New Business Development

Dr.
Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
MBA – SEM 2 (VNSGU)
NEW BUSINESS DEVELOPMENT

TOPICS FROM EXAMINATION PAPERS
LONG ANSWER QUESTIONS
1. Entrepreneurial performance is a function of socio-economic background, motivations,

ability and environmental factors
2. Innovation and Entrepreneurship is essential for economic growth
3. Women entrepreneurship in India
4. Business Incubation Centres
5. Characteristics of MSME sector in India
6. Importance/ Role of MSME in growth & economic development of Indian Economy.
7. SWOT analysis of MSME sector in India
8. Problems faced by MSME in India
9. Incentives by Gujarat Government to promote MSME
10. Initiatives given by Government of India to promote MSME
11. Scouting for Project ideas
12. Facets of Project Analysis
13. Technical analysis of Project
14. Steps in Market and Demand analysis
15. EDPs
16. Nature and Nurture play a key role in EDP. Explain
SHORT NOTES
1. Contents of project report / Contents of Business Plan

2. NABARD
3. Venture capital
4. SIDBI
5. GIDC
6. EXIM Bank
7. MUDRA Bank
8. Procedure to set up new unit
9. Sickness in small industries
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NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

Dr. Zakir Patel, Prof, Naran Lala College of Commerce & Management, Navsari
LONG ANSWERS
FACTORS AFFECTING ENTREPRENEURSHIP /

ENTREPRENEURSHIP IS A FUNCTION OF SOCIO-ECONOMIC
BACKGROUND, ABILITY, MOTIVATIONS AND ENVIRONMENTAL
FACTORS / BARRIERS TO ENTREPRENEURSHIP
 Growth of any country depends upon social, economic, political, cultural & psychological
factors. They are environmental factors.
 These factors may be having positive & negative influence on growth of entrepreneurship.
Positive influence helps the growth whereas negative influence of these factors becomes
barriers to entrepreneurship in a country.
Barriers to
entrepreneurship
Economic Cultural Social Personal Psycholog Governmental

Factors Factors Factors Factors ical Factors
Factors
ECONOMIC FACTORS:
The growth of entrepreneurship depends upon certain economic factors like capital, labour, raw
material & markets.
Capital: Capital is one of the most important requirements to start a business. If capital is not
available, then it may create problems in hiring labour, buying raw-material & compete in the
market... Thus, availability of capital helps growth of entrepreneurship & lack of it acts as a
barrier to it.
Labour: The quality as well as the quantity of labour is another factor that influences the
growth of entrepreneurship. It must be noted that persons without proper technical skills may
act as a barrier to entrepreneurship. Different countries face this problem differently. Some
countries, like India, have abundant labour which helps in bringing labour cost down.
Raw material: If adequate raw material is not available, neither any enterprise can be
established nor can entrepreneurship emerge. However, in some cases it may not be true. E.g.
Japan lacks adequate raw material but still there is no problem in entrepreneurship growth.
Market: The size & competition of market has major influences on growth of
entrepreneurship. Monopoly situation is more favourable to entrepreneurship as compared to
competitive situation. The larger the market size, the better the scope of entrepreneurship.
Small market acts as a barrier.
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CULTURAL FACTORS:
Culture is all about the values, customs, traditions, norms, beliefs and assumptions which are
shared among the members of the society. Every society show a different set of cultural
background. This affects the business also. The cultural factors in a country decide the level of
entrepreneurial activities in the country. Some countries place a very high value to business and
ultimately help in creating wealth whereas some other cultures might value business only to a
certain extent. If the culture does not attach great value to business talents, industrial leadership
etc. then people may not prefer any business.
SOCIAL FACTORS:
Society is highly important factor in deciding the business activities. Social factors also play an
important role in encouraging entrepreneurship in a country.
Customs & tradition: If customs & traditions play a dominant role in production decision
making rather than critical assessment of facts, then entrepreneurship will not be encouraged
because an entrepreneur will be guided more by customs rather than his own initiative &
drive. In fact, in Europe, people rejected customs & tradition and hence entrepreneurship
growth became possible.
Rationality of society: A society is said to be rational when decisions regarding resource
utilization are based on facts & critical scientific standards. It must not be based on anything
that is not logical.
Social system: The social system existing in a locality also affects entrepreneurship. For
example, in a society where there is joint family system, entrepreneurship becomes difficult
to be developed because those members of joint family who are working hard for the
success of the business more than the other members of the family, do not get the
opportunity to enjoy the fruits of their labour since they have to share their wealth with other
members of the family.
Social set-up: The social set-up in some countries is not favourable to entrepreneurship. For
example, in some societies, education, research & training are given very little importance.
Such societies cannot expect entrepreneur to emerge & take up new ventures.
PERSONALITY FACTORS:
Following are some important personality related factors that act as barriers in entrepreneurship
development.
Suspect personality: In less developed countries, the entrepreneur is looked upon with
suspicion. People tend to see a suspect personality in the entrepreneur. They see the
entrepreneur only as a profit maker & an exploiter of resources. Such negative feelings
towards entrepreneur affect the growth of entrepreneurship.
Emergence of Government Planning: In less developed countries, people favour direct
state activity (government actions) in the economy rather than private entrepreneur due to
suspect personality factors. Planning imposes controls & this goes against the very
personality of an entrepreneur.
PSYCHOLOGICAL FACTORS:
There are many theories that focus on psychological factors for the development of
entrepreneurship. As per these theories, entrepreneurship can only develop when the entrepreneurs
have a certain personality traits. These personality traits decide the emergence of entrepreneurship
in the society. The best among these theories is David McClelland’s theory of need of
achievement. According to this theory, entrepreneurship can only grow if the average level of
need for achievement is high. If need for achievement is low, it acts as a barrier to
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entrepreneurship in a country.
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GOVERNMENT FACTORS:
The industrial policy of government influences the growth of entrepreneurship in a country. By
providing basic infrastructure facilities & services, incentives & concessions, the government can
provide support to entrepreneurs. If the government policy lacks these entirely, then, it may
become a barrier to entrepreneurship. Hence, we can say that in societies where the government is
interested in economic development, entrepreneurship grows; otherwise government may also act
as a barrier.
Besides the above factors, there are some other factors which may act as barriers for
entrepreneurship development. They are:
Non co-operation of banks & financial institutions: If banks & other financial institutions
develop a negative attitude in providing easy access to finance to the entrepreneurs, then they
would become a barrier to entrepreneurship growth.
Political stability: If the government changes frequently, policies also change fast with new
government. As a result of this political instability, entrepreneurs do not get motivated to start a
new enterprise. Frequently changing industrial policies act as a barrier to the overall growth of
entrepreneurship.
Patent problems: Since big business houses have large facilities of R&D, they can offer
innovation in production & thereby, they get patents on their inventions. Hence, for small
entrepreneurs, these patents act as barrier to their growth.
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ENTREPRENEURSHIP IS ESSENTIAL FOR ECONOMIC

DEVELOPMENT / ROLE & IMPORTANCE OF ENTREPRENEURS
IN ECONOMIC DEVELOPMENT OF A COUNTRY
Entrepreneurs initiate and sustain the process of economic development in the following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities.
Investment of public savings in industry results in productive utilization of national resources.
Rate of capital formation increases which is essential for rapid economic growth. Thus, an
entrepreneur is the creator of wealth.
2. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like
land, labour and capital into national income and wealth in the form of goods and services. They
help to increase net national product and per capita income in the country, which are important
yardsticks for measuring economic growth.
3. Generation of Employment:
Entrepreneurs generate employment both directly and indirectly. Directly, self-employment as an
entrepreneur offers the best way for independent and honourable life. Indirectly, by setting up
large and small scale business units they offer jobs to millions. Thus, entrepreneurship helps to
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reduce the unemployment problem in the country.

