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Chapter-8 Small Business AND Entrepreneurshi P Development PART - 1

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CHAPTER—8

SMALL BUSINESS
AND
ENTREPRENEURSHI
P DEVELOPMENT
PART--1
A business which operates on a small scale
and required less capital, less labour and
less machines is called small business.
The goods are produces on a small scale.
This business is operated and managed by
the owner of the business. In India, the
village and small Industries sector
consists of both traditional Handlooms,
Handicrafts, khadi and Village Industries.
Modern small Industries – Small scale
industries and Power looms.
• According to The Micro,Small
and Medium Enterprise
Development (MSMED) Act,
2006, a small scale enterprise
defined as one where the
investment in Plant and
Machinery is more than Rs. 25
lakhs but does not exceed Rs.
5 crore.
• Several parameters can be used to
measure the size of business. These
include
• The number of persons employed in
business,
• Capital invested in business,
• Volume of output of business and
• Power consumed for business
activities.
• The definition used by the Government of India to
describe small Industries is based on the investment
in plant and machinery. It can be divided as follows:
Category

Category Manufacturing Unit Service Providers

Less than Rs. 10


Micro Enterprise Less than Rs. 25 Lakhs
Lakhs
Between Rs. 25 Lakhs to Between Rs. 10 Lakhs to
Small Enterprise
Rs. 5 Crore Rs. 2 Crore
Between Rs. 5 Crore to Between Rs. 2 Crore to
Medium Enterprise
Rs. 10 Crore Rs. 5 Crore
• ROLE OF SMALL SCALE INDUSTRIES IN SOCIO
ECONOMIC DEVELOPMENT OF INDIA
• 1. Employment: Small scale Industries are second
largest employers of human resources after
Agriculture. It has 95% of the industrial unit in the
country. These enterprises are labour intensive and
labour is available in abundants amount is rural
areas of India.
• 2. Variety of product: Small scale Industries
produce an enormous Variety of goods e.g.
readymade garments, stationery, soaps, Leather’s
goods Plastic and rubber goods.
• 3. Export: The share of product from SSI is
45% of total export from India. So it earn
valuable foreign exchange and solve the
problem of balance of payment.
• 4. Balance regional development: SSI can be
set anywhere in the country. They use local
resources, less capital and simple technology.
• 5. Complementary to large scale
Industries: SSI. supply various types of
components, spare parts, tools etc, which are
required by large scale enterprises
• 6. Low cost of production: SSI also enjoy the
advantage of low cost of production because
they used local resources in their product.
• 7. Quick and timely decision Due to the
small size of the organization quick and timely
decisions can be taken without consulting
many people.
• 8. Development of entrepreneurship:
SSI provide opportunity of young men and
women to start their own business.
• ROLE OF SMALL BUSINESS IN RURAL INDIA
• 1. Provides Employment in Rural Areas: Cottage and
rural industries provide employment opportunities in the
rural areas as these are labour oriented enterprises. In Indian
rural areas ample labour is available.
• 2. Improve Economic Condition: Small business provide
multiple source of income to the rural households.
SSI improves economic conditions and standard of living of
people living in those Areas.
• 3. Prevent migration: Development of rural and village
industries can also prevent migration of the rural population
to urban areas in search of employment.
• 4. Utilisation of Local Resources: SSI use local
resources e.g. coir, wood and other products.
• 5. Equitable distribution of rational
Income: Small Scale Industries and cottage
Industries ensure equitable distribution of national
income. This helps to reduce the gap between rich
and the poor in the country.
• 6. Balanced Regional development – These
enterprises are often dependent on local source of
production. This way, industries do not just limit
themselves to a particular place but diversify. This
helps in balanced regional development.
• Problem of Small Scale Industries:
• 1. Finance: Non-availability of sufficient funds in order
to carry out business operations is an important problem
faced by small scale industries. Bank sit at to grant
financial help to these units.
• 2. Raw Material & Power: Small scale units are
unable to buy raw materials in bulk due to lack of funds
and storage facilities. Shortage of power is another
factor which leads to under utilization of plant capacity.
• 3. Marketing: Small scale units generally face
difficulties in marketing of their products and services
as they are hardly any funds for Advertising or sales
promotion. They depend on intermediaries who exploit
them.
• 4. Technology: Majority of small scale enterprises
are using old techniques of production because they
cannot afford new techniques, machines and
equipment necessary for modernising product. As a
result, their cost of production increases.
• 5. Competition: Small scale firms face competitions
not only from large industries but also from
multinational companies.
• 6. Other problems:
• Lack of Managerial Efficiency.
• Lack of Demand of Produced Goods.
• Labour Problems.
• Burden of Local Taxes.
• Poor Product Quality.
• GOVERNMENT ASSISTANCE TO SMALL
INDUSTRIES AND SMALL BUSINESS UNITS
• (A). INSTITUTIONAL SUPPORT:
• I. National Small Industries Corporation (NSIC)
• This was set up in 1955 to promote, aid and foster
the growth of small scale units in India. Main
constraint faced by entrepreneurs is shortage of
funds to purchase machinery and equipment. Non
availability of finance, deprives many new
entrepreneurs from availing opportunities. NSIC
was established to cater to this need of entrepreneur.
• Main functions of NSIC:
• 1. It supplies imported machines and raw
materials to small industries on easy hire-
purchase schemes.
2. It export the products of small units.
3. It provides technology to Small Scale
Industries.
4. Helps in up gradation to technology.
5. Provides in up gradation of technology
6. Provides various equipment on lease basis.
7. Undertakes construction of industrial
estates.
• II. District Industries Center (DIC)
• The concept of DIC came during 1977,
when Government of India announced the
new Industrial policy on 23rd Dec, 1977.
The main objective of DICs is to make
available all necessary services at one
place. The finance for setting up DICs in
a state are contributed equally by
particular state Govt. and Central Govt.
• Functions of District Industries Center
• 1. Act as the focal point of industrialization of the
district
2. Identifies projects for setting up of SSI units.
3. Issues permanent registration certificate to SSI
units.
4. Provides marketing support to SSI units
5. Act as a link between the entrepreneurs and the
lead bank of district.
6. Helps businessman in obtaining license from
Electricity board, water supply board etc.
• Govt. Incentives to hilly backward and Rural
Areas
• 1. Power: Some states supply power at a
confessional rate of 50%.
• 2. Tax holidays: Exemption from payment of tax
for 5 years.
• 3. Land and Water: Availability of land at
confessional rate. Water is supplied on no profit no
loss basis.
• 4. Octroi: Most of the states have abolished octroi.
• 5. Protective Measures: The government reserved
800 items for exclusive production by the small
scale Industries and give priority in allocation of raw
materials and machines.
• 6. Marketing Assistance: Government tries to
solve their marketing problem by improving
information and in order to provide guarantee for
sale of goods.
• 7. Finance: Subsidy of 10-15% for building capital
asset. Loans are offer data confessional rates.
• 8. Sales Tax: In all Union Territories, small
industries are exempted from sales tax while some
states give exemption of 5 years.
MADHU TRIVEDI
9468881560
madhusanjaytrivedi@gmail.com

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