Entrepreneurship

and
Small Medium
Enterprises
 Unit : I
1.Definition,
2.Nature and Importance of an Entrepreneur,
3.Types of Entrepreneur
4.Qualities & Characteristics of an Entrepreneur
5.Intrapreneurship
6.Entrepreneurial Process.
 
Introduction:
An Entrepreneur is the person who is
responsible for
-- setting up a business or enterprise.
-- takes initiative
-- innovative
-- and looks for high achievements.
Definition of an Entrepreneur:
The word derived from the French word
‘enterprendre’ means “to undertake”.

According to J.A Schumpeter:

Entrepreneur is an innovator who carries out
new combinations to initiate the process of
economic development through introduction of
new products, new markets, take over of new
source of raw materials and establishment of a
new organization of industry.
According to Webster: “Entrepreneur is one who assumes
the responsibility of the risk and management of
business.”
 
According to Peter Drucker:
“Entrepreneur is one who always searches for change,
responds to it and exploits as an opportunity. Innovation
is a specific tool of entrepreneurs, the means by which
they exploit change as an opportunity for different
business or service.”

According to Dewing: “The function of entrepreneur is

one that promotes ideas into business.”
Nature and Importance of an Entrepreneur:
1.Contributes for the economic development.

2.Speed up the process of activating the factors of

production.

3.Creation of employment opportunities.

4.Development of backward and Tribal areas.

5.Improvement in the standard of living of the

weaker sections of the society.
Types of Entrepreneur:
1. Trading Entrepreneurs
a.Real Estate,
b.Mall Trading.

2. Industrial Entrepreneurs:
a. Large, b.Medium and c. Tiny Sector.

3.Corporate Entrepreneurs.
4.Agricultural Entrepreneurs
a.Plantation
b.Horticulture
c.Poultry [Poultry feed, poultry equipment, and
poultry processing sectors]

5.Service Entrepreneurs
a.Engineering
b.Beauty Parlours.

6.Health Entrepreneurs.
Classifications of Entrepreneurs
1.Innovating Entrepreneurs

2.Imitative Entrepreneurs

3.Fabian Entrepreneurs [lack the will to adopt to

new methods of production]

4.Drone Entrepreneurs [they are not ready to make

changes in their existing production methods.
They struggle to exist, not to grow ,continue to
operate in a traditional way and resist changes.
 Qualities and Characteristics of an
Entrepreneur.
According to James J.Berne

1.He is an enterprising individual, energetic, hard

working, resourceful, aware of new opportunities,
able to adjust himself with changing conditions
with ease and willing to assume risks involved in
change.
2.He is interested in advancing technology and in
improving the quality of his product or service.
3.He is interested in expanding the scale of his
operations by reinvesting his earnings.

4.He visualizes changes and adopt

5.He is a firm believer in planning and systematic

work.

6.He works for the society at large.

Characteristics of an Entrepreneur.
Technical competence, initiative, good judgment,
intelligence, leadership qualities, self-
confidence, energy, attitude, creativeness,
fairness, honesty, tactfulness and emotional
stability.

1.Mental ability

2.Clear Objectives

3.Business Secrecy
4.Human relations ability

5.Communication ability

6.Technical knowledge
Entrepreneurial Behaviours

1.Grasping opportunity

2. Solving problems creatively

3.Take responsibility

4.Networking effectively to manage

interdependence.
Entrepreneurial Attributes:

1.Achievement orientation and ambition

2.Creativity, determination

3.Preference for learning by doing

Entrepreneurial skills

1.Strategic thinking

2.Negotiating

3.Networking

4.Creative problem solving

Intrapreneurship:
Intrepreneurship or intrapreneuring or corporate
entrepreneurship is the process by which other
new ventures are born with in an existing
corporation.

It involves
-- expansion by exploring new opportunities
-- through new combinations of existing resources.
Entrepreneur Intrapreneur

Independent Semi- independent

person

Raises the necessary Neither raises capital nor

Capital by himself and guarantees the investors.
Guarantees the return to the
investors.

Takes full risks Does not fully bear the

risks.
Operates from outside operating with in the orgns.
Examples for Intrapreneurship:
1) 3M: Minnesota Mining and Manufacturing
a) Allows employees to devote a percentage of
their time to independent projects.

2) HP: They failed to recognize the Steve Wozniaks

proposal for the personal computer. But PC is the
base for the Apple Computers.

David Packard and Charles House[engineer

invented the high quality video monitor. It was
used by NASA also the heart transplants.
3.IBM
-- separate organizations/ board of directors/
autonomous decision making authority.

-- products like Automatic Teller Machine for

Banks, Industrial robots, and the IBM Personal
Computer.
Intrapreneur – Philip Estridge.
Intrapreneurial Environment:
1.Organization operates on frontiers of technology
2.New ideas encouraged
3.Trail and error encouraged
4.Failures allowed
5.Resources available and accessible
6.Multidiscipline teamwork approach
7.Ling time horizon
8.Appropriate reward system
9.Sponsors and support of Top management
Entrepreneurial Process
Stage I : Change in the economic environment,
creates needs for new goods and services.