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4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in economic
development. They set up industries in backward areas to avail various concessions and subsidies
offered by the central and state governments.
Public sector steel plants and private sector industries by Modis, Tatas, Birlas and others have put
the hitherto unknown places on the international map.
5. Improvement in Living Standards:

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 scale sector help to improve the standards of life of a common man. These offer goods at
lower costs and increase variety in consumption.
6. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
indigenous substitutes of hitherto imported products thereby reducing dependence on foreign
countries. Businessmen also export goods and services on a large scale and thereby earn the
scarce foreign exchange for the country.
Such import substitution and export promotion help to ensure the economic independence of the
country without which political independence has little meaning.
7. Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has
several backward and forward linkages. For example- the establishment of a steel plant generates
several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of
machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They give an
organization its momentum. Entrepreneurial behaviour is critical to the long term vitality of every
economy. The practice of entrepreneurship is as important to established firms as it is to new
ones.
Important role that entrepreneurship plays in the economic development of our economy
(India) are:
1. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources like
land, labour and capital into national income and wealth in the form of goods and services. They
help increase Net National Product and Per Capita Income in the country.
2. Generation of Employment:
Entrepreneur generates employment both directly and indirectly. By starting their business they
present an opportunity to others for work by offering jobs.
3. Balanced Regional Development:

Entrepreneurs help to remove the regional disparities in the economic development of areas. They
set up industries in backward areas to avail various substitutes and bring up the development of
that region.
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4. Improvement in Living Standards:

Entrepreneur set up industry which introduces new products on a mass scale. They are at lower
costs and this helps to improve the standard of life of a common man.
5. Economic Independence:
Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture
substitutes of imported products thereby reducing dependence on foreign countries. These
businessmen also export products thereby earning foreign exchange for the country.
Entrepreneurship does not emerge and grow spontaneously. There are various factors having both
positive and negative influence on the growth of entrepreneurship. (Positive influence implies
facilitating and conducive conditions whereas negative influences refer to factors inhibiting the
emergence of entrepreneurship).
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WOMEN ENTREPRENEURSHIP
Definition:
“Women Entrepreneurs may be defined as the women or a group of women who initiate, organize
and operate a business enterprise”.
“Government of India has defined women entrepreneurs as an enterprise owned and controlled by
a women having a minimum financial interest of 51% of the capital and giving at least 51% of
employment generated in the enterprise to women”.
Factors responsible for Women entering in business:

 Women entrepreneurs are engaged in business due to push and pull factors.
 These factors encourage women to have an independent occupation and become
independent. A sense towards independent decision-making on their life and career is the
motivational factor behind this urge. Women also want to feel independence from
household work and domestic responsibilities. Under the influence of these factors the
women entrepreneurs choose a profession as a challenge and as an urge to do something
new. Such situation is described as pull factors.
 In push factors, women are engaged in business activities due to family compulsion and
the responsibility is forced upon them.
Role of women as an Entrepreneur:

o Imaginative: It refers to the original ideas with competitive market. Well-planned
approach is needed to examine the existing situation and to identify the entrepreneurial
opportunities. It further implies that women entrepreneurs have association with
knowledgeable people and contacting the right organization offering support and services.
o Attribute to work hard: Enterprising women have further ability to work hard. The
imaginative ideas have to come to a fair play. Hard work is needed to build up an
enterprise.
o Persistence: Women entrepreneurs must have an intention to fulfil their dreams. They
have to make a dream transferred into an idea. Studies show that successful women work
hard.
o Ability and desire to take risk: The desire refers to the willingness to take risk and ability
to plan, making forecast estimates and calculations.
o Profit earning capacity: she should have a capacity to get maximum return out of
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invested capital.

Functions of Women Entrepreneur:

A Woman entrepreneur has also to perform all the functions involved in establishing an
enterprise. These include idea generation, and screening, determination of objectives, project
preparation, product analysis, determination of forms of business organization, completion of
formal activities, raising funds, procuring men machine materials and operations of business.
Fredrick Harbiscon, has enumerated the following five functions of a women entrepreneur’s :
 Exploration of the prospects of starting a new business enterprise.
 Undertaking a risk and handling of economic uncertainties involved in business.
 Introduction of innovations, imitations of innovations.
 Coordination, administration and control.
 Supervision and leadership.
In short, women entrepreneur are those women who think of a business enterprise, initiate it
organize and combine the factors of production, operate the enterprise, undertake risk and handle
economic uncertainties involved in running a business enterprise.
With education and training, the women have gained confidence to do all work, which was the
prerogative of man and do it excellently, rather better than men. Over the years, the educated
women have become ambitious, acquired experience and basic skills of competency and self-
assurance.
Problems of Women Entrepreneurs in India:

Women in India are faced many problems to get ahead their life in business. A few problems can
be detailed as;
1. The greatest deterrent to women entrepreneurs is that they are women. A kind of
patriarchal – male dominant social order is the building block to them in their way towards
business success. Male members think it a big risk financing the ventures run by women.
2. The financial institutions are sceptical about the entrepreneurial abilities of women. The
bankers consider women loonies as higher risk than men loonies. The bankers put
unrealistic and unreasonable securities to get loan to women entrepreneurs. According to a
report by the United Nations Industrial Development Organization (UNIDO), “despite
evidence those women’s loan repayment rates are higher than men’s, women still face
more difficulties in obtaining credit,” often due to discriminatory attitudes of banks and
informal lending groups (UNIDO, 1995b).
3. Entrepreneurs usually require financial assistance of some kind to launch their ventures –
be it a formal bank loan or money from a savings account. Women in developing nations
have little access to funds, due to the fact that they are concentrated in poor rural
communities with few opportunities to borrow money (Starcher, 1996; UNIDO, 1995a).
The women entrepreneurs are suffering from inadequate financial resources and working
capital. The women entrepreneurs lack access to external funds due to their inability to
provide tangible security. Very few women have the tangible property in hand.
4. Women’s family obligations also bar them from becoming successful entrepreneurs in
both developed and developing nations. “Having primary responsibility for children, home
and older dependent family members, few women can devote all their time and energies to
their business” (Starcher, 1996, p. .The financial institutions discourage women
entrepreneurs on the belief that they can at any time leave their business and become
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housewives again. The result is that they are forced to rely on their own savings, and loan
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from relatives and family friends.

