Syllabus

Unit-I: Entrepreneurship: Definition and Concept of

entrepreneurship - Entrepreneur Characteristics –
Classification of Entrepreneurs –Role of Entrepreneurship
in Economic Development –Start-ups.

Unit-II: Idea Generation and Project Formulation: Ideas in

Entrepreneurships – Sources of New Ideas – Techniques for
Generating Ideas – Preparation of Project Report –
Contents; Guidelines for Report preparation – Project
Appraisal Techniques –Economic Analysis-Financial Analysis-
Market Analysis.;

Unit-III: Institutions Supporting and Taxation Benefits:

Central level Institutions: NABARD; SIDBI,– State Level
Institutions –DICs – SFC - Government Policy for MSMEs -
Tax Incentives and Concessions.

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 UNIT I
Entrepreneurship: Definition and Concept of entrepreneurship -
Entrepreneur Characteristics – Classification of Entrepreneurs –Role
of Entrepreneurship in Economic Development –Start-ups

History of Entrepreneurship

The term “entrepreneurship” can be traced back to as early as the Middle

Ages, when the “entrepreneur” was simply someone who carried out tasks, such
as buildings and construction projects by applying all the resources at his
disposal. However, it was during the 16th century when “business” was used as a
common term, and the “entrepreneur’’ came into focus, as a person, who is
responsible for undertaking a business venture.

Entrepreneurship as a term can be traced back to the economists of the

eighteenth century, and it continued to attract the interest of economists in
the nineteenth century. In the twentieth century, the word became synonymous
with free enterprise and capitalism.

During the 20th century, within the last two decades, the concept of
entrepreneurship has evolved from being a single individual to an entire
organization or a corporation
Definitions of Enterpreneurship:
“Entrepreneurship can also be described as a process of action, which an entrepreneur
undertakes to establish his/her enterprise”

According to Peter F. Drucker “Entrepreneurship is defined as a systematic

innovation, which consists in the purposeful and organized search for changes,
and it is the systematic analysis of the opportunities such changes might offer
for economic and social innovation”.

According to Ricardo Cantillon “Entrepreneurship entails bearing the risk of

buying at a certain price and selling at uncertain prices.

Functions of Entrepreneurship

The various functions of entrepreneurship are Innovation and creativity, Risk

taking and achievement and organization and management, Catalyst of
Economic Development, Overcoming Resistance to Change and Research.

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These have been depicted, at a glance, with the help of the given Figure and are
being discussed, in brief, below.

According to Bill Bernbach, co-founder of Doyle Dane Bernbach – “an idea can turn
to dust or magic, depending on the talent that rubs against it’’.

(i) Innovation and Creativity – Innovation generally refers to changing

processes or creating more effective processes, products and ideas. For
businesses, this could mean implementing new ideas, creating dynamic products
or improving your existing services. Creativity is defined as “the tendency to
generate or recognize ideas, alternatives, or possibilities that may be useful in
solving problems, communicating with others. Creativity and innovation have
always been recognized as a sure path to success. Entrepreneurs think outside
of the box and explore new areas for cost-effective business solutions.

(ii) Risk taking and Achievement – Entrepreneurship is a process in which the

entrepreneur establishes new jobs and firms, new Creative and growing
organization which is associated with risk, new opportunities and achievement.
It results in introducing a new product or service to society. In general,
entrepreneurs accept four types of risks namely Financial Risk, Job Risk, Social
& Family Risk & Mental & Health Risk, which are as follows:

(a) Financial Risk – Most of entrepreneurs begin by using their

own savings and personal effects and if they fail, they have the fear of losing it.
They take risk of failure.

(b) Job Risk – Entrepreneurs, not only follow the ideas as

working situations, but also consider the current risks of giving up the job &

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starting a venture. Several entrepreneurs have the history of having a good job,
but gave it up, as they thought that they were not cut out for a job.

(c) Social and Family Risk – The beginning of entrepreneurial

job needs a high energy which is time consuming. Because of these undertakings,
he/she may confront some social and family damages like family and marital
problems resulting on account of absence from home and not being able to give
adequate time to family.

(d) Mental Health Risk – Perhaps the biggest risk that an

entrepreneur takes it is, the risk of mental health. The risk of money, home,
spouse, child, and friends could be adjusted but mental tensions, stress, anxiety
and the other mental factors have many destructive influences because of the
beginning and continuing of entrepreneurial activity. This can even lead to
depression, when faced with failure.

(iii) Organization and Management – The entrepreneurial organization is a

simple organizational form that includes, one large operational unit, with one or
a few individuals in top management. Entrepreneurial management means the
skills necessary to successfully develop and manage a business enterprise. A
small business start-up under an owner-manager is an example of an
entrepreneurial organization. Here, the owner-manager generally maintains
strict control over business operations. This includes directing the enterprise’s
core management functions. According to Mintzberg, these include the
interpersonal roles, informational roles and decision-making roles. The
smaller the organization, the more concentrated these roles are in the hands of
the owner-manager. The entrepreneurial organization is generally unstructured.

(iv) Research – An entrepreneur is a practical dreamer and does a lot of

ground-work before taking a leap in his/her ventures. In other words, an
entrepreneur finalizes an idea only after considering a variety of options,
analysing their strengths and weaknesses by applying analytical techniques,
testing their applicability, supplementing them with empirical findings, and then
choosing the best alternative. It is then that he/she applies the ideas in
practice. The selection of an idea, thus, involves the application of research
methodology.

(v) Overcoming Resistance to Change – New innovations are generally opposed

by people because it makes them change their existing behaviour patterns. An
entrepreneur always first tries new ideas at his/her level. It is only after the
successful implementation of these ideas that an entrepreneur makes these
ideas available to others for their benefit. His/her will power, enthusiasm and
energy help him/her in overcoming the society’s resistance to change.

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(vi) Catalyst of Economic Development – An entrepreneur plays an important
role in accelerating the pace of economic development of a country, by
discovering new uses of available resources and maximizing their utilization.
Today, when India is a fast developing economy, the contribution of
entrepreneurs has increased multi-fold.

Understanding the Meaning an Entrepreneur

Before the concept of entrepreneurship is explored, it is important to, first,

understand the meaning of ‘entrepreneur’ & also know who can be an
entrepreneur. An entrepreneur is someone who exercises initiative by organizing
a venture to take benefit of an opportunity and, as the decision maker, decides
what, how, and how much of a good or service will be produced. An
entrepreneur supplies risk capital as a risk taker, and monitors and controls the
business activities. The entrepreneur is usually a sole proprietor, a partner, or
the one who owns the majority of shares in an incorporated venture. If one
desires to be an entrepreneur, the given equation is what describes, what an
entrepreneur actually is

Entrepreneur + Capital = Products + Customers = Business.

Definitions

Let us now consider some definitions to understand who an entrepreneur is:

(i) According to Oxford Dictionary an entrepreneur is “A person who sets up

a business or businesses, taking on financial risks in the hope of profit”.

(ii) According to the International Encyclopaedia, an entrepreneur is “An

individual who bears the risk of operating a business in the face of uncertainty
about the future conditions”.

