UNIT - 1 2.

Management Control:
Earlier writers used to consider the manage-ment control one of the chief functions of the
ENTREPRENEUR entrepreneur. Management and control of the business are conducted by the entrepreneur himself.
So, the latter must possess a high degree of management ability to select the right type of persons
A person who sets up a business or businesses, taking on financial risks in the hope of profit. to work with him. But, the importance of this function has declined, as business nowadays is
managed more and more by paid man-agers.
An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most 3. Division of Income:
of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, The next major function of the entrepreneur is to make necessary arrangement for the division of
services, and business/or procedures. total income among the different factors of production employed by him. Even if there is a loss in
the business, he is to pay rent, interest, wages and other contractual incomes out of the realised
CHARACTERISTICS OF ENTREPRENEURS sale proceeds.
4. Risk-Taking and Uncertainty-Bearing:
1. Curiosity: Successful entrepreneurs are naturally curious individuals who are always seeking new Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very
opportunities and insights. They are constantly learning and seeking ways to improve their risky as an entrepreneur is required to produce goods or services in antici-pation of their future
businesses. demand.
2. Problem-solving: Entrepreneurs often start their businesses after identifying a problem and then Broadly, there are two kinds of risk which he has to face. Firstly, there are some risks, such as
coming up with a way to address it. Entrepreneurs are also able to figure out how to solve
risks of fire, loss of goods in transit, theft, etc., which can be insured against. These are known as
problems that will occur during the development of the business.
3. Adaptability: Successful entrepreneurs are able to adapt to changing circumstances and market measurable and insurablerisks. Secondly, some risks, however, cannot be insured against because
+conditions. They are flexible and open-minded, willing to pivot their business strategies as their probability cannot be calculated accurately. These constitute what is called uncertainty (e.g.,
needed. competitive risk, technical risk, etc.). The entrepreneur undertakes both these risks in production.
4. Decision Making: Entrepreneurs must make many decisions on a daily basis, often with limited 5. Innovation:
information. Successful entrepreneurs are decisive and able to make tough decisions quickly and Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is to make
confidently.
frequent inventions — invention of new products, new techniques and discovering new markets
5. Team Building: No entrepreneur can succeed alone. Successful entrepreneurs are able to build
and manage effective teams, delegate tasks, and empower their employees to succeed. — to improve his competitive position, and to increase earnings.
6. Risk Tolerance: Entrepreneurship involves taking calculated risks. Successful entrepreneurs are
willing to take risks and embrace uncertainty in order to achieve their goals. ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
7. Comfortable with Failure: Failure is an inevitable part of entrepreneurship. Successful 1. Capital formation :
entrepreneurs are comfortable with failure and view it as an opportunity to learn and grow. Entrepreneurs mobilise the idle savings of the public through the issues of industrial securities.
8. Leadership: Successful entrepreneurs are strong leaders. Leadership is an essential Investment of public savings in industry results in productive utilisation of national resources. Rate
entrepreneurial skill, as the entrepreneur will need to be able to cultivate trust and support from the
of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur
people who join his business as managers and workers. Many new businesses are cash-poor and
experience significant challenges – but a good leader can inspire loyalty in workers who may not is the creator of wealth.
yet be receiving high wages, as well as in employees who are facing roadblocks in their efforts to 2. Improvement in per capita income :
build the company. Entrepreneurs locate and exploit opportunities. They convert the talent and idle resources like land,
9. Innovation: Successful entrepreneurs are able to identify new and innovative ways to solve labour and capital into national income and wealth in the form of goods and services. They help to
problems and meet customer needs. They are creative and always looking for ways to improve increase net national product and per capita income in the country, which are important yardsticks
their products or services. for measuring economic growth.
10. Long-Term Focus: Entrepreneurship is a long-term game. Successful entrepreneurs have a clear
3. Improvement in living standards :
vision of where they want to go and are willing to invest the time and resources needed to achieve
their goals. Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new
products. Production of goods on mass scale and manufacture of handicrafts, etc., in the small
FUNCTIONS OF ENTREPRENEUR scale sector help to improve the standard of life of a common man. These offer goods at lower
1. Decision Making: costs and increase variety in consumption.
The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is to 4. Economic independence :
determine what to produce, how much to produce, how to produce, where to produce, how to sell Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
and so forth. Moreover, he is to decide the scale of production and the proportion in which he indigenous substitutes of hitherto imported products thereby reducing dependence on foreign
combines the different factors he employs. In brief, he is to make vital business decisions relating countries. Businessmen also export goods and services on a large scale and thereby earn the scarce
to the purchase of productive factors and to the sale of the finished goods or services. foreign exchange for the country.
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5. Backward and forward linkages: free and compelled to innovate: The National Science Foundation, an organisation in USA found
An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has several that small companies produce four time more innovations per research dollar than do bigger
backward and forward linkages. For example, the establishment of a steel plant generates several companies. Entrepreneurship development programmes are aimed at accelerating the pace of small
ancillary units and expands the demand for iron ore, coal, etc. These are backward linkages. By firms growth in India. Increased number of small firms is expected to result in more innovations
increasing the supply of steel, the plant facilitates the growth of machine building, tube making, and make the Indian industry compete in international market.
utensil manufacturing and such other units. Entrepreneurs create an atmosphere of enthusiasm and
convey a sense of purpose. They give an organisation its momentum. Entrepreneurial behaviour is
critical to the long term vitality of every economy. The practice of entrepreneurship is an important DIFFERENCE BETWEEN ENTREPRENEUR AND MANAGER
to established firms as it is to new ones.
6. Generation of Employment :
At the beginning of seventh five year plan the backlog of unemployment was estimated to be
around 44 million persons. At present, the number of unemployed in the country is far greater than
what it was during 1985. Emphasis on modernisation which usually results in automation, use of
high technology, and technology up gradation initiated during 1980s and structural changes
introduced by the Government during 1990’s are likely to give much rise to capital-intensive rather
than labour intensive industry. It is feared that there will be very little additional job opportunities
within the fold of organised public and private sectors. Most of the job opportunities in future are
likely to be emerging from informal and unorganised sectors of economy. Entrepreneurship
development training which helps in strengthening informal and unorganised sector is expected to
motivate enterprising people to opt for self employment and entrepreneurial career. It will
therefore, help in solving the problem of increasing unemployment to some extent.
7. Harnessing Locally Available Resources and Entrepreneurship :
India is considered to be very rich in natural resources. In spite of about five decades of planned
development a large number of states have remained economically backward. A few large scale
industries started by entrepreneurs from outside the state in an economically backward areas may
help as model of pioneering efforts, but ultimately the real strength of industrialisation in backward
areas depend upon the involvement of local entrepreneurship in such activities : Increased
activities of local entrepreneurs will also result in making. use of abundantly available local
INTRAPRENEUR:
resources.
8. Balanced Regional Growth : An intrapreneur is a person who develops a new idea within the framework of an existing company. They
Medium and large scale industries can only be started with huge investment which is either are similar to an entrepreneur in their focus on innovation, but unlike an entrepreneur, they have access to
available with well established industrial houses or need to be drawn from public exchequer. Also, their employer’s resources. With their organization’s sponsorship, an intrapreneur typically takes on less
promotion of such industries does not help in reducing disparities of income and wealth. On the risk than an entrepreneur.
other hand, an important advantage of small scale enterprises is that they can be started with
meager financial ‘resources and little or no previous experience or entrepreneurial background. Intrapreneurs are individuals who are tasked with creating new and innovative products within an already-
9. Reducing Unrest and Social Tension Amongst Youth : established business. Backed by a company's available resources, intrapreneurs develop open-ended ideas
Many problems associated with youth unrest and social tension are rightly considered to be due to and turn them into real-world products and services.
youth not being engaged in productive work. In the changing environment where we are faced with
the problem of recession in wage employment opportunities, alternative to wage career is the only INTRAPRENEUR VS. ENTREPRENEUR
viable option. The country is required to divert the youth with latent entrepreneurial traits from
wage career to self-employment career. Such alternate path through entrepreneurship could help Intrapreneurs and entrepreneurs both aim to innovate. An intrapreneur innovates from within an
the country in defusing social tension and unrest amongst youth. organization and is able to use company resources in pursuit of their project. An entrepreneur, on the
other hand, works for themselves and seeks external resources and support in pursuit of their project.
10. Innovations in Enterprises :
Business enterprises need to be innovative for their survival and better performance. It is believed
that smaller firms have relatively higher necessity and capability to innovate. The smaller firms do
not face the constraints imposed by large investment in existing technology. Thus they are both
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 II) Based on the Use of Technology:
DIFFERENCE BETWEEN ENTREPRENEUR AND INTRAPRENEUR 1. Technical Entrepreneur:
• The entrepreneurs who establish and run science and technology-based industries are called
‘technical entrepreneurs.’
• Speaking alternatively, these are the entrepreneurs who make use of science and technology in
their enterprises.
2. Non-Technical Entrepreneur:
• Based on the use of technology, the entrepreneurs who are not technical entrepreneurs are non-
technical entrepreneurs.
• They are concerned with the use of alternative and imitative methods of marketing and
distribution strategies to make their business survive and thrive in the competitive market.
III) Based on Ownership:
1. Private Entrepreneur:
• A private entrepreneur is one who as an individual sets up a business enterprise. He / she it’s the
sole owner of the enterprise and bears the entire risk involved in it.
2. State Entrepreneur:
• When the trading or industrial venture is undertaken by the State or the Government, it is called
TYPES OF ENTREPRENEURS: ‘state entrepreneur.’
I) Based On The Type of Business:
3. Joint Entrepreneurs
1. Trading Entrepreneur:
• When a private entrepreneur and the Government jointly run a business enterprise, it is called
• They procure the finished products from the manufacturers and sell these to the customers
‘joint entrepreneurs.’
directly or through a retailer.
IV) Based on Gender:
• These serve as the middlemen as wholesalers, dealers, and retailers between the
1. Men Entrepreneurs:
manufacturers and customers.
• When business enterprises are owned, managed, and controlled by men, these are called ‘men
2. Manufacturing Entrepreneur:
entrepreneurs.’
• The manufacturing entrepreneurs manufacture products.
2. Women Entrepreneurs:
• They identify the needs of the customers and, then, explore the resources and technology to be
• Women entrepreneurs are the enterprises owned and controlled by a woman or women having a
used to manufacture the products to satisfy the customers’ needs.
minimum financial interest of 51 per cent of the capital and giving at least 51 per cent of
3. Agricultural Entrepreneur:
employment generated in the enterprises to women.
• The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs. V) Based on the Size of Enterprise:
• They cover a wide spectrum of agricultural activities like cultivation, marketing of agricultural 1. Small-Scale Entrepreneur:
produce, irrigation, mechanization, and technology.
• An entrepreneur who has made investment in plant and machinery up to Rs 1.00 crore
2. Medium-Scale Entrepreneur:
• The entrepreneur who has made investment in plant and machinery above Rs 1.00 crore but
below Rs 5.00 crore