5. Indian women give more emphasis to family ties and relationships. Married women have
to make a fine balance between business and home. More over the business success is
depends on the support the family members extended to women in the business process
and management. The interest of the family members is a determinant factor in the
realization of women folk business aspirations.
6. Another argument is that women entrepreneurs have low-level management skills. They
have to depend on office staffs and intermediaries, to get things done, especially, the
marketing and sales side of business. Here there is more probability for business fallacies
like the intermediaries take major part of the surplus or profit. Marketing means mobility
and confidence in dealing with the external world, both of which women have been
discouraged from developing by social conditioning. Even when they are otherwise in
control of an enterprise, they often depend on males of the family in this area.
7. The male – female competition is another factor, which develop hurdles to women
entrepreneurs in the business management process. Despite the fact that women
entrepreneurs are good in keeping their service prompt and delivery in time, due to lack of
organisational skills compared to male entrepreneurs women have to face constraints from
competition. The confidence to travel across day and night and even different regions and
states are less found in women compared to male entrepreneurs. This shows the low level
freedom of expression and freedom of mobility of the women entrepreneurs.
8. Knowledge of alternative source of raw materials availability and high negotiation skills
are the basic requirement to run a business. Getting the raw materials from different souse
with discount prices is the factor that determines the profit margin. Lack of knowledge of
availability of the raw materials and low-level negotiation and bargaining skills are the
factors, which affect women entrepreneur’s business adventures.
9. Knowledge of latest technological changes, know how, and education level of the person
are significant factor that affect business. The literacy rate of women in India is found at
low level compared to male population. Many women in developing nations lack the
education needed to spur successful entrepreneurship. They are ignorant of new
technologies or unskilled in their use, and often unable to do research and gain the
necessary training (UNIDO, 1995b, p.1). Although great advances are being made in
technology, many women’s illiteracy, structural difficulties, and lack of access to technical
training prevent the technology from being beneficial or even available to females
(“Women Entrepreneurs in Poorest Countries,” 2001). According to The Economist, this
lack of knowledge and the continuing treatment of women as second-class citizens keep
them in a pervasive cycle of poverty (“The Female Poverty Trap,” 2001). The studies
indicate that uneducated women do not have the knowledge of measurement and basic
accounting.
10. Low-level risk taking attitude is another factor affecting women folk decision to get into
business. Low-level education provides low-level self-confidence and self-reliance to the
women folk to engage in business, which is continuous risk taking and strategic cession
making profession. Investing money, maintaining the operations and ploughing back
money for surplus generation requires high risk taking attitude, courage and confidence.
Though the risk tolerance ability of the women folk in day-to-day life is high compared to
male members, while in business it is found opposite to that.
11. Achievement motivation of the women folk found less compared to male members. The
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low level of education and confidence leads to low level achievement and advancement
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motivation among women folk to engage in business operations and running a business
concern.
12. Finally high production cost of some business operations adversely affects the
development of women entrepreneurs.
How to Develop Women Entrepreneurs?

Following efforts can be taken into account for effective development of women entrepreneurs.
1. Consider women as specific target group for all developmental programs.
2. Better educational facilities and schemes should be extended to women folk from
government part.
3. Adequate training program on management skills to be provided to women community.
4. Encourage women’s participation in decision-making.
5. Vocational training to be extended to women community that enables them to understand
the production process and production management.
6. Skill development to be done in women’s polytechnics and industrial training institutes.
Skills are put to work in training-cum-production workshops.
7. Training on professional competence and leadership skill to be extended to women
entrepreneurs.
8. Training and counselling on a large scale of existing women entrepreneurs to remove
psychological causes like lack of self-confidence and fear of success.
9. Counselling through the aid of committed NGOs, psychologists, managerial experts and
technical personnel should be provided to existing and emerging women entrepreneurs.
10. Continuous monitoring and improvement of training programs.
11. Activities in which women are trained should focus on their marketability and
profitability.
12. Making provision of marketing and sales assistance from government part.
13. To encourage more passive women entrepreneurs the Women training program should be
organized that taught to recognize her own psychological needs and express them.
14. State finance corporations and financing institutions should permit by statute to extend
purely trade related finance to women entrepreneurs.
15. Women’s development corporations have to gain access to open-ended financing.
16. The financial institutions should provide more working capital assistance both for small
scale venture and large scale ventures.
17. Making provision of micro credit system and enterprise credit system to the women
entrepreneurs at local level.
18. Repeated gender sensitization programs should be held to train financiers to treat women
with dignity and respect as persons in their own right.
19. Infrastructure, in the form of industrial plots and sheds, to set up industries is to be
provided by state run agencies.
20. Industrial estates could also provide marketing outlets for the display and sale of products
made by women.
21. A Women Entrepreneur’s Guidance Cell set up to handle the various problems of women
entrepreneurs all over the state.
22. District Industries Centres and Single Window Agencies should make use of assisting
women in their trade and business guidance.
23. Programs for encouraging entrepreneurship among women are to be extended at local
level.
24. Training in entrepreneurial attitudes should start at the high school level through well-
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designed courses, which build confidence through behavioural games.

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BUSINESS INCUBATION CENTRES
Meaning:
 Business incubators support the development of start-ups by providing them with advisory
and administrative support services.
 According to the National Business Incubation Association, an incubator's primary
objective is to produce successful and financially viable firms that can survive on their
own.
 Early incubators focused on technology companies or on a combination of industrial and
service companies, but newer incubators work with companies from different industries.
 Incubation is a dynamic process of business development. Incubators nurture young firms,
helping them to survive in their early stage.
 Incubators provide:
o Infrastructural support i.e. office space, meeting room
o Platform to do networking
o Management assistance
o Other support services, specific to incubators
Main Activities of Business Incubation Centres:

 Incubate early stage entrepreneurial ventures based on technology and innovation.
 Create physical infrastructure and support systems necessary for business incubation
activities.
 Facilitate networking with professional resources, which include mentors, experts,
consultants and advisors for the incubate companies.
 Identify technologies/innovations which have potential for commercial ventures Create .
 Promote and foster the spirit of entrepreneurship.
 Carry out activities that facilitate knowledge creation, innovation and entrepreneurship
activities.
Features of BIC:
 Flexible space for office, meetings, events
 Inspired by ‘Co working spaces’ / ‘Multi-tenant non-profit centres’ i.e. share space,
resources
 Flexible tenancy & payment: by hour, day, month
 Positive filter on the organizations who can work there i.e. ethical, creative
 Meeting place for people, network, support, tools and inspiration
 Sound business model – not ‘dependent’ charity
Role of Business Incubation Centres:

The major role played by Business Incubation Centres (BIC) can be summarised as follows;
Finance
Incubators help start-ups save on operating costs. The companies that are part of an incubator can
share the same facilities and share on overhead expenses, such as utilities, office equipment
rentals, and receptionist services. Start-ups can also take advantage of lower lease rates if the
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incubator is located in low-rent industrial parks. Incubators may also help start-ups with their
financing needs by referring them to angel investors and venture capitalists, and helping them
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with presentations. Start-ups may have better luck securing financing if they have the stamp of
approval of incubator programs.
Management
In addition to financial help, start-ups also need guidance on how to compete successfully with
established industry players. Incubators can tap into their networks of experienced entrepreneurs
and retired executives, who can provide management guidance and operational assistance. For
example, a biotechnology start-up would benefit from the counsel of retired pharmaceutical
executives who have first-hand experience of the drug development and clinical approval process.
Similarly, a restaurant entrepreneur could learn about the difficulties of overseas expansion from
retired hospitality-industry executives. Start-ups usually benefit from having respected individuals
on their boards of directors and scientific advisory panels, because these individuals bring
invaluable connections and experience to the table.
Synergy
The close working relationships between an incubator's start-ups create synergies. Even after the
start-ups leave an incubator, the connections and networks established through these relationships
can endure for a long time. Start-up entrepreneurs can provide encouragement to one another, and
employees may share ideas on new approaches to old problems. Start-ups may plan joint
marketing campaigns and cooperate on product development initiatives. These synergies do not
necessarily exist among start-ups funded by venture capitalists, because the companies that
receive the funds do not necessarily know one another and they may be located in different
geographic locations.
Economy
By helping new businesses prosper, incubators assist in creating long-lasting jobs for their host
communities. Start-ups in incubation programs have greater viability and show superior financial
performance over the long term. They create long-lasting jobs for new graduates, experienced
mid-career personnel, and veteran executives. This benefits communities and drives economic
growth.
Benefits of BIC:
For Entrepreneurs:
1. New technology / product gets developed
2. Informed investment decision
3. Possibilities of takeover
For Government:
1. Economic development
2. Social benefits
3. Encouragement to innovate
Start-up incubators in India

Government’s start up policy gives prime role to incubators by giving them recognition,
regulation guidelines and financial help. The identified incubators have to provide the various
assistance to start-ups. Atal Innovation Mission promotes Atal Incubation Centres to realise its
mission objectives.
Atal Incubation centres (AIM)

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AIM has supported the launch of incubation centres called Atal Incubation Centres (AICs) to
create world class incubation facilities across India with suitable physical infrastructure. The AICs
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should provide capital equipment, operating facilities, experts for mentoring the start-ups,
business planning support, supply of seed capital, providing industry partners, trainings etc.,
required for encouraging innovative start-ups. Atal Incubation Centres are established in in areas
such as manufacturing, transport, energy, health, education, agriculture, water and sanitation etc.
Business and technology related entities including higher educational institutions, R&D institutes,
corporate sector, alternative investment funds registered with SEBI, business accelerators,
individual groups, and even individuals are eligible to apply as AICs.
Selected AICs will get a grant-in-aid of up to Rs. 10 crore for a maximum period of 5 years to
cover the capital and operational expenditures under the AIM.
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CHARACTERISTICS OF MSME
According to Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro,
Small and Medium Enterprises (MSME) are classified in two Classes:
(a) Manufacturing Enterprises- These enterprises are engaged in the manufacture or production
of goods pertaining to any industry specified in the Industries (Development and regulation) Act,
1951. The Manufacturing Enterprise is defined in terms of investment in Plant & Machinery.
(b) Service Enterprises: The enterprises engaged in providing services and are defined in terms
of investment in equipments.
The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises are as under:
Manufacturing Sector
Enterprises Investment in plant & machinery
Micro Enterprises Does not exceed 25 lakh rupees
Small Enterprises More than 25 lakh rupees but does not exceed 5
crore rupees
Medium More than 5 crore rupees but does not exceed 10
Enterprises crore rupees
Service Sector
Enterprises Investment in equipments
Micro Enterprises Does not exceed 10 lakh rupees:
Small Enterprises More than 10 lakh rupees but does not exceed 2
crore rupees
Medium More than 2 crore rupees but does not exceed 5
Enterprises core rupees
Following are the characteristics of some industries which identify them as MSME industries:
1. Labour intensive:
Small-scale industries are fairly labour-intensive. They provide an economic solution by creating
employment opportunities in urban and rural areas at a relatively low cost of capital investment.
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2. Flexibility:
Small-scale industries are flexible in their operation. They adapt quickly to various factors that
play a large part in daily management. Their flexibility makes them best suited to constantly
changing environment.
3. One-man show:
A small-scale unit is generally a one-man show. It is mostly set up by individuals. Even some
small units are run by partnership firm or company, the activities are mainly carried out by one of
the partners or directors. Therefore,’ they provide an outlet for expression of the entrepreneurial
spirit. As they are their own boss, the decision making process is fast and at times more
innovative.
4. Use of indigenous raw materials:
Small-scale industries use indigenous raw materials and promote intermediate and capital goods.
They contribute to faster balanced economic growth in a transitional economy through
decentralisation and dispersal of industries in the local areas.
5. Localised operation:
Small-scale industries generally restrict their operation to local areas in order to meet the local and
regional demands of the people. They cannot enlarge their business activities due to limited
resources.
6. Lesser gestation period:
Gestation period is the period after which the return or investment starts. It is the time period
between setting the units and commencement of production. Small-scale industries usually have a
lesser gestation period than large industries. This helps the entrepreneur to earn after a short
period of time. Capital will not be blocked for a longer period.
7. Educational level:
The educational level of the employees of small industries is normally low or moderate. Hardly
there is any need of specialised knowledge and skill to operate and manage the SSI.
8. Profit motive:
The owners of small industries are too much profit conscious. They always try to keep high
margins in their pricing. This is one of the reason for which the unit may lead to closure.
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ROLE/IMPORTANCE OF MSME IN INDIAN ECONOMIC

DEVELOPMENT
The Importance of MSME in India has been described below:

1. It creates large-scale employment: Enterprises that are inclusive in this sector require
low capital to start up new business. Moreover, it creates a vast opportunity for the
unemployed people to avail. India produces about 1.2 million graduates per year out of
which the total number of engineers are around 0.8 million. There is no economy so far
that could provide that large number of fresher’s in one year only. MSME is the boon for
the fresh talent in India.
2. Economic stability in terms of Growth and leverage Exports: It is the most significant
13
driver in India contributing to the tune of 8% to GDP. Considering the contribution of