Stage II: By starting a new venture.

Stage III: Intrapreneurship

Stage IV: Co-ordinating the varied activities to

achieve the entrepreneurial goal.
Unit: II
1.Concept of Entrepreneurship

2. Phases of Entrepreneurship Development

3. Factors Influencing Entrepreneurship.

I. Concept of Entrepreneurship:

Acc to McClelland;
-- Doing things in a new and better way.
-- entrepreneurial role calls for decision making
under uncertainty.

According to Casson,
-- entrepreneurship consists of an eccentric
(unusual)evaluation of economic events which
other people are unwilling to support.
Acc to Keynes:
--ability to mobilize the resources and combine
them to initiate change in production.

Aditya Mittal:
-- Entrepreneurship is a state of mind and can be
applied to any number of different fields.
-- it is critical as it helps to prevent stagnation by
challenging traditional thinking and drives
progress and development that can bring about
long term change.
-- everyone has the potential to be entrepreneurial
in their thinking and approach.

Finally,
An entrepreneur may at best be defined as a
person responsible for existence of new business
enterprises.
II. Phases of Entrepreneurship Development
Three Phases:

1. Initial Phase

2.Development Phase

3.Support Phase
1.Initial Phase:
Creation of awareness about the entrepreneurial
opportunities based on survey.

2.Development Phase: [EDP]

Implementation of training programmes to
develop motivation and managerial skill.

3.Support Phase: Infrastructure support of

counselling and assisting to establish a new
enterprise and to develop existing units.
EDP: Entrepreneurial Development Programme.
EDP is primarily meant for developing those first-
generation entrepreneurs, who on their own cannot
become successful entrepreneurs.

EDP covers 3 areas.

1.Location
2.Target Group
3.Enterprise [ Entrepreneurial activities]
 Institutional Support to Training and
Entrepreneurship Development:
National Level: [Promotion of MSMEs]
1. NISIET –National Institute Small Industry
Extension Training, Hyderabad.

2. IIE – The Indian Institute of Entrepreneurship

Guwahati.

3. NIESBUD – National Institute Entrepreneurship

and Small Business Development
To promote entrepreneurship development in India,
the Ministry has two schemes:
Promotion of;
1.Entrepreneurship Development Institutions[ EDI]

2. National Entrepreneurship Development Board

[NEDB]
Objectives of these Programmes:

1.Promoting entrepreneurship for creating self-

employment through enterprise creating.

2.Facilitating creation of training infrastructure

3.Supporting research of entrepreneurship related

issues.
III. Factors Influencing Entrepreneurship.
1.Technical knowledge

2.Entrepreneurial Training

3.Market contacts

4.Family business

5.Availability of capital
6.Successful role models

7.Local manpower

8.Capable advisors& supporters

9.Supplier assistance

10.Governmental & Institutional support.

Unit III.
1.Entrepreneurial Motivation and the
Motivating Factors
2. Entrepreneurship Development in India
3.Rural Entrepreneurship
4.International Opportunities.
Entrepreneurial Motivation and the
Motivating Factors
Motivation:
The term ‘motivation’ has been derived from the
word ‘motive’.

Motive may be defined as an inner state of our

mind that moves or activates or energizes and
directs our behaviour towards our goals.  
 Motivation may be defined as the process that
motivates person into action and induces him to
continue the course of action for the achievement
of goals.
It is an ongoing process because human
needs/goals are never completely satisfied.
 
Entrepreneurial Motivation
Motive

 
  Goal Behaviour
I. Maslow’s Need Hierarchy Theory:
1.Physiological Needs.
Entrepreneur also being a man needs to meet
his/her physiological needs for survival. Hence,
he/she is motivated to work in the enterprise to
have economic rewards to meet the basic needs.

 
2.Safety Needs.
Economic security and protection: Meeting these
needs requires more money and hence, the
entrepreneur is promoted to work more in his/her
enterprise.
3.Social Needs:
An entrepreneur is motivated to interact with
fellow intrepreneurs, his/her employees and
others.

4.Esteem Needs:
In case of entrepreneurs, the ownership and self-
control over the enterprise satisfies their esteem
needs by providing them status, respect,
reputation and independence.
5. Self-Actualizing
An individual may self-actualize in being a
successful entrepreneur.

Based on this Maslow’s hierarchy of needs, for

entrepreneurs, it is mainly social, esteem and
self- actualization needs that motivate them to
work more and more for satisfying them.
II. McClelland’s Acquired Needs Theory:
1. Need for Affiliation
2. Need for power
3. Need for Achievement:
This refers to one’s desire to accomplish
something with own efforts.