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3. Large-Scale entrepreneur: 2. Family background : This factor includes size of family, type of family and economic
• The entrepreneur who has made investment in plant and machinery more than Rs 5.00 crore. status of family. In a study by Hadimani, it has been revealed that Zamindar family helped to
FACTORS AFFECTING ENTREPRENEURSHIP GROWTH : gain access to political power and exhibit higher level of entrepreneurship. Background of a
family in manufacturing provided a source of industrial entrepreneurship. Occupational and
I) ECONOMIC FACTORS social status of the family influenced mobility. There are certain circumstances where very few
Economic environment exercises the most direct and immediate influence on entrepreneurship. people would have to be venturesome.
The economic factors that affect the growth of entrepreneurship are the following : 3. Education : Education enables one to understand the outside world and equips him with the
1. Capital : Capital is one of the most important perquisites to establish an enterprise. basic knowledge and skills to deal with day-to-day problems. In any society, the system of
Availability of capital facilitates for the entrepreneur to bring together the land of one, machine education has a significant role to play in inculcating entrepreneurial values.
of another and raw material of yet another to combine them to produce goods. Capital is 4. Attitude of the Society : A related aspect to these is the attitude of the society towards
therefore, regarded as lubricant to the process of production. entrepreneurship. Certain societies encourage innovations and novelties, and thus approve
2. Labour : The quality rather quantity of labour is another factor which influences the entrepreneurs’ actions and rewards like profits. Certain others do not tolerate changes and in
emergence of entrepreneurship. Most less developed countries are labour rich nations owing to such circumstances, entrepreneurship cannot take root and grow. Similarly, some societies have
a dense and even increasing population. an inherent dislike for any money-making activity.
3. Raw Materials : The necessity of raw materials hardly needs any emphasis for establishing 5. Cultural Value : Motives impel men to action. Entrepreneurial growth requires proper
any industrial activity and its influence in the emergence of entrepreneurship. In the absence of motives like profit-making, acquisition of prestige and attainment of social status. Ambitious
raw materials, neither any enterprise can be established nor an entrepreneur can be emerged.
and talented men would take risks and innovate if these motives are strong. The strength of
The more favourable these conditions are, the more likely is the raw material to have its
these motives depends upon the culture of the society.
influence of entrepreneurial emergence.
III) PSYCHOLOGICALFACTORS
4. Market : The fact remains that the potential of the market constitutes the major determinant
of probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate
lies in eating, the proof of all production lies in consumption, i.e., marketing. The size and specially upon psychological factors. These are as follows :
composition of market both influence entrepreneurship in their own ways. and the rate at which 1. Need Achievement:
it is expanding are the most significant characteristics of the market for entrepreneurial The theory states that people with high need-achievement are distinctive in several ways. They
emergence. like to take risks and these risks stimulate them to greater effort. The theory identifies the
5. Infrastructure : Expansion of entrepreneurship presupposes properly developed factors that produce such people. Initially McClelland attributed the role of parents, specially
communication and transportation facilities. It not only helps to enlarge the market, but expand the mother, in mustering her son or daughter to be masterful and self-reliant. Later he put less
the horizons of business too. Take for instance, the establishment of post and telegraph system emphasis on the parent-child relationship and gave more importance to social and cultural
and construction of roads and highways in India. They need to constantly check and influence factors. He concluded that the ‘need achievement’ is conditioned more by social and cultural
reinforcement rather than by parental influence and such related factors.
the Government’s thinking and decision-making.
2. Withdrawal of Status Respect: There are several other researchers who have tried to
II) SOCIALFACTORS
understand the psychological roots of entrepreneurship. One such individual is Everett Hagen
1. Caste Factor : There are certain cultural practices and values in every society which who stresses the-psychological consequences of social change.
influence the’ actions of individuals. These practices and value have evolved over hundred of
3. Motives : Other psychological theories of entrepreneurship stress the motives or goals of the
years. For instance, consider the caste system (the varna system) among the Hindus in India. It
entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige,
has divided the population on the basis of caste into four division. The Brahmana (priest), the security and service to society. Stepanek points particularly to non-monetary aspects such as
Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to independence, persons’ self-esteem, power and regard of the society.
the social mobility of individuals. By social mobility’ we mean the freedom to move from one
IV. POLITICALFACTORS
caste to another. The caste system does not permit an individual who is born a Shridra to move
to a higher caste. It is for the government/society to ensure the availability of required resources for the
entrepreneurs and also the accessibility to them. This is because the successful entrepreneur
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contributes to the well being of the society. Policies relating to various-economic aspects like 8. Expanding the business
prices, availability of capital, labour and other inputs, demand structure, taxation, income After an entrepreneur establishes their business, they may reach a level of success where they want to
distribution, etc. affect growth of entrepreneurship to a large extent. expand. This stage of managing a business entails many considerations, including figuring out a way to
address greater demand, researching new partners and reassessing their role in the company. An
ENTREPRENEURIAL CHALLENGES entrepreneur may revise existing processes to better meet the company's needs.
1. Selecting a service or product 9. Managing time
An entrepreneur may have the skills and passion to start a company, but one important factor in starting Starting a new business and managing it creates many periodic tasks, so entrepreneurs may create
a business is deciding what to sell. To start, they may identify a demand in their community they could deadlines to help with prioritizing their obligations. Because their role can encompass many
meet. A marketing firm or freelance researcher may help them conduct market research to discover what responsibilities, entrepreneurs have several approaches they can take to manage time. One strategy they
needs there are and which ones they have the resources to address. can use is creating goals for themselves and others in the organization. They may assess which tasks are
2. Developing a sales strategy absolutely necessary and which they can delegate.
Though an entrepreneur may recognize an opportunity in a certain community, they might also research 10. Maintaining confidence
the best way to sell to that community. They may hire a professional to create a marketing plan or make It can take a lot of confidence to start a company and just as much to run one. It's important for
one themselves. To do this, they can assess who their target audience is and what strategy might best entrepreneurs to maintain confidence so they can lead effectively and make appropriate business
reach them. decisions. Entrepreneurs may set long- and short-term goals to track and reflect on their success.
3. Establishing starting funds Keeping a community of supportive leadership and employees may also help. When an entrepreneur is
For entrepreneurs who start with lower capital, there are ways to earn funding to get started. They may more confident, they may feel more prepared to address challenges.
begin with a traditional bank loan or a federal small business loan. If they plan to provide a product or 11. Collaborating with partners
service that they know has significant demand already, they might start a fundraising campaign. For entrepreneurs whose organization is doing well, they may consider partnering with other
4. Maintaining a budget professionals or businesses. Though this may help them allocate leadership responsibilities and increase
Because running a company can be unpredictable, an entrepreneur can stay prepared by carefully funding, there are many considerations. First, entrepreneurs can assess areas of improvement, whether a
maintaining a budget. They may do this by prioritizing efficient marketing strategies and allocating the partnership might help and also how their skills and personalities might combine to benefit the
rest according to their unique needs. Assessing which expenses are necessary may help entrepreneurs organization. It's important to establish the terms of the partnership with a lawyer to protect all parties'
adjust their funds to better prepare for changes. interests.
5. Sustaining revenue E-ENTREPRENEURSHIP
It's important for entrepreneurs to manage their organization's money carefully to account for any E-Entrepreneurship refers to establishing a new company with an innovative business idea within the
potential delay in invoice payments. Aside from budgeting, entrepreneurs may charge a down payment Net Economy, which, using an electronic platform in data networks, offers its products and/or services
to ensure they can afford expenses until they receive full payment. By sending invoices as early as based upon a purely electronic creation of value. Essentially, this value offer was only made possible
possible and requesting payment as soon as they complete projects, entrepreneurs can secure funding to through the development of information technology.
keep operations running efficiently. E-ENTREPRENEURSHIP CHALLENGES
6. Staffing the organization 1. Lack of trust:
To make sure that they hire people who care about their organization's mission and will work hard, • Customers may be hesitant to trust a new online business, especially if it is not well-known or
entrepreneurs may oversee the hiring process. They may publish highly detailed listings to attract established.
2. Competition:
candidates whose qualifications match the organization's specific needs. Before interviewing anyone,
• The internet has made it easier for businesses to enter the market, leading to increased
they can develop questions to assess if the candidate might be a good fit for their organization and if the
competition.
role can help them in their career goals. 3. Cybersecurity:
7. Managing employees • E-entrepreneurs must ensure that their online platforms are secure and protected from cyber
As the creators and leaders of an organization, entrepreneurs guide their employees on how to best carry threats.
out the organization's goals. They can achieve this by developing clear, detailed instructions for each 4. Logistics:
role. When an entrepreneur effectively communicates the goals of the organization, employees may • E-commerce businesses must have a reliable logistics system in place to ensure timely delivery
better understand what they expect and what they're working toward. of products to customers.
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 5. Marketing: 6. Marketing:
• E-entrepreneurs must develop effective marketing strategies to reach their target audience and • E-entrepreneurs must develop effective marketing strategies to reach their target audience and
stand out from the competition. stand out from the competition.
6. Funding: 7. Funding:
• E-entrepreneurs may face difficulty in securing funding for their business, especially if they are • E-entrepreneurs may face difficulty in securing funding for their business, especially if they are
not well-established. not well-established.
E-ENTREPRENEURSHIP BENEFITS
1. Low start-up costs:
• E-entrepreneurship requires less capital investment than traditional businesses, making it easier
for entrepreneurs to start their own business.
2. Global reach:
• The internet has made it possible for e-entrepreneurs to reach a global audience, expanding their
customer base and increasing their revenue potential.
3. Flexibility:
• E-entrepreneurs have the flexibility to work from anywhere, at any time, as long as they have an
internet connection.
4. Scalability:
• E-entrepreneurship allows businesses to scale up or down quickly, depending on market demand.
5. Innovation:
• E-entrepreneurship encourages innovation and creativity, as entrepreneurs are constantly looking
for new ways to improve their products and services.
6. Data-driven decision-making:
• E-entrepreneurs can use data analytics to make informed decisions about their business, such as
identifying customer preferences and optimizing marketing strategies.
E-ENTREPRENEURSHIP LIMITATIONS
1. Lack of personal touch:
• E-business lacks the personal touch. One cannot touch or feel the product. So it is difficult for
the consumers to check the quality of a product. Also, the human touch is missing as well. In the
traditional model, we have contact with the salesperson. This lends it a touch of humanity and
credibility.
2. Delivery time:
• The delivery of the products takes time. In traditional business, you get the product as soon as
you buy it. However, in e-commerce, the delivery of the product can take several days or even
weeks.
3. Security issues:
• There are a lot of people who scam through online business. Also, it is easier for hackers to get
your financial details.
4. Competition:
• The internet has made it easier for businesses to enter the market, leading to increased
competition.
5. Logistics:
• E-commerce businesses must have a reliable logistics system in place to ensure timely delivery
of products to customers.

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 UNIT – 2
2. Motivational Training:
ENTREPRENEURSHIP DEVELOPMENT PROGRAMME Motivational training inputs are meant for developing the motivation of potential entrepreneurs
and their enterprise building skills. Besides, motivational inputs also include psychological games, tests,
Meaning goal setting exercises, role play etc.
The motivational inputs will be aimed at increasing the participants, understanding of the
Entrepreneurial Development Programme (EDP) may be defined as a programme designed to help a entrepreneurial personality and entrepreneurial behaviour and bring about through self-study, changes in
person in strengthening his entrepreneurial motives and in acquiring skills and capabilities necessary for self-concept, value, skills thereby leading to positive entrepreneurial behaviour.
playing his entrepreneurial role effectively and efficiently. It is therefore necessary to promote his 3. Developing Management Skills:
understanding of motives, motivation pattern, impact on behaviour and entrepreneurial values. Prospective entrepreneurs should be given exposure in different types of management problems.
It would sharpen their management skills. The management problems take different forms and the
Entrepreneurship development concentrates more on growth potential and innovation. Entrepreneurship management patterns are peculiar to the situation. So, training for exposing managerial skills will be
Development has gaining increasing significance in developing an economy. It is an organised and arranged in keeping the situational requirements. However, managerial aspects should include production
systematic development. It is a tool of industrialization and a solution to unemployment problem for any planning, labour laws, cost analysis, financial accounting, selling arrangements, taxation laws etc.
country. 4. Training for Project Management:
Project inputs are required to help the potential entrepreneurs to develop their project ideas into
ENTREPRENEURSHIP DEVELOPMENT PROGRAMME –OBJECTIVES bankable projects. They should be given acquaintance with the industrial opportunities in the area and
also necessary guidance on product selection. Necessary knowledge about project feasibility, viability and
1. To Promote First Generation Businessman and Industrialists implementation should also be given to the potential entrepreneurs.
2. To Create Awareness about Availability of Resources Under project preparation, technical feasibility includes selection of technology, availability of
3. To Promote Small, Cottage & Local Industries raw materials, selection of location and site, availability of plant and machinery, infrastructure facilities,
4. To Encourage Self Employment Tendencies roads, transport, power, manpower/personnel requirement.
5. To Provide Knowledge about Government Plans and Programmes 5. Structural Arrangement:
6. To Make a Successful Entrepreneur Training inputs also aim at familiarising the participants about the proposed structural
7. To Provide Training to Operate Business arrangement for the business or industrial unit. They should be given adequate familiarisation about
8. To Create Awareness about Marketing government policy regarding development of industries, especially with regard to small scale industries,
9. To Develop Entrepreneurs in all Areas of the Country registration and licensing procedures, forms of organisation like proprietary, partnership, private company
10. To Clear Doubts of Entrepreneurs, Give Solutions and Suggest Remedies of Problems and Joint Stock Company, institutional setup etc.
6. Support System:
ENTREPRENEURSHIP DEVELOPMENT PROGRAMME – COURSE CONTENTS AND In most of the cases, participants are generally first generation entrepreneurs and they do not
CURRICULUM OF EDPS know about the government and institutional support system. Support system may also be used as
motivational inputs to encourage the participants about their future prospects. They should be familiarised
1. General Approach to Entrepreneurship: with the incentives/concessions available, tax-incentives, tax holiday, backward/zero industries districts
The participants should be given exposure about the conceptual framework of entrepreneurship concessions, soft loan scheme, special schemes for technicians etc.
role, expectation, Entrepreneurial environment etc. Innovative behaviour related issues should be focused 7. Factory Visits/In-Plant Training:
to enlighten the entrepreneurs about their future challenges and prospects. Besides, development agencies Practical exposure is also necessary. Depending upon their products the potential entrepreneurs
should try to design appropriate strategies enabling the potential entrepreneur to tackle different risk may feel the need to gain more knowledge about the production process etc. by visiting some of the
inherent in an innovation activity. similar units in production. For this purpose, factory visits may have to be arranged.
These risks are as follows:
(i) Technical risks – the risk of not knowing enough about the technical processes, materials etc. ENTREPRENEUR DEVELOPMENT PROGRAMME (EDP)– PHASES:
(ii) Economic Risks – the risk of market fluctuations and changes in relation to raw materials etc.
(iii) Social Risks – the risk inherent in the development of new relationship. • Pre-Training,
(iv) Environmental Risks – risk which result from environmental changes in the manager’s work as an
outcome of the new activity. • Training

• Post-Training Phases
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1. Pre-Training Phase: 3. Post Training or Follow-up Phase:
Post training support services are rendered to the participants who have successfully completed
This is a preparatory phase for launching the programme. It is a planning phase where all the entrepreneurship.
requisite arrangements are made to deliver a content based and useful EDP. This stage lays the foundation
for a strong EDP that can deliver desired results. ▪ Assistance in registration of the enterprise.
▪ Loan procedures and documentation.
• Identification of promising area having good commercial prospects. ▪ Facilitating infrastructure like land, plant layout, purchase of plant and machinery,
• Selection of project faculty/course coordinator who is a visionary and has relevant experience. power connection etc.
• Arrangement of infrastructural facilities for the programme like location, availability of internet, ▪ Securing subsidies and grants and utilizing incentives given by Centre and State
computers, food and lodging arrangements (if participants are expected to be from different government.
cities). ▪ Management consultancy and trouble shooting.
• Conducting industrial survey/environmental scanning for identification of good business ▪ Providing up-to-date information on the industry.
opportunities. ▪ Meeting with EDP organizers and participants.
• Designing the course contents
• Getting support from various agencies such as DICs, SFCs, SISI etc PROBLEMS OF ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES (EDPS) :
• Advertising and publicity of EDP to reach prospective minds. Promotional campaigns through
either with the help of print or electric media, leaflets, posters, etc. 1. No Policy at the National Level.
Though Government of India is fully aware about the importance of entrepreneurial
• Selection of participants for the training program.
development, yet we do not have a national policy on entrepreneurship. It is expected that the
government will formulate and enforce a policy aimed at promoting balanced regional development of
2. Training Phase:
various areas through promotion of entrepreneurship.
2. Problems at the Pre training Phase:
The primary thrust of training programme is to instill motivation, skill or competency amongst the
Various problems faced in this phase are — identification of business opportunities,
budding entrepreneurs. EDP should aim to provide both theoretical and hands-on practical knowledge to
finding & locating target group, selection of trainee & trainers etc.
various trainees.
3. Over Estimation of Trainees:
Under EDPs it is assumed that the trainees have aptitude for self employment and
i. Management:
training will motivate and enable the trainees in the successful setting up and managing of their
They should be taught basic principles of management and their applications in real life scenarios to
enterprises. These agencies thus overestimate the aptitude and capabilities of the educated youth. Thus
realise the benefits and significance of the management functions like planning, organizing, staffing,
on one hand the EDPs do not impart sufficient training and on the other financial institutions are not
directing, controlling and coordinating. The various techniques involved in the management process must
prepared to finance these risky enterprises set up by the not so competent entrepreneurs.
be explained. The trainer can use case studies, management games, role- plays and simulations to polish
4. Duration of EDPs:
the skills acquired by the trainees.
An attempt is made during the conduct of EDPs to prepare prospective entrepreneurs
ii. Technical Competence:
thoroughly for the various problems they will be encountering during the setting up and running of
Focus should be laid upon acquiring technical competence suitable to the area selected. Industry experts
their enterprises. Duration of most of these EDPs varies between 4 to 6 weeks, which is too short a
may be called upon to share their experiences. It’s important for the trainees to understand the basics of
period to instill basic managerial skills in the entrepreneurs. Thus the very objective to develop and
technology, rate of technological change in that industry and challenges ahead. A comparative analysis of
strengthen entrepreneurial qualities and motivation is defeated.
present state of technology in developed and developing nations may be relevant at this stage.
5. Non Availability of Infrastructural Facilities:
iii. Motivation and Stress Management:
No prior planning is done for the conduct of EDPs. EDPs conducted in rural and
The entrepreneurial training programs are designed to elevate and sustain the motivation levels of the
backward areas lack infrastructural facilities like proper class room suitable guest speakers, boarding
trainees. Stress management is an important component of EDPs as entrepreneurs have to struggle
and lodging etc.
through different phases before finally getting results. They should be taught stress management
6. Improper Methodology:
techniques and should also be counseled to hold-on to their beliefs and ideas. The importance of family
The course contents are not standardized and most of the agencies engaged in EDPs are
members need to highlighted here.
themselves not fully clear about what they are supposed to do for the attainment of pre-determined
goals. This puts a question mark on the utility of these programmes.

