SUBMITTED TO :Mr. Pankaj Goel SUBMITTED BY ::Anu Tayal Navdeep Sharma


Introduction to Small Business  Problems of Small Business in India  Opportunities for Small Business in India  India¶s rapidly growing sectors


As a result. lower investments and ensure a equitable distribution of income and facilitate an effective mobilization of resources of capital and skill.1 cr. Small business enterprises have achieved an impressive growth in number of units over the period of time.INTODUCTION TO SMALL BUSINESS ‡ Small business enterprises play an important role in the industrialization of India. ³An undertaking having an investment in plant and machinery of not more than Rs. They provide large scale employment and have a comparatively higher labour capital ratio. 3 . They need a shorter gestation period. According to GOI-2000.´ ‡ The GOI has also given an important place to small business in framework of Indian Economy.

but GOI is keen on providing solutions to such problems through various departments. 4 .PROBLEMS OF SMALL BUSINESSES IN INDIA ‡ The growth of entrepreneurship in India . Previously such problems were not considered seriously. directly or indirectly depends upon the growth of small business units .The small business enterprises have their own set of problems which are faced by them.

Problems of small businesses Problems related to Marketing Problems related to Production Problems related to Finance Problems related to Human Resources Other Problems 5 .

‡ 6 .after sale services etc due to lack of awarness . There are various reasons for low quality * Lack of quality consciousness * Dependence on manually operated machines * Lack of skilled labour workforce * Lack of technical education * Insistence of buyers for low price Poor sales promotion :.Many small business units do not want to spend any amount on sales promotion activities such as advertising .PROBLEMS RELATED TO MARKETING  Poor product quality :.There is generally low demand of the products produced by small business units due to poor quality.

‡ Lack of marketing opportunities :. 7 ..Small units set up in rural and back word areas face the problem of finding market opportunities within local areas and have to search for outlets elsewhere for which they do not have adequate resources.Marketing problems of these units vary not only by size of these units but also by the pattern of distribution channels necessary to reach the customer. ‡ Absence of suitable marketing channels :.Contd.

PROBLEMS RELATED TO PRODUCTION ‡ Shortage of raw material:.Non-availability of quality raw materials on a timely basis in an adequate quantity is one of the main problem faced by these units. 8 . ‡ Obsolescence of Technology being used :. Sub-Standard quality of raw material is supplied to them. Therefore productivity and quality in small scale units tends to be low while unit cost of production is generally high. They are not able to afford new machines and equipments and therefore not in position to use the latest techniques of production.Majority of small scale units use old techniques of production & outdated machinery and equipment.

shortage of raw material etc. ‡ Gestation period:. ‡ High production cost:-Two main inputs of cost of products are labour and raw material. Various problems related to raw material and labour are * Poor quality of material * Insufficient supply of raw material * High transport cost * Unskilled labour * labour strikes All these problems are result in low productivity and high production cost. Many small scale units having long gestation period because there is procedural delay in sanctioning the loan. power connection.Contd.Means gap between establishment and production of a unit.. 9 .

Many small scale units have become sick and have closed down due to * Delay in getting new connection * Inadequate supply * High costs 10 . ‡ Electricity:.Contd..Power is major input to many industries and its shortage can cause failure in the industry.

equipments as well as for meeting day-to-day expenses.little fixed investment .they find it difficult to borrow at reasonable rates. Due to their low goodwill . Inadequate access to credit is a major problem facing small units. ‡ Hurdles in getting loan sanctioned:* Personal qualification of entrepreneur * Firm¶s accounting policy * Size of enterprise * Nature of product & market prospects etc 11 .Finance is one of the critical inputs for growth and development of industry.PROBLEMS RELATED TO FINANCE ‡ Inadequacy of funds:. They are unable to procure adequate financial resources for purchase of machinery.

. If a unit fails to repay the installment then the institution can take serious action.Contd.The amount of installment and repayment schedule are fixed by financial institutions. Many small scale entrepreneurs lack knowledge of these facts. 12 . ‡ Improper utilization of funds:. inappropriate finance mix and high cost of capital. ‡ Pattern of repayment of loan:. the usual course of sickness is due to under capitalization.If a unit is not able to manage its funds effectively it may get sick.In small units. ‡ Inappropriate financial structure:.

the owner finds it difficult to manage all the activities. indiscipline etc.PROBLEMS RELATED TO HUMAN RESOURCE ‡ Non-availability of skilled man power:. For this. The enterprise have to pay more to retain the skilled labour force. ‡ Less no. ‡ Labour related problems:.Labour related problems are absenteeism. training cost. increase in wastage.The organization structure of small units is simple due to presence of few employees. deterioration of quality results in decline profitability of units.As small units located in backward areas may get abundant supply of unskilled labour. 13 . high wage rate. high maintains cost. The owner himself manage all the activities. engineers. However the business grow. it become necessary to increase the amount of manpower in enterprise. of employees:. Professional managers. qualified staff is not willing to work in a backward places. In various small units these problems have led to low productivity.

that are * Shortage of power supply * Lack of proper airways and waterways * Non-existence of basic roads and highways * Small units associated in rural areas find it difficult to communicate with other regions due to lack of telecom network. Without technology up gradation these units not survive in global market. But the small scale units face various problems related to this. 14 .Adequate infrastructure facilities are necessary for the overall development of business.OTHER PROBLEMS ‡ Infrastructure facilities:. ‡ Lack of technology up gradation:.The technology use by small units is generally not globally competitive.