(iii) Schumpeter’s Definition – The entrepreneur, in an advanced economy is an

individual who introduces something new in the economy – a method of
production not yet tested by experience in the branch of manufacturing, a
product with which consumers are not yet familiar, a new source of raw material
or of new markets and the like”

Types of Entrepreneurs

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Depending upon the level of willingness to create innovative ideas, there can be
the following types of entrepreneurs:

(i) Innovative Entrepreneurs – These entrepreneurs have the ability to think

newer, better and more economical ideas of business organisation and
management. They are the business leaders and contributors to the economic
development of a country. Inventions like the introduction of a small car ‘Nano’
by Ratan Tata, organised retailing by Kishore Biyani, making mobile phones
available to the common man by Anil Ambani are the works of innovative
entrepreneurs.

(ii) Imitating Entrepreneurs – These entrepreneurs are people who follow the
path shown by innovative entrepreneurs. They imitate innovative entrepreneurs
because the environment in which they operate is such that it does not permit
them to have creative and innovative ideas on their own. In our country also, a
large number of such entrepreneurs are found in every field of business
activity. Development of small shopping complexes is the work of imitating
entrepreneurs. All the small car manufacturers now are the imitating
entrepreneurs.

(iii) Fabian Entrepreneurs – Fabian entrepreneurs are those individuals who do

not show initiative in visualising and implementing new ideas and innovations. On
the contrary, they like to wait for some development, which would motivate
them to initiate unless there is an imminent threat to their very existence.
Meaning of ‘Fabian’- He/she is ‘a person seeking victory by delay
rather than by a decisive battle’ & ‘Drone’ is ‘a person who lives on
the labour of others’

(iv) Drone Entrepreneurs – Drone entrepreneurs are those individuals who are
satisfied with the existing mode and speed of business activity and show no
inclination in gaining market leadership. In other words, drone entrepreneurs
are ‘die-hard conservatives’ and even ready to suffer the loss of business.

(v) Social Entrepreneurs – Social entrepreneurs drive social innovation and

transformation in various fields including education, health, human rights,
workers’ rights, environment and enterprise development. Dr. Mohammed Yunus
of Bangladesh who started Gramin Bank is a case of social entrepreneur.

(vi) Agricultural Entrepreneur – The entrepreneurs who undertake agricultural

pursuits are called Agricultural Entrepreneurs. They cover a wide spectrum of
agricultural activities like cultivation, marketing of agricultural produce,
irrigation, mechanization and technology.

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(vii) Trading Entrepreneur – As the name itself suggests, the trading
entrepreneur undertakes the trading activities. He/she procures the finished
products from the manufacturers and sells these to the customers directly or
through a retailer. These serve as the middlemen as wholesalers, dealers, and
retailers between the manufacturers and customers.

(viii) Manufacturing Entrepreneur – The manufacturing entrepreneurs

manufacture products. They identify the needs of the customers and, then,
explore the resources and technology to be used to manufacture the products
to satisfy the customers’ needs.

(ix) Women Entrepreneurs – Women entrepreneurship is defined as the

enterprises owned and controlled by a woman/women having a minimum financial
stake of 51 per cent of the capital and giving at least 51 per cent of
employment generated in the enterprises to women.

(x) Inventors & Challenger Entrepreneurs – Inventor entrepreneurs with their

competence and inventiveness invent new products. Their basic interest lies in
research and innovative activities & Challenger entrepreneurs plunge into
industry because of the challenges it presents. When one challenge seems to be
met, they begin to look for new challenges.

(xi) Life-Timer Entrepreneurs – These entrepreneurs take business as an

integral part to their life. Usually, the family enterprise and businesses which
mainly depend on exercise of personal skill fall in this type/category of
entrepreneurs

Role of Entrepreneurship in Economic Development

1. Capital formation

Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in
productive utilization of national resources. Rate of capital formation increases
which is essential for rapid economic growth. Thus, an entrepreneur is the
creator of wealth.

2. Improvement in per capita income

Entrepreneurs explore opportunities and exploit them. They convert talent and
idle resources like land, labor, and capital into national income and wealth as
goods and services. They help increase the net national product and per capita
income in the country, which are important indicators for measuring economic
growth.

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3. Improvement in living standards

Entrepreneurs set up industries that overcome the scarcity of essential

commodities and introduce new products. The production of goods on a large
scale and the manufacture of handicrafts, etc., help in improving the standard
of living of a common man in the small scale sector. Offer goods at these low
costs and increase consumption diversity.

4. Economic independence

Entrepreneurship is essential for national self-reliance. Industrialists help to

manufacture indigenous substitutes of hitherto imported products thereby
reducing dependence on foreign countries. Businessmen also export goods and
services on a large scale and thereby earn scarce foreign exchange for the
country. Such import substitution and export promotion help to ensure the
economic independence of the country without which political independence has
little meaning.

5. Backward and forward links

An entrepreneur initiates change in which there is a chain reaction. There are

many backward and forward linkages in establishing an enterprise. For example,
the setting up of a steel plant creates many ancillary units, and the demand for
iron ore, coal, etc. expands. There are backward relationships. By increasing the
supply of steel, the plant facilitates machine manufacturing, tube making, vessel
manufacturing, and the development of other such units.

Entrepreneurs create an atmosphere of enthusiasm and express a sense of

purpose. They give an organization its momentum. Entrepreneurial behavior is
critical to the long-term vitality of every economy. The practice of
entrepreneurship is as important for established firms as it is for newcomers.

6. Generation of Employment

It is feared that there will be very few additional job opportunities within the
fold of organized public and private sectors. Most of the job opportunities in
the future are likely to be emerging from the informal and unorganized sectors
of the economy. Entrepreneurship development training which helps in
strengthening the informal and unorganized sector is expected to motivate
enterprising people to opt for self-employment and entrepreneurial career. It

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will, therefore, help in solving the problem of increasing unemployment to some
extent.

7. The exploitation of locally available resources and

entrepreneurship

India is considered rich in natural resources. Despite nearly five decades of

planned development, a large number of states remain economically backward.
Some large-scale industries started by out-of-state entrepreneurs in
economically backward regions can help as a model of pioneering efforts. But
ultimately the real strength of industrialization in backward areas depends on
the involvement of local entrepreneurship. Activities: Increased activities of
local entrepreneurs will also result in construction. Use of abundant available
local resources.

8. Balanced Regional Development

Medium and large-scale industries can only be started with a huge investment
that is either available with well-established industrial houses or needs to be
drawn from the exchequer. Also, promoting such industries does not help reduce
inequalities of income and wealth. On the other hand, an important advantage of
small-scale industries is that they can be started with little financial and
resources and little or no previous experience or entrepreneurial background.

9. Reducing Unrest and Social Tension Amongst Youth

Many problems associated with youth unrest and social tension are rightly
considered to be due to youth not being engaged in productive work. In the
changing environment where we are faced with the problem of recession in wage
employment opportunities, the alternative to a wage career is the only viable
option. the country is required to invert the youth with latent entrepreneurial
traits from wage careers to self-employment careers. Such an alternate path
through entrepreneurship could help the country in defusing social tension and
unrest amongst youth

10. Innovations in Enterprises

Business enterprises need to be innovative for their survival and better

performance. It is believed that smaller firms have a relatively higher necessity
and capability to innovate. The smaller firms do not face the constraints
imposed by a large investment in existing technology. Thus they are both free
and compelled to innovate. The National Science Foundation, an organization in
the USA found that small companies produce four times more innovations per

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research dollar than do bigger companies. Entrepreneurship development
programs are aimed at accelerating the pace of the small firm’s growth in India.
an increased number of small firms is expected to result in more innovations and
make the Indian industry compete in the international market.