But in case of an entrepreneur, the high need for

achievement is found as the dominating one.
Motivating Factors:
Acc. To P.N.Sharma
1.Educational background

2.Occupational experience

3.Desire to do work independently

4.Family Background
5.Assistance from government

6.Assistance from financial institutions

7.Availability of Technology/raw material

8. Financial assistance from venture capital

Acc. M.Chandra Sekhor
Facilitating Factors:
1.Success stories of entrepreneurs

2.Previous association

3.Previous experience

4.Inherited property

5.Influence of others
6.Encourage and inspiration

7.Reinforcing confidence

8.Moral support

9.Desire to achieve

10.Realization of a dream or an idea or ideas

11.Availability of incentives.
Entrepreneurship Development in India
Approaches to ED
Entrepreneurship development should integrate
-- Entrepreneurial Training,
-- Provision of Incentives,
-- Consultancy services
-- Sectoral Development.
Entrepreneurship Development Programme:
Objectives of EDP programmes.
1.To give substance to the governments policies of
simulation of economic growth.

2.Dispersing( Separate) industries to rural areas

3.Promoting the processing of local raw materials.

Entrepreneurial Development:
1.Entrepreneurial education
2.Publicity for entrepreneurial opportunities
3.Identification of potential entrepreneurs
4. Guidance in selecting products and preparing
project reports.
5.Availability of local agencies with trained
personnel for entrepreneurial counselling and
promotions.
6.Recognition of entrepreneurial skills.
Issues of EDPs:
1.Structure and Composition of EDPs.

2. Areas of Operation

3.Fixing Priorities

4.Lack of specialist’s support.

3. Rural Entrepreneurship:
Rural Entrepreneurs:
The entrepreneur who brings in overall change
through innovation, new ideas for the maximum
social good in rural areas is a rural entrepreneur.

-- Rural entrepreneur is one of the segments of rural

growth.

-- he is responsible for effecting change, add value

to art and crafts.
Rural Industry:
-- rural industry includes village and small
industries.

-- cottage industry is an important aspect of rural

industry.

-- rural industry appropriate for the rural areas.

-- rural industry serves the requirements of rural

people as well as other markets.
Classification of Rural Entrepreneurs :

1.Agriculture Entrepreneurs.

2.Micro Entrepreneurs.

3.Small Business Entrepreneurs

4.Rural Artisans[skilled craftsman].

Benefits of Rural Industrialization:
1.Additional employment opportunities, raise
production, improve economic conditions in
rural areas.

2. Rural industrialization leads to the development

of rural areas because of that it lessening the
-- disproportionate growth in large cities,
-- reducing the growth of slums, social tensions,
-- exploitation and environmental pollution.
3.Rural industries strive to build up village
republics and human resources development.

4.It provides scope for the promotion of artistic

achievement and creativity.
Types of Industries:
1.Handicrafts:[ Raw materials can be wood, metal
clay, cloth etc to produce consumer articles.

-- All India handicrafts Board.

-- Handlooms and Handicrafts Export Promotion

Corporation promotes exports from this sector.

-- The products are,carpets, printed textiles, art,

metal wares, Zari goods, embroidered goods
etc.gems and jewellery.
2.Handloom Industries.

3.Sericulture.[Product from silk]

4.Coir Industries.

5.Khadi and Village Industries.

Problems of Entrepreneurship:
1. Inadequate flow of credit, obsolete technology,
machinery and equipment.

2. Poor quality standards.

3. Inadequate infrastructural facilities.

 International Entrepreneurship Opportunities

International Business

Exporting Non equity Direct foreign

a) Direct arrangement investment
b) Indirect
Unit IV: Starting the Venture.
1.Business Plan
2.Marketing Plan
3.Financial Plan
4.Organizational Plan
5.Financing the venture
a) Source of Capital
b) Venture Capital.
Unit V: Small Scale Industries
Management:

1.Scope and Types of Small Business

2.Industrial Policy for Small Scale Industries.

1.Small Scale Industries:
SSIs existed in India for a long time in various
sectors and contributed significantly in bringing
down;
-- regional imbalance;
-- generating employment opportunities,
output, and exports;
-- fostering entrepreneurship;
--accelerating economic development.
It occupies a position of prominence in India and
contributes over 50% of the industrial production
in terms of value-addition.

This sector plays a key role in the industrialization

process and accounts for one-third of exports, and
employs the largest manpower next to agriculture.

The process of liberalization, privatization and

globalization (LPG) has opened up new
opportunities and challenges for this sector.
1.Small Scale industry:
The amount investment not exceed Rs 10 million.

2.Ancillary Industrial Undertakings

An industrial undertaking which is engaged or is
proposed to be engaged in the manufacture or

-- production of parts, components,

-- sub-assemblies, tooling
-- or the rendering of services and the
undertaking supplies or renders or proposes
to supply or render not less than 50 per cent
of its production or services

-- The amount not exceed Rs 10 million

3.Tiny Enterprises
Investment limit in plant and machinery in
respect of tiny enterprises is Rs 2.5 million
irrespective of location of the unit.
Scope and Types of Small Business
Scope of Small Scale Enterprises

Manufacturing Trading Services

1Village & Cot Ind Whole sale Professional serv.
2 Handlooms& Handicrafts Retail Commercial serv.
3 Modern SSI Franchise Personal ser
i SSI Financial ser.
ii Ancillary Units IT serv.
iii Tiny Units
4 Artisans
Investment:
Tiny : Up to 25 Lakhs
Small : Up to 3 Crore
Medium : Up 5 Crore
Large : Above 5 Crore.
 Small Scale Industries

Traditional Modern Modern Industries.