MSME to manufacturing, exports, and employment, other sectors are also benefitting from
Page
it. Nowadays, MNCs are buying semi-finished, and auxiliary products from small

enterprises, for example, buying of clutches and brakes by automobile companies. It is

helpful in creating a linkage between MSME and big companies even after the
implementation of the GST 40% MSME sector also applied GST Registration that plays
an important role to increase the government revenue by 11%.
3. Encourages Inclusive Growth: The inclusive growth is at the top of the agenda of
Ministry for Medium, and small and Medium-sized enterprises for several years. On the
other hand, poverty and deprivation are a deterrent to the development of India. Besides, it
includes marginalized sections of a society which is a key challenge lying before the
Ministry of MSME.
4. Cheap Labour and minimum overhead: While in the large-scale organizations, one of
the main challenge is to retain the human resource through an effective human resource
management professional manager. But, when it comes to MSME, the requirement of
labour is less and it does not need a highly skilled labourer. Therefore, the indirect expense
incurred by the owner is also low.
5. Simple Management Structure for Enterprises: MSME can start with limited resources
within the control of the owner. From this decision making gets easy and efficient. On the
contrary, a large corporation requires a specialist for every departmental functioning as it
has a complex organizational structure. Whereas a small enterprise does not need to hire
an external specialist for its management. The owner can manage himself. Hence, it could
run single-handedly.
6. The main role in the mission of “Make in India”: The signature initiative by the Prime
Minister of India “Make in India” has been made easy with MSME. It is taken as a
backbone in making this dreams a possibility. In addition, the government has directed the
financial institution to lend more credit to enterprises in the MSME sector.
7. MSME Facilitates Women Growth: It provides employment opportunities to women in
India. It promotes entrepreneurial skills among women as special incentives are given to
women entrepreneurs.
8. Brings Balanced Regional Development: SSI (Small Scale Industries) promotes
decentralized development of industries as most of the small scale industries are set up in
backward and rural areas. It removes regional disparities by industrializing rural and
backward areas and brings balanced regional development. It promotes urban and rural
growth in India. It helps to reduce the problems of congestion, slums, sanitation and
pollution in cities by providing employment and income to people living in rural areas. It
plays an important role by initiating the government to build the infrastructural facilities in
rural areas. It helps in improving the standard of living of people residing in suburban and
rural areas in India. The entrepreneurial talent is tapped in different regions and the
income is also distributed instead of being concentrated in the hands of a few individuals
or business families.
9. Helps in Mobilization of Local Resources: It helps to mobilize and utilize local
resources like small savings, entrepreneurial talent, etc., of the entrepreneurs, which might
otherwise remain idle and unutilized. Thus it helps in effective utilization of resources. It
paves way for promoting traditional family skills and handicrafts. There is a great demand
for handicraft goods in foreign countries. It helps to improve the growth of local
entrepreneurs and self-employed professionals in small towns and villages in India.
10. Optimisation of Capital: SSI requires less capital per unit of output. It provides quick
14
return on investment due to shorter gestation period. The pay-back period is quite short in
small scale industries. SSI functions as a stabilizing force by providing high output capital
Page

ratio as well as high employment capital ratio. It encourages the people living in rural
areas and small towns to mobilize savings and channelize them into industrial activities.
11. Promotes Exports: SSI does not require sophisticated machinery. Hence, it is not
necessary to import the machines from abroad. On the other hand, there is a great demand
for goods produced by small scale sector. Thus it reduces the pressure on the country’s
balance of payments. SSI earns valuable foreign exchange through exports from India.
12. It Complements Large Scale Industries: SSI plays a complementary role to large scale
sector and supports the large scale industries. SSI provides parts, components, accessories
to large scale industries and meets the requirements of large scale industries through
setting up units near the large scale units. It serves as ancillaries to large Scale units.
13. It Meets Consumer Demands: SSI produces wide range of products required by
consumers in India. SSI meets the demand of the consumers without creating a shortage
for goods. Hence, it serves as an anti-inflationary force by providing goods of daily use.
14. It Ensures Social Advantage: SSI helps in the development of the society by reducing
concentration of income and wealth in few hands. SSI provides employment to people and
pave for independent living. SSI helps the people living in rural and backward sector to
participate in the process of development. It encourages democracy and self-governance.
15. Develops Entrepreneurship: 1. It helps to develop a class of entrepreneurs in the society.
It helps the job seekers to turn out as job givers. It promotes self-employment and spirit of
self-reliance in the society. Development of small scale industries helps to increase the per
capita income of India in various ways. It facilitates development of backward areas and
weaker sections of the society. Small Scale Industries are adept in distributing national
income in more efficient and equitable manner among the various participants of the
society
******************************************************************************
PROBLEMS FACED BY MSME IN INDIA
The various problems faced by small scale industries are as under:

(1) Finance:
Finance is one of the most important problem confronting small scale industries Finance is the life
blood of an organisation and no organisation can function proper у in the absence of adequate
funds. The scarcity of capital and inadequate availability of credit facilities are the major causes of
this problem.
Firstly, adequate funds are not available and secondly, entrepreneurs due to weak economic base,
have lower credit worthiness. Neither they neither are having their own resources nor are others
prepared to lend them. Entrepreneurs are forced to borrow money from money lenders at
exorbitant rate of interest and this upsets all their calculations.
After nationalisation, banks have started financing this sector. These enterprises are still
struggling with the problem of inadequate availability of high cost funds. These enterprises are
promoting various social objectives and in order to facilitate then working adequate credit on
easier terms and conditions must be provided to them.
(2) Raw Material:
15
Small scale industries normally tap local sources for meeting raw material requirements. These
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units have to face numerous problems like availability of inadequate quantity, poor quality and