Start-up

The general consensus is that a startup is a business built to grow extremely

rapidly. Rapid growth usually necessitates the use of a technology that
invalidates the assumptions of politicians and businesses.

According to startup guru Steve Blank, a startup is a “temporary

organization designed to search for a repeatable and scalable business
mode”

Key Features of Internet Startups

1. Operational Scalability
The theoretical cost-per-transaction (for both buyer and seller) is thus far
lower than any physical store.
2. Market Size
It’s still not trivial to scale across borders or states, but the practically
addressable market size has never been larger.
3. Generality
Software is the most general product imaginable (every field uses s/w) and
software engineering skills are highly portable.
4. Low Capital Barriers
You have an incredibly powerful manufacturing device on your desk, a kind of
virtual 3D printer before its time, whose price is now within reach of even the
world’s poorest.
5. Low Regulatory Barriers
Unlike virtually every physical arena, the internet is still mostly unregulated,
especially for smaller businesses.
6. Free and Open Source Software
The internet is built on open-source technologies, FOSS is a uniquely scalable
means of charitable giving.
7. Long Tail
Not only is it possible to address markets of unprecedented size, it is now
feasible to address markets of unprecedented specificity (e.g. via ads on FB).
8. Failure Tolerance
The almost non existent penalty for failure permeates every layer of decision-
making at an internet company (e.g. Move Fast and Break Things). Moreover, as

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 computer power grows, we can now simulate more of the world on the computer
before shipping the final product.
9. Amenable to Titration
It's possible to build a hybrid business in which you engage with the physical
world (e.g. Uber, AirBnB, Groupon). The advantage is that market demand is
proven, price points are generally higher, and real-world impact is tangible. The
disadvantage is that some or all of the above trends may no longer work to your
benefit. The key is to titrate at the right level.

Strategies for startups

You can follow to help get your company up and running:

1. Start with a Great Idea

Your first step in learning how to start a business is to identify a problem and
solution. This is because successful startups begin from business ideas that fill
the needs of a group of customers. But your idea doesn’t always have to be a
new one. You can update existing products or services in a way that’s better for
the consumer. This can be as simple as:

 Changing the product’s appearance

 Adding a new feature
 Finding a new use for a product that customers already love
For instance, Apple started from Steve Jobs’ original idea for a computer and
has since created enhanced versions that better fit the market. They’ve also
continued to evolve newer products like iPhones and iPads, making them more
useful with each update. One example is how they’re adding a keyboard for iPads
that’ll make them easier to use like a laptop.2 All these innovations by Apple led
to them being worth of over a billion dollars.

2. Make a Business Plan

Once you have an idea, you’ll want to start building a business plan that
describes your products and services in detail. It should include information on
your industry, operations, finances and a market analysis.
Writing a business plan is also important for getting financing for your startup.
Banks are more likely to give loans to companies that can clearly explain how
they’re going to use the money and why they need it.

3. Secure Funding for Your Startup

The cost of a startup is different for every business owner. However, no matter
what your costs are, you’ll likely need to get startup financing from:

 Friends and family

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  Angel investors
 Venture capitalists
 Bank loans

4. Surround Yourself With the Right People

There can be a lot of risk in starting a business. That’s why you’ll need essential
business advisors to help guide you along the way, like:

 Attorneys
 Certified Public Accountants (CPAs)
 Insurance professionals
 Bankers
Building the right startup team is especially important in the early stages of
small businesses. This means you’ll want to carefully select your:

 Co-founders
 Contractors
 Initial employees, including remote workers

5. Make Sure You’re Following All the Legal Steps

From designing your product to setting up your workplace, opening your dream
startup can be a lot of fun. But before you officially enter the market, you’ll
want to take the right legal steps to give you the best chance at success,
including:

 Applying for a business license

 Registering your business name
 Getting a federal tax ID number
 Filing for a trademark
 Creating a separate bank account
 Familiarizing yourself with industry regulations
 Building contracts for clients and others you plan to work with

6. Establish a Location (Physical and Online)

Whether you need to establish a manufacturing facility, set up an office space
or open a storefront, you’ll want to determine if leasing or buying a property is
right for you. In many cases, you can get tax deductions for managing a
commercial space, which is a benefit to owning your own place. You’ll also be able
to rent it out to make extra income.

In today’s digital era, it’s important to set up an online presence and e-

commerce platform. In fact, you’ll have trouble being successful without it. This

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is because customers are increasingly shopping online and using google to find
out more information on your products. On top of this, websites offer
advantages like:

 Keeping your store open 24 hours a day, on weekends and on holidays,

which increases sales.
 Helping you reach customers around the world.
 Allowing customers to read reviews about your products, which can raise
your brand’s credibility.

7. Develop a Marketing Plan

Every startup needs to spend different amounts of money and time on
marketing. It’s an important expense, because it helps you:

 Establish a brand identity

 Stand out from competition
 Create customer relationships and build loyalty
 Increase visibility, which attracts new customers
 Strengthen your company’s reputation
Some startup marketing activities you should look into include:

 Using social media to engage customers and promote coupons or deals

 Giving rewards out for referrals, which brings in more business
 Offering free samples or demos in your store
 Sponsoring events to get your name out there in local communities

8. Build a Customer Base

In order for your startup business to have long-term success, you’ll want to
build a customer base. These loyal customers can help with:

 Boosting your sales, because they’re willing to keep spending at your

company
 Sending a message to new customers that your brand is trustworthy
 Gaining referrals, which saves you time and effort with finding new
customers
Some ways you can attract and retain customers include:

 Regularly offering a great product or service

 Launching loyalty programs to keep them coming in
 Using affiliate marketing on social media, which involves paying
influencers to promote products to your target audience

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  Focusing on great customer service
 Using market research to understand your customers’ expectations
better
 Asking for feedback directly from the customer

10. Plan to Change

Startups change drastically within their first few years in operation. A
key to success is to evolve and adapt your business model to your market
and industry.
Some strategies to make sure you’re prepared to adapt are:

 Hiring forward thinkers so you know your team is adaptable

 Listening to feedback from customers, suppliers and others that you
work with
 Staying updated on trends in your industry

Unit-II

Idea Generation and Project Formulation: Ideas in Entrepreneurships – Sources

of New Ideas – Techniques for Generating Ideas – Preparation of Project Report
–Contents; Guidelines for Report preparation – Project Appraisal Techniques –
Economic Analysis-Financial Analysis-Market Analysis.;

Sources of New Ideas

1.Past Work Experience: If you have been working somewhere for the past
few years, you have obviously been doing something right to still be on the
payroll. During this time, you have gained experience in your field and been
professionally exposed to various other fields. You have developed contacts
both within your company and also elsewhere in the industry. You have picked up
skills and may also have received training in a specialized subject.

When you start a business in some way connected to the work you used to do,
you start off with a lot of advantages. You bring with you your experience,
technical knowledge, contacts, etc. That is a huge plus in the uncertain world of
business.

2.Hobbies: Hobbies are a means to avoid boredom and dissatisfaction at work.

Explore both formal hobbies such as stamp collection, badminton, and classical
music and also informal leisure activities such as walking, yoga, and cooking. For

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example, if you are interested in cricket, you can start a sports goods shop
specializing in cricket, manufacture protective gear, or start a local cricket
magazine, or even a cricket training camp. The possibilities are endless.