Khadi &Village Ind Small Scale Power Loom

Handlooms Export Oriented
Coir Ind Ancillaries
Sericulture Tiny Ind
Cottage Ind SSSBEs
Artisans
2. Industrial Policy for Small Scale Industries.

Objectives of Industrial Policy:

1.To maintain a sustained growth in productivity.

2. To enhance employment opportunities.

3. To attain international competitiveness

1.Licensing policy:
-- List of Industries reserved for Small scale
industries are exempted from obtaining from
license.

-- Drugs and pharmaceuticals have been removed

for the compulsory license.

-- only five industries are under compulsory

licensing due to environmental, safety and
strategic considerations.
2.Industrial Entrepreneurs Memorandum. [IEM]
-- Industries not covered under the CL are required
to file an Industrial Entrepreneurs Memorandum
with the Secretariat for Industrial Assistance[SIA]

-- They have to provide the value of the investment

on plant & Machinery of such units.
3.Liberalization of Location Policy:
-- Entrepreneurs are free to select any place for the
location of their business.

- But approval is required if it is located with in 25

KM where the population is more than on
million.

-- This policy may not applicable to the electronic,

computer based industry, printing industries etc.
4.Policy for small scale Industries for reservation of
products.
-- 114 items are reserved for SSI.

-- If any non –SSI wants to manufacture the items

reserved for the SSI then they need to obtain an
industrial license and undertake export obligation
of 50% of their annual production.

-- this condition will not applicable to any

undertakings operating under 100% EOU.
5.Exim policy for small scale sector.
Schemes of Government of India for SSI:
1.Organization of specialized training programmes
on packaging for exports in collaboration with
the Indian Institute of Packaging, Bombay.

2.Assistance to SSI units for participation in the

International and Internal Trade fairs.

3.Dissemination of export information to SSI

through Technological Information Promotions
Systems [TIPS].
4. Incentives for quality production in the SSI
sectors.
EXIM Policy:
-- Status like export/trading/ start trading/super star
trading are given to the small, medium exporters
based on the prescribed export performance level.

-- if the status is claimed in terms of FOB value of

exports, double weightage is given to the export
of products manufactured by SSI.
-- 92% of the non traditional items are exported
from small scale sector.
-- like, auto ancillaries, bicycle
components,cosmetics, handicrafts etc.

-- Following areas were Ministry of commerce

identified to focus more on the sectors.
I) Garments, Gold Jewellery
ii Drugs, Foot wear, Processed food, Electric
power machinery etc.
Infrastructural Set Up:
1.18 Export Promotion Council for the promotion of
specific commodities.
2.Chamber of Commerce and Industry and Asso.of
Trade and Industry.
3.Federations of Indian Export Organizations[FIEO]
4.Trade Fair Authority of India[TFAI].
5.Agricultural and Processed Food Products Export
Development Authority.
6.Spices Trading Corporation of India Ltd.
7.Tea Trading Corporation of India ltd.
Special Import License (SIL)
-- Exporters recognized as Export Houses, Star
Trading House, Trading Houses, etc. Are eligible
for grant of special Import License (SIL) @
certain percentage of their FOB value of exports

-- However, 2 percent additional SIL is granted

for exports of Products manufactured by units
registered as SSI, provided the exports of these
products is more than 50% of the exports during
the period
Export Promotion and Marketing:
SIDO : Small Industries Development Organization
--It provides export consultancy, organizing
specialized training programmes for promoting
exports.
The schemes of SIDO are;

Export Oriented Units.

Between 1991 to1997 the investment in the EOUin
the five states was 28,177 crores spead over
18,91,00 units.
Export Processing Zones:
-- To encourage the exporters who manufacturing
the products are getting incentives from GOI by
establishing EPZs.
-- EPZS and EOUs are under the purview of
Ministry of Commerce.
-- EPZs provided with basic infrastructural facilities
at reduced rates and
-- Developed land sites, standard designed factory
buildings, roads, power, water and drainage also
banking, post office facilities etc.
Packaging for export
-- With a view to acquaint SSI Exporters of the
latest Packaging standards, techniques etc.
training programmes on packaging for exports
are organized in various parts of the country.

-- These programmes are organised in association

with Indian Institute of Packaging which has
requisite expertise on the subject.
Technical & managerial consultancy services
Technical & Managerial Consultancy Services to
the SSI manufacturers/exporters is provided
through a network of field offices to ensure
higher level of production and generation of
higher exports.
Marketing development assistance
Marketing Development Assistance (MDA) is
being operated by Ministry of Commerce under
which MDA is given to exporters through FIEO
and Export Promotion Councils/ Commodity
Boards to plan their marketing strategy for export
growth.