15 16
7. Mode of Selection: ADVANTAGES OF INDUSTRIAL ESTATE
There is no uniform procedure adopted by various agencies for the identification of 1. Economies of scale
prospective entrepreneurs. Organisations conducting EDPs prefer those persons who have some Units located in an industrial estate can adopt centralized buying and selling. The
project ideas of their own and thus this opportunity is not provided to all the interested candidates. requirement of all the members for raw materials and components can be pooled together and bulk
8. Non Availability of Competent Faculty: purchases made. Such bulk purchases would be eligible for quantity discounts resulting in lower
Firstly there is problem of non availability of competent teachers and even when they are costs.
available, they are not prepared to take classes in small towns and backward areas. This naturally Similarly in the case of sales, the produce of members can be pooled together and sold.
creates problems for the agencies conducting EDP. This would reduce selling costs to a great extent. This kind of centralized buying and selling would
9. Poor Response of Financial Institutions: enable member units to enjoy scale economies.
Entrepreneurs are not able to offer collateral security for the grant of loans. Banks are not 2. Economies of Agglomeration
prepared to play with the public money and hence they impose various conditions for the grant of Agglomeration refers to the benefit of reduced production costs because of concentration
loans. Those entrepreneurs who fail to comply with the conditions are not able to get loan and hence of industries. The benefits from agglomeration are:
their dream of setting up their own enterprises is [Link] attitude of lending institutions will • availability of skilled labor.
go a long way in stimulating entrepreneurial climate. • presence of repair, maintenance and service facilities.
• availability of components.
INDUSTRIAL ESTATES • presence of financial institutions.
An industrial estate or an industrial park is an area that has been specially designed so that factories 3. Benefits of inter-relatedness
can be built there. The idea of industrial estate is borrowed from the United Kingdom for the The finished product of one unit might be the raw material for another unit. Since the
encouragement of industrial growth in selected areas. It is an institutional arrangement for building up units are located close by, it results in savings in transportation costs for the purchaser and assured
basic infrastructure and common services facilities for the development of industrial units. All utility market and reduced selling cost for the seller.
services such as water, electricity, transport, drainage, are readily available to all units at low or even 4. Low investment
subsidies rates. External economies of scale of operations are available from the establishment and Since the government provides land for setting up industrial estates at affordable costs,
development of industrial estates. the initial investment is less. Industrialists can acquire assets on hire-purchase or on lease and can
benefit from higher output.
INDUSTRIAL ESTATE OBJECTIVES 5. Availability of infrastructure
The infrastructural facilities such as electricity, water, roads, telecom etc., are readily
• Ensuring well-planned and structured industrial development. available in industrial estates. Entrepreneurs need not spend their time and money to get electricity
• Providing necessary infrastructure. connection, water supply and telephone connection. Therefore production can commence immediately
• Providing common facilities to a number of industries. without any wastage of time and resources
• Promoting development of clusters. 6. Availability of support facilities
• Enabling small units to share the benefits of common facilities. Apart from the basic infrastructure, banks, post offices etc., are located in industrial
• Decentralizing industries to rural and backward areas. estates. This facilitates business transactions to a great extent.
• Promoting balanced regional development. 7. Mutual cooperation
• Encouraging the development of small-scale industries in the country. The units in an industrial estate can cooperate among themselves and undertake joint
research. Such research can be for exploring new markets, new sources of supply of raw materials,
An industrial estate is a place where necessary infrastructural facilities are made available better processes etc., They can share best practices relating to quality standards, TQM, TPM, ISO
to entrepreneurs. The government of India has initiated several measures and provided various standards etc. Such co-operation would benefit all the member units.
incentives to promote industrial development. Setting up of industrial estates is one such measure. 8. Focus on business
The government launched the program of setting up Industrial Estates in 1955. The state government The initial investment is low and all the basic and supporting infrastructural facilities are
is responsible for planning, developing, and maintaining the industrial estates. The central government readily available. Therefore entrepreneurs can focus their full attention on the business and
provides the required financial assistance for the setting up of industrial estates. Financial assistance concentrate on its growth.
of the central government in the form of loans, grants, and subsidies are provided to the state 9. Increased employment opportunities
government. Industrial estates create more employment opportunities and increase the mobility of
labor. Since many of the units are labor intensive, there are opportunities for both skilled and
unskilled workers.

17 18
10. Development of backward areas 2)To Provide Competitive Strength, Survival and Growth: several other incentives are provided
Industrial estates provide employment to the local youth. With their development a host for the survival and growth of industries. For example, reservation of products, price preference etc.
of facilities such as banks, post offices, insurance companies, housing, schools, health care facilities will improve the competitive strength. Other concessions like concessional finance, tax relief etc.,
come up. This results in the development of backward areas and balanced regional development. contribute their survival and growth.
3)To Generate More Employment and Remove Unemployment: Market adjustments and external
INDUSTRIAL CLUSTERS economies play a significant role in the economic development of a country. Subsidies cause
movement of entrepreneurs from developed areas to developing or backward areas. In short,
A geographic concentration of interconnected firms, suppliers, and institutions in a particular field. It incentives and subsidies serve as a catalyst to start a dynamic process of development.
has the potential to affect competition by increasing the productivity of the companies in the clusters, 4)To Promote Entrepreneurship: Industrial estates, availability of power, concessional finance,
driving innovation, and stimulating new businesses in the specific field. capital investment subsidy, transport subsidy etc, are few examples of subsidies which are aimed at
encouraging entrepreneurs to take up new ventures.
INCENTIVES AND SUBSIDIES
PROBLEMS RELATING TO SUBSIDIES
In India Entrepreneurs are offered a number of incentives because they fulfill two main objectives of
economic development. Firstly, they facilitate decentralization of industries. They assist in the 1. A subsidy may remain unutilized.
dispersal of industries over the entire geographical area of the country. Secondly, they facilitate the 2. If the administration is inefficient or corrupt, subsidy will not produce the desired results
transformation of a traditional technique into modern technique characterized by improved skills, high 3. It is very difficult to measure the impact of subsidies.
production and higher standard of living. 4. Subsidies may lead to inefficiency in the long run.
5. Subsidies once introduced are difficult to withdraw.
INCENTIVES 6. The administrative procedure must be effective.
7. The cost of administering a subsidy should be considered.
It is the financial and promotional assistance provided by the government to the industries for 8. The subsidy scheme should be communicated to prospective beneficiaries.
boosting up industrial development in all regions particularly in backward areas. Incentives include 9. The quantum of subsidy should be adequate to produce the desired results.
concession, subsidies and bounties. ‘Subsidy’ denotes a single lump-sum which is given by a 10. The target groups to whom the subsidy is to benefit should be clearly determined.
government to an entrepreneur to cover the cost. It is granted to an industry which is considered
essential in the national interest. The term Bounty denotes bonus or financial aid which is given by a ENTREPRENEURIAL DEVELOPMENT AGENCIES
government to an industry to help it compete with other units in home market or in a foreign market.
Bounty offers benefits on a particular industry; while a subsidy is given in the interest of the nation. COMMERCIAL BANKS
The object of incentives is to motivate an entrepreneur to start new ventures in the larger interest of It plays an important role in the growth and development of economy in general and enterprise sector
the nation and the society. in particular. Commercial Bank in India comprises the State Bank of India (SBI) and its subsidiaries,
nationalized Banks, foreign banks and other scheduled commercial banks, regional rural banks and
ADVANTAGES OF INCENTIVES AND SUBSIDIES non-scheduled commercial banks. The period for which loan is granted varies from 7 to 10 years.
These loans are repayable in half yearly or yearly installments. Most commercial banks have got
• They act as a motivational force which makes the potential entrepreneur to enter into business specialized units in their administrative structure to take care of the financial needs of the small scale
activities. industrial units. The fixed capital needs or the long and medium term needs of the small scale
• They encourage the entrepreneur to start industries in the backward areas industrial units are presently being taken care by the banks under their integrated scheme of credit for
• They help the government to get a balanced regional development. the small entrepreneurs. The rate of interest charged normally from the small scale industrial units is
• They help to develop new enterprises which lead to economic development. between 12% and 15% against 18% from the large scale units.

NEED FOR INCENTIVES AND SUBSIDIES BRIDGE CAPITAL/FINANCE

Bridge capital is the advance given to cover the finance requirement during the time lag between the
1)To Remove Regional Disparities in Development: Industries may be concentrated and sanctioning and disbursement of term loan by financial institutions. It is an assistance given for a short
overcrowded in some regions, in order to correct this regional balance, incentives are provided to period to help borrower for overcoming the delay in disbursement of a sanctioned term loan or in
entrepreneurs. They will start new ventures in such backward areas. Thus the backward areas become getting the proceeds of a public issue. It is provided by commercial banks.
developed and regional imbalances are corrected.

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MICRO, SMALL AND MEDIUM ENTERPRISES(MSME) IMPORTANCE AND ROLE OF MSMES IN THE INDIAN ECONOMY
Small businesses are playing an important role in the industrial economy of the world. These are
particularly important in the developing economies. Small business is predominant even in developed 1. To generate large scale employment
countries such as USA, Japan etc. In India, capital is scarce and labour abundant. MSMEs are thought to have lower capital-output and
THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) DEVELOPMENT ACT, 2006 capital-labour ratios than large-scale industries, and therefore, better serve growth and employment
Under this act, the central Government shall set up, for the purpose of the act, a Board known as the objectives. The MSME sector in India has grown significantly since 1960 – with an average annual
National Board for Micro, Small and Medium Enterprises. growth rate of 4.4% in the number of units and 4.62% in employment (currently employing 30
million). Not only do MSMEs generate the highest employment per capita investment, but they also
CLASSIFICATION OF ENTERPRISES go a long way in checking rural-urban migration by providing people living in isolated areas with a
sustainable source of employment.
1. In Case of Manufacturing Enterprise: 2. To sustain economic growth and increase exports
i. A micro enterprise is one in which the investment in plant and machinery does not exceed Rs.25 Non-traditional products account for more than 95% of the MSME exports (dominating in the export
Lakhs. of sports goods, readymade garments, plastic products etc.). Since these products are mostly
ii. A small enterprise one in which the investment in plant and machinery is more than Rs.25 Lakhs handcrafted and hence eco-friendly, there exists a tremendous potential to expand the quantum of
but does not exceed Rs. 5 crore. MSME led exports. Also, MSMEs act as ancillary industries for Large Scale Industries providing
iii. A medium enterprise is one in which the investment in plant and machinery is more than Rs. 5 them with raw materials, vital components and backward linkages e.g. large scale cycle manufacturers
crore but does not exceed Rs. 10 crore. of Ludhiana rely heavily on the MSMEs of Malerkotla which produce cycle parts.
3. Making Growth Inclusive
2. In Case of Service Enterprise: MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable and
i. A micro enterprise is one in which the investment in plant and machinery does not exceed Rs. 10 marginalized. For many families, it is the only source of livelihood. Thus, instead of taking a welfare
lakhs. approach, this sector seeks to empower people to break the cycle of poverty and deprivation. It
ii. A small enterprise one in which the investment in plant and machinery is more than Rs.10 lakhs focuses on people’s skills and agency. However, different segments of the MSME sector are
but does not exceed Rs. 2 crore. dominated by different social groups.
iii. A medium enterprise is which the investment in plant and machinery is more than Rs. 2 crore but
does not exceed Rs. 5 crore. ADVANTAGES OF MSME

EXPORT ORIENTED UNIT 1. Employment generation:

• MSMEs are a significant source of employment in India. They provide employment
Export oriented units are those SSI units which export at least 30% of its annual production by the end opportunities to people in both urban and rural areas.
of the 3th year of commencement of production. 2. Contribution to GDP:
The primary objectives of MSME are to play a complementary role in the socio-economic set up of a • MSMEs contribute significantly to the Gross Domestic Product (GDP) of India. They account
country. The other objectives are as follows: for around 30% of India’s GDP.
3. Innovation:
1. To provide increased employment opportunities. • MSMEs are known for their innovation and creativity. They are more flexible and can adapt to
2. To provide production of large variety of goods especially consumer goods through about changing market conditions quickly.
intensive methods. 4. Regional development:
3. To bring backward areas too in the mainstream of national development. • MSMEs play a crucial role in the development of rural and backward areas. They help in
4. To improve the level of living of people in the country. creating a balanced regional development.
5. To create a climate for the development of self-employed experts, professionals and small 5. Export promotion:
entrepreneurs. • MSMEs are encouraged to participate in export activities. The government provides various
6. To ensure more equitable distribution of national income. incentives and schemes to promote exports by MSMEs.
7. To ensure balanced regional development as regards industries.
8. To encourage the adoption of modern techniques in the unorganized traditional sector or the
industry.