3.Strengths and Abilities: Be sure to allow your business to exploit your

strengths and abilities and to steer clear of your weaknesses. List your
strengths and weaknesses.

There is an interesting exercise to list your strengths, which is given below:

1. List your top ten accomplishments.

2. List the skills and personal attributes you applied to achieve them.

3. The more commonly occurring ones are your major strengths.

You may surprisingly find out that you are good at compiling information or
negotiating or working with animals.

Look at what you enjoy and what you are good at, and try combining them in the
business you are going to start. If you love painting but are not good at it, do
not become a painter but if you have great communication skill, you can think
about starting a business selling works of new artists to hotels and offices.

4.Friends and Family:

An interesting way to know their thoughts is to get them Consulting friends and
family members can be a great idea to look for ideas. Those close to you might
have also thought of starting a business. You can take advantage of their work
experience and interests to generate ideas and they would also be useful in the
analysis of these ideas. together in a focus group. A focus group is a group of
people sitting together to discuss a specific topic. You can invite some other
people with domain knowledge to join you in this. For example, if you want to
discuss business opportunities in the automobile sector, invite someone you know
who works for Maruti.

5.Distribution Channels: The retailers and the distributors are the people
closest to the consumer. No one knows more than them, what the consumer
wants and what is he/she getting right now. Most distributors deal with a wide
variety of products so their experience may be across industries.

6.Travel: Ideas may develop when you travel to different parts of the country
or to different countries and see different ways of doing things or products
that may work at home. Travel makes you aware of the alternatives.

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 7.Books and Magazines: You can pick up a lot from business publications and
periodicals. They write on current trends in industry, best practices, legal
issues, and general business environment. Business magazines are good sources
of knowledge but you can gain from reading general interest magazines too.
They keep you in touch with the latest trends and happenings.

8.Current Trends: It is important to keep abreast of the current trends. Look

at the world around you and see where it is headed. What new opportunity does
this trend throw up? Double income families may mean greater demand for
crèches, home security, and ready- to-eat products. Keep your eyes and ears
open for new trends and fads.

9.Research Organizations:

Across the country, there are many research organizations and even some
universities engaged in developing new technology and commercializing them. If
you visit regional research labs, you would be surprised at the amount of
relevant work going on there.

10.The Web: The Internet has today become the most important search tool. Where
else will you find so much information literally at your fingertips? Good if you have a PC
and an Internet connection at home, or else you may go to the neighbourhood Internet
cafe. Use the search engines effectively and visit relevant sites.

Techniques for Generating Ideas

1. Role Playing: Role playing involves designers acting out scenarios. These scenario
are often ones that the designers observed during the research phase of the design
process when they participated in user research. This technique is a tool for both
team-based ideation
and communication to users and/or clients
2. Active Search: Active search refers to designers hunting for a particular
solution. This hunt could range from a web search for images of current vacuum
cleaners to searching through books, magazines, newspapers, etc. to find the
demographics of a
particular population
3. Attribute List: Attribute listing refers to taking an existing product or system,
breaking it into parts and then recombining these to identify new forms of the
product or system
4. Brainstorm: Brainstorming involves generating a large number of solutions to a
problem (idea) with a focus on the quantity of ideas. During this process, no ideas are
evaluated; in fact unusual ideas are welcomed. Ideas are often combined to form a
single good idea as suggested by the slogan “1+1=3” [12]. Brainstorming can be used
by groups as well as individuals Since brainstorming was the first idea generation

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technique created it is often referred to as, “the mother of all idea generation
techniques”
5. Collaborate: Collaboration refers to two or more people working together towards
a common goal Designers often work in groups and co-create during the entire
creative process.
6. Concrete Stimuli: Concrete stimuli are used when designers want to gain new
perspectives on a problem by manipulating physical materials. This could be looking at
paint chips, feeling different material textures or physically manoeuvring objects.
7. Critique: Critique refers to receiving input on current design ideas. This could be
collaborative such as receiving a design critique from a colleague or individuals
critiquing their own ideas (either systematically or intrinsically). This technique often
spurs new thought by finding solutions to design flaws within current concepts.
8. Documenting: Documenting refers to designers writing down ideas (physically or
electronically). This includes journaling, writing stories, and taking notes.
9. Expert Opinion: Designers often elicit opinions from experts to identify potential
problems with products or services before more comprehensive evaluations. This
occurs when they are looking for an answer to a problem that is outside their domain
knowledge or when they want to test a new idea
10. Empathy/User Research: User research requires the designer to observe people
in everyday situations in order to develop empathy for them. The methods used to
conduct this type of research is founded in ethnographic research methods such as
observations, field studies and rapid ethnography
11.Encompass: Encompassing is an inspirational technique which involves designers
immersing themselves in information relevant to the current project.
12.Forced Analogy: Force d analogy involves comparing the current problem with
something else that has little or nothing in common in order to gain new insights and
results. This technique often generates ideas for new areas of research.
13.Incubate: Incubation refers to stepping back from the problem to let the
subconscious mind work
14.Passive Searching: Passive searching refers to designers looking through material
(web, magazines, books) for inspiration without searching for a particular solution to
a problem. They are simply looking for inspiration.
15.Prototyping: Prototyping, in this study, refers to a low- fidelity model of an idea.
These models can be created with any type of material (paper, clay, etc.) as they are
only used to conceptualize a thought.
16.Reflect: Reflection occurs when designers review their previous work (sketches,
documents, prototypes, etc.)
17.Sketching: Sketching refers to a rough drawing of an idea.
18.Socializing: Socializing refers to talking with others about topics unrelated to the
current project.

PROJECT

17
A project is a combination of interrelated activities to achieve a specific objective within a
schedule, budget, and quality. It involves the coordination of group activity, wherein the
manager plans, organizes, staffs directs, and controls to achieve an objective, with
constraints on time, cost, and performance of the end product.

Characteristics of a Project :
Projects are not homogeneous. Each project is different in itself. The
distinctive characteristics of a project are as follows.

1. Objectives –
Every project is started with some objective or goal viz. time, budget,
quality, and quantity, when objectives are fulfilled project cause existing.
You can initially define the objectives of the project what actually need
to achieve. Objectives are the key characteristics of the project where
you will see the progress of the project and time to time analysis will
show you the result of how much you have achieved.

2. Single entity –
A project is one whole thing. This means that in a project although
different people contribute still is recognized as a single entity. The
teams are often specifically assembled for a single project.

3. Life Span –
No project can be ceaseless and indefinite. It must have one and beyond
which it cannot proceed. Every project is invariably time-bound. At the
time of planning, you will see the time phase of the project where the
team can work independently on the project modules. Let’s consider an
example project that is divided into three modules let’s say A, B, and C.
If the total time span of a project is 5 months then you can set the time
span for modules independently like A can complete in 2 months and also B
can complete in 2 months and C can complete in 1 month as per
requirement.

4. Require funds –
Every project needs funds to reach the endpoint. Without adequate
funds, no project can be successfully implemented. Cost estimation is one
of the essential factors for any organization. So, calculating in advance
the required funds for the project will be very impactful.

5. Life Cycle –
Each project has a life cycle with different stages like start, growth,
maturity, and decay. A project has to pass through different stages to
get itself completed. Let’s consider an example where the project is

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 related to software development then you can say SDLC (Software
Development lifecycle) will be the life cycle of the project where you will
see many stages like planning, defining, designing, building, testing, and
deployment, etc.

