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Institutional Support to Entrepreneurship

The term institutional support refers to the part of economic environment of

industry and business. It consisting of authorities and institutions whose
decisions and active support in form of laws, regulation, financial and non-
financial help brings a lot of changes in the functioning of any business.
The institutions could be government owned, statutory, semi-autonomous or
autonomous. It is the government or government supported institutions
authorized to take up certain activities - financing, marketing, project
preparation, training the to promote industrial activities in the state.
Directorate of Industries and Commerce
This is the primary Governmental agency responsible for promoting industrial
growth. It operates through the District Industries Centre (DIC) which are
located in the head quarter of each district.
District Industries Centre (DIC)
Government at both the levels have in the past taken a number of measures for
the development of industries but the actual achievement have been far below
the expectations. Also focus of attention for industrial development was mainly
on large cities to the neglect of district areas. Accordingly, the DIC were
established in May 1978 in order to cater to the needs of small units. Each
district has a DIC at its head-quarters. The main responsibility of DICs is to act
as chief multifunctional agency in respect of various Government departments
and other agencies. The prospective small entrepreneurs would get all assistance
from DIC for setting up and running a unit.
DIC's role is mainly promotional and developmental. To attain this end, it has to
provide needed services and support to small and village Industries. Its various
functions include the following.
1) DIC identifies prospective entrepreneurs by conducting entrepreneurial
motivational programmes throughout the district. DIC gives training to rural
entrepreneurs and also assists other units giving training to small entrepreneurs.
EDPs, are an important aspect of industrialization since the entrepreneur may be
highly qualified but still he may not be familiar with the different aspects and
steps required in setting up of an industrial venture. DICs have been conducting
EDPs in association with SISI and various TCOs to develop Entrepreneurial
skills in the young entrepreneurs.
2) DIC offers Technical advice to new entrepreneurs for the selection of
projects suitable to them.
3) DIC provides provisional and permanent registration to new entrepreneurs.
Entrepreneurs are issued with Provisional SSI registration which is essential for
obtaining assistance from the financial institutions.
4) DIC sponsors the loan application to SIDCO and Banks for the purchase of
fixed assets and sanction margin money under rural industries project loan
scheme payable to other financial agencies for the purchase of fixed assets.
5) It takes the initiative to get clearance from department and takes follow up
measures to get speedy power connection.
6) It makes necessary recommendation to the concerned raw-material suppliers
and issues the required certificates for the import of Raw material and
7) DIC arranges for the financial assistance with the lead bank of the respective
8) DIC assists SSI units and rural artisans to get subsidies under IRDP from
various institutions.
9) It assists under self-employment for unemployed educated youth scheme
introduced in 1983-84 for youths between 18-25 years with SSLC qualification.
Industrial Development Corporation
It was established on 20th October 1954 by the Central Government which has
been regarded mainly as the instrument to achieve a balanced development of
Industries in the private as well as the public sector.
The NIDC plans and formulates projects for setting up new Industries or for
developing new lines of production. It undertakes establishment of such
undertakings which in the opinion of the central government would contribute
to the industrial development of the country.

The main objective of the corporation is promotion of industries rather than

granting of finance. It builds up industrial schemes of its own or collaborates
with the private industry. It can also render assistance for the modernisation of

The corporation was set up with the authorized capital of Rs. 1 crore out of
which Rs. 10 lakhs have been issued and paid up by the government which was
increased to 50 lakhs by the end of March 1963. It can also borrow from the
government. It is also empowered to issue shares and debentures to enlarge its
financial base.

State Financial Corporation

The State Finance Corporations (SFCs) are the integral part of institutional
finance structure in the country. SEC promotes small and medium industries of
the states. Besides, SFCs are helpful in ensuring balanced regional
development, higher investment, more employment generation and broad
ownership of industries.
Organisation and Management:
The State Finance Corporations management is vested in a Board of ten
directors. The State Government appoints the managing director generally in
consultation with the Reserve Bank and nominates three other directors.

The insurance companies, scheduled banks, investment trusts, co-operative

banks and other financial institutions elect three directors. Thus the majority of
the directors are nominated by the government and quasi-government

The important functions of State Finance Corporations are:

(i) The SFCs grant loans mainly for acquisition of fixed assets like land,
building, plant and machinery.

(ii) The SFCs provide financial assistance to industrial units whose paid-up
capital and reserves do not exceed Rs. 3 crore (or such higher limit up to Rs. 30
crore as may be specified by the central government).