21 22
 7 Preparation of Project Report: The report usually covers important items like sources of
DISADVANTAGES OF MSMEs finance, availability of machinery and technical know-how, sources of raw material and labour,
market potential and overall profitability.
1. Lack of funds: 8 Registration as a Small Scale Industry: Registration with Department of industries and
• MSMEs are financially weak and often face difficulty in raising funds for their operations. Commerce is only optional. There is no statutory obligation, but small scale industries can avail
2. Lack of managerial skills: various facilities, incentives and concessions offered by the state as well as central government only if
• MSMEs often lack the necessary managerial skills required to run a business effectively. they registered as SSI.
3. Competition from large businesses: 9) Obtaining Statutory Licence: Any person should obtain the following licenses and certificates
• MSMEs face tough competition from large businesses that have more resources and before starting the venture:
economies of scale. (A) License from Local Bodies For
4. Difficulty in adopting new technology: (1) Construction of the building.
• MSMEs may find it challenging to adopt new technology due to a lack of resources and (2) Installation of plant and machinery.
expertise. (B) License from the Directorate of Factories and Boilers For:
5. Limited access to markets: (1) Approval of factory building.
• MSMEs may face difficulty in accessing new markets due to a lack of resources and limited (2) Registration under section 6, 7 and 85 of the Factory Act.
reach. (C) No Objection Certificate from State Pollution Control Board.
10) Apply for Power Connection: There are 2 categories of power, the Low Tension (LT) and High
STEPS AND FORMALITIES OF MSME Tension (HT). A consumer can avail LT only if the connected load is 75 HP and below. If connected
1. Scanning of Business Environment: it is essential on the part of the entrepreneur to study and load is between 75 HP and 130 HP, the consumer has the option to avail either LT supply or HT
understand the prevailing business environment. Entrepreneur should scan the business opportunities supply.
and threats in the new environment. To study the administrative framework, procedure, rules and 11) Arrangement of Finance: Entrepreneur needs to acquire assists of 2 kinds namely fixed assets
regulations and other formalities implemented by the government. The potential entrepreneur must and current assets. Long term finance is needed to acquire fixed assets like land, building, plant and
assess his own deficiencies, which he can compensate through training machinery and for security deposits. Short term funds are required for acquiring current assets.
2. Selection of the Product: The very success of one’s venture will depend on the rationality of his Current assets are essential for the day to day working of the industry. Long term funds includes
decision in this regard. The economic viability of the product can be ascertained by considering owner’s capital, subsidy from central/ state govt., personal borrowings from friends and relatives and
certain demand aspects such as volume of demand in the domestic market, volume of demand in the long term loans from financial institution like KFC and KSIDC.
export market, volume of potential demand, a degree of substitution of an existing product etc. The 12) Registration under the Sales Tax Act: Business enterprises are subject to three important taxes-
prospective entrepreneur has to identify the product based on market research or market survey. Income Tax, Excise Duty and Sale Tax. Income tax is levied on income as defined under the IT Act of
3. Selection of Form of Ownership: He has to select sole proprietorship or family ownership or 1961. It is revenue of Central Government. Excise duty is a tax levied by the central Government. It is
partnership or private limited company as the form of the ownership. the duty levied on the cost of goods manufactured within a country. Sales tax is levied whenever
4. Selection of Location and Site: Location is selected after considering certain factors such as goods are purchased from within the state. When goods are purchased from outside the state, Central
nearness to market, sources of material and labour, modern infrastructure facilities etc. The Sales Tax is levied. Application for registration should mention all places of business dealer including
entrepreneur has to choose a suitable plot for the factory. He may purchase land directly or choose the godown in which the goods are stored.
from an industrial area developed by State Development Corporations like SIDCO, or Directorate of 13) Installation of Machinery: Machinery should preferably be installed as per the plant layout.
Industries. In order to stimulate industrial growth, the government of is providing infrastructural 14) Recruitment of Manpower: The number and type of workers is to be decided. After this, the
assistance by way of required workers should be recruited.
• Developing areas. 15) Procurement of Raw Material: The raw materials may be procured indigenously or may have to
be imported by the entrepreneur. The next step is to start production, which is taken up in two stages-
• Development Plots
Trial production and Commercial production having successfully test marketed the product,
• Industrial estates, and
commercial marketing can be undertaken.
• Mini industrial units.
16) Application for Permanent Registration: For this, application form has to be made to the GM of
5 Designing Capital Structure: Apart from the own capital, he may secure finance from friends
DIC through IEO/ Taluk Industries Officer. The GM should inform the entrepreneur of the date and
and relatives, term loans from banks and financial institutions.
time of inspection of the unit. On being satisfied a registration certificate may be issued by the
6 Acquiring Manufacturing Know-How or Technology: Many institutions of government,
Directorate of Industries within one month of the receipt of the application. The period of the
research laboratories, research and development divisions of big industries and certain consultancy
certificate whether provisional or permanent will be for a period of 2 years. Renewal certificate would
agencies provide the manufacturing know-how.
be affected by the GM (DIC) within a period of 3 months from the date of expiry of certificate.
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SMALL INDUSTRIAL DEVELOPMENT ORGANISATION (SIDO) NATIONAL SMALL INDUSTRIES CORPORATION (NSIC)
The SIDO was formed under the Ministry of Industry. It is a policy making, co-ordination and It was set up in 1995 to provide machinery to small scale units on hire purchase basis and to assist
monitoring agency for the development of small scale industries. It maintains a close liaison with the these units in obtaining orders from government departments and offices. Its head office is at Delhi. It
government, financial institutions and other agencies which are involved in the promotion and has four regional offices at Delhi, Mumbai, Chennai and Calcutta. It has eleven branches offices also.
development of small scale units. It provides a comprehensive range of consultancy services and National Small Industries Corporation (NSIC) is a government undertaking that promotes the
technical, managerial, economic and marketing assistance to the small scale units. It has launched development and growth of small-scale industries in India .
various technology support programmes for the benefit of small scale industries in the country
through a number of steps. The steps include establishment of (a) process-cum-product development FUNCTIONS OF NATIONAL SMALL INDUSTRIES CORPORATION
centers, (b) tool rooms and training centers. (c) Specialized institutes and (d) regional testing centers 1. Credit and performance rating:
with its field testing stations. • NSIC provides credit and performance ratings to small-scale industries to help them secure
loans from banks and financial institutions.
FUNCTIONS OF SIDO 2. Registration of companies:
• NSIC provides a single point registration scheme for small-scale industries. This scheme
Small Industries Development Organisation (SIDO) is an apex body and nodal agency for enables small-scale industries to obtain various benefits such as exemption from payment of
formulating, coordinating and monitoring the policies and programmes for promotion and Earnest Money Deposit (EMD) and security deposit .
development of small-scale industries in India. The main functions of SIDO are classified into three 3. Data bank of industries:
categories: (i) Co-ordination, (ii) Industrial development, and (iii) Extension. These functions are • NSIC maintains a data bank of small-scale industries and provides information to
performed through a national network of institutions and associated agencies created for specific
entrepreneurs on the availability of machinery, raw materials, and other resources.
functions. Here are the details of the functions:
4. Marketing assistance:
1. Co-ordination: • NSIC provides marketing assistance to small-scale industries by organizing exhibitions, trade
fairs, and buyer-seller meets.
• Evolving a national policy for the development of small-scale industries. 5. Export promotion:
• Coordinating the policies and programmes of various State Governments. • NSIC promotes exports by small-scale industries by providing various incentives and
• Maintaining a proper liaison with the related Central Ministries, Planning Commission, State schemes.
Governments, Financial Institutions, etc.
• Coordinating the programmes for the development of industrial estates. NATIONAL ALLIANCE OF YOUNG ENTREPRENEURS (NAYE)
It is a national level apex organization of young entrepreneurs. It assists in promoting new enterprises
2. Industrial development:
through first generation entrepreneurs. NAYE sponsored an Entrepreneur Development Scheme with
• Reserving items for production by small-scale industries. Bank of India in August 1972 on pilot basis. The scheme is known as BINEDS. It is operative in the
• Collecting data on consumer items imported and then encouraging the setting up of industrial states of Punjab, Rajasthan, Himachal Pradesh and Union Territories of Chandigarh and Delhi.
units to produce these items by giving coordinated assistance. NAYE has entered into similar arrangement with Dena Bank, Central Bank of India and Union Bank
• Rendering required support for the development of ancillary units. of India .NAYE strives hard for up liftmen of young entrepreneurs especially women. It holds
• Encouraging small-scale industries to actively participate in Government Stores Purchase workshops, conferences, training programmes etc. to create awareness in entrepreneurs.
Program by giving them necessary guidance, market advice, and assistance.
TECHNICAL CONSULTANCY ORGANISATION (TCOs)
3. Extension:
It was established in different parts of the country to provide consultancy services to small and
• Making provision for technical services for improving technical process, production planning, medium enterprise at reasonable costs. The TCO was established in Kerala ( KITCO) in June
selecting appropriate machinery, and preparing factory layout and design. 1972. Functions and activities of TCOs include:
• Providing consultancy and training services to strengthen the competitive ability of small- i. Industrial potential surveys.
scale industries. ii. Preparation of profits and feasibility studies.
• Rendering marketing assistance to small-scale industries to effectively sell their products. iii. Evaluation of project.
• Providing assistance in economic investigation and information to small-scale industries. iv. Conduct of EDPs.
v. Assisting in the modernization, technical up gradation and rehabilitation programmes
etc.
vi. Undertaking market research and surveys for specific products.
vii. Offering merchant banking services.
25 26
SMALL INDUSTRIES SERVICE INSTITUTES SCIENCE AND TECHNOLOGY ENTREPRENEUR PARKS (STEP)
STEP is an area where applied research on high tech projects is conducted with the Collaboration of
Small Industries Service Institutes have been established in each state in 1956 as agencies of SIDO. multinational companies, universities, technological and research institutes. In 1972 a conventional
The objective is to develop small scale industries. The functions performed may be summarized as ‘Techno Park’ was set up by the Birla Institute of Scientific Research.
follows:
1) It promotes entrepreneurship and development of SSIs in rural and other underdeveloped SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI)
areas. SIDBI was set up on April 2, 1990 as a wholly owned subsidiary of IDBI. It is operating through its
2) It supplies market information in selected cases and undertakes market distribution surveys Head Office at Lucknow and a network of 5 Regional Offices and 25 Branch Offices in all the states.
for industrial enterprises. It is an apex institution for promotion, financing and development of industries in small scale sector
3) It conducts various programmes for workers in other organizations as well as in small and co-ordination of functions of other institutions engaged in similar activities.
industry incertain trades.
4) It assesses the capacities of small units for imported/controlled materials. FUNCTIONS OF SIDBI
5) It provides technical guidance on the efficient use of wastages and scraps. 1. Refinancing:
6) It prepares designs and drawing for production equipment and accessories. • SIDBI provides refinance assistance to banks and financial institutions that have extended
7) It ensures that small industry development in India is being done in right lines. loans to MSMEs.
8) It provides workshop common facilities to industrialists at reasonable charges. 2. Direct financing:
• SIDBI provides direct financing to MSMEs in the form of service sector financing, receivable
9) It conducts detailed plant studies to locate production and other problems. It initiates and
financing, risk capital and sustainable financing, etc.
coordinates modernization of selected industries. 3. Marketing assistance:
10) The institute assists in rehabilitation of sick units. • SIDBI helps MSMEs expand their marketing channels by providing services like leasing,
11) It helps to develop ancillary industries. It registers SSI units with NSIC to supply their factoring, etc.
products to government. 4. Credit rating:
12) The institute conducts modernization studies for technology up gradation. • SIDBI provides credit and performance ratings to MSMEs to help them secure loans from
13) It undertakes quality control, energy conservation and pollution control, specialized banks and financial institutions.
training programmes on export marketing. 5. Registration of companies:
• SIDBI provides a single point registration scheme for small-scale industries. This scheme
14) The institutes also conduct surveys and studies for identification of industries having
enables small-scale industries to obtain various benefits such as exemption from payment of
scope of promotion and development. Earnest Money Deposit (EMD) and security deposit.
15) It advises the Govt. of India and state government on policy matters relating to small
industry development.
THE NATIONAL INSTITUTE FOR ENTREPRENEURSHIP AND SMALL BUSINESS
DEVELOPMENT (NIESBUD)
KHADI AND VILLAGE INDUSTRIES COMMISSION
It is an apex body established in 1983 by the ministry of Industries, Government of India, for
KVIC makes finance available to the implementing agencies in the form of capital expenditure loans.
coordinating, training and overseeing the activities of various institutions/agencies engaged in
It also extends assistance for setting up of retail sales outlets and also for strengthening of the capital
entrepreneurship development, particularly in the area of small industry and small business. The
base of the registered institutions and cooperatives. It also assists individual artisans besides
Institute which is registered as a society under Government of India Societies Act started functioning
formulating liberal pattern of assistance for identified hill, border and weaker sections. The loans for
from 6th July, [Link] policy, direction and guidance to the institute is provided by its governing
Khadi are interest free, while those for village industries have an interest at the rate of 4% per annum.
council whose chairman is the minister of SSI. It has an executive committee.
FUNCTIONS OF KVIC
OBJECTIVES OF NIESBUD
(1) To train the artisans.
The objectives of the institute include the following:
(2) To assist village industries in procuring raw materials. 1. To evolve standardized materials and processes for selection, training, support and
(3) To assist and support through marketing of finished products of village industries. To provide sustenance of entrepreneurs, potential and existing.
equipment and machinery to producers on concessional terms. 2. To share internationally, its experience and expertise in entrepreneurship development.
(4) To undertake R and D programmes for improved implements for silk reeling, more efficient 3. To train the trainers, promoters and consultants in various areas of entrepreneurship
extraction of oil in power grains, manufacture of panel boards from banana stems and improved development.
‘charka’ and looms.
4. To provide national/international forums for the interaction and exchange of experiences
The main thrust of KVIC is to alleviate rural poverty and to make the village artisan more productive helpful for policy formulation and modification at various levels.
through improved technology and market support. 5. To provide vital information and support to trainers, promoters and entrepreneurs by
organizing research and documentation relevant to entrepreneurship development.
27 28
 9. Cluster intervention:
FUNCTIONS OF NIESBUD • NIESBUD provides cluster intervention services to promote entrepreneurship in clusters.
1. Training:
• NIESBUD provides training to entrepreneurs, trainers, and consultants in various STATE INDUSTRIAL DEVELOPMENT CORPORATION (SIDCO)
areas of entrepreneurship development. It was registered as a Limited Company on 21st July 1961 with the objective of organizing,
2. Consultancy: stimulating and assisting industrial development in Tamilnadu
• NIESBUD provides consultancy services for the promotion and development of
small-scale industries, village, and cottage industries, etc. FUNCTIONS OF SIDCO
3. Research:
• NIESBUD undertakes research and survey for identifying the problems and prospects 1. Development of financial support:
• SIDCs engage in the development of financial support for medium and big businesses.
of entrepreneurship development.
2. Creation of industrial infrastructure:
4. Extension:
• SIDCs create industrial infrastructures such as industrial parks and estates.
• NIESBUD provides extension services for the promotion and development of 3. Promotion of entrepreneurship and skill development:
entrepreneurship. • SIDCs assist in the formation of entrepreneurship and the development of skills.
5. Management development programmes: 4. Publicity and marketing:
• NIESBUD conducts management development programmes for entrepreneurs to • SIDCs help businesses with publicity and marketing.
enhance their managerial skills.
6. Entrepreneurship-cum-skill development programmes: TAMILNADU INDUSTRIAL INVESTMENT CORPORATION (TIIC)
• NIESBUD conducts entrepreneurship-cum-skill development programmes to promote It provides financial assistance for starting of new industrial units, expansion, diversification or
entrepreneurship and skill development. Modernization of existing units...
7. Cluster intervention:
• NIESBUD provides cluster intervention services to promote entrepreneurship in FUNCTIONS OF TIIC
clusters.
1. Financial assistance:
• TIIC provides financial assistance for the purchase of land, machinery, and construction of
RESPONSIBILITIES OF NIESBUD
buildings for setting up new units, expansion, modernization, and diversification of existing
1. Standardization of materials and processes:
industries.
• NIESBUD aims to evolve standardized materials and processes for selection, training, 2. Promotion of MSMEs:
support, and sustenance of entrepreneurs, potential and existing.
• TIIC focuses on extending assistance to Micro, Small, and Medium Enterprises (MSMEs),
2. Sharing of experience and expertise:
which account for 90% of the total assistance. About 40% of the total assistance is availed by
• NIESBUD shares its experience and expertise in entrepreneurship development first-generation entrepreneurs.
internationally. 3. Industrial development:
3. Training of trainers, promoters, and consultants:
• TIIC has financed Greenfield projects, many of which are presently successful brands. It
• NIESBUD trains the trainers, promoters, and consultants in various areas of entrepreneurship provides financial support for medium and big businesses.
development. 4. Marketing assistance:
4. Research and survey:
• TIIC helps businesses with publicity and marketing.
• NIESBUD undertakes research and survey for identifying the problems and prospects of 5. Consultancy services:
entrepreneurship development.
• TIIC provides consultancy services for the promotion and development of small-scale
5. Consultancy services:
industries, village, and cottage industries, etc.
• NIESBUD provides consultancy services for the promotion and development of small-scale
industries, village, and cottage industries, etc. It has introduced the following scheme:
6. Extension services: ➢ Techno crafts Assistance: SFC has introduced this scheme to provide liberalized financial
• NIESBUD provides extension services for the promotion and development of assistance to entrepreneurs. Any person with a degree or diploma in Engineering, Technology
entrepreneurship. is eligible for assistance
7. Management development programmes: ➢ Assistance to SC/ST Entrepreneurs: The Corporation gives 90% of the cost of fixed assets
• NIESBUD conducts management development programmes for entrepreneurs to enhance for loans not exceeding Rs.50,000 per person and Rs.1lakh if there is more than one.
their managerial skills. ➢ Single Window Scheme: The single window scheme is fir grant of term loan and working
8. Entrepreneurship-cum-skill development programmes: capital to new micro and small units whose project cost does not exceed Rs.20lakhs and total
• NIESBUD conducts entrepreneurship-cum-skill development programmes to promote working capital requirement is within Rs.10 lakhs. The repayment period is between 5 and 10
entrepreneurship and skill development.
years.
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➢ Special Capital Assistance: It has created a special capital fund with the object of providing
equity type of assistance for soft terms for entrepreneurs who have necessary skill and UNIT – 3
experience but lack of financial sources to set up SSI units. It has introduced special schemes
for professionals, ex-servicemen, women entrepreneurs etc. KFC has introduced another BUSINESS IDEA:
scheme called quality certificate scheme. The object of this scheme is to help the SSI units in
securing the certificate of International Standards Organization (ISO). A promising venture always starts with a brilliant business idea. Successful entrepreneurs are
innovators or problem resolvers who come with ideas to fill the potential gaps in the market or
handle an existing scenario with an alternative outlook to find the better and cheaper way of
doing the things.