Eligible exporters: -
-- Status Holder exporters namely Export Houses,
Trading Houses etc. They would be eligible to
get MDA through FIEO.
---Such exporters would be eligible to get MDA
through their respective EPCs/Commodity
Boards.
Promotional Schemes
i) Technology Development and Modernization
Fund Scheme

Small Industries Development Bank of India

(SIDBI) has been implementing a scheme of
technology development and modernization of
SSI units

ii) Quality Awareness Scheme

Small Industries Service Institutes organizing
Workshop on ISO-9000 certification and
awareness about quality.
UPTECH:
A new scheme for technology up gradation for
industrial clusters has been started recently.

The scheme aims at diagnostic study of the

clusters, identification of technological needs,
technological intervention and wider
dissemination of information and technology
within the clusters.
Unit: VI
1.Process of Setting up a Small-Scale
Industry.
2.Enterprise Location.
3.Financing small business.
4.Legal Framework for Small Business.
 
1.Process of Setting up a Small-Scale Industry.
1.Selection of Industry.

2.Arrangement for Technical Know-how

i) Prepare Project Report
[ Project report includes Marketing, Pricing
strategies, Financing, Staffing etc.]

3.Apply to Financial Institutions

4. Selection of Location and Acquisition of Premises.

5.Apply to D.I for Registration and NOC, Power

allotment.

6.Apply to Local body/ Panchayat / Municipality for

NOC and Permission.

7. Apply for Power connection

Place for Machinery
Apply for Quota for Raw materials.
Recruit Staff.
8. Install Machinery.

9. Trial Runs

10.Corrective Measures

11.Production [ Purchase of Raw materials]

a) Maintenance of records,
b) Standardization of products,
c) Quality control productivity.
12. Sales

13. Profits
i) Pay to creditors
ii) Dividends
Establishing a small Scale Industries:
1.Licenses.
Industries employing less than 100 workers and
having fixed assets of less than 10 lakhs need not to
obtain any license.

But, SSI has to confirm to the rules and regulations

prescribed by state or local authorities under the
Factories Act, Commercial Establishments Act,
Town Planning rules and rule made for the issue of
quotas of raw materials etc.
For installing power looms, they have get
permission from the Textile Commissioner, GOI.

2.Registration of SSI:
--All the SSI has to registered with the Director of
Industries in their state.

--Copy of this application for registration has to be

sent to the Director of Small Service Institute in
the concerned state.
-- This will help the SSI in obtaining financial
assistance from the government and for
obtaining machinery on hire- purchase from the
NSIC.

-- Assistance in the supply of

i) controlled raw materials
ii) specific certificate for imported raw materials
iii) facilities for export promotion
Will be easily available if they registered with
the State Director of Industries.
3.Infrastructure:
Director of Industries and SISI can provide the
following facilities;
a) Built up factory space in an Industrial estate,
b) Develop the factory site, power etc.

After the State Director of Industries, the

Municipality or the Panchayat issues the NOC.
4.Machinery:
--NSIC: under hire- purchase scheme.

-- NSIC has acquired the necessary experience in the

procurement of machines from the right sources.

-- it takes care of the problems up to the stage of delivery

of machines to the entrepreneurs.

--Small entrepreneur should enlist with the NSIC.

-- This application form should be accompanied with

Registration Certificate and report of the DI.
5.Raw Materials:
Arrange for raw
materials and distribute
through state Govts.
Development Comm.SSIO: Import of raw materials

through Minerals and

Metals Trading
Corporation and STC.
Directors of Industries : Allot quotas of raw
materials.

Chief Controller of Imports : They issue licenses

And Exports and its Port for import of raw
Offices materials.
6.Marketing : Internal
1.Small Industries Service Institutes. [SISI]
-- They enlist the units for participation under
Central Govt stores purchase programme.

-- Issue competency certificates to the units

receiving Govt orders.

2.National Small Industries Corporation. [NSIC]

-- Secure contracts from the Director- General of

Supplies and Disposals, Railways and Defence.
3.State Small Industries Corporations: SSIC
-- secure orders from the state governments.

4. Small Industries Service Institute: Export.

-- render technical counselling for satisfactory
execution of export orders.
-- disseminate information about the items having
export markets.
5.Chief Controller of Imports and Exports:
-- issue license s for export of products to foreign
countries.
6.Export Promotion Council:
-- They publish Trade Directories, Brochures
-- organize exhibitions and show rooms etc
-- maintain close liaison between Indian exporters
and foreign buyers.

7.State Trading Corporation of India.

-- register units for participation under Export Aid
to SSI.
- they secure export orders for SSI.
7. Incentives for SSI:
SIDO : Co-ordinates policies and programmes at the
national level and provides extension services.

State level: State Directories of Industries,

SIDC, FC cater to the needs of Small
industries, the needs include :land,
shed, credit,power and raw materials etc.
NSIC : Provides machines and equipments on hire-
purchase.
assist units to participate in the Trg. Progs.
SIDO:Technical Consultancy on improved technical
processes

SISI: Training of workers, demonstration of modern

machines and processes etc.