even supply of raw material is not on regular basis. All these factors adversely affect t e
functioning of these units.
Large scale units, because of more resources, normally corner whatever raw material that is
available in the open market. Small scale units are thus forced to purchase the same raw material
from the open market at very high prices. It will lead to increase in the cost of production thereby
making their functioning unviable.
(3) Idle Capacity:
There is under-utilisation of installed capacity to the extent of 40 to 50 percent in case of small
scale industries. Various causes of this under-utilisation are shortage of raw material problem
associated with funds and even availability of power. Small scale units are not fully equipped to
overcome all these problems as is the case with the rivals in the large scale sector.
(4) Technology:
Small scale entrepreneurs are not fully exposed to the latest technology. Moreover, they lack
requisite resources to update or modernise their plant and machinery Due to obsolete methods of
production, they are confronted with the problems of less production in inferior quality and that
too at higher cost. They are in no position to compete with their better equipped rivals operating
modem large scale units.
(5) Marketing:
These small scale units are also exposed to marketing problems. They are not in a position to get
first-hand information about the market i.e. about the competition, taste, liking, disliking of the
consumers and prevalent fashion.
With the result they are not in a position to upgrade their products keeping in mind market
requirements. They are producing less of inferior quality and that too at higher costs. Therefore, in
competition with better equipped large scale units they are placed in a relatively disadvantageous
position.
In order to safeguard the interests of small scale enterprises the Government of India has reserved
certain items for exclusive production in the small scale sector. Various government agencies like
Trade Fair Authority of India, State Trading Corporation and the National Small Industries
Corporation are extending helping hand to small scale sector in selling its products both in the
domestic and export markets.
(6) Infrastructure:
Infrastructure aspects adversely affect the functioning of small scale units. There is inadequate
availability of transportation, communication, power and other facilities in the backward areas.
Entrepreneurs are faced with the problem of getting power connections and even when they are
lucky enough to get these they are exposed to unscheduled long power cuts.
Inadequate and inappropriate transportation and communication network will make the working
of various units all the more difficult. All these factors are going to adversely affect the quantity,
quality and production schedule of the enterprises operating in these areas. Thus their operations
will become uneconomical and unviable.
(7) Under Utilisation of Capacity:
Most of the small-scale units are working below full potentials or there is gross underutilization of
capacities. Large scale units are working for 24 hours a day i.e. in three shifts of 8 hours each and
16
are thus making best possible use of their machinery and equipments.
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On the other hand small scale units are making only 40 to 50 percent use of their installed
capacities. Various reasons attributed to this gross under- utilisation of capacities are problems of
finance, raw material, power and underdeveloped markets for their products.
(8) Project Planning:
 Another important problem faced by small scale entrepreneurs is poor project planning.
These entrepreneurs do not attach much significance to viability studies i.e. both technical
and economical and plunge into entrepreneurial activity out of mere enthusiasm and
excitement.
 They do not bother to study the demand aspect, marketing problems, and sources of raw
materials and even availability of proper infrastructure before starting their enterprises.
Project feasibility analysis covering all these aspects in addition to technical and financial
viability of the projects, is not at all given due weight-age.
 Inexperienced and incomplete documents which invariably results in delays in completing
promotional formalities. Small entrepreneurs often submit unrealistic feasibility reports
and incompetent entrepreneurs do not fully understand project details.
 Moreover, due to limited financial resources they cannot afford to avail services of project
consultants. This result is poor project planning and execution. There are both time
interests of these small scale enterprises.
(9) Skilled Manpower:
 A small scale unit located in a remote backward area may not have problem with respect
to unskilled workers, but skilled workers are not available there. The reason is Firstly,
skilled workers may be reluctant to work in these areas and secondly, the enterprise may
not afford to pay the wages and other facilities demanded by these workers.
 Besides non-availability entrepreneurs are confronted with various other problems like
absenteeism, high labour turnover indiscipline, strike etc. These labour related problems
result in lower productivity, deterioration of quality, increase in wastages, and rise in other
overhead costs and finally adverse impact on the profitability of these small scale units.
(10) Managerial:
 Managerial inadequacies pose another serious problem for small scale units. Modern
business demands vision, knowledge, skill, aptitude and whole hearted devotion.
Competence of the entrepreneur is vital for the success of any venture. An entrepreneur is
a pivot around whom the entire enterprise revolves.
 Many small scale units have turned sick due to lack of managerial competence on the part
of entrepreneurs. An entrepreneur who is required to undergo training and counselling for
developing his managerial skills will add to the problems of entrepreneurs.
 The small scale entrepreneurs have to encounter numerous problems relating to
overdependence on institutional agencies for funds and consultancy services, lack of
credit-worthiness, education, training, lower profitability and host of marketing and other
problems. The Government of India has initiated various schemes aimed at improving the
overall functioning of these units
**********************************************************************
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SWOT ANALYSIS OF MSME IN INDIA
STRENGTHS
MSMEs sector are enormous due to the following factors:

 MSMEs can be started at a very low cost.
 Adapting to change is crucial in these sectors; not being tied to any bureaucratic inertia, it
is typically easier to respond to the marketplace quickly.
 Good customer relation results in greater accountability and maturity. Customers who are
treated like family are more likely to return to that business in the future.
 Independence to work for own firm is another advantage of these sectors.
 Ability to innovate and create new products and services more rapidly and creatively than
larger companies that are delayed in bureaucracy.
 A small firm has also the ability to modify its products or services in response to unique
customer needs. The average entrepreneur or manager of a small business knows his
customer base far better than in a large company.
 Cater to customer needs. If a modification in the products or services offered or even the
business's hours of operation would better serve the customers, it is possible for a small
firm to make changes.
 The people involved – the entrepreneur, any partners, advisers, employees, or even family
members – have a passionate, almost compulsive, desire to succeed. This makes them
work harder and better.
WEAKNESSES
 It can be difficult to reach enough potential customers to establish a successful base of
customers. Potential customers might be less likely to do business with a small business
that does not offer a well-known brand of products or services.
 One of the largest weaknesses for small business owners is to raise finance. Many business
owners invest their own money at the start of a business or if the business falls upon hard
times because institutional lenders like banks and government financial corporations are
generally reluctant to advance money to these small units.
 Small business owner has to bear high cost of production, which acts as one of the
weakness for the small businesses.
 Most of small scale businesses do not have skilled personnel. Due to which these
businesses lack in identification of industrial projects for development consultancy and
counselling services and providing industrial training and skill `formation
 Small businesses do not use Information technology and its applications such as the
designing of prototype machines for product identified according to country resources and
requirements.
 Many times it becomes very difficult to obtain the permission of and licence from, the
Industrial Development of the state, local bodies etc.
 Marketing is one of the weaknesses for small businesses.
 Besides these, the entrepreneurs face many problems in marketing due to
Lack of standardization Poor finish
Poor designing Poor bargaining power
18
Poor quality Lack of service after sales

Lack of quality control Scale of production
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Lack of precision Brand preferences