IDEA GENERATION TECHNIQUES

1. The 5W+H Method

An ideal generated idea is the one which must answer, Who, What, Where, Why, When and
How., which is the method of 5W and H. These were the parameters, on which, if the ideas are
generated, might result in a great solution which on implementation might prove to be the best
one.
2. Social Listing
A problem arises when more of the competitors are into the same product line as yours. So, to
reduce the communication gap, this social listing is done. It can be done by-polls on social media
sites such as Reddit, Twitter, etc. The customers’ reactions are taken, and through this reaction,
ideas are being formatted so that the customers feel attracted towards the product and our
product turns out to collect huge revenues.
3. Mind Mapping
Mind mapping can turn out to be another successful method in generating ideas. It can be done
by diagrammatically representing the task of the concept.
4. Collaboration
As the name suggests, two or more people work together to achieve a particular goal. This
method is again the most popular one. Many people join their hands for a particular project or so;
this is done because a team always has more ideas and innovations than one business person.
5. The Story Boarding Method
It is a method in which the ideas or the concepts are placed to look like that of a cartoon strip.
Then a story is being developed from it. Ideas are being taken from every colleague, and then a
sticky note is then being passed on aboard.
6. Sketching as a Group
As we know, if something is drawn as a picture or sketch, our sensors of the brain start acting,
and the sketch which has been visualized by the eyes remains in the memory for a longer time as
compared to the discussions being made. Thus if a rough sketch of ideas is made on the
whiteboard or so, it could be easier for others to understand, and if they have innovative ideas,
they can come up with them.
7. Use online Tools to generate ideas
Ideas can too be identified across the multidimensional internet. Ideas are available here in great
abundance. One of these platforms can be Evernote, which provides solutions that are well-
formatted and helpful. And this allows one to write thoughts instantly.
8. Brainstorming:
A group of people come together to generate ideas in a free-flowing environment. The goal is to
generate as many ideas as possible without any criticism or judgment.
9. Attribute Listing:
This technique involves breaking down a problem into smaller parts and then listing the
attributes of each part. The goal is to identify new ideas by combining different attributes.

31 32
10. SCAMPER: 8. Promote Entrepreneurial Activity
This technique involves asking questions about a product or service to generate new ideas. The entrepreneur may promote entrepreneurial activity for the establishment of industries having
SCAMPER stands for Substitute, Combine, Adapt, Modify, Put to another use, Eliminate, and good potential for exports, by identifying suitable business opportunities. It is clear that decisions
Rearrange. regarding the profitability or otherwise from the promotion of particular entrepreneur activity, or
in which specific areas are Industries, opportunities for promotion are available may be taken on
IDENTIFICATION OF BUSINESS OPPORTUNITIES the basis of study and analysis of the aforesaid factors.

• A business opportunity, also called bizopp, is the chance to take advantage of an occurrence BUSINESS PLAN
in the market to begin a business.
• It involves some kind of favourable condition which exists in the market. • A business plan is a roadmap for your business. It outlines your goals, strategies, and how
• A business opportunity is what makes some businesses succeed while others fail. Leaders are you plan to achieve them. It’s a living document that you can update as your business
successful because they see opportunities before other people spot them, make plans then grows and changes.
build business models to capitalise on that opportunities. • In the world of business, a well-thought-out plan is often the key to success. This plan,
known as a business plan, is a comprehensive document that outlines a company’s goals,
FACTORS TO CONSIDER IN IDENTIFYING BUSINESS OPPORTUNITIES: strategies, and financial projections. Whether you’re starting a new business or looking to
expand an existing one, a business plan is an essential tool.
1. Analysis of Internal Demand
Business opportunities may be identified by assessment of internal demand of the existing and PURPOSES OF A BUSINESS PLAN
proposed products, as to what will be the possibility of future demand? Before it, the
entrepreneur will have to keep into consideration, the per capita income, population, and national 1. Attract investors and lenders:
income. If you’re seeking funding for your business, a business plan is a must-have. Investors and lenders
2. Availability of Raw Materials want to see that you have a clear plan for how you’ll use their money to grow your business and
Easy availability of raw material also has an important role in selecting the business generate revenue.
opportunities, the reason being that the quantity and level of future production are decided only 2. Get organized and stay on track:
by it. If the raw material is easily available, then not only the production cost is low, but it also Writing a business plan forces you to think through all aspects of your business, from your target
makes the entrepreneur ready to establish the industrial unit. market to your marketing strategy. This can help you identify any potential challenges and
3. External Assistance opportunities early on, so you can develop a plan to address them.
Role of external assistance, like – government, suppliers, investors, and specific institutions is 3. Make better decisions:
also important, in Identification of business opportunities, the reason being that external A business plan can help you make better decisions about your business by providing you with a
assistance, support and cooperation are helpful in Identification of opportunities. In various framework to evaluate different options. For example, if you’re considering launching a new
areas, governments provide assistance, subsidies, and incentives in the identification of business product, your business plan can help you assess the potential market demand, costs, and
possibilities and the establishment of industries. profitability.
4. Knowledge about Industrial Development
By obtaining detailed knowledge about proposed industrial development from various sources, ESSENTIAL COMPONENTS OR ELEMENTS OF A BUSINESS PLAN
the entrepreneur may know, the establishment of which type of industry and at which place will
be profitable, and which not? Besides, by such knowledge, he can also know, which specific
industry has wide possibilities of development?
5. Internal Sources
The availability of internal sources also has an important role in the identification of business
opportunities. If the sources of production are regularly available to the entrepreneur, he may
take positive steps for the establishment of the industrial unit.
6. Risk in Business Opportunities
Every business involves risk. It goes on increasing or decreasing with the environment in such
conditions, the entrepreneur has to identify, when, and how much risk involved in the business
opportunities? He has also to ascertain, to what extent, the taking of this may be profitable to
him.
7. Performance of Existing Units 1. Executive summary
The entrepreneur main objectively analyzes the performance of existing units to identify business The executive summary is the most important part of your business plan, even though it’s the last
opportunities. For that, he will have to analyze products, and product expansion, capital, profits, one you’ll write. It’s the first section that potential investors or lenders will read, and it may be
employment, assets, export possibilities, etc. the only one they read. The executive summary sets the stage for the rest of the document by
introducing your company’s mission or vision statement, value proposition, and long-term goals.

33 34
 2. Business description or overview BUSINESS PLAN FAILURE
The business description section of your business plan should introduce your business to the
reader in a compelling and concise way. It should include your business name, years in Business failure is when a company is unable to meet its financial obligations and is forced to
operation, key offerings, positioning statement, and core values (if applicable). You may also shut down or suspend operations, this is referred to as a business failure. When a company is
want to include a short history of your company. unable to generate a profit, this might lead to the company’s failure.
3. Product and price
In this section, the company should describe its products or services, including pricing, product TYPES OF BUSINESS PLAN FAILURE
lifespan, and unique benefits to the consumer. Other relevant information could include
production and manufacturing processes, patents, and proprietary technology.
4. Competitive analysis
Every industry has competitors, even if your business is the first of its kind or has the majority of
the market share. In the competitive analysis section of your business plan, you’ll objectively
assess the industry landscape to understand your business’s competitive position. A SWOT
analysis is a structured way to organize this section.
5. Target market
Your target market section explains the core customers of your business and why they are your
ideal customers. It should include demographic, psychographic, behavioral, and geographic
information about your target market.
6. Marketing plan
Marketing plan describes how the company will attract and retain customers, including any
planned advertising and marketing campaigns. It also describes how the company will distribute
its products or services to consumers. 1. Preventable Failures
7. Team Preventable failures are the ones that may have been anticipated, but they were not. This is the
After outlining your goals, validating your business opportunity, and assessing the industry most damaging type of failure, and it frequently results from a startup’s inability to follow best
landscape, the team section of your business plan identifies who will be responsible for practices, lack of expertise, or foresight. Therefore, after a failure that might have been avoided,
achieving your goals. Even if you don’t have your full team in place yet, investors will be it’s important to look closely at where things went wrong and repeat the successes.
impressed by your clear understanding of the roles that need to be filled. 2. Unavoidable Failures
8. Financial plan These typically occur in the circumstances with distinct sets of elements and complexity. The
In the financial plan section,established businesses should provide financial statements, balance lesson to be learned from this sort of failure is to implement systems to identify tiny failures
sheets, and other financial data. New businesses should provide financial targets and estimates caused by complicated circumstances and to take corrective action before the company’s failure.
for the first few years, and may also request funding. 3. Intelligent Failures
9. Funding requirements This is the finest variety. They occur quickly and do not require excessive resources. This kind
Since one goal of a business plan is to secure funding from investors, you should include the offers the most valuable information at the lowest price. This is the mindset underlying the trial-
amount of funding you need, why you need it, and how long you need it for. and-error method when a company undertakes tests to develop a successful product or business
strategy.
PERSPECTIVES OF BUSINESS PLAN PREPARATION
1. Entrepreneur’s Perspective: REASONS OF BUSINESS PLAN FAILURES
• This perspective focuses on the entrepreneur’s vision for the business, including its
mission, goals, and strategies.
• The entrepreneur must articulate what the venture is all about.
2. Marketing Perspective:
• This perspective focuses on the market in which the business operates, including
information on competitors, customers, and market trends.
3. Investor’s Perspective:
• This perspective focuses on the financial aspects of the business, including revenue and
expense projections, cash flow projections, and a break-even analysis.

35 36
1. Poor Planning
It causes many small companies to fail. Planning starts with choosing the ideal business and 7. Hire a business advisor:
affects all areas of business operations, including site selection, finance, workforce planning, • A business advisor can provide valuable insights and advice on how to overcome
budgeting, and growth. Realistic, up-to-date planning is crucial. Conversely, planning based on business failure.
hopes and rumors may quickly undermine a strong company idea. • They can help you develop a plan to get back on track and achieve your goals.
2. Unprepared Expansion 8. Avoid emotional decision-making:
Every company owner wants to develop their firm, but growing without facilities makes a • It’s important to make decisions based on facts and data, not emotions.
business susceptible to failure. This is the physical component of growth pricey, and other • By avoiding emotional decision-making, you can make better decisions for your
geographical places have different buying patterns. business.
3. Cash Flow
Cash flow issues destroy hundreds of small enterprises annually. Unfortunately, most business
owners don’t know how much money it takes to manage a business. Therefore, developing a
business plan utilizing cautious predictions and not being excessively optimistic should be
preferred. This is why cash-flow analysis —tracking corporate income and expenditures—is
essential.
4. Flawed Business Strategies
Failure to control flawed business strategies is the most common reason for failure.
Unfortunately, some business owners hesitate to recognize fault. So if caught early, many small
enterprises may recover from bad business decisions. However, business owners and managers
often need to improve their methods, arguing that the project will pay off in the next month or
quarter.
5. Shrinking Clientele
Poor service, high costs, and new competition can cause a customer base decline. To increase
client interactions and improve products/services, marketing, inventories, customer service, and
staff.