CITD : Central Institute of Tool Design.

Conducts several regular and part-time training
programmes in the field of Tool Design &
Manufacture, Low Cost Automation, and CAD &
CAM for the benefit of National & International
participants.
IDEMI: Institute for the Design of Electrical
Measuring Instruments, Mumbai.
-- provides technical know how & Testing,
-- calibration, training facilities for manufacturers
of electrical measuring instruments.

Rural Industries Projects [RIP]

Artisans Development Programme is covered by
this Projects.
 Enterprise Location.
Location Policy:
Other than cities of more than 1 million
population there is no requirement for the
approval from the central govt, except the
industries under compulsory licensing.

Any polluting industries should be located outside

25 Kms.
Factors Influencing Location of an Enterprise:

1.Selection of Region

2.Selection of Community

3.Selection of Site

4.Optimum selection of site.

1.Selection of Region
a) Availability of raw materials
b) Nearness to market
c) Availability of power and fuel
d) Transport
e) Suitability of climate
f) Government policy
g) Competition among states
h) Metrological &Topography [Atmospheric
phenomena, especially weather and weather
conditions & landscape /geography]
2.Selection of Community.
a) Availability of labour
b) Civic amenities for workers
c) Finance facilities
d) Availability of water and fire fighting facilities
e) Local taxes and restrictions
f) Communication facility
g) Political stability
3. Selection of Site:
a) Soil, Size & Topography
b) Disposal of waste
c) Price of Land
d) Expansion potential
e) Health of locality
f) Statutory considerations
g) Flood and drought experience
h) State assistance.
4.Optimum selection of site
Optimum selection of industry is based on the
comparative economic survey of the alternative
sites in question.
 Financing small business.
1.SIDBI

Banks
1.Commercial Banks
2.RRBs [Regional Rural Banks]
3.Co- operative banks

State Level Others:

1.SFC 1.NABARD
2.SIDCs 2.NSIC
3.SIICs[ State Industrial Investment Cor]
4.SSIDCs
Types of Finance:

1.Short Term Finance: [funds required for a period

less than 1 year.]

Sources of finance.
a).Bank credit
b).Trade Credit
c).Installment credit
2.Medium Term Finance [ Period of 1 to 5 years]

Sources of finance
a) Issue of Debentures
b)Loans from banks & other financial institutions
c)Public deposits [ for existing concerns]
d) Ploughing back of profits [for existing concerns]
3.Long Term finance [5 years and above]
Sources of finance
a)Issue of shares
b)Issue of debentures
c)Loans from financial institutions
d)Ploughing back of profits [for existing concerns].
Guidelines followed by the banks:
1.The debt equity ratio
2.Turnover to net worth
3.Return on capital employed
4.Net profit as a percentage of net worth
5.Dividend paid to shareholders
6.Ratio of current assets to current liabilities.
Assistance by SFCs, SIDC & Commercial Banks.
Financing
-- of new projects in the S&M size category
-- for modernization of S&M industries
-- for rehabilitation of S&M industries
-- of import of capital equipment.
SIDBI: Services of SIDBI are,
1.Promotion
2.Financing
3.Development of Industries in the small- scale
sector
4.Co-ordinating the functions of institutions engaged
in similar activities.
5.Refinance
6.Bills financing
7.Project & equity finance.
Direct finance: through 38 offices providing
schemes to specific target groups.

Indirect finance: by refinance and bills

rediscounting through 894 primary lending
institutions having 65,000 outlets across the
country.
Financial Assistance to Small- scale Units:
1. Rupee loans to the SS units are granted at
concessional rates of interest.

2. Non –commitment charge is levied on loans up

to Rs.5 lakhs to units in the small scale sector.

3. Commitment charge at the rate of 1%is levied on

all other loans after an initial grace period of 12
months from the date of sanction.
4.But, units located in category ‘A’ backward
areas are totally exempted from commitment
charges on rupee loans.

5. And units located in category ‘B&C’ areas are

eligible for 50% concession on the commitment
charges.

6.The SSI are allowed a debt- equity ratio

extending up to 2.5. The promoters contribution
norm varies between 12.5% to 22.50%,
depending on the location of the project and
status of the entrepreneurs.
Credit Facilities to SSI:
1.Banking system provides mainly working capital
and SFCs provides investment capital.

2. The credit provided by banks to this sector was

treated as credit to ‘Priority Sector’.

3. The commercial banks are required to lend 40%

of their total loans of which 15 to 16% is
required to be in the form of direct agricultural
advances and the rest can be to the SSI and
indirect agricultural loans etc.
4.Assistance is provided to new units by way of
interest free loans to fill the shortfall inequity.

The loans are repayable over a period of 5 to 7

years after an initial moratorium period of 5 to 7
yrs.
Financial Assistance to Medium- Scale Units:
1.For medium scale units located in
backward areas – 12.50%
Non- backward areas –14% of interest.