6. Team Spirit –
Team spirit is required to get the project completed because the project
constitutes different members having different characteristics and from
various disciplines. But to achieve common goal harmony, missionary zeal,
team spirit is necessary.

7. Risk and Uncertainty –

The project is generally based on forecasting. So risk and uncertainty are
always associated with projects. There will be a high degree of risk in
those project which are not properly defined. Only the degree of control
over risk and uncertainty varies with the project being conceived based
on information available.

8. Directions –
Project is always performed according to the directions given by the
customers with regard to time, quality and quantity, etc. The convenience
of the supply sides of economics such as labor availability ore resources
and managerial talent etc. are all secondary concerns, primary being the
customer requirement.

9. Uniqueness –
Each project is unique in itself, and it’s having own features. No two
projects are similar even if the type of organization is the same. The
uniqueness of the project can measure by considering the many factors
like objectives, features of the project, application of the project, etc.

10. Flexibility –
Change and project are synonymous. A project sees many changes
throughout its life span. These changes can make projects more dynamic
and flexible.

11. Sub-Contracting –
Sub-contracting is a subset of every project and without which no
project can be completed unless it is a proprietary firm or tiny in nature.
The more complexity of a project the more will be the extent of
contracting. Every project needs the help of an outsider consultant,
engineer, or expert in that field.

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 12. Cost –
If the quality of the project is to be changed there could be an impact on
the cost of the project. The cost could increase if more resources are
required to complete the project quicker

PROJECT REPORT:

A Project Report is a document which provides details on the overall picture of

the proposed business. The project report gives an account of the project proposal
to ascertain the prospects of the proposed plan/activity.

Contents of a Project Report

Following are the contents of a project report.

Title

The title page of the report denotes the title of a project and the author’s
name. It mentions the name and detail of industry for which the project is
undertaken. This page must clearly define the area and scope of project.

Abstract

Abstract is a brief summary giving details about the contents of a project

report. It provides an idea to reader regarding what is project report about.
Anyone who does not know anything about report simply by reading its abstract
can make out whether it is of their interest or not. Abstract is generally half a
page long.

Acknowledgements

This section of report denotes the individuals who assisted you during your
project work. It is meant for thanking the people who provided you technical or
any other type of assistance such as your supervisor.

Contents page

Content page tells about the main chapter and sub sections included in the
report. Chapters with proper titles are mentioned along with the page numbers
telling where the particular chapter/section begins and ends. It should be
ensured that only sufficient levels of subheadings are provided under each
chapter.

Introduction

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It is the most crucial element of the project report. The introduction tells
about the nature and scope of the report to the reader. This part summarizes
what the author set out to attain, gives a clear description regarding the
background of the project, main contributions, and relevance. The introduction
shall summarize the key things in the report and provide the sections containing
the technical material.

Background

Background component sets the project report into context and describes the
layout for attaining project goals. For meeting out the proposed goals different
approaches should be evaluated for choosing the efficient one. However, this
part of report can be included as a part of introduction also but it is ideal to
present it as a separate chapter in case if project involve extensive amount of
research and ground work. All pieces of work which are listed should be
provided with proper sources from where they are referred.

Body of report

This is the central part of project report which contains three to four chapters
which describes all technical work undertaken for the completion of project.
The chapter’s structure dependent upon project which reflects the
development of project in chronological order. It should be justified why a
particular approach is chosen above other alternatives mentioned in background
component. Every interesting features and problems during the implementation
should be properly documented. All contents relating to testing and integration
should be thoroughly discussed with the supervisor.

Conclusions and future work

It denotes the achievements made as a result of completing the project. This

part of report concludes the success and failures of a project. It also provides
suggestions for future work of project for taking it further. No project is
completely perfect and each of it come with certain limitations.

Bibliography

Bibliography tells about the books, articles, journals, manuals etc. which are
used while doing the project or referred in the report. Full and accurate
information regarding sources used such as title, author name, issue and page
number should be mentioned for readers. Providing the source of information
helps readers in validating the facts of report.

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 Appendix

This part comprises of information that is peripheral to main body of report.

Things included here are such as program listings, graphs, proofs, tables or any

other thing that would break up the theme of text if it appeared in situ. All
material should be bind in a single volume and compressed as much as possible.

User Guide

This section consists of proper instructions for better understandability of

users. Suppose a project that had led to the development of new software, it
should provide a complete guide on how to use it. It displays all essential
features of project using diagrams for illustrating them properly. User guide
component of report should be kept simple and concise.

Guidelines for Project Preparation from Planning Commission

1. General Information:

The feasibility report should include an analysis of the industry to which the
project belongs. It should deal with the past performance of the industry. The
description of the type of industry should also be given, i.e., the priority of the
industry, increase in production, role of the public sector, allocation of
investment of funds, choice of technique, etc. This should also contain
information about the enterprise submitting the feasibility report.

2. Preliminary Analysis of Alternatives:

This should contain present data on the gap between demand and supply for the outputs
which are to be produced, data on the capacity that would be available from the projects
that are in production or under implementation at the time the report is prepared, a
complete list of all existing plants in the industry, giving their capacity and level of
production actually attained, a list of all projects for which letters of intents/ licenses have
been issued and a list of proposed projects.

3. Project Description:

The feasibility should provide a brief description of the technology /process

chosen for the project. Information relevant to determining optimality of the
location chosen should also be included. To assist in the assessment of the
environmental effects of a project, every feasibility report must present the
information on specific points, i.e., population, water, air, land, flora and fauna;
effects arising out of project’s pollution, other environmental discretions, etc.

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4. Marketing Plan

A good marketing plan should contain the following items:

a. Data on the marketing plan.

b. Demand and prospective supply in each of the areas to be served.

c. The method and data used for main estimates of domestic supply and
selection of the market areas should be presented. Estimates of the degree of
price sensitivity should be presented.

5. Capital Requirements and Costs:

The estimates should be reasonably complete and properly estimated.

Information on all items of costs should be carefully collected and presented.

6. Operating Requirements and Costs:

Operating costs are essentially those costs which are incurred after the
commencement of commercial production. Information about all items of
operating cost should be collected. Operating costs relate to the cost of raw
materials and intermediates, fuel, utilities, labour, repair and maintenance,
selling expenses, and other expenses.

7. Financial Analysis:

The purpose of this analysis is to present some measures to assess the financial
viability of the project. A proforma Balance Sheet for the project data should
be presented. Depreciation should be allowed for on the basis of specified rate
by the Bureau of Public Enterprises (BPE). Foreign exchange requirements
should be cleared by the Department of Economic Affairs (DEA).

8. Economic Analysis:

Social profitability analysis needs some adjustment in the data relating to the
costs and returns to the enterprise. One important type of investment involves
a correction in input and costs, to reflect the true value of foreign exchange,
labour and capital. The enterprise should try to assess the impact of its
operations on foreign trade. Indirect costs and benefits should also be included
in the report. If they cannot be quantified, they should be analysed and their
importance emphasised.

9. Miscellaneous Aspects:

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The preceding three areas are deemed appropriate to almost every new small
enterprise. Notwithstanding, depending upon the size of the operation and
peculiarities of a particular project, other items may be considered important
to be applied out in the project report. To mention a few, probable use of
minicomputers or other electronic data processing services, cash flow
statements, method of accounting etc., may be of great use in some micro and
small enterprises.