(iii) The SFCs underwrite new stocks, shares, debentures etc., of industrial

(iv) The SFCs provide guarantee loans raised in the capital market by scheduled
banks, industrial concerns, and state co-operative banks to be repayable within
20 years.

In many state governments, for the promotion of small scale industries, a

separate corporation has been set up which is known as Small Industries
Development Corporation. They undertake all kinds of activities for the
promotion of small scale industries. Right from the stage of installation, to the
stage of commencing production, these Corporations help small scale industries
(SSI) in many ways.
In short, they provide infrastructure facilities to small scale industries. Due to
the assistance provided by SIDCO, many backward areas in most of the states
have been developed. So, SIDCO has also been responsible in spreading the
industrial activity throughout several states.

The following are the main objectives of SIDCO

1. The main objective of SIDCO is to stimulate the growth of industries in
the small scale sector
2. To provide infrastructure facilities like roads, drainage, electricity, water
supply, etc is one of the primary objective of SIDCO.
3. To Promote industrial estates which will provide industrial sheds of
different sizes with all basic infrastructure facilities.
4. To Provide technical assistance through training facilities to the
5. To Promote skilled labor through the setting up of industrial training

Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission (KVIC) is a statutory body
established by an Act of Parliament (No. 61 of 1956, as amended by act no. 12
of 1987 and Act No.10 of 2006. In April 1957, it took over the work of former
All India Khadi and Village Industries Board.
The broad objectives that the KVIC has set before it are...
● The social objective of providing employment.
● The economic objective of producing saleable articles.
● The wider objective of creating self-reliance amongst the poor and
building up of a strong rural community spirit.
The KVIC is charged with the planning, promotion, organisation and
implementation of programs for the development of Khadi and other village
industries in the rural areas in coordination with other agencies engaged in rural
development wherever necessary.
Its functions also comprise building up of a reserve of raw materials and
implements for supply to producers, creation of common service facilities for
processing of raw materials as semi-finished goods and provisions of facilities
for marketing of KVI products apart from organisation of training of artisans
engaged in these industries and encouragement of co-operative efforts amongst
them. To promote the sale and marketing of khadi and/or products of village
industries or handicrafts, the KVIC may forge linkages with established
marketing agencies wherever feasible and necessary.
National Small Industries Corporation Ltd (NSIC) !
The National Small Industries Corporation Ltd. (NSIC), an ISO 9000 certified
company, since its establishment in 1955, has been working to fulfill its mission
of promoting, aiding and fostering the growth of small-scale industries and
industry related small-scale services/businesses in the country.

Over a period of six decades of transition, growth and development, the NSIC
has proved its strength within the country and abroad by promoting
modernization, up gradation of technology, quality consciousness, strengthening
linkages with large and medium enterprises and enhancing export projects and
products from small-scale enterprises.

Its main functions are to:

a. Provide machinery on hire-purchase scheme to small-scale industries.

b. Provide equipment leasing facility.

c. Help in export marketing of the products of small-scale industries.

d. Participate in bulk purchase programme of the Government.

e. Develop prototype of machines and equipments to pass on to small-scale

industries for commercial production.

f. Distribute basic raw material among small-scale industries through raw

material depots.

g. Help in development and up-gradation of technology and implementation of

modernization programmes of small-scale industries.

h. Impart training in various industrial trades.

i. Set up small-scale industries in other developing countries on turn-key basis.

j. Undertake the construction of industrial estates.

With a view to ensuring larger flow of financial and non-financial assistance to

the small-scale sector, the Government of India set up the Small Industries
Development Bank of India (SIDBI) under a special Act of the Parliament in
October 1989 as wholly-owned subsidiary of the IDBI. The bank commenced
its operations from April 2, 1990 with its head office in Lucknow. The SIDBI
has taken over the outstanding portfolio of the IDBI relating to the small-scale

The important functions performed by of SIDBI include:

1. To initiate steps for technological up-gradation and modernisation of existing

2. To expand the channels for marketing the products of SSI sector in domestic
and international markets.

3. To promote employment oriented industries especially in semi-urban areas to

create more employment opportunities and thereby checking migration of
people to urban areas.

The SIDBI’s financial assistance to small-scale industries is channelized

through the existing credit delivery system comprising State Financial
Corporation, State Industrial Development Corporations, Commercial Banks,
and Regional Rural Banks.