2.Commitment charges:
‘A’ backward areas --No commitment charges.
‘B&C’ backward areas – commitment charge at the rate of .
5% per annum shall be levied after allowing the normal
period of a grace of six months from the date of sanction.

3.Non backward areas - 1% as commitment charges.

Legal Framework for Small Business.
Types of controls:
1.Formal
Informal

2.Direct
Indirect

3.Protective
Promotional
SSIs are regulated by the following Acts.
1.The Workmen’s compensation Act 1923

2.The Trade Unions Act 1926

3.The Payment of Wages Act 1936

4.The Industrial Disputes Act 1947

5.The Factories Act 1948

6.The Shops and Commercial Estab. Act 1948

7.The Minimum wages Act, 1948

8.The Provident Fund Act 1952

9.The Employment and Standing Orders Act 1956

10.The Maternity Benefit Act 1961

11. The Bonus Act 1965

12. The Gratuity Act 1972

Others:
1.The Industrial Development Regulations Act
2. Indian Boiler Act
3.Income Tax Act
4.The central and State Sales Tax Act
5. Drugs controls Act
6.The companies Act.
Unit : VII
1.Institutional assistance to Small –Scale
Industries.

2.Women Entrepreneurship.

3.Incentives and Facilities for Exporters of

Small Scale Sector.
Institutional Assistance to Small –Scale
Industries.
Institutional assistance to SSI by way of;
1.Promotional
2.Financial
3.Technical
4.Marketing
5.Training
6. Others
7.Associations.
1.Promotional:

a. DISG g.EC
b. SIDO h.SDC
c. SSIC i.NSIC
d. SIIC j.NPC
e. IDC k.IBS
f. COIR BOARD l. DIC
2. Financial

SFC NABARD
IFCI KVIC
CB HDFC
LIC/ UTI SCIC[ shipping credit and Inv.com]
SIDBI world bank
HUDCO
3.Technical
a.ITCO
b.CITD
c.IDEMI
d.NID
e. Pollution control boards
f.The Technology Dev.and Information Company
of India
g.The Products and Process Development Centres.
4. Marketing
a.The Investment centres
b.EPC
c.CB/ EH/ EIC
d.IIP
e.STC of India
d.Jute Corporation of India
f.Minerals and Metals Trading Corporation of India
g.EXIM Bank of India
h.The Indian Institute of Foreign Trade
i.Export Credit Guarantee Corporation of India Ltd.
5.Training
a.The Centre for Entrepreneurship Development

b.The Entrepreneurship Development Institute of India

c.The Management Development Institute

d.The Institute of Management

e.Institute of Entrepreneurship Development

f.The National Institute for Entrep &Small Business
Dev
g.Training of Rural Youth for Self- Employment

h.The Indian Institute of Entrepreneurship

i.EDPs of SIDBI

j.The National Institute of Fashion Technology.

6.Associations:
a.The National Alliance of Young Entrepreneur.

b.The Association of Women Entrepreneurs of

Karnataka.

c.The Coimbatore District Small Industries

Association

d.Industrial Associations

e.Associated chambers of Commerce and Industry

of India.
f.Federation of Associations of Small Industries of
India

g.Federation of Tiny and Small Industries of India

h.Federation of Micro and Small and Medium

Enterprises.

i.National Association of Software and Service

Companies.
j.Association of Lady Entrepreneurs of Andhra
Pradesh.
7.Research Institutions.
a.The Central Manufacturing Technology Institute

b.Automotive Research Association of India

c.The Central Leather Research Institute

d.The Council of Scientific and Industrial Research

e.Process and Product Development Centre.

Women Entrepreneurship:
-- IDBI has provided under a special scheme,
refinancing at a concessional rate of 9% a year, the
ceiling on the rate of interest on the loan being
12.5%.

-- IDBI extends 100% refinancing to SFCs in respect

of proposals covered under the automatic
refinancing scheme and 85% if the proposals
come under the normal refinancing scheme.
For commercial banks, refinancing is extended at
75% of the loan amount under both schemes.

-- the financial assistance, organizations are being

identified and encouraged to provide liaison,
training, consultancy and extension support to
women entrepreneurs.

-- the cost of these services is being borne by the

IDBI subject to a ceiling of Rs.10,000 per
beneficiary.
Government schemes for women empowerment [Women
Entrepreneurship in Small Scale Industries]
 The government programme for women development began
as early as 1954 in India but the actual participation began
only in 1974. At present, the Government of India has
over 27 schemes for women operated by different
departments and ministries. Some of these are:

Integrated Rural Development Programme (IRDP)

Training of Rural Youth for Self-Employment (TRYSEM)

Prime Minister’s Rojgar Yojana (PMRY)

Women’s Development Corporation Scheme (WDCS)
Working Women’s Forum
Indira Mahila Yojana
Indira Mahila Kendra
Mahila Samiti Yojana
Rashtriya Mahila Kosh
Khadi and Village Industries Commission
Indira Priyadarshini Yojana
SIDBI’s Mahila Udyam Nidhi Mahila Vikas Nidhi
SBI’s Sree Shaki Scheme
NGO’s Credit Schemes
National Banks for Agriculture and Rural Development’s
Schemes
The experience in conducting EDPs for women
indicate that,
1.More time required to complete all legal and
procedural formalities in view of the various
restriction on their mobility.