Project appraisal

Under the project appraisal process, a financial institution conducts an

assessment of various aspects of an investment proposition independently and
objectively to come to a viable financing decision. Project appraisal for finance
is done using five methods that are discussed below:

1. Economic Analysis

Under economic analysis, the following project aspects are taken into
account: raw material requirements, level of capacity utilization, expected
sales, expected costs, and plausible profits.

A business should always ascertain the profit volumes of the company as the
same would determine other economic variables such as sales, purchase,
expenses, etc. The company needs to anticipate the targeted sales required to
achieve the forecasted profit volumes. The sales in turn depend on the demand
for the product. Thereby, enlisting the product demand as a quintessential
factor for ascertaining the project feasibility.

.Also, the location for setting up the enterprise is essential in ascertaining the
viability of the project. While selecting the location, various government
policies, incentives, and concessions offered by the government schemes need
to be contemplated. Therefore, location is an important attribute of economic
analysis.

2. Financial Analysis

Financial analysis is an important prerequisite for any successful business. The

project appraisal involves assessing the fixed capital and working capital
requirements of the business to ascertain the financial viability of the business

Fixed capital, also known as ‘fixed assets’ in a company, include both the tangible
as well as intangible assets, which once purchased are used repetitively over a

24
period of time. Fixed assets shall include land and building, vehicle, plant and
machinery, equipment, etc. Depending upon the type of operation, scale of
operation, and time of investment, the requirement of fixed capital in a company
varies. While evaluating the requirement of Fixed Capital, various factors should
be taken into consideration, such as, the cost of the asset, architect and
engineer’s fees, electrification and installation charges (which normally come to
10 percent of the value of machinery), depreciation, pre-operation expenses of
trial runs, etc., Likewise, any cost incurred in remodeling, repair, and additions
of buildings should also be captured in the project report.

Working capital is the excess of current assets over current liabilities. A ratio
of 2:1 (Current Assets: Current Liabilities) is considered to be viable. Current
assets are those assets that can be conveniently converted into cash within one
week. Whereas, Current liabilities refer to those obligations that can be repaid
in a period of one week. Thus, working capital suffices an organization’s day-to-
day requirements and hence serves as a lubricant for the smooth transition of
the business. Insufficiency of working capital may adversely impact the working
of the business.

3. Market Analysis:

Before commencing the production of the product, the business must conduct a
market analysis to understand the potential demand for the product. Market
analysis involves demand forecasting. Demand Forecasting probes into
anticipating and identifying the requisite market for the product to be
purchased. Some of the common methods of demand forecasting include:

i) Opinion Polling Method: A survey is conducted and the opinions of the

ultimate customers are considered. The various methods are: Under this
method, sales are estimated by simply adding the probable demands of all
customers

 Sample Survey: Under this method, a random sample of the total population is
approached to ascertain the demand of the product during the forecasted
period of This date of the defined sample is taken and summed. The total
demand of the sample is used to calculate the total demand of the population.
 Sales Experience method: A sample market is surveyed before the sale of the
new product under this method. The results of the survey are then projected to
that of the entire universe in order to assimilate the total demand.
 Vicarious Method: In this method, consumers are approached indirectly via
dealers who have an understanding of the potential customers. In this method,
the dealer’s opinion about the customer’s opinion is captured.

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ii) Life cycle Segmentation Analysis: It is based on the concept, that like
humans a product also has a defined life cycle. The product life cycle captures
the following stages:

 Introduction
 Growth
 Maturity
 Saturation
 Decline

4. Technical Feasibility:

Technical feasibility refers to evaluating and assessing the adequacy of the

proposed plant and equipment to produce the said product within the prescribed
norms. is evaluated. It is done to Technical feasibility evaluates that whether
the business has the sufficient know-how or the same needs to be procured
from somewhere else. And if the arrangement is to be made, then the right
sources are being researched. In the case of foreign collaboration, the terms
and conditions of the same shall be clearly spelled out.

While assessing the technical feasibility of the project, the following factors
should be duly considered:

 Availability of land and site.

 Availability of adequate raw materials as per defined quantity and quality.
 Availability of other inputs like water, power, transport, communication
facilities.
 Availability of servicing facilities like machine shops, electric repair shops, etc.
 Adequate licenses for coping with anti-pollution law.
 Availability of workforce as per required skill and arrangements proposed for
training-in-plant and outside.

5. Managerial Competence:

The ability of the management to run a business successfully is quintessential

for assessing the viability of any project. A poor project may flourish with the
backing of good management support. Thus, evaluating the competence of the
management or the talent of the promoter serves as a strategic advantage for
the success of the project.

Unit-III
Institutions Supporting and Taxation Benefits: Central level Institutions:
NABARD; SIDBI,– State Level Institutions –DICs – SFC - Government
Policy for MSMEs - Tax Incentives and Concessions

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National Bank for Agriculture and Rural Development (NABARD)

National Bank for Agriculture and Rural Development (NABARD) has released a
study named, ‘Achieving Nutritional Security in India: Vision 2030’, in December
2020. The report assesses the trends for nutritional security and identifies
determining factors that have a significant effect on reducing malnutrition
levels in India. With this, it becomes important for IAS Exam candidates to
learn what NABARD is and why is it an important entity in the Indian Economy.

NABARD is India’s apex development bank – National Bank for Agriculture and
Rural Development. With headquarters in Mumbai, NABARD has branches
across India.

What is NABARD?
Important Facts about NABARD
It came into existence on 12th July 1982
CRAFICARD was formed on 30th March 1979.

Its origin lies with

B. Sivaraman was the chairman of the
committee.
Who owns NABARD? Government of India
What is the vision of NABARD? Rural prosperity
 NABKISAN Finance Limited (NABKISAN)
 NABSAMRUDDHI Finance Limited (NSFL)
 NABFINS Limited (NABFINS)
 NABFOUNDATION
Who are NABARD subsidiaries?  NABCONS (NABARD Consultancy
Services)
 NABVENTURES Limited
 NABSanrakshan Trustee Company Private
Limited
 Dairy Entrepreneurship Development
Scheme
 Commercial production units of organic
inputs
 Agriclinic and Agribusiness Centres
Government Schemes with NABARD
Scheme
partnership
 National Livestock Mission
 GSS – Ensuring End Use of Subsidy
Released
 Interest subvention Scheme
 New Agricultural Marketing

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 Infrastructure
NABARD Official Website https://www.nabard.org/

In the year 1982, CRAFICARD or the Committee to Review Arrangements of

Institutional Credit for Agriculture and Rural Development recommended the
establishment of a developmental bank and accordingly, NABARD was set up.

It was formed by a special parliamentary act. The chief focus of the

organisation was the advancement of rural India by enhancing the flow of credit
for the upliftment of agriculture as well as the rural non-agricultural sector.

Functions of NABARD

The functions of NABARD are described below.

 In order to build an empowered and financially inclusive rural India, NABARD

has specific departments that work towards the desired goals. These
departments can be collectively categorized into three majors units:
o Financial
o Developmental
o Supervision
 The financial support necessary to build rural infrastructure is provided by
NABARD.
 Preparation of district-level credit plans by NABARD are used to guide and
motivate the banking industry to achieve required targets.
 NABARD also supervises the Regional Rural Banks (RRBs) and Cooperative Banks
along with developing their banking practices and integrating them to the Core
Banking Solution (CBS) platform.
 NABARD also helps handicraft artisans sell their products by training and
providing a marketing platform for them.
 NABARD has partnered with various leading global organisations and
institutions affiliated with the World Bank that have played a role in
transforming agriculture.
o It offers advisory services and financial assistance provided by
these international partners to help in consultation with rural
development and other agricultural practices.

