SMALL BUSINESS

MEANING AND NATURE OF SMALLBUSINESS

• The definition used by the Government of India to describe small industries is based on the investment in plant and machinery. This measure seeks to keep in view the socio-economic environment in India where capital is scarce and labour is abundant.

Categories

• Small scale industry:

A small scale industrial undertaking is defined as one in which the investment in fixed assets of plant and machinery does not exceed rupees one crore.

• Ancillary small industrial unit:

The small scale industry can enjoy the status of an ancillary small industry if it supplies not less than 50 per cent of its production to another industry, referred to as the parent unit.

• Export oriented units:

The small scale industry can enjoy the status of an export oriented unit if it exports more than 50 per cent of its production. It can avail the incentives like export subsidies and other concessions offered by the government for exporting units.

• Small scale industries owned and managed by women entrepreneurs:

An enterprise promoted by women entrepreneurs is a small scale industrial unit in which she/they individually or jointly have share capital of not less than 51 per cent.

• Tiny industrial units:

A tiny unit is defined as an industrial or business enterprise whose investment in plant and machinery is not more than Rs. 25 lakhs.

• Small scale service and business

(Industry related) enterprises:

A small scale service and business enterprise is one whose investment in fixed assets of plant and machinery excluding land and building does no exceed Rs. 10 lakhs.

• Micro business enterprises: Within the tiny and small business sector, micro enterprises are those whose investment in plant and machinery does not exceed rupees one lakh.

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• Village industries: Village Industry has been defined as any industry located in a rural area which produces any goods, renders any service with or without the use of power

• Cottage industries: These are also known as Rural Industries or Traditional industries. They are not defined by capital investment criteria as in the case of other small scale industries.

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Features:

• These are organised by individuals, with private resources;
• normally use family labour and locally available talent;

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• the equipment used is simple;
• capital investment is small;
• produce simple products, normally in their own premises;
• production of goods using indigenous technology.

ADMINISTRATIVE SETUP FOR THE�SMALL SCALE, AGRO AND RURAL�INDUSTRIES

ROLE OF SMALL BUSINESS IN INDIA

• Small industries in India account for 95 per cent of the industrial units in the country. They contribute almost 40 per cent of the gross industrial value added and 45 per cent of the total exports (direct and indirect exports) from India.

• Small industries are the second largest employers of human resources, after agriculture. They generate more number of employment opportunities per unit of capital invested compared to large industries.

• Small industries in our country supply an enormous variety of products which include mass consumption goods, readymade garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc.

• The contribution of small industries to the balanced regional development of our country is noteworthy. Small industries which produce simple products using simple technologies and depend on locally available resources both material and labour can be set up anywhere in the country.

• Small industries provide ample opportunity for entrepreneurship. The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little capital investment and almost nil formalities to start a small business.

• Small industries also enjoy the advantage of low cost of production. Locally available resources are less expensive.

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• Due to the small size of the organisations, quick and timely decisions can be taken without consulting many people as it happens in large sized organisations.

• Small industries are best suited for customised production. i.e. designing the product as per the tastes/preferences/needs of individual customers, say for an example tailor-made shirt or trouser. They can produce according to the needs of the customers as they use simple and flexible production techniques.

• Small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customers and employees.

ROLE OF SMALL BUSINESS IN�RURAL INDIA

PROBLEMS OF SMALL BUSINESS

1. Finance
2. Raw materials
3. Managerial skills
4. Labour
5. Marketing
6. Quality
7. Capacity utilisation

(viii) Technology

(ix) Sickness

(x) Global competition

GOVERNMENT ASSISTANCE TO�SMALL INDUSTRIES AND SMALL�BUSINESS UNITS

INSTITUTIONAL SUPPORT

• National Bank for Agriculture and Rural Development (NABARD):

NABARD was setup in 1982 to promote integrated rural development. Since then, it has been adopting a multi-pronged, multi-purpose strategy for the promotion of rural business

enterprises in the country.

• Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans using credit and non-credit approaches. It offers counselling and consultancy services and organises training and development programmes for rural entrepreneurs.

• The Rural Small Business�Development Centre (RSBDC):

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It is the first of its kind set up by the world association for small and medium enterprises and is sponsored by NABARD. It works for the benefit of socially and economically

disadvantaged individuals and groups.

• It aims at providing management and

technical support to current and prospective micro and small entrepreneurs in rural areas.

• National Small Industries Corporation (NSIC):

This was set up in1955 with a view to promote, aid and foster the growth of small business units in the country.

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Functions:

• Supply indigenous and imported machines on easy hire-purchase terms.

• Procure, supply and distribute indigenous and imported raw materials.
• Export the products of small business units and develop export-worthiness.
• Mentoring and advisory services.
• Serve as technology business incubators.

• Creating awareness on technological upgradation.
• Developing software technology parks and technology transfer centres.

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A new scheme of ‘performance and credit rating’ of small businesses is implemented through National Small Industries Corporation (NSIC).

• Small Industries Development Bank of India (SIDBI):
• Set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organisations.
• To coordinate the functions of other institutions in similar activities.

• The National Commission for Enterprises in the Unorganised Sector (NCEUS):

The NCEUS was constituted in September, 2004, with the following objectives:

• To recommend measures considered necessary for improving the productivity of small enterprises in the informal sector.

• To generate more employment opportunities on a sustainable basis, particularly in the rural areas.
• To enhance the competitiveness of the sector in the emerging global environment.
• To develop linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology upgradation, marketing and formulation of suitable arrangements for skill development.

• Rural and Women Entrepreneurship Development (RWED):

RWE provides the following services:

• Creating a business environment that encourages initiatives of rural and women entrepreneurs.
• Enhancing the human and institutional capacities required to foster entrepreneurial dynamism and enhance productivity.

• Providing training manuals for women entrepreneurs and training them.
• Rendering any other advisory services.

• World Association for Small and Medium Enterprises (WASME):

It is the only International Non- Governmental Organisation of micro, small and medium enterprises based in India, which set up an International Committee for Rural Industrialisation. Its aim is to develop an action plan model for sustained growth of rural enterprises.

• Scheme of Fund for Regeneration of Traditional Industries (SFURTI):

To make the traditional industries more productive and competitive and to facilitate their sustainable development, the Central Government set up this fund with Rs. 100 crores allocation to begin within the year 2005.

The main objectives of the scheme are as follows:

• To develop clusters of traditional industries in various parts of the country;
• To build innovative and traditional skills, improve technologies and encourage public-private partnerships, develop market intelligence etc., to make them competitive, profitable and sustainable; and
• To create sustained employment opportunities in traditional industries

• The District Industries Centres (DICs):

The District Industries Centers Programme was launched on May 1, 1978, with a view to providing an integrated administrative framework at the district level, which would look at the problems of industrialisation in the district, in a composite manner.

INCENTIVES

• Land
• Power
• Water
• Sales Tax
• Octroi
• Raw materials

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• Finance
• Industrial estates
• Tax holiday

THE FUTURE

The mantra of success for

small businesses in this modern era

has to be ‘think global, act local.’