Question

Distinguish between the following.

Political Environment and Legal Environment.

Answer 1

Political environment comprises political conditions such as peace and stability, law and order, etc. For example, a situation of political unrest such as frequent change in the ruling government also implies a change in the rules and policies of the government regarding production and manufacturing. Such a frequent change in the regulations regarding production discourages investment. Similarly, the opening up of our economy, under the New Economic Policy in 1991, provided business opportunity to many foreign companies.
On the other hand, legal environment refers to the legislation and rules passed by the government, such as the Companies Act, Trade Union Act, etc. Knowledge of these legislations is essential for enterprises, as their non-compliance can lead to legal trouble for them. For example, an export–import company in India has to follow the rules and regulations as stated under the EXIM policy and the Foreign Trade (Development and Regulation) Act, 1992. Similarly, the refining, processing, distribution and sale of petroleum and petroleum products is governed by the Petroleum and Natural Gas Regulatory Board Act, 2006.