Important Contributions of NABARD

NABARD Contributions
Kisan Credit Card Scheme: RuPay Kisan Cards:

 This scheme was  All farmer clients were

introduced in 1998 in provided with RuPay cards
association with RBI trying to bring a technological

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 to provide crop loans. change in the rural financial
sector.

Small Industries Development Bank of India (SIDBI)

Small Industries Development Bank of India (SIDBI) is an independent financial

institution aimed at aiding the growth and development of Micro, Small and
Medium Enterprises (MSMEs) which contribute significantly to the national
economy in terms of production, employment and exports.

 SIDBI was established with the mission of facilitating and strengthening the
flow of credit to Micro, Small and Medium Enterprises and for addressing the
developmental and financial gaps in the ecosystem of MSMEs.
 It is a statutory body set up under an act of the Indian Parliament in 1990.

Functions of SIDBI

 It aims at emerging as a single-window to meet the developmental and financial

needs of MSMEs in order to make them globally competitive, strong, vibrant and
to protect the institution as a customer-friendly financial body.
 It also aims at enhancing the wealth of shareholders through the modern
technology platform.
 It is involved in the promotion and development of the MSME sector.
 It is the principal institution for the development, promotion and financing of
the MSME sector and for coordination of functions of the institutions engaged
in similar activities.
 SIDBI retained its position in the top 30 Development Banks of the World in
the ranking of The Banker, London.
 SIDBI also functions as a Nodal/Implementing Agency to various ministries of
the Government of India viz., Ministry of MSME, Ministry of Textiles, Ministry
of Commerce and Industry, Ministry of Food Processing and Industry, etc.

Financial Support of SIDBI to MSMEs

SIDBI provides financial support to MSMEs in the following ways:

1. Indirect financing by way of refinancing the banks, refinancing financial

institutions for onward lending to MSMEs.
2. Direct financing by way of service sector financing, receivable financing, risk
capital and sustainable financing, etc.

Apart from providing financial assistance, SIDBI focuses on the “credit plus
approach” under which it facilitates technology modernisation & upgradation,
cluster development, enterprise development, upgrading the skills and support
marketing activities.

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 District Industrial Centre (DIC)

The district industrial centre (DIC) was established on 8th may 1978. With a
view to provide integrated administrative frame work at the district level for
promotion of Small Scale Industries.
Objectives of DIC:
1. To accelerate the overall efforts for industrialization of the district
2. To develop the rural industries and handicrafts and promotes rural
industrialization.
3. To have balance economic development all over the district
4. Providing the benefits of the government to the new entrepreneurs.
5. Centralization of procedures required to start a new industrial unit and
minimization of the
efforts and time required to obtain various permissions, Licenses, registrations,
subsidies etc.

Functions of District Industrial Centres:

1. It monitors the registration of MSMEs
2. It provides infrastructural assistance to entrepreneurs in form of grievance
redressel through the district level clearances’ committees of industries.
3. The DIC organizes entrepreneurship development training programs.
4. It provides required information about local sources of raw materials and
their availability.
5. It sanctions SSI registration
6. It prepares techno-economic feasibility report.

7. It provides opportunity guidance to entrepreneurs.

8. It guides entrepreneur with regard to manpower assessment with respect to
skilled and semi skilled workers.
9. It provides information about various Govt schemes, subsidies ,grants and
assistance available from the other corporations set up for promotion of
industries.
10. Helps entrepreneurs in obtaining sponsored schemes licences from the
lectricity Board, Water Supply Board, no objection certificates etc.
11. Implements government sponsored schemes for educated unemployed people
like PMRY scheme. Jawahar Rojgar yogana etc.

State Financial Corporation

At the time of setting up of the Industrial Finance Corporation of India, the

necessity of establishing similar other institutions at the state level for
assisting the smaller industrial concern had not been recognised because it was

30
not possible for a single institution to satisfy the capital needs of smaller
concerns speeded all over the country. In 1951, the State Financial Corporation
was passed by the Central Government to create a separate financial
corporation for the states. The S.F.C. meets the financial requirements of small
industrial concerns in the private sectors.
Objectives and Scopes:

The main objectives of the S.F.C are to provide financial assistance to

medium and small scale industries which are outside the scope of I.F.C.I. The
main function of S.F.C. is limited within its states. It covers not only public
limited companies but also private limited companies, partnership firms and
proprietary concerns.

Functions Of SFC:

The main functions of S.F.C. are as follows:

1. It grants loan and advances to industrial concerns that are repayable

within the maximum period of 20 years.
2. It subscribes the shares and debentures of industrial concerns.
3. It underwrites the shares and debentures of the industrial concerns.
4. It guarantees loans raised by the industrial concerns repayable within 20
years.
5. Guarantees deferred payments for purchase of capital goods with India.
6. It acts as an agent of the State and central Government.

According to section 2(C) of the SFC Act 1951 as amended in 1961, the SFC
can assist an industrial concern that is engaged in any of the following activities:

1. Manufacture, preservation or processing of goods

2. Hotel Industries
3. Road Transport
4. Generation or distribution of electricity or any other form of power
5. Development of any area of land as industrial estate.
6. Fishing or providing facilities for fishing or manufacture of fish products.
7. Providing special or technical knowledge or other services for the
promotion of industrial growth.

SFC provides foreign exchange loans under World Bank schemes.

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 The SFC occupies an important place as an institution for industrial
development in the country. The major beneficiaries of the SFC are assistances
are the following industries:

1. Food Processing
2. Textile Chemical and Chemical Products
3. Metal Production
4. Cement.

Micro, Small and Medium Enterprises(MSME)

MSME stands for Micro, Small and Medium Enterprises. These industries or
enterprises form the backbone of our economy and need assistance and
protection from other big companies as they lack resources and technology. To
do this the government provides some schemes, rebates or counselling to these
enterprises.

The existing MSME classification was based on the criteria of investment in

plant and machinery or equipment. So, to enjoy the MSME benefits, they have
to limit their investment to a lower limit, as mentioned below:

Existing MSME Classification

Sector Criteria Micro Small Medium
Manufacturing Investment < Rs.25 lakh < Rs.5 crore < Rs.10 crore
Services Investment < Rs.10 lakh < Rs.2 crore < Rs.5 crore

These lower limits are killing the urge to grow as they are unable to scale their
businesses further. Also, there has been a long-pending demand for the revision
of MSME classification so that they can further expand their operations while
continuing to avail the MSME benefits. Now, under the Atmanirbhar Bharat
Abhiyan, the government revised the MSME classification by inserting
composite criteria of both investment and annual turnover.

Also, the distinction between the manufacturing and the services sectors under
the MSME definition has been removed. This removal will create parity between
the sectors. The following is the revised MSME classification, where the
investment and annual turnover, both are to be considered for deciding an
MSME.

Revised MSME Classification

Criteria Micro Small Medium*
Investment < Rs.1 crore < Rs.10 crore < Rs.50 crore
& & & &

32
Annual Turnover < Rs.5 crore < Rs.50 crore < Rs.250 crore

Government Polices for MSMEs

1.Udyog Aadhaar Memorandum

Aadhaar card is a 12 digit number given to all individuals by the government. In

this, the Aadhaar card is a mandatory requirement. The benefit of registering
in this scheme is the ease in availing credit, loans, and subsidies from the
government. Registration can be done both ways in the online mode or the
offline mode.