OVERCOME FROM BUSINESS PLAN FAILURES

1. Establish a contingency plan:

• A contingency plan can help you prepare for the worst-case scenario and minimize the
impact of failure.
2. Conduct a SWOT analysis:
• A SWOT analysis can help you identify your strengths, weaknesses, opportunities, and
threats.
• This can help you develop a plan to overcome your weaknesses and take advantage of
opportunities.
3. Focus on your customers:
• Your customers are the lifeblood of your business.
• By focusing on their needs and wants, you can develop products and services that meet
their needs and build a loyal customer base.
4. Be SMART:
• Set specific, measurable, achievable, relevant, and time-bound goals for your business.
• This can help you stay focused and motivated.
5. Manage cash flow during downturn:
• Cash flow is critical to the survival of any business.
• During a downturn, it’s important to manage your cash flow carefully and conserve your
resources.
6. Invest in social media:
• Social media can be a powerful tool for marketing and building your brand.
• By investing in social media, you can reach a wider audience and connect with your
customers.

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 UNIT – 4
6. Boosted sales:
FINANCING OPTIONS • Financing programs can help businesses boost sales by giving customers more buying power
and flexibility.
Financing options refer to the various ways in which businesses, consumers, and investors can obtain 7. Lower costs:
funds to achieve their goals 1. There are two main types of financing: debt financing and equity • Financing can lower a company’s costs by providing access to capital at a lower cost than
financing. Debt financing is a loan that must be paid back, often with interest, while equity financing other sources of funding.
does not need to be paid back but relinquishes ownership stakes to the shareholder. 8. Increased flexibility:
• Financing provides companies with greater flexibility in managing their cash flow and capital
FINANCING OPTIONS IMPORTANCE structure.

1. Enable operations and activities: FINANCING OPTIONS DISADVANTAGES

• Financing enables companies to carry out their operations and activities by providing the
necessary funds to purchase assets, pay employees, and cover other expenses. 1. Interest payments:
2. Generate revenues and profits: • Financing options such as debt financing require interest payments, which can increase the
• Financing helps companies acquire assets that can generate revenues and profits. These assets cost of capital for a business.
can include property, plant, equipment, and other resources that are essential to the company’s 2. Risk of insolvency:
operations. • Debt financing must be repaid before equity in the event of insolvency, which can put a
3. Allow expansion: business at risk of bankruptcy.
• Financing can help companies expand their operations by providing the necessary funds to 3. Collateral requirements:
acquire new assets, hire additional employees, and enter new markets. • Lenders may require collateral for debt financing, which can put a business’s assets at risk if
4. Improve cash flow: it defaults on the loan.
• Financing can improve a company’s cash flow by providing the necessary funds to cover 4. Creditworthiness requirements:
expenses and invest in growth opportunities. • Lenders may require businesses to meet certain creditworthiness requirements before
5. Boost sales: approving a loan, which can be difficult for new or small businesses.
• Financing programs can help businesses boost sales by giving customers more buying power 5. Ownership dilution:
and flexibility. • Equity financing can dilute the ownership of existing shareholders, which can reduce their
6. Lower costs: control over the business.
• Financing can lower a company’s costs by providing access to capital at a lower cost than 6. Dividend payments:
other sources of funding. • Equity financing may require dividend payments, which can reduce a business’s cash flow
7. Increase flexibility: and profits.
• Financing provides companies with greater flexibility in managing their cash flow and capital 7. Higher cost of capital:
structure. • Equity financing is generally more expensive than debt financing, which can increase a
business’s cost of capital.
FINANCING OPTIONS ADVANTAGES 8. Disclosure requirements:
• Publicly traded companies that use equity financing must meet certain disclosure
1. Increased cost-efficiency: requirements, which can be costly and time-consuming.
• Financing options may provide increased cost-efficiency, which can help businesses save
money and improve their bottom line. BRIDGE CAPITAL
2. Less risky than equities:
• Financing options may be less risky than equities, which can help businesses manage their • Bridge capital is temporary funding that helps a business cover its costs until it can get
risk exposure and protect their investments. permanent capital from equity investors or debt lenders.
3. Higher percentage returns: • The repayment terms for bridge capital vary, but usually payment is made in full when the
• Financing options have the potential to deliver higher percentage returns, which can help company receives the new capital or a longer-term loan.
businesses generate more profits and grow their operations.
4. Strategic alternatives: BRIDGE CAPITAL ADVANTAGES
• Financing options offer a number of strategic alternatives, which can help businesses achieve
their goals and objectives more effectively. 1. Immediate access to funds:
5. Improved cash flow: • Bridge financing can provide a company with the necessary funds to continue operating
• Financing options can improve a company’s cash flow by providing the necessary funds to while it seeks out more permanent financing options.
cover expenses and invest in growth opportunities.

39 40
 2. Flexibility: 4. Small Business Grants
• Bridge financing can be structured in a variety of ways, including debt or equity, and can If one is lucky enough, he/she may get a small business grant from central, state or local
be used during an IPO. government or big business entities. The funds so acquired need not be repaid by the budding
3. Short-term solution: entrepreneur.
• Bridge financing is a short-term solution that can help a company avoid bankruptcy or 5. Microloans
insolvency by providing the necessary cash flow to keep the business running. These are small business loans offered by an individual or a group of individuals at a
4. Funding for strategic initiatives: slightly lower interest rate for startups.
• Bridge financing can be used to fund acquisitions or other strategic initiatives that require 6. Angel Investors
immediate capital. An angel investor is the one who can invest between 10K to 100K in a new business
venture only if the budding entrepreneur can convince the angel of the business idea and its
BRIDGE CAPITAL DISADVANTAGES profitability. Remember, they keep control over the operations and actively participate in the
decision making of the business.
1. Higher interest rates: 7. Venture Capital
• Bridge financing is typically more expensive than other forms of financing due to the Though it is the source of high capital, i.e. more than one million, it should be avoided in
higher risk involved. the initial stage of the business. The venture capital investors look forward to owning a share in
2. Less favourable terms: equity along with control and decision-making power.
• Lenders may impose less-than-ideal terms on startups in desperate situations . 8. Form a Partnership
3. Risk of over-reliance: Some of the well-established business organizations invest in the new business units and
• Continual dependence on bridge financing without addressing core financial issues can initiating a partnership with them since they find these startups to be of high potential.
trap startups in a debt cycle.
4. Collateral requirements: SEED CAPITAL ASSISTANCE ADVANTAGES
1. Investors Willing to Take Risk:
• Bridge financing often requires collateral, putting startup assets at potential risk.
The most significant advantage of seed capital is that the investors are ready to take the
high risk of failure involved in the startup business.
SEED CAPITAL ASSISTANCE
2. Usually, No-Debt Financing:
Most of the times, the budding entrepreneur is not overburdened by the debts or liability.
• The primary goal of seed capital assistance is to help startups achieve their initial goals by
Instead, he/she needs to give away some share in equity to the investors.
providing them with the necessary funds to cover the costs of creating a proposal.
3. High Growth Prospectives:
• Seed capital assistance refers to the type of financing used in the formation of a startup.
The seed capital provides financial leverage to the startups for grabbing new
• It is the money raised to begin developing an idea for a business or a new product. opportunities and accelerate growth.
• Funding is provided by private investors, usually in exchange for an equity stake in the 4. Flexible Business Agreements:
company or for a share in the profits of a product. The terms of a seed funding business agreement are negotiable and flexible, which is not
• Much of the seed capital a company raises may come from sources close to its founders the case in venture capital and bank borrowings.
including family, friends, and other acquaintances. 5. Angels Share Knowledge and Experience:
• Some seed capital may come from angel investors, professional investors who have a high In sources like an angel investor, venture capital, incubator, partnership and accelerator,
net worth. the investor takes an interest in the business. He/she also share relevant knowledge and
information with the budding entrepreneur.
SEED CAPITAL ASSISTANCE SOURCES 6. No Monthly Fees:
Many of the investors (except in case of loans and borrowings) are interested in the
1. Friends and Family ownership of the new venture rather than charging interest or monthly fees.
The easiest way of raising fund for a startup is through family or friends since they are
familiar with the budding entrepreneur and his/her idea. However, one must be careful while 7. Builds Relationship, Network and Community:
opting this source, as losing money may spoil relations with the lender. Some sources of funds like angel investors, crowdfunding and incubators allow the
2. Bootstrapping budding entrepreneur to access their business networks and community to build public relations.
Savings is a vital source of raising initial funds for a startup. Even the investors hesitate
to put in their money in a new business which lacks self-raised capital. SEED CAPITAL ASSISTANCE DISADVANTAGES
3. Loans or Lines of Credit 1. May Lead to Diversions:
To avail small borrowings from external sources, a budding entrepreneur may go for Acquisition of funds for business is a time consuming, and tedious work with diverts the
loans or lines of credit from commercial banks. However, this source may require to keep entrepreneur’s attention from the underlying business operations towards fulfilling seed capital
personal collateral with the lender for security. requirement.

41 42
2. Loss of Control and High Interference:
An investors, especially the angel investors, exercise control over the company’s decision Financial institutions perform a wide variety of promotional behavior for new
making and operations, in the sake of providing guidance. This excessive involvement of the entrepreneurs, consultancy services for small and medium enterprises and programmes designed
investors trouble the entrepreneurs a lot. for accredited voluntary agencies for the financial upliftment of the needy. These include
3. Giving Up Equity: entrepreneurship development and self-employment. The main function of financial institutions
The budding entrepreneurs by opting for means like angel investors, venture capitalists and is to provide mainly the term loan assistance to small and medium scale industries for acquiring
incubators may land up giving away a share of business ownership in the form of equity and fixed assets like land, building, place and machinery. Loans are also extended for expansion,
limiting the future profits for himself or herself. diversification, technology development, expansion of the business. The following institutions
4. Interpreting Seed Capital Acquisition as Success: are available for providing the above mentioned benefits.
Some budding entrepreneurs falsely consider the acquisition of funds as their most significant
achievement. Thus, going into a relaxation mode when they need to perform in making their 1. Industrial development bank of India (IDBI)
business a success. 2. National bank for agriculture and rural development (NABARD)
5. Costly Affair Due to High-Risk Involvement: 3. Export import bank of India
Since startups involve a high risk of failure and loss, the investors provide funds at a high rate of 4. Small industrial development bank of India (SIDBI)
interest or in exchange for a significant business share. 5. Industrial investment bank of India
6. Sometimes Investors Lack Expertise: 6. Industrial finance corporation of India (IFCI)
In the practice of creating a diversified portfolio, the investors sometimes put their money in 7. Industrial Credit and Investment Corporation of India (ICICI)
less-known business, thus increasing the risk of loss. 8. Industrial Reconstruction Bank of India
7. Limits Future Profits: 9. Indian banking system and commercial banks
Since some sources of capital acquisition demand giving up of a portion of business ownership 10. State Financial Corporations
by issuing equity shares to the investor, the budding entrepreneur needs to share all future profits 11. Life Insurance corporation of India (LIC)
with such investors. 12. Unit Trust of India (UTI)
8. Investments May Not Stay Lifelong:
The investors purposefully pool in their money in a new venture. They aim at making profits, FINANCIAL INSTITUTIONS ROLES
and when the business reaches a saturation point, they tend to withdraw their investments..
1. Providing capital:
MARGIN MONEY SCHEME • Commercial banks provide capital to entrepreneurs and invest in productive purposes, which
encourages self-sufficiency, reduces joblessness, and promotes the right industries.
• Margin money is the amount of money that an investor has to deposit with a broker or an 2. Financing:
exchange to cover some or all of the credit risk of their counterparty. • Commercial banks grant loans and advances to businesses, which helps them in their growth
• It is also known as collateral. and expansion.
• Margin money is required in various financial transactions such as futures trading, 3. Facilitating domestic and international trade:
options trading, and home loans. • Banks provide references and guarantees on behalf of their clients, which helps sellers supply
• In futures trading, margin money is calculated based on a percentage of the total value goods on credit. This is particularly important in international trade when the parties reside in
covered under the futures contracts. different countries and are often unknown to each other.
• The initial margin is the cash deposit required to be put forward when opening a new 4. Agency functions:
futures position, which is determined based on a percentage of the full contract value. • Commercial banks purchase and sell shares and debentures of the company, collect income
and pay expenditures, and open L.C. Exchange Foreign exchange.
• In options trading, margin money is the amount of cash an investor must deposit with the 5. Transfer of money:
broker as collateral to write options. • Commercial banks transfer the amount of public and organizations from one place to another
• In home loans, margin money is the amount that the borrower has to pay upfront to the place within the country or outside of the country or one account to another account with the
bank or the lender. help of T.T., draft, etc.
• It is usually a percentage of the total loan amount and is used to cover the risk of default 6. Creating money:
by the borrower.
• The banking system can create money. When the business expands, more money is needed for
exchange transactions. Money in a country’s legal tender cannot usually be expanded quickly.
FINANCIAL INSTITUTIONS IN INDIA
The bank’s money can be increased quickly and used when more money is needed.
Finance is one of the essential supplies of an enterprise. Without sufficient funds, no
business can be developed. In India, Central and state governments are promoting a number of
financial institutions to bring in the industrial development in the state. A number of hold up
institutions set up by central and state government help the entrepreneurial activities in various
ways. The activities cover a wide range of services i.e. financing, technological guidance,
equipment support, training, marketing and providing subsidy and grants.
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COMMERCIAL BANKS IN INDIA

• Commercial Banks operate under the Banking Companies Act, 1956.

• Any banking organization that deals with the deposits and loans of businesses are referred to
as a commercial bank.
• Commercial banks issue bank checks and drafts and accept term deposits.
• Through installment loans and overdrafts, commercial banks also serve as moneylenders.
• Commercial banks also provide a variety of deposit accounts, including checking, savings,
and time deposits.
• These institutions are run for profit and are owned by a group of people.
• A commercial bank's main source of income is the difference between the two rates which it
charges borrowers and pays depositors. PRIVATE SECTOR BANKS

CLASSIFICATION OF COMMERCIAL BANKS • There are two types of private sector banks – Old Private Sector Banks and New Private
Sector Banks.
• Old Private Sector Banks are those private sector banks that existed at the time of
nationalization.
• No new banks could be established in India prior to 1993.
• The Reserve Bank of India issued guidelines for the establishment of new private sector banks
in India in 1993.
• The majority of a bank's share capital is held by private individuals. These banks are set up as
limited-liability corporations.
• Private sector banks include ICICI Bank, Axis Bank, HDFC, and others.

