SMALL BUSINESS

PREPARED BY
PRASANTH.S.R
 SMALL BUSINESS

Village & small industries in India come under two

categories – traditional and modern.
 Traditional industries- handlooms, handicrafts, coir,
sericulture, khaddar & village industries
Modern small industries – small scale industries & power
looms.
 TYPES OF SMALL SCALE
INDUSTRY
a. Small- scale industry : It is defined as the one in which the
investment in plant and machinery does not exceed Rs 1 crore. It
can be up to Rs 5 crore if the thrust is on export promotion and
modernization.
b. Ancillary small industrial unit : If an industrial unit supplies
not less than 50% of its production to parent unit, it can enjoy the
status of ancillary small industry. Parent unit normally provides
technical guidance and financial help.
c. Export –oriented units : If the unit exports more than 50% of
production, the small scale industry gets the statys of an export
 TYPES OF SMALL SCALE
INDUSTRY……………..
D. Small scale industries owned & managed by women entrepreneurs:
Small scale units promoted by women entrepreneurs in which they
individually or jointly hold shares of not less than 51%, can avail various
concessions offered by the government.
e. Tiny industrial units : Here investment in plant and machinery should
not exceed Rs 25 lakh.
f. Small scale service and business enterprises : Investment in fixed assets
of plant and machinery excluding land and building not exceeding Rs 10
lakh is the criteria for this category.
 TYPES OF SMALL SCALE
INDUSTRY……………..
g. Micro business enterprises These are small business units in which
investment in plant & machinery should not exceed Rs 1 lakh.
h. Village industries Any industry located in rural area producing goods or
rendering services with or without the use of power And fixed capital
investment per worker not more than Rs 50000 Or an amount per worker
as may be specified by the central government from time to time.
i. Cottage industries  Known as traditional industries  Not defined by
capital investment criteria  Organized by individuals with private
resources  Family members as employees  Use of simple machinery and
equipment  Less capital investment  Produce simple items, usually in
their own premises  Use indigenous technology
 ADMINISTRATIVE SETUP FPR THE SMALL
SCALE, AGRO AND RURAL INDUSTRIES
Traditionally people in rural areas fully immersed in agriculture. Now
rural households are turning towards non agricultural activities such as
wage employment, self employment in commerce, manufacturing and
services.
 Cottage and rural industries provide employment opportunities to
traditional artisans and weaker sections of society
 Prevent migration of rural work force to urban areas looking for
employment.
 The government of India has realized the twin objectives of
ACCELARATED INDUSTRIAL GROWTH & CREATING ADDITIONAL
PRODUCTIVE EMPLOYMENT in rural and backward areas through the
 PROBLEMS OF SMALL BUSINESS
a. Lack of managerial experience : One or few persons carry the small scale industry ,
they may not have specialized knowledge in the field of management. b. Inadequate
finance: Small entrepreneurs cannot able to arrange full finance from own sources. They
obtain finance from unorganized sector at a higher rate of interest.
c. Lack of proper machinery & equipment : Because of financial problems, many small
units use outdated machinery and equipment for production.
d. Lack of technical knowhow: The small entrepreneurs do not have the knowledge
about different alternative technologies to improve the quality of products and reduce
cost.
e. Run on traditional lines: Usually small scale industries not adopt modern methods of
production. They prefer old designs and patterns. There is a high degree of obsolescence
in most of the small units.
f. Irregular supply of raw materials: The quantity, quality and regularity of supply of
raw materials are other problems of small industries. Small units are forced to go for
small quantity purchases and pay high prizes. Economies of bilk purchase cannot be
enjoyed.
 PROBLEMS OF SMALL BUSINESS ……….
g. Problem of marketing: Small units find it difficult to popularize the brand name of
their products due to tough competition from big business houses. They lack costly
advertisement & network distribution system.
h. Personnel problems: Small units will not able to pay handsome salary so, highly
qualified staff may not be employed.
i. Lack of clear cut policy of the government: The government may take decisions
relating to small units on the basis of political considerations rather than on economic
considerations.
j. Bogus units: 20% of small units in the country are bogus units. They exist for the
purpose of getting quotas at concessional rates & divert them into black markets. This is
a threat for the promotion of true entrepreneurships.
k. Under utilization of capacity: 40 to 50% of capacities are not utilized by small units. l.
Non availability of cheap power: Small units have to depend on high cost power. m.
Problems of entry into WTO: Because of the rules of the WTO, small scale units find it
difficult to survive. Many will be forced to close down.
 GOVERNMENT ASSISTANCE TO SMALL
INDUSTRIES & SMALL BUSINESS UNITS
A number of measures have been taken by the governments, central & state, to protect this sector
from large scale industrial units & to promote its growth.
The important protective & promotional measures include the following:
1. Reservation of products: The government has notified that 675 items can be produced exclusively by the
small scale units. It is reserved for them, e.g. writing pads, rubber bands, paper files etc
2. Reservation and preference in government procurement: SSI units have been given protection from
competition in the matter of purchases by the government departments. A large number of items have been
reserved for exclusive purchase from SSI sector while a number of items h
ave been provided price preference up to 15 percent over units in the large scale sector. 3. Infrastructural
and institutional support: Infrastructural institutional supports are provided through industrial estates,
district industries centre, small industries service institute, etc which provide technical assistance, testing
facilities , etc.
4. Machinery on hire purchase: The national small industries corporation arranges supply of machines on
hire purchase to small scale units.
5. Marketing assistance: Marketing assistance including export promotion assistance are provided by
institutions like SIDO, NSIC, etc.
 GOVERNMENT ASSISTANCE TO SMALL INDUSTRIES &
SMALL BUSINESS UNITS…………