2. Zero Defect Zero Effect

In this model, goods that are manufactured for export have to adhere to
a certain standard so that they are not rejected or sent back to India. To
achieve this the government has launched this scheme. In this, if the
goods are exported these are eligible for some rebates and concessions.

3. Quality Management Standards & Quality Technology Tools

Registering in this scheme will help the micro, small and medium
enterprises to understand and implement the quality standards that are
required to be maintained along with the new technology. In this scheme,
activities are conducted to sensitize the businesses about the new
technology available through various seminars, campaigns, activities etc.

4. Grievance Monitoring System

Registering under this scheme is beneficial in terms of getting the

complaints of the business owners addressed. In this, the business
owners can check the status of their complaints, open them if they are
not satisfied with the outcome.

5. Incubation

This scheme helps innovators with the implementation of their new

design, ideas or products. Under this from 75% to 80% of the project
cost can be financed by the government. This scheme promotes new
ideas, designs, products etc.

6. Credit Linked Capital Subsidy Scheme

33
 Under this scheme, new technology is provided to the business owners to
replace their old and obsolete technology. The capital subsidy is given to
the business to upgrade and have better means to do their business.
These small, micro and medium enterprises can directly approach the
banks for these subsidies.

7. Women Entrepreneurship

This scheme is especially started for women who want to start their own
business. The government provides capital, counselling, training and
delivery techniques to these women so that they manage their business
and expand it. The government has launched a number of more schemes
and support system for these enterprises, to know more about the MSME
schemes the following link of the government can be checked.

MSMEs - Tax Incentives and Concessions

MSME enterprises are the backbone of any economy and are an engine of
economic growth, promoting equitable development for all. Therefore, to
support and promote MSMEs, the Government of India through various
subsidies, schemes, and incentives promote MSMEs through the MSMED Act.

To avail of the benefits under the MSMED Act from the Central or State
Government and the Banking Sector, MSME Registration is required. This blog
will help you entrepreneurs in understanding the Benefits under MSME
Registration that Startups should not miss on. Benefits are –

1. Collateral Free loans from banks

2. Subsidy on Patent Registration

3. Overdraft Interest Rate Exemption

4. Industrial Promotion Subsidy Eligibility

5. Protection against Payments (Delayed Payments)

6. Fewer Electricity Bills

7. ISO Certification Charges Reimbursement

8. Special consideration on international trade fairs

9. Waiver of Stamp Duty and Registration Fees

34
10. Exemption under Direct Tax Laws

11. Bar Code registration subsidy

12. Subsidy on NSIC Performance and Credit ratings

13. Eligible for IPS subsidy

14. Access to Tenders

15. The Reservation Policy has two objectives

1. Collateral Free loans from banks

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was
launched by the Government of India to make available collateral-free credit to
the micro and small enterprise sector. Both the existing and the new
enterprises are eligible to be covered under the scheme. The Ministry of Micro,
Small and Medium Enterprises, Government of India, and Small Industries
Development Bank of India (SIDBI), established a Trust named Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement
the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

2. Subsidy on Patent Registration

A hefty 50% subsidy is given to the Enterprise that has the certificate of
registration granted by MSME. This subsidy can be availed for patent
registration by giving application to respective ministry.

3. Overdraft Interest Rate Exemption

Businesses or enterprises registered under MSME can avail a benefit of 1% on

the Over Draft as mentioned in a scheme that differs from bank to bank.

4. Industrial Promotion Subsidy Eligibility

Enterprises registered under MSME are also eligible for a subsidy for
Industrial Promotion as suggested by the Government.

5. Protection against Payments (Delayed Payments)

At times, the buyers of services or products from the MSME’s or SSIs tend to
delay the payment. The Ministry of Micro, Small and Medium Enterprise lend a
helping hand to such enterprises by giving them the right to collect interest on

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the payments that are delayed from the buyer’s side. The settlement of such
disputes must be done in minimum time through conciliation and arbitration.

In case, if any MSME registered enterprise supplies any goods or services to a

buyer then the buyer is required to make the payment on or before the agreed
date of payment or within 15 days from the day they had accepted the goods
and services from MSME or SCI registered business( if there is no mention of
the date of payment).

If the buyer delays the payment for more than 45 days after accepting the
products or services then the buyer has to pay the compound interest along
with interests (monthly) on the amount that was agreed to be paid. The interest
rate is three times the rate that is notified by the Reserve Bank of India.

6. Fewer Electricity Bills

This concession is available to all the Enterprises that have the MSME
Registration Certificate by providing an application to the department of the
electricity along with the certificate of registration by MSME.

7. ISO Certification Charges Reimbursement

The registered MSME enterprises can claim the reimbursement of the

expenses that were spent for the ISO certification.

8. Special consideration on international trade fairs

Under the International Cooperation Scheme, financial assistance is provided on

a reimbursement basis to the State/Central Government organizations,
industries/enterprises Associations and registered societies/trusts and
organizations associated with MSME for deputation of MSME business
delegation to other countries for exploring new areas of MSMEs, participation
by Indian MSMEs in international exhibitions, trade fairs, buyer-seller meet and
for holding international conference and seminars which are in the interest of
MSME sectors.

9. Waiver of Stamp Duty and Registration Fees

At present, IT units in public IT Parks are exempted from Stamp Duty and
Registration fees up to 31st March 2006. Now all new industrial units having
MSME Registration and expansions will be exempted from payment of Stamp
Duty and Registration fees.

10. Exemption under Direct Tax Laws

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Enterprises that have MSME Registration can enjoy Direct Tax Exemption in
the initial year of business, as mention in the scheme by Government and
depending on business activity.

11. Bar Code registration subsidy

Enterprises that have MSME Registration can avail Bar Code Registration
subsidy as mentioned in the scheme.

12. Subsidy on NSIC Performance and Credit ratings

Enterprises that have MSME Registration can avail Subsidy on NSIC

Performance and Credit ratings as mentioned in the scheme.

13. Eligible for IPS subsidy

Enterprises that have MSME Registration are eligible for Industrial Promotion
Subsidy (IPS) as mentioned in the scheme.

14. Access to Tenders

There are multiple government tenders that are open only to MSMEs to
promote small business participation in India.

15. The Reservation Policy has two objectives

Ensure increased production of consumer goods in the small scale sector,

Expand employment opportunities through setting up small scale industries.

Overview of Govt. Initiatives on MSMEs

Under the Chairmanship of Hon’ble Prime Minister Shri Narendra Modi, the
Ministry of Micro, Small and Medium Enterprises (MSME) implements various
programmes/ MSME schemes for the development and promotion of MSMEs
across the country.

Moreover, the Government of India has been really proactive to ensure that all
the benefit of these MSME schemes reaches to the MSMEs in time. To provide
immediate relief to the MSME sector, various announcements (in addition to the
various MSME schemes) have been made under the Atmanirbahar Bharat
Package. The most important ones also included:

 INR 3 lakh crore collateral-free automatic loans for MSMEs to buy raw
material, meet operational liabilities and restart businesses
 Revision of MSME definition to extend maximum benefits to the sector

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  Disallowing global tenders in procurements upto INR 200 cr to create attractive
opportunities for domestic players

 Clearing of MSME dues by the Government and Public Sector Units (PSUs) within
45 days

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