Distribution contacts Competitive marketing

Lack of knowledge of marketing Ignorance of potential market
OPPORTUNITIES
The opportunities enjoyed in the present scenario by the MSMEs are government support,
reservation of product items, excise relief and ancillary for large business. Keeping the
weaknesses aside, MSMEs have access to opportunities like a number of bilateral and multilateral
trade agreements have taken place, which opens the gateway to a great source of revenue for
entrepreneurs/business owners. Likewise enhanced credit support with more and more
government initiatives for their promotion are offered, hence entrepreneurs/ business owners can
expect some relief in terms of access to credit facilities. In addition, with the arrival of digital era
(internet), the access to newer opportunities has become easier and increased significantly. Some
of the entrepreneurs have also used made a stand against monopolies & made a mark in the
industry. Therefore, the emergence of online marketplaces and alternative funding has also made
it easier for entrepreneurs to make safe business funding. Also, NSIC (National Small Industries
Corporation) have launched several marketing programmes to promote MSMEs. Therefore, small
business owners can utilize adequate marketing support avail from Government agencies for the
growth of MSMEs.
THREATS
Some of the threats related to MSMEs are:
 Slow Payment: While large corporations and banks have been fortified with ample low-
cost cash to buy small businesses‟ products and services, they continue to pay slowly,
bargain harder and demand more concessions from powerless small businesses who are
selling their souls “where the money is.”
 New costs, taxes and compliance: As social causes like sustainability, diversity,
healthcare and fair taxation are being legislated by governments and lobbied into
favourable terms for corporations, small business is getting choked. Now, the new costs,
taxes and compliance rules are sapping the will of owners to believe that they should risk,
invest and remain confident in their businesses.
 “Approved” vendor programs force buying solely on price: To shift responsibility and
outsource their liability, corporations and governments are hiring third party sourcing
companies whose objective is to reduce small business vendor power and commoditize
their products and services.
**********************************************************************
INCENTIVES TO MSME IN INDIA

Many incentives are provided both by the Central and State Governments to promote the growth
of small-scale industries and also to protect them from the onslaught of the large-scale sector.
Among the various incentives given to small-scale industries the following deserve special
mention:
1. Reservation:
To protect the small-scale industries from the competition posed by large-scale industries, the
Government has reserved the production of certain items exclusively for the small-scale sector.
19
The number of items exclusively reserved for the small-scale sector has been considerably
increased during the Five Year Plan Periods and now stands at 822.
Page

However, prior to the 1997 – 98 Budget the number of items reserved for the small-scale sector
stood at 836. The Finance Minister de-reserved 14 items in the 1997 – 98 Budget.
2. Preference in Government purchases:

The Government as well as Government organisations shows preference in procuring their
requirements from the small-scale sector. For instance, the Director General of Supplies and
Disposals purchases 400 items exclusively from the small-scale sector. The National Small-Scale
Industries Corporation assists the SSI units in obtaining a greater share of Government and de-
fence purchases.
3. Price preference:
The SSI units are given price preference up to a maximum of 15 per cent in respect of certain
items purchased both from small-scale and large-scale units.
4. Supply of raw materials:

In order to ensure regular supply of raw materials, imported components and equipment’s, the
Government gives priority allocation to the small-scale sector as compared to the large-scale
sector. Further, the Government has liberalised the import policy and streamlined the distribution
of scarce raw materials.
5. Excise duty:
In respect of SSI units excise duty concessions are granted to both registered and unregistered
units on a graded scale depending upon their production value. Full exemption is granted up to a
production value of Rs.30 lakhs in a year and 75 % of normal duty is levied for production value
exceeding Rs.30 lakhs but not exceeding Rs.75 lakhs. If the production value exceeds Rs.75 lakhs,
normal rate of duty will be levied.
6. RBI’s credit guarantee scheme:

In 1960, the RBI introduced a Credit Guarantee Scheme for small-scale industries. As per the
Scheme, the RBI takes upon itself the role of a guarantee organisation for the advances which are
left unpaid, including interest overdue and recoverable charges. This scheme covers not only
working capital but also advances provided for the creation of fixed capital.
7. Financial assistance:
Small-scale industries are brought under the priority sector. As a result, financial assistance is
provided to SSI units at concessional terms by commercial banks and other financial institutions.
With a view to providing more financial assistance to the small-scale sector, several schemes have
been introduced in the recent past the Small Industries Development Fund (SIDF) in 1986,
National Equity Fund (NEF) in 1987 and the Single Window Scheme (SWS) in 1988.
SIDF provides refinance assistance to small-scale and cottage and village industries and the tiny
sector in rural areas. NEF provides equity type support to small entrepreneurs for setting up new
projects in the tiny/small-scale sector. In 1996, the small-scale sector received 42.3 per cent of the
total priority sector advances from public sector banks.
8. Technical consultancy services:

The Small Industries Development Organisation, through its network of service and branch
institutes, provides technical consultancy services to SSI units. In order to provide the necessary
technical input to rural industries, a Council for Advancement of Rural Technology was set up in
20
October, 1982.
The Technical Consultancy Organisation provides consultancy services to MSME units at a
Page
subsidised rate. Many financial institutions are also providing subsidies to SSI units for availing of
consultancy services. For instance, small entrepreneurs proposing to set up rural, cottage, tiny or
small-scale units, can get consultancy services at a low cost from the Technical Consultancy
Organisations approved by the All-India and State-level financial institutions.
They have to pay only 20% of the fees charged by a technical consultancy organisation. The entire
balance of 80% or Rs.5, 000 whichever is lower is subsidised by the Industrial Finance
Corporation of India.
9. Machinery on hire purchase basis:

The National Small Industries Corporation (NSIC) arranges supply of machinery on hire purchase
basis to SSI units, including ancillaries located in backward areas which qualify for investment
subsidy. The rate of interest charged in respect of technically qualified persons and entrepreneurs
coming from backward areas are less than the amount charged to others. The earnest money
payable by technically qualified persons and entrepreneurs from backward areas is 10% as against
15% in other cases.
10. Transport subsidy:

The Transport Subsidy Scheme, 1971 envisages grant of a transport subsidy to small-scale units in
selected areas to the extent of 75 % of the transport cost of raw materials which are brought into
and finished goods which are taken out of the selected areas.
11. Training facilities:

The Entrepreneurship Development Institute of India, financial institutions, commercial banks,
technical consultancy organisations, and NSIC provide training to existing and potential
entrepreneurs.
12. Marketing assistance:

The National Small Industries Corporation (NSIC), the Small Industries Development
Organisation (SIDO) and the various Export Promotion Councils help SSI units in marketing their
products in the domestic as well as foreign markets. The SIDO conducts training programmes on
export marketing and organises meetings and seminars on export promotion.
13. District Industries Centres (DICs):

The 1977 Industrial Policy Statement introduced the concept of DICs. Accordingly a DIC is set up
in each district. The DIC provides and arranges a package of assistance and facilities for credit
guidance, supply of raw materials, marketing etc.
What are Government incentives for MSME?