PUBLIC SECTOR BANKS

• These are banks in which the Government of India owns a majority stake.
• This group includes the State Bank of India, India's largest commercial bank.
• The State Bank of India Act, 1955, established the State Bank of India by converting the
then-existing Imperial Bank of India into the State Bank of India.
• Following the formation of the State Bank of India in 1955, another 14 banks were
nationalized between 1969 and 1991. These were the banks with more than 50 crores in
national deposits.
• Another six banks were nationalized in 1980, bringing the total to twenty.
• The formation of the State Bank Group was intended to accelerate the expansion of
banking facilities in rural areas.
• The decision to nationalize the major commercial banks was made with the goal of
opening a large number of branches throughout the country, particularly in rural areas
and mobilizing large amounts of deposits for the purpose of lending to productive
purposes.
• Currently, there are a total of 12 Nationalised Banks in India.
45 46
REGIONAL RURAL BANKS Secondary Functions
• Regional Rural Banks were established in accordance with the provisions of an 1. Discounting Bills of Exchange
Ordinance promulgated on September 26, 1975, and the RRB Act, 1976, with the goal of • Bill discounting is a service provided by commercial banks to their depositors.
ensuring adequate institutional credit for agriculture and other rural sectors. • A bill of exchange is a promise to pay a specific amount of money at a specific point in
• RRBs can only operate in the areas that have been designated by Gol as covering one or the future.
more districts in the state. • It can also be encashed earlier by using a commercial bank's discounting process.
• RRBs are jointly owned by Gol, the relevant State Government, and Sponsor Banks; the 2. Credit Creation
issued capital of an RRB is divided among the owners in the proportions of 50%, 15%, • Commercial banks use this function to accept deposits and advance loans by keeping
and 35%, respectively. small amounts of cash on hand for day-to-day transactions.
• When a bank advances a loan, it opens an account in the customer's name and does not
FOREIGN BANKS pay him in cash, but instead allows him to withdraw funds by cheque as needed.
• These banks are registered and have their headquarters in another country, but they have 3. Financing Foreign Trade
branches in our country. • Commercial banks offer their customers the option of financing foreign trade by
• As of now, there are approximately 46 foreign banks operating in India in 2021. accepting foreign bills of exchange and collecting them from foreign banks.
• These banks also conduct other foreign exchange transactions, such as buying and selling
• Foreign banks in India include HSBC, Citibank, Standard Chartered Bank, and others.
foreign currency.
NON SCHEDULED COMMERCIAL BANKS 4. Overdraft Facility
• An overdraft is a loan that allows a customer with a current account to overdraw his
• These banks are not added in the Second Schedule of the Reserve Bank of India Act,
account up to a predetermined limit.
1934.
• In this function of a commercial bank, the bank allows a depositor to withdraw an amount
• Non scheduled commercial banks in India include Capital Local Area Bank Ltd -
greater than the balance in his account.
Phagwara (Punjab), Krishna Bhima Samruddhi Local Area Bank Ltd, Mahbubnagar
5. Agency Functions of Bank
(Andhra Pradesh), Subhadra Local Area Bank Ltd., Kolhapur (Maharashtra), and others.
• The bank acts as a customer's agent and receives a commission for performing agency
functions, such as:
FUNCTIONS OR ROLE OF COMMERCIAL BANKS
o Collection and transfer of funds
Primary Functions
o Payments of various items
1. Accepts Deposits
o Purchase and sale of shares and securities
• A commercial bank's first primary function is to accept deposits in the form of current,
o Collection of dividends and interest
savings, and fixed deposits.
o Letters of reference
2. Gives Loans and Advances
6. General Utility Services
• The second major function of a commercial bank is to make loans and advances,
• Customers can also get a variety of general utility services from banks. These are as
primarily to businessmen and entrepreneurs, and to earn interest on those loans and
follows:
advances.
o Banks provide travelers and gift cheques to their customers.
• This is, in fact, the bank's primary source of revenue.
o Customers can keep their ornaments and important documents safe in lockers.
• A bank reserves a portion of its deposits and lends the remainder to borrowers in the form
o It allows you to underwrite securities issued by government, public, or private
of cash credit, demand loans, short-term loans, and overdrafts.
entities.
• Cash Credit – An eligible borrower has first sanctioned a credit limit in this function of a
commercial bank, and within that limit, he is allowed to withdraw a certain amount on a
ROLE OF CENTRAL AND STATE GOVERNMENT IN PROMOTING
given security.
ENTREPRENEURSHIP:
• Demand Loans - In this function of a commercial bank, the entire loan amount is paid in
one lump sum by crediting it to the borrower's loan account.
1. Make in India:
• Short-term Loans - In this commercial bank function, short-term loans are made against
Designed to transform India into a global design and manufacturing hub, the Make in India
collateral as personal loans to finance working capital or as priority sector advances. The
initiative was launched in September 2014. It came as a powerful call to India’s citizens and
entire amount is repaid in one installment or in a series of installments over the loan
business leaders, and an invitation to potential partners and investors around the world to
period.
overhaul outdated processes and policies and centralize information about opportunities in
India’s manufacturing sector. This has led to renewed confidence in India’s capabilities among
potential partners abroad, business community within the country and citizens at large.
47 48
 infrastructure in terms of capital equipment and operating facilities. These incubation centers,
2. Digital India: with a presence across India, provide access to sectoral experts, business planning support, seed
The Digital India initiative was launched to modernize the Indian economy to makes all capital, industry partners and trainings to encourage innovative start-ups.
government services available electronically. The initiative aims to transform India into a 8. Jan Dhan-Aadhaar-Mobile (JAM):
digitally empowered society and knowledge economy with universal access to goods and JAM, for the first time, is a technological intervention that enables direct transfer of subsidies to
services. Given historically poor internet penetration, this initiative aims to make available high- intend beneficiaries and, therefore, eliminates all intermediaries and leakages in the system,
speed internet down to the grassroots. This program aims to improve citizen participation in the which has a potential impact on the lives of millions of Indian citizens. Besides serving as a vital
digital and financial space, make India’s cyber space safer and more secure, and improve ease of check on corruption, JAM provides for accounts to all underserved regions, in order to make
doing business. Digital India hopes to achieve equity and efficiency in a country with immense banking services accessible down to the last mile.
diversity by making digital resources and services available in all Indian languages. 9. Support to Training and Employment Program for Women (STEP):
3. Start-up India: STEP was launched by the Government of India’s Ministry of Women and Child Development
Through the Startup India initiative, Government of India promotes entrepreneurship by to train women with no access to formal skill training facilities, especially in rural India. The
mentoring, nurturing and facilitating startups throughout their life cycle. Since its launch in Ministry of Skill Development & Entrepreneurship and NITI Aayog recently redrafted the
January 2016, the initiative has successfully given a head start to numerous aspiring Guidelines of the 30-year-old initiative to adapt to present-day needs. The initiative reaches out
entrepreneurs. to all Indian women above 16 years of age. The program imparts skills in several sectors such as
4. Stand-Up India: agriculture, horticulture, food processing, handlooms, traditional crafts like embroidery, travel
Launched in 2015, Stand-Up India seeks to leverage institutional credit for the benefit of India’s and tourism, hospitality, computer and IT services.
underprivileged. It aims to enable economic participation of, and share the benefits of India’s 10. Department of Science and Technology (DST):
growth, among women entrepreneurs, Scheduled Castes and Scheduled Tribes. Towards this The DST comprises several arms that work across the spectrum on all major projects that require
end, at least one woman and one individual from the SC or ST communities are granted loans scientific and technological intervention. The Technology Interventions for Disabled and
between Rs.1 million to Rs.10 million to set up greenfield enterprises in manufacturing, services Elderly, for instance, provides technological solutions to address challenges and improve quality
or the trading sector. The Stand-Up India portal also acts as a digital platform for small of life of the elderly in India through the application of science and technology. The ASEAN -
entrepreneurs and provides information on financing and credit guarantee. India Science, Technology & Innovation Cooperation, on the other hand, works to narrow the
5. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): development gap and enhance connectivity between the ASEAN countries. It encourages
A flagship initiative of the Ministry of Skill Development & Entrepreneurship (MSDE), this is a cooperation in science, technology and innovation through joint research across sectors and
Skill Certification initiative that aims to train youth in industry-relevant skills to enhance provides fellowships to scientists and researchers from ASEAN member states with Indian R&D/
opportunities for livelihood creation and employability. Individuals with prior learning academic institutions to upgrade their research skills and expertise.
experience or skills are also assessed and certified as a Recognition of Prior Learning. Training 11. Trade related Entrepreneurship Assistance and Development (TREAD):
and assessment fees are entirely borne by the Government under this program. To address the critical issues of access to credit among India’s underprivileged women, the
6. National Skill Development Mission: TREAD program enables credit availability to interested women through non-governmental
Launched in July 2015, the mission aims to build synergies across sectors and States in skilled organizations (NGOs). As such, women can receive support of registered NGOs in both
industries and initiatives. With a vision to build a ‘Skilled India’ it is designed to expedite accessing loan facilities and receiving counseling and training opportunities to kick-start
decision-making across sectors to provide skills at scale, without compromising on quality or proposed enterprises, in order to provide pathways for women to take up non-farm activities.
speed. The seven sub-missions proposed in the initial phase to guide the mission’s skilling 12. Science for Equity Empowerment and Development (SEED):
efforts across India are: (i) Institutional Training (ii) Infrastructure (iii) Convergence (iv) SEED aims to provide opportunities to motivated scientists and field level workers to undertake
Trainers (v) Overseas Employment (vi) Sustainable Livelihoods (vii) Leveraging Public action-oriented, location specific projects for socio-economic gain particularly in rural areas.
Infrastructure. Efforts have been made to associate national labs and other specialist S&T institutions with
7. Atal Innovation Mission (AIM): innovations at the grassroots to enable access to inputs from experts, quality infrastructure.
AIM is the Government of India’s endeavour to promote a culture of innovation and SEED emphasizes equity in development, so that the benefits of technological accrue to a vast
entrepreneurship, and it serves as a platform for promotion of world-class Innovation Hubs, section of the population, particularly the disadvantaged.
Grand Challenges, start-up businesses and other self-employment activities, particularly in 13. Biotechnology Industry Research Assistance Council (BIRAC):
technology driven areas. In order to foster curiosity, creativity and imagination right at the BIRAC is a not-for-profit Public-Sector Enterprise, set up by Department of Biotechnology to
school, AIM recently launched Atal Tinkering Labs (ATL) across India. ATLs are workspaces strengthen and empower emerging biotechnology enterprises. It aims to embed strategic research
where students can work with tools and equipment to gain hands-on training in the concepts of and innovation in all biotech enterprises and bridge the existing gaps between industry and
STEM (Science, Technology, Engineering and Math). Atal Incubation Centers (AICs) are academia. The ultimate goal is to develop high-quality, yet affordable, products with the use of
another program of AIM created to build innovative start-up businesses as scalable and cutting-edge technologies. BIRAC has initiated partnerships with several national and global
sustainable enterprises. AICs provide world class incubation facilities with appropriate physical
49 50
partners for building capacities of the Indian biotech industry, particularly start-ups and SME’s, average annual growth rate of 4.4% in the number of units and 4.62% in employment (currently
and has facilitated several rapid developments in medical technology. employing 30 million). Not only do MSMEs generate the highest employment per capita
DISTRICT INDUSTRIES CENTRE (DIC) investment, but they also go a long way in checking rural-urban migration by providing people
District Industries Centre (DIC) is a central sector scheme that promotes small village and living in isolated areas with a sustainable source of employment.
cottage industries in a particular area. The DICs are managed and operated at the district level to 2. To sustain economic growth and increase exports
provide all the necessary support services to entrepreneurs or first-time business owners to start Non-traditional products account for more than 95% of the MSME exports (dominating in the
their own MSMEs. The main aim of a DIC is to shift the focus on the development of cottage export of sports goods, readymade garments, plastic products etc.). Since these products are
and small-scale industries. The central government sets up the DICs, which are located in almost mostly handcrafted and hence eco-friendly, there exists a tremendous potential to expand the
every central district across the country. quantum of MSME led exports. Also, MSMEs act as ancillary industries for Large Scale
Industries providing them with raw materials, vital components and backward linkages e.g. large
ROLE OF DISTRICT INDUSTRIES CENTERS(DIC) scale cycle manufacturers of Ludhiana rely heavily on the MSMEs of Malerkotla which produce
1. Loan Arrangement cycle parts.
• DICs arrange loans with financial institutions like banks, NBFCs, MFIs, etc. to provide 3. Making Growth Inclusive
funding assistance to entrepreneurs. MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable
• They also monitor the flow of industrial credit, district-wise. and marginalized. For many families, it is the only source of livelihood. Thus, instead of taking a
2. Undertakes Training Courses welfare approach, this sector seeks to empower people to break the cycle of poverty and
• DICs conduct training courses for entrepreneurs of small and tiny units. deprivation. It focuses on people’s skills and agency. However, different segments of the MSME
• Training courses help entrepreneurs to develop new products with better quality and sector are dominated by different social groups.
performance. NATIONAL ENTREPRENEURSHIP DEVELOPMENT BOARD (NEDB)
3. Machinery and Equipment The National Entrepreneurship Development Board (NEDB) is an apex body established by the
• DICs designate the locations from where the machinery and equipment can be acquired. Government of India in 1983 to supervise the activities of various agencies in the entrepreneurial
• They also arrange for machinery supply on a hire-purchase basis. development programs. It is a society under the Government of India Society Act of 1860. The
4. Conducts Surveys major role of the institute are:
• DICs conduct surveys of existing industries, traditional industries, raw materials, and • To make effective strategies and methods.
human resources. • To standardize model syllabus for training.
• These industries also provide forecasting of numerous products related to specific • To develop training aids, tools, and manuals.
industries. • To conduct workshops, seminars, and conferences.
5. Promoting rural artisans
• To evaluate the benefits of EDPs and promote the process of Entrepreneurial
• DICs have helped in the promotion of rural artisans by working closely with Small Scale
Development.
Industries.
• To help support government and other agencies in executing entrepreneur development
• They have also worked for the development of khadi and village industries and organized
programs.
training programs for rural artisans.
• To undertake research and development in the field of EDPs.
MICRO, SMALL AND MEDIUM ENTERPRISES(MSME)
ENTREPRENEURSHIP DEVELOPMENT INSTITUTE OF INDIA (EDII)
Small businesses are playing an important role in the industrial economy of the world. These are
particularly important in the developing economies. Small business is predominant even in • The Entrepreneurship Development Institute of India (EDII) is a non-profit autonomous
developed countries such as USA, Japan etc. institute located in Ahmedabad, Gujarat, India.
THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSME) DEVELOPMENT ACT, 2006 • It was established in 1983 and is promoted by IDBI Bank Ltd., IFCI Ltd., ICICI Bank Ltd.
Under this act, the central Government shall set up, for the purpose of the act, a Board known as and the State Bank of India (SBI).
the National Board for Micro, Small and Medium Enterprises. • The institute offers master's degree programmes in Entrepreneurship, a fellowship
programme and a number of entrepreneurship training programmes.
ROLE OF MICRO, SMALL AND MEDIUM ENTERPRISES • EDII is an acknowledged National Resource Institute for Entrepreneurship Education,
1. To generate large scale employment Research, Training & Institution Building.
In India, capital is scarce and labour abundant. MSMEs are thought to have lower capital-output • The institute aims to promote and develop entrepreneurship, conduct research and provide
and capital-labour ratios than large-scale industries, and therefore, better serve growth and consultancy for entrepreneurship development, and coordinate and collaborate with other
employment objectives. The MSME sector in India has grown significantly since 1960 – with an organizations in undertaking training, research and other activities to increase outreach of
the institute.
51 52
NATIONAL INSTITUTE FOR ENTREPRENEURSHIP AND SMALL BUSINESS RESPONSIBILITIES OF NIESBUD
DEVELOPMENT (NIESBUD)
1. Standardization of materials and processes:
It is an apex body established in 1983 by the ministry of Industries, Government of India, for • NIESBUD aims to evolve standardized materials and processes for selection, training,
support, and sustenance of entrepreneurs, potential and existing.
coordinating, training and overseeing the activities of various institutions/agencies engaged in
2. Sharing of experience and expertise:
entrepreneurship development, particularly in the area of small industry and small business. The • NIESBUD shares its experience and expertise in entrepreneurship development
Institute which is registered as a society under Government of India Societies Act started internationally.
functioning from 6th July, [Link] policy, direction and guidance to the institute is provided by 3. Training of trainers, promoters, and consultants:
its governing council whose chairman is the minister of SSI. It has an executive committee. • NIESBUD trains the trainers, promoters, and consultants in various areas of
OBJECTIVES OF NIESBUD entrepreneurship development.
The objectives of the institute include the following: 4. Research and survey:
• NIESBUD undertakes research and survey for identifying the problems and prospects of
• To evolve standardized materials and processes for selection, training, support and entrepreneurship development.
sustenance of entrepreneurs, potential and existing. 5. Consultancy services:
• To share internationally, its experience and expertise in entrepreneurship development. • NIESBUD provides consultancy services for the promotion and development of small-
scale industries, village, and cottage industries, etc.
• To train the trainers, promoters and consultants in various areas of entrepreneurship
6. Extension services:
development.
• NIESBUD provides extension services for the promotion and development of
• To provide national/international forums for the interaction and exchange of experiences entrepreneurship.
helpful for policy formulation and modification at various levels. 7. Management development programmes:
• To provide vital information and support to trainers, promoters and entrepreneurs by • NIESBUD conducts management development programmes for entrepreneurs to enhance
• organizing research and documentation relevant to entrepreneurship development. their managerial skills.
8. Entrepreneurship-cum-skill development programmes:
• NIESBUD conducts entrepreneurship-cum-skill development programmes to promote
FUNCTIONS OF NIESBUD
entrepreneurship and skill development.
1. Training:
• NIESBUD provides training to entrepreneurs, trainers, and consultants in various
areas of entrepreneurship development.
2. Consultancy:
• NIESBUD provides consultancy services for the promotion and development of
small-scale industries, village, and cottage industries, etc.
3. Research:
• NIESBUD undertakes research and survey for identifying the problems and
prospects of entrepreneurship development.
4. Extension:
• NIESBUD provides extension services for the promotion and development of
entrepreneurship.
5. Management development programmes:
• NIESBUD conducts management development programmes for entrepreneurs to
enhance their managerial skills.
6. Entrepreneurship-cum-skill development programmes:
• NIESBUD conducts entrepreneurship-cum-skill development programmes to
promote entrepreneurship and skill development.
7. Cluster intervention:
• NIESBUD provides cluster intervention services to promote entrepreneurship in
clusters.

