of information.
3. Commission’s role is advisory. It can only conduct enquiry.
3. Commission has the power of passing final order which is subject to appeal only to Supreme Court.
4. Commission submits report about the findings to the Central Government. The power of making final order rests with the Central Government.
4. Commission itself can pass final order after enquiry.
5. Agreements relating to MTPs need not be registered.
5. All agreements relating to specified restrictive trade practices are required to be furnished for registration to the Director-General.
6. Consequences of indulging in an MTP are more serious. Apart from the order to prohibit the person concerned from indulging in an MTP the Central Govt is empowered to pass orders to remedy or prevent any mischief resulting from the practice.
6. Consequences of indulging in an RTP are not very serious. A cease and desist order is passed and he relevant clauses of the RTP agreement are declared void.

3.       (a) Critically evaluate the price policy in India.
(b) Critically evaluate the monetary policy in the India context.
Ans: Monetary Policy: Monetary policy refers to policy formulated and implemented for achieving the following objectives:
a)      Regulating the supply of money including credit money and adjusting it to the needs of the economy
b)      To control the cost of money by regulating the rates of interest.
c)       Directing the supply of money to the required channels in accordance with the plan of priorities prepared by the planning authority.
According to A.G. Hart "A policy which influences the public stock of money substitute of public demand for such assets of both that is policy which influences public liquidity position is known as a monetary policy."
From the above discussion, it is clear that a monetary policy is related to the availability and cost of money supply in the economy in order to attain certain broad objectives.
Importance of monetary policy
 A modern economy is a money economy. All transactions are effected with the help of and through the medium of money. The prices of goods, services and factors are fixed in terms of money. People earn their income in the form of money and spend it in the form of money. So the supply of money creates money income in the hands of the community and expenditure of money generates the demand for different goods and services.
The monetary authority has to maintain a perfect balance between increase in the production of goods and services and increase in the supply of money. If increase in the supply of money exceeds increase in the production of goods and services the result is inflation. On the other hand, if the production of goods and services increases at a fast rate and the supply of money increases at a slow rate the result is recession and maybe depression. Hence the monetary authority has to monitor the growth in production very closely and adjust the money supply to it.
In India the monetary policy is formulated and implemented by the Reserve Bank of India which is an autonomous financial institution. It is expected that the RBI would use professional expertise to control the supply of money to the benefit of the community.
Obstacles In Implementation of Monetary Policy
Through the monetary policy is useful in attaining many goals of economic policy, it is not free from certain limitations. Its scope is limited by certain peculiarities, in developing countries such as India. Some of the important limitations of the monetary policy are given below.
a)      There exists a Non-Monetized Sector: In many developing countries, there is an existence of non-monetized economy in large extent. People live in rural areas where many of the transactions are of the barter type and not monetary type. Similarly, due to non-monetized sector the progress of commercial banks is not up to the mark. This creates a major bottleneck in the implementation of the monetary policy.
b)      Excess Non-Banking Financial Institutions (NBFI): As the economy launch itself into a higher orbit of economic growth and development, the financial sector comes up with great speed. As a result many Non-Banking Financial Institutions (NBFIs) come up. These NBFIs also provide credit in the economy. However, the NBFIs do not come under the purview of a monetary policy and thus nullify the effect of a monetary policy.
c)       Existence of Unorganized Financial Markets:  The financial markets help in implementing the monetary policy. In many developing countries the financial markets especially the money markets are of an unorganized nature and in backward conditions. In many places people like money lenders, traders, and businessman actively take part in money lending. But unfortunately they do not come under the purview of a monetary policy and creates hurdle in the success of a monetary policy.
d)      Higher Liquidity Hinders Monetary Policy: In rapidly growing economy the deposit base of many commercial banks is expanded. This creates excess liquidity in the system. Under this circumstances even if the monetary policy increases the CRR or SLR, it dose not deter commercial banks from credit creation. So the existence of excess liquidity due to high deposit base is a hindrance in the way of successful monetary policy.
e)      Money not appearing in an Economy: Large percentage of money never comes in the mainstream economy. Rich people, traders, businessmen and other people prefer to spend rather than to deposit money in the bank. This shadow money is used for buying precious metals like gold, silver, ornaments, and land and in speculation. This type of lavish spending give rise to inflationary trend in mainstream economy and the monetary policy fails to control it.
f)       Time Lag Affects Success of Monetary Policy: The success of the monetary policy depends on timely implementation of it. However, in many cases unnecessary delay is found in implementation of the monetary policy. Or many times timely directives are not issued by the central bank, then the impact of the monetary policy is wiped out.
g)      Monetary & Fiscal Policy Lacks Coordination: In order to attain a maximum of the above objectives it is unnecessary that both the fiscal and monetary policies should go hand in hand. As both these policies are prepared and implemented by two different authorities, there is a possibility of non-coordination between these two policies. This can harm the interest of the overall economic policy.
These are major obstacles in implementation of monetary policy. If these factors are controlled or kept within limit, then the monetary policy can give expected results. Thus though the monetary policy suffers from these limitations, still it has an immense significance in influencing the process of economic growth and development.
4.       (a) Elucidate the redressal machinery under the consumer protection act.
The following agencies established under the Consumer Protection Act for the redressal of consumers disputes:
a)      A District Consumer Disputes Redressal Forum to be known as the "District Forum" established by the State Government   in each district of the State by notification. The State Government may, if it deems fit, establish more than one District Forum in a district;
b)      A State Consumer Disputes Redressal Commission to be known as the "State Commission" established by the State Government in the State by notification; and
c)       A National Consumer Disputes Redressal Commission established by the Central Government by notification.
1. The District Consumer Protection Council At the lowest level are the District Forums and these are established in each District and have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed does not exceed Rs.20,00,000 (TWENTY LAKHS), and a complaint can be filed in a District Forum within the local limits of which
a)      The opposite party resides or
b)      Carries on his business or works for gain or
c)       Where the cause of action arises.
Membership: The District Consumer Protection Council (hereinafter referred to as the District Council) shall consist of the following members:
a)      The collector of the district (by whatever name called) who shall be its Chairman; and
b)      Such number of other official and non-official members representing such interest as maybe described by the state government.
Objects of the District Council: The Objects of every District Council shall be to promote and protect within the district the rights of consumers laid down in the clause (a) to (f) of Section 6 (National Consumer Protection Council)
2. The State Consumer Protection Councils: The State Consumer Disputes Redress Commission is established in each state and these have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed exceeds Rs.20,00,000 (TWENTY LAKHS) but does not exceed Rs.1,00,00,000 (ONE CRORE).
a)      The Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
b)      Such number of other official or non-official members representing such interests as may be prescribed by the State Government.
Objects of state council: The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6. (Objects of National Council)
3. The Central Consumer Protection Council: The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council (hereinafter referred to as the Central Council). The National Consumer Disputes Redressal Commission has jurisdiction to entertain complaints where the value of the goods or services and compensation if any claimed exceeds Rs.1,00,00,000 (ONE CRORE)
a)      The Minister in charge of consumer affairs in the Central Government, who shall be its Chairman, and
b)      Such number of other official or non-official members representing such interests as may be prescribed.
Objects of the Central Council
The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
a)      The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
b)      The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect  the consumer against unfair trade practices;
c)       The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
d)      The right to be heard and to be assured that consumers'  interests will receive due consideration at appropriate forums;
e)      The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
f)       The right to consumer education.
(b) Elucidate the role of institutional investors in Indian capital market.
5.       (a) How far have structural reforms made an impact on reducing poverty and provision for food security?
(b) How far has IT Revolution opened up Indian economy?

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