Economic Environment (Economic Policies)

Policies are guidelines for action. Economic policies of the government significantly influence and guide projects.

Key economic policies influencing projects are:
  1. Monetary Policy: It is concerned with money supply, price stability, interest rates and credit availability. Cheap money reduces project cost costs, dear money increases project costs.
  2. Fiscal Policy: It is concerned with the use of taxation and government expenditure to regulate economic activity. Taxation on income, expenditure and capital exerts an important influence on project decisions. Government purchases, subsidies and other transfers also influence the activities of projects.
  3. Industrial Policy: It is concerned with industrial licensing, location, incentives, facilities, foreign investment, technology transfer and nationalization. It greatly influences the investment climate for projects.

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