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 UNIT – 5
SMALL SCALE INDUSTRIES ROLE
SMALL SCALE INDUSTRIES(SSI):
1. Employment
• Small Scale Industries (SSI) are businesses that manufacture, produce and render services on a SSI’s are a major source of employment for developing countries like India. Because of the
small or micro scale level. limited technology and resource availability, they tend to use labour and manpower for their
• The investment in such industries is one time and mostly done on plant and machinery, with production activities.
the total investment not exceeding 1 crore. 2. Total Production
• The manufacturing of goods and rendering of services are done with the help of smaller These enterprises account for almost 40% of the total production of goods and services in India.
machines and very limited manpower. They are one of the main reasons for the growth and strengthening of the economy.
• Small scale industries are known as the lifeline of an economy, which is very important for a 3. Make in India
country like India. SSI’s are the best examples for the Make in India initiative. They focus on the mission to
• Being a labour-intensive industry, it is very helpful in creating employment opportunities for manufacture in India and sell the products worldwide. This also helps create more demands from
the population of the country. all over the world.
4. Export Contribution
SMALL SCALE INDUSTRIES OBJECTIVES: India’s export industry majorly relies on these small industries for their growth and development.
Nearly half of the goods that are exported from India are manufactured or produced by these
• To create more employment opportunities. industries.
5. Public Welfare
• To help develop the rural and less developed regions of the economy.
These industries have an opportunity to earn wealth and create employment. SSIs are also
• To reduce regional imbalances.
important for the social growth and development of our country.
• To ensure optimum utilisation of unexploited resources of the country.
6. Seedbed for Large Scale Industries
• To improve the standard of living of people.
SSI acts as the seedbed for Large Scale Industries (LSI) as it provides conducive conditions for the
• To ensure equal distribution of income and wealth.
development and growth of entrepreneurs. Small enterprises require low investment and simple
• To solve the unemployment problem. technology and use local resources to meet local demands through personal contacts. Thus, it
• To attain self-reliance. creates scope for the growth and development of LSI.
• To adopt the latest technology aimed at producing better quality products at lower costs.
ESTABLISHING A SMALL SCALE ENTERPRISE
SMALL SCALE INDUSTRIES CHARACTERISTICS
1. Decision on the Ownership
1. Ownership: SSI’s generally are under single ownership. So it can either be a sole An entrepreneur wishing to establish an SSI must first decide on the ownership structure of the
proprietorship or sometimes a partnership firm. SSI. The SSI can be established as a sole proprietorship firm, partnership or company.
2. Management: Generally, both the management and the control is with the owner/owners. 2. Product Selection
Hence the owner is actively involved in the day-to-day activities of the business. Next, entrepreneurs must decide whether the SSI will venture into manufacturing or provide
3. Labor Intensive: SSI’s dependence on technology is pretty limited. Hence they tend to service, the product/product range that needs to be manufactured and the quantity of production of
use labour and manpower for their production activities. products or the service that will be provided.
4. Flexibility: SSI’s are more adaptable to their changing business environment. So in case of 3. Location
amendments or unexpected developments, they are flexible enough to adapt and carry on, The location must be selected where the unit is to be established. The size of the plot, exact site,
unlike large industries. covered and open area must be decided. Once the location is finalised, the SSI unit should be
5. Limited Reach: Small scale industries have a restricted zone of operations. Hence, they established in that location and the business operation can start. The location of the established
can meet their local and regional demand. unit will be the registered address/primary address of the SSI unit.
6. Resources Utilisation: They use local and readily available resources which helps the 4. Registration
economy fully utilise natural resources with minimum wastage. After the unit is established at the decided location, the SSI must obtain the Shop and
Establishment Act registration, company registration, or partnership firm registration, as
applicable. Once the registration is obtained, the establishment can start its business.

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5. SSI Registration 4. Export Units
SSI/MSME registration can be applied at any time after the unit obtains the Shop and An SSI is considered as an export unit when the exporting is more than 50% of its production.
Establishment Act registration, company registration, or partnership firm registration. If SSI 5. Cottage Units
registration is applied before production, the turnover and investment details must be mentioned as The cottage units are considered as SSIs when they do not involve a dedicated facility and are
zero in the registration application. If SSI registration is applied after the SSI units start carried out within living spaces or houses of the owners.
production, then the turnover and investment details will be automatically filled in the registration 6. Village Industries
application from the ITR of the unit. An SSI is considered village industries when they are established in rural areas and are not part of
6. Machinery and Equipment the organised sector. Typically, these industries solely depend on human labour for production.
The machinery and equipment required for manufacturing the chosen products or providing
services have to be decided. The machinery and equipment with the latest technology must be ORGANIZATION STRUCTURE FOR SMALL SCALE INDUSTRIES
procured and installed in the SSI unit.
7. Power and Water Connection START-UP PROCESS OF SMALL SCALE INDUSTRIES IN INDIA
The plot where the enterprise is located or SSI unit is established should have adequate power and
water connections. If pollution board permissions are required, all such permissions from the 1. Validate if Your Business is Achievable
respective authorities must be obtained for the SSI unit. The first step to starting a business is to conduct proper research to see if your business idea is
8. Recruitment of Manpower relevant to the market. With adequate market research using analytical tools, you can validate and
Once the machines and equipment are installed on the unit and the required permissions are know if your business will thrive in the market or not, who your competitors are, what your target
obtained, the need for manpower arises to run them. The required manpower must be employed market will be, and more.
for starting and running the business unit. 2. Draft a Business Plan
9. Procurement of Raw Materials After validating your business idea with the right market research, write an effective business
Raw materials are important for running an enterprise. The manpower will require raw materials plan, including all the things your business hopes to achieve in the long run.
to work upon the installed machinery or equipment to manufacture or provide service. 3. Determine the Type of Business Structure to Use
10. Production To effectively develop a new business, you must decide on the structure you want your
After procuring the raw materials, the SSIs can start production of the products of the units. The organization to have. You can determine the necessary number of partners and investors to look
products manufactured by the SSI can be sold in the market after considerable units are produced. out for by choosing a business structure.
11. Marketing The most common structures used by businesses are as follows:
When the products are manufactured or services can be provided, the entrepreneurs must market • Sole Proprietorship
their products or services to gain customers and grow business. • Partnership
12. Quality Assurance • Operational Team
Before marketing the products, the product quality certification from the respective authorities • Administrative and Management Team
such as BIS, AGMARK, HALLMARK, FSSAI, etc., must be obtained. • Marketing and Sales Team
• Finance Team
SMALL SCALE INDUSTRIES TYPES 4. Generate Funds
The ability to bring in investors is a key component of any business structure. To make this
1. Manufacturing Industries concept clearer, let us take a look at the three main types of investments that startups usually rely
The manufacturing industries manufacture finished goods for consumption or used further in on. They are equity financing, debt financing, and convertible notes.
processing. Some examples of such SSIs are food processing units, power looms, engineering
• Equity Financing: This involves selling shares of your company in exchange for capital.
units, etc.
• Debt Financing: It requires taking out loans from lenders, such as banks or venture
2. Ancillary Industries
capitalists.
Ancillary industries manufacture components for other manufacturers. These manufacturers then
• Convertible Notes: This will offer shareholders an option to eventually convert their
assemble the final product. Big companies manufacture finished goods, but they do not generally
investment into actual stock.
make all the parts themselves. The vendors of such big companies are ancillary industries.
5. Register Your Business
3. Service Industries
Investors and potential investors have more faith and confidence in registered enterprises.
Service-based industries are not involved in any kind of manufacturing products. They provide
Registering your business will enable you to apply for loans, get grants for startups, get
services such as repair, maintenance and upkeep of the products after-sales.
sponsorships, etc.
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 8. Quality:
6. Get Involved in Government Programs Small business finds it difficult to come upto global standards of the quality. They also don’t have
Participating in a government program implies that you should register your business under a funds for research in order to improve upon the quality. The product quality is their weakest point
startup program that the government is running. A business will benefit from this and gain certain as compared to the standards of the large scale units.
advantages, such as reduced tax payments, business promotion, and protection of business rights, 9. Sickness:
among many others. It is painful to see most of the small units going sick. There is a lack of planning. Skilled and
7. Build Online Visibility trained personnel is another hurdle. They have to sell on credit. Their customers do not pay them
In our fast-paced digital world, businesses need to be on social media platforms tailored to their in time. There are large scale bad debts. Thus, they fall short of working capital to keep the
growth. Also, a website can be developed in addition to social media marketing methods, as this production process going. This leads to sickness.
will increase the company’s visibility and foster client confidence.
8. Get an Onsite Location OVERCOME PROBLEMS IN SMALL SCALE INDUSTRIES
Securing a physical location is essential for business owners in the early stages of starting up, as it
can promote trust among customers and give them assurance over their investments. Having an 1. Equitable Allocation of Raw Materials, Imported Components and Equipment: The small
onsite presence allows potential buyers to have faith that they are making secure financial scale industrial units should be given an equitable allocation of raw materials, imported
decisions when spending money. components, and equipment.
2. Improvement in the Methods and Techniques of Production: The small scale industrial
SMALL SCALE INDUSTRIES PROBLEMS units should improve their methods and techniques of production to increase efficiency and reduce
costs.
1. Shortage of Funds: 3. Incentives for Research and Development: The government should provide incentives for
Small business entrepreneurs don’t have enough long- term or short-term funds. These are, research and development to encourage small scale industries to invest in the latest technology.
therefore, short of both fixed assets as well as working capital. Even the banks do not come to 4. Provision of Financial Assistance: Financial institutions should provide financial assistance to
their help in a big way. Financial institutions like ICICI, IDBI and IFCI help only large scale small scale industries to help them overcome their shortage of funds.
industries. 5. Training and Development of Labour Force: Small scale industries should provide training
2. Lack of Latest Technology: and development opportunities to their labour force to improve their skills and productivity.
Small business lacks funds. Latest technology is not used because it is expensive. Only old 6. Marketing Assistance: The government should provide marketing assistance to small scale
methods and techniques are being used. Due to this they earn less margin of profit. industries to help them compete with large scale units.
3. Shortage of Raw Materials:
There is shortage of raw material because of less working capital. They can’t buy in bulk during
the season and cannot enjoy the economies of large scale.
4. Shortage of Power:
Because of shortage of power, the small business enterprises are not able to use full capacity of the
plant at their disposal. They cannot afford to have their own power generators.
5. Labour Problem:
The labour is mostly unskilled. Small business don’t have resources to provide good training.
Labour are also not paid well. There is no motivation for professional growth. Small business is
incapable to bargain with powerful trade unions.
6. Marketing Problem:
Small business cannot face the competition with large scale units in marketing and selling. They
cannot afford to spend much on advertising and proper distribution of goods. They have to depend
on middlemen, who pay low prices and even the recovery from the middlemen is very slow.
7. Managerial Skills:
Only individuals or a small group of people own and operate the small business units. They don’t
possess professional managerial skills required to run a business successfully.

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