15 . The main reason for low adoption is the small units are not technology savvy and are resistant to change.India¶s small businesses are not inclined towards research & development initiatives. research and development institutions and industry. Without ICT adoption they are unable to get the various advantages which these technologies can bring to a small business enterprise.Contd« ‡ Low level of ICT adoption:. ‡ Research & Development:. There is no proper linkage between academic institutions.Information and Communication Technologies (ICT) adoption by Indian small enterprises is very low compared to advanced countries.

Contd. ‡ License system:. A lot of time and energy is required.. This is a major handicap which hinders the growth of small units.Obtain license from authority is other problem faced by small units. 16 .

17 .OPPORTUNITIES FOR SMALL BUSINESSES The Government of India has undertaken several reforms to attract more investors to the small business sector in India. The Indian business opportunities is huge in possibly in every sector ±       Financial services Telecom Auto Mobiles Media IT Real Estate etc.

resulting in increased growth for retail sector.¶s and in turn creating the Indian brand value. ‡ Massive young skilled work force.FAVOURABLE BUSINESS OPPORTUNITIES IN INDIA ‡ Improvement in the infrastructure and intellectual capital. ‡ Progressive tax reforms. ‡ Introducing the concept of Public Private Partnership(PPP). ‡ Increasingly Indians have become more brand conscious. ‡ Tailor made policies as per investor requirements. 18 . ‡ More mergers and acquisitions to build brand value of the individual Co.

with free and fair judiciary. ‡ India¶s competitive advantage in Information Technology can be used to enhance productivity in industries. attracting huge investments from FII¶s.. ‡ A well established banking system consisting of public and private banks and other financial institutions. ‡ India is rich in natural resources and self sufficient in agriculture. 19 .Contd. ‡ Availability of huge pool of technical manpower . ‡ The capital market in India are one of the fastest growing market in the world. ‡ India is a well established democratic country.

INDIA¶S RAPIDLY GROWING SECTORS ‡ Indian Retail Industry ‡ Indian Software Industry ‡ Indian Pharmaceutical Industry ‡ Indian Automobile Industry ‡ Hospitality Industry in India 20 .

‡ The future of the India Retail Industry looks promising with the growing of the market. with the government policies becoming more favorable and the emerging technologies facilitating operations. accounting for 10% of the country¶s GDP and around 8% of the employment. ‡ Indian retail is expected to grow 25 per cent annually. 21 . ‡ The India Retail Industry is gradually inching its way towards becoming the next boom industry.Indian Retail Industry ‡ The Indian retail industry is the largest among all the industries.

‡ Presently there are more than 2000 software firms in the country.Indian Software Industry ‡ The software industry is the main component of the information technology in India. ‡ It is expected that the Indian software industry will generate a total employment of ten million people by 2012 22 .

India data says. just like many other segments in India is booming.Hospitality Industry in India ‡ The successful growth story of µhospitality industry in India¶ seconds only to china in Asia pacific. ‡ Hospitality industry in India is set to grow at 15% a year 23 . ‡ Hospitality segment. ‡ The world travel and tourism council.´ India ranks 18th in business travel and will be among the top 5 in this decade.

the Indian pharmaceutical industry is estimated to be growing at about 8 to 9 percent annually.Indian Pharmaceutical Industry ‡ A highly organized sector. ‡ The Pharma industry in India is one of the major foreign direct investments encouraging sectors 24 . in terms of technology. quality and the vast range medicines that are manufactured. ‡ The Indian pharmaceutical industry ranks very high amongst all the third world countries.

‡ Some of the leading names in Indian automobile industry Maruti.a time when car had touched the Indian streets for the first time. Mahindra & Mahindra. commercial vehicles . Tata Motors. three wheelers and two wheelers. Hero. 25 . ‡ Automobiles industry of India can be broadly classified under passenger vehicles. ‡ The auto mobile sector of India is the seventh largest in the world.Indian Automobile Industry ‡ Indian automobile industry has grown leaps and bounds since 1898.

imperfect knowledge of machinery. Instead of this Government of India undertake several reforms which include provisions of training facilities . special bonus for setting small business in backward areas. lack of managerial skills. tax deduction for small scale business. 26 . availability of machinery. low quality products and high production cost.CONCLUSION The growth & development of small scale units has been constrained by several factors including technological obsolescence. constrains of infrastructure facilities. inadequate & irregular supply of raw material.

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