6. Financial assistance: Provided by concessional terms by commercial

banks, state level financial institutions, etc
7. Training facilities: Training for existing & would be entrepreneurs are
offered by entrepreneurship development institute of India, technical
consultancy organization, management institute etc. at a concession fee.
8. Supply of raw materials: Arrangements have also been made for the
supply of raw materials, particularly scarce and costly items to the small
scale units.
9. Accommodation in industrial estates: For promoting more & more small
scale business units, the government has established many industrial
estates in different parts.
 NABARD(NATIONAL BANK FOR AGRICULTURAL
AND RURAL DEVELOPMENT
NABARD was set up in 1982. The objective is to create
sustainable and employment opportunity to the unemployed and
under employed persons in rural areas. Rural artisans ,
handicraftsmen, small entrepreneurs, groups of individuals
partnership firms , co- operative societies are eligible for
assistance All manufacturing, processing,and approved service
activities in the cottage and village industries sectors are eligible
for assistance.
 RURAL SMALL BUSINESS DEVELOPMENT
CENTRE (RSBDC)

It is sponsored by NABARD . It same is to give

management and technical assistance to micro and small-
scale entrepreneur in rural areas . This agency has
organized various programmes on rural
entrepreneurship, skill up gradation workshop, training
programmes, etc.. in various villages. It helps
unemployed youth in rural areas in starting small
business in areas
 NATIONAL SMALL INDUSTRIES
CORPORATION LTD (NSIC)
It was set up in [Link] main functions are
Supply of machinery on hire-purchase basis
 Providing equipment leasing facility
Registration of units for participation in the purchase
programmers of the central and state governments
Marketing assistance
Development of prototypes of machinery and equipment
 A new scheme of performance and credit rating of small
business
 SMALL INDUSTRIES DEVELOPMENT BANK OF
INDIA(SIDBI)
 It is an apex bank set up to meet the credit requirement of small
scale sectors
 It has 27 branches and 5 regional office with its head office in
Lucknow
 It offers refinancing of term loans
 discounting and rediscounting of bills
 It extension of equity type assistance
 Providing of factoring and leasing services
 Specialize scheme for direct assistance
 THE NATIONAL COMMISION FOR ENTERPRISES IN
THE UNORGANISED SECTOR(NCEUS)
 It recommend measures for the improvement of productivity
of small enterprises in the informal sector
 It generates employment on a sustainable basis.
 It enhance competiveness of the small scale sector to survive
in the global environment
 It link the sector with other institutions in areas such as credit
technology marketing and skill development
 RURAL AND WOMEN ENTERPRENOURSHIP
DEVELOPMENT(RWED)

 It aims at promoting and environment to business at

building institutional and human capacities of rural women
 It create a business environment to encourage initiative
of rural women entrepreneur
 It enhance human and institutional capacities to increase
productivity
 It imparts training to women entrepreneurs
 WORLD ASSOCIATION FOR SMALL & MEDIUM
ENTERPRISES(WASME)

 Its aim is to develop an action plan for sustained growth of

rural enterprises.
 It has set up an international committee for rural
industrialization.
 There are various government programme schemes such as
IRDP, PMRV,TRYSEM, ETC.
 There are wage employment scheme like JRY, food for work,
etc. and also other schemes like khadi, handloom, & handicraft.
 SCHEMES OF FUND FOR RE- GENERATION
OF TRADITIONAL INDUSTRIES (SFURTI)
 The central government has set up a fund with RS:100crore,this is ment
for allocation to begin with the year 2005. It is to make implementation by
the ministry of agro and rural industry with the help of state government
 The objective is to develop clusters of traditional industry
 It helps to make traditional industries competitive ,profitable and
sustainable.
 It helps to create employment opportunities in traditional industries
 SMALL INDUSTRIES DEVELOPMENT
ORGANISATION (SIDO)
 It is an apex body for formulating ,co-ordinating and monitoring the
policies and programmes for promotion and development of small scale
industries. It functions are:-
 To evolve a national policies for the development of small scale industries
 To co-ordinate the policies and programmes of various state government
 To reserve items for production by small scale industries
 To collect data on consumer item imported and encourage entrepreneurs
to produce this item by co- ordinated assistance
 SMALL INDUSTRIES DEVELOPMENT
CORPARATION(SIDCO)
It is set up under companies act 1956,as state government
undertaking to cater the primary development needs of tiny and village
industries It functions are:-
 To procure and supply of scares raw material
 To supply machinery on hire purchase
 To provide marketing assistance
 To enter joint ventures in the small scale sectors
 To construct industrial estates and provide infrastructure facilities
 SMALL INDUSTRTIES SERVICE
INSTITUTES(SISIs)

They are set up to provide consultancy and training to

existing to small entrepreneur . It functions are:-
 To render technical support services
 To conduct EDPs
 To initiate promotional programmers
 STATE INDUSTRIAL DEVELOPMENT CO-
OPERATIONS(SIDCs)
There are 26 state industrial development corporations In all,
these corporations are owned by state governments, they have been set
up to provide facilities for rapid industrialization in the respective
states . It functions are:-
 Granting of loans, issuing guaranties, underwriting the shares of
debentures
 Promoting industrial projects by themselves or in participation with
others
 Underwriting the development of industrial areas ,construction of
sheds and providing infrastructural facilities
 Administering various schemes of the government
 DISTRICT INDUSTRIES CENTERS(DICs)
 DICs were established in May 1978 for catering the needs of
small entrepreneurs. It act as multifunctional agency in respect
of various government departments. The DICs comes under the
directorate of industries and commerce of every state. Every
district has one DICs.
 The organizational structure of DICs consist of one general
manager and several managers of different disciplines to
provide technical services in the area relevant to the needs of
district concerned
INCENTIVES
Incentives are financial assistance provided by
government to entrepreneurs for boosting industrial
development in all regions here subsidy is a lump sum
amount given as a help to the entrepreneurs by the
government. It aims to correct the regional imbalance in
industrial development by encouraging the new
entrepreneurs to start industries in the backward areas.
FORMS OF SUPPORT TO INDUSTRIES BY
THE GOVERNMENT
 Reservation of products
 Reservation and preference in government procurements
 Infrastructural and institutional support
 Machinery on hire purchase
 Marketing assistance
 Financial assistance
 Training facilities
 Supply of raw materials
 Accommodation in industrial estates
 Technical assistance for technological up gradation
 Incentives for setting up units in backward areas