1. Marketing Assistance scheme for providing marketing support to MSMEs i.e.
– To enhance the marketing competitiveness of MSMEs.
– to provide them a platform for interaction with the individual/institutional buyers;
– to update them with prevalent market scenario
– For capturing the new market opportunities
2. Domestic Market Promotion Scheme to expand domestic markets

– Establishment and Maintenance of Showrooms & Sales Depots
– Participation in Domestic Exhibitions.
3. Export Market Promotion to improve the export performance through:

21
– participation in seminars and conferences

– organising participation in international fairs;
Page
– Publicity abroad
4. Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT SME)- Collateral free loan
up to a limit of Rs. 100 lakh is available for individual MSE on payment of guarantee fee to bank
by the MSE.
5. Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)- it provides 15% subsidy
for additional investment up to Rs. 1 cr for technology upgradation by MSEs.
6. Technology and Quality Upgradation Support to MSMEs- use of energy efficient technologies
(EETs) in manufacturing units. Following assistance will be provide:
– Funding support
– Setting up of Carbon Credit Aggregation Centres.
– Encouraging MSMEs to acquire product certification / licenses from National /
International bodies etc.
**********************************************************************
INCENTIVES TO MSME BY GUJARAT GOVERNMENT
Assistance to MSMEs
i. Solar Pump:
Government of Gujarat has introduced this scheme to help the salt producers in
obtaining solar pump system at concessional rates.
ii. Capital Investment subsidy for Manufacturing Enterprises:

 Capital Investment subsidy will be eligible only on Loan Amount disbursed by the
Bank/Institution.
 In Municipal Corporation Areas: Subsidy @ 10% of term loan amount disbursed by the
bank/ Financial Institution with maximum amount of Rs.15 lakhs
iii. Assistance for quality certification:
1. ERP System:- 50% of capital cost for installing ERP system of approved ERP
services provided by Industries Commissionerate subject to a maximum amount of Rs.
50,000/-.
2. ISO Certification:- 50% assistance for Consulting fees charges of obtaining ISO
certification maximum amount of Rs.50,000/-
iv. Assistance for Technology assistance:
Grant at the rate of 50% of cost of technology acquisition, including royalty payments
for first two years, subject to maximum of Rs.50 laths technology.(Assistance will not
available for the purchase of plant & machinery or equipments.
v. Assistance for Patent registration:
Assistance of up to 75%of expenditure incurred for obtaining patents, subject to
maximum of Rs. 25 lakhs within the operative period of the scheme
Bharat Ratna Dr. Baba Saheb Ambedkar Udhyog Uday Yojna for SC/ST Entrepreneurs of
MSME
22
Government of Gujarat has introduced this scheme to help the SC/ST categories of entrepreneurs .
assistance is provided in case of investment subsidies, patent registration, quality certification,
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technology upgradation, venture capital, rehabilitation of sick units, consumption of energy and
water etc.
Scheme for Market Development Assistance

 Schemes 1 - Assistance to MSME manufacturing sector participation in the Exhibition
through Industries Association / Federation / Chambers
 Schemes 2 - Assistance to MSME for participation in Trade fairs outside the state of
Gujarat (Within India) / International Trade Fair outside India
 Schemes 3 - Assistance to Organizers for organizing industrial Exhibitions in Gujarat
Schemes for Assistance to MSEs for Shed and Plot developed By Private Developer Schemes
 Assistance to Private Developer for developing readymade sheds in Mini Estate
 Assistance in rent to MSEs
Schemes for Assistance Labour Intensive Industries

 Payroll assistance will be provided @Rs.1200 per person & additional Rs.300 per women
employment. In case of expansion this payroll assistance will be provided only for
additional domicile employees.
 In case of expansion, the payroll assistance will not be eligible for reemployed person/s
that had been relieved by the enterprise within one year period before commencement of
production of expansion.
 Interest Subsidy :7% maximum up to Rs. 1 crore per annum for period of 5 years.
Scheme for Assistance for Research and Development Activities
 Assistance to R&D institutions / laboratories set up with State Government or Government
of India including setting up of new R&D institutions /laboratories shall be provided as per
requirement.
 Assistance to laboratories established by Industries Association with the help of
Government will be up to 60% of the project cost for machinery and equipment cost.
 Assistance for Contract/Sponsored research work from any industrial enterprise/Industrial
association to recognized R&D institution / technical collages approved by AICTE, will be
considered @ 50% of project cost, excluding cost of land and building, subject to
maximum Rs. 50 Lacs
Scheme for Assistance for Environment Protection Measure
Sr.
No Eligible Activity Quantum of Assistance
1 Implementation of Cleaner production technology (1). Upton 35% of cost of Plant &
in place of existing process such as substitution & M.S.M.E. Machinery with ceiling of Rs.
optimization of raw material, reduction in water 35 Lacs during the operative
consumption or energy consumption or waste period of the scheme for
23
generation. MSME.
Page

Sr.
No Eligible Activity Quantum of Assistance
Any other environment management project with (1). Upton 25% of cost of Plant &
use of Clean, Efficient and Innovative Pollution M.S.M.E. Machinery with ceiling of Rs.
Control Equipment Lakhs during the operative
period of the Scheme of
MSME.
Assistance for Innovation:

 Institution will support to the innovator by providing mentor services.
 Institution will allow the innovator to use facilities available in the institution for start-ups.
 Rs. 10000/- per month will be provided to the innovator as sustenance allowance for one
year whose project is recommended by institution as approved by Committee.
 Up to Rs. 5 Lakhs assistance will be provided to the institution for mentoring service.
 Up to Rs. 10.00 Lakhs assistance will be provided for Cost of Raw Material/Components
& other related equipment required for the innovative process for the new product
development based on approval of the committee.
 Govt. will support selected innovator to get free access to University/Libraries/Govt.
Laboratories/SDCs(GIDC)/CoE/PSUs to have more clarity on his innovative ideas/concept
Awards to MSMEs:
 Separate awards will be given for Micro, Small and Medium Enterprise Category
Award will be given in each of following three category
 Growth in Production & Profit
 Quality and Environment Improvement Measures
 Innovation in Technology for New Product or Process Development
Award of Rs.2 lakh, Trophy and Appreciation Letter to each winner
 Awards to Best MSEs Entrepreneur in the following category one to each -
 Women Entrepreneur
 Young Entrepreneur (first generation Entrepreneurs below 35 years age)
 SC Entrepreneur
 ST Entrepreneur
Award of Rs.2 lakh, Trophy and Appreciation Letter to each winner
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MARKET ANALYSIS PROCESS
Meaning of Market Analysis: Market analysis means getting answers to the following two
questions:
1. What will be the total demand for the product/service?
2. What shall be the market share of our proposed project?
Process of Market Analysis: Market analysis should be carried out in an orderly and systematic
manner. The important steps in such analysis are as follows:
Situational analysis and specification of objectives
Collection of secondary information
Conduct of market survey
Characterisation of the market
STEP 1: SITUATIONAL ANALYSIS AND SPECIFICATION OF OBJECTIVES:

Definition: Situational analysis means analysing the situation of the market in an informal way.
Entrepreneur may informally talk to customers, competitors, middlemen, and others in the
industry about the market situation.
 Situational analysis produces data to know about the market. When time and cost is less,
we must not go for in-depth formal study and analysis BUT we must always go for
situational analysis first. To carry out such a study, it is necessary to decide its objectives
clearly and in detail. Objectives must be structured in the form of questions.
Example: Suppose a company has invented a new type of food processor with many new features
as compared to old style mixer-grinder. Suppose the entrepreneur needs information about