2.Discrimination was evident during the

implementation stage but less once the units
were established.

3.Women entrepreneurs had to face the

discouraging attitude of tradition bound traders.
4.Women coming from families in industrial and
business activities could achieve success faster
than most others.

5.More married women in the age 30-45 were found

to be more reliable as their responsibilities
towards their family were clearly defined.

6. All successful women entrepreneurs had strong

family support in the form of finance and business
know-how.
Incentives and Facilities to Exporters.
1.Duty Drawback

2.Duty Exemption scheme

3.Excise Rebate

4.Marketing Development Assistance

5.Supply of Raw Materials

6.Export oriented Units/ Export Processing Zone

7.Export Houses, Trading Houses and Star Trading

Houses

8. Export Promotion Capital Goods Scheme.

9. Foreign Currency Accounts for Exporters.

10.Other Benefits.
1.Duty Drawback
For a product exported from India, the manufacturer
would have paid duties as under,
1. Import duties on raw materials and components
imported and
2. Excise duty on the items manufactured in India

The customs and Central Excise Duty Drawback

Rules, 1971 provide for refund of such duties to
the exporter on the export being completed.
For claiming the drawback, the exporter should file
with the customs the copy of the shipping bill
within 6o days after the customs officer at the
port has given ‘Let Export Order”.
2.Duty Exemption Scheme.
The scheme enables the exporter to import
materials without payment of customs duty. The
licence issued under this scheme is known as
‘Advanced Licence’.

The items allowed to be imported under these license

are such as are to be used in the manufacturer of
goods to be exported from India.

After exports, the Duty Exemption Entitlement

Certificate duly completed by the customs will
have to be surrendered to the licensing authority in
fulfillment of the export obligation imposed.
3.Excise Rebate.
Finished goods which are subject to excise duty for
home consumption are exempt from the duty when
they are exported.
1. Export under bond. Under this method, the
exporter has to execute a bond in favour of central
Excise Authorities.
2. Refund of duty. If the duty is already paid, after
export is made the exporter should make a claim
with the central Excise authorities. Then the excise
authorities will arrange for the refund of the centra
excise.
4.Marketing Development Assistance.
The government OF India has instituted Marketing
Development Fund for providing grants in aid
for the development of markets for Indian
products abroad.
Schemes eligible for assiastance under the Fund are,
a.Market survey abroad
b.Publications for issue within the country or
abroad.
c.Participation in exhibitions abroad.
d.Setting up showrooms, warehouses.
e. Research and Development
f. Setting up of foreign offices.

5.Supply of Raw materials.

Units engaged in exports are given priority in the
allotment of scarce raw materials such as steel. In
certain cases, the raw materials are arranged to be
supplied at international process, much below the
internal prices.
6. Export Oriented Units/ Export Processing Zone.
Units undertaking to export their entire production
of goods may be set up under the Export Oriented
Units scheme.
These units in engaged in service activities may be
considered on merits.
EPZ are free from domestic tariff area, where trade
barriers applicable to the rest of the economy do
not apply and where export oriented units can
operate free of import duties including Tax
exemptions.
Facilities for EPZ:
1.Automatic approvals of proposals by the
Development Commissioner on certain
conditions.
2.No licence required for import of capital goods,
raw materials, spares etc.
3.Duty free import of capital goods and equipments
from preferred sources.
4.Second hand capital goods allowed to be
imported.
5.Exemption from Central Excise Duty and other
levies on products manufactured within the zone.
6.Complete exemption from Income Tax on profits
for a period of 5 years.
7.Sub contacting part of job work to units in the
domestic market may be allowed.
8. Assured power supply.
9.Green card to units for getting facilities like
Telephone, telex, cement, steel etx on priority
basis.
7. Export Houses, Trading Houses and Star Trading
Houses.
-- a registered exporter is a person holding valid
registration certificate issued by an Export
Promotion Council, Commodity Board for the
purpose of export promotion.
EH - 15 Cr
TH - 75Cr
STH - 300 Cr.
-- SIL
-- Foreign Currency A/cs
8.Export Promotion Capital Goods Scheme.
Under the EPCG scheme, capital goods may be
imported at a concessional rate of customs duty of
25% of CIF value with an export obligation of 3
times CIF value to be achieved within 4 years.

9.Foreign Currency Accounts for Exporters.

Exporters with a net foreign earnings pf Rs.4 Cr and
over during the preceding year may be permitted
by RB to maintain foreign currency accounts in US
dollars or pound with SBI,Public sector banks and
foreign banks operating in India.
10.Other Benefits.
1.Exemption from sales Tax/ Income Tax
2. Training facilities in India and Abroad.
3.Availability of concessional finance from banks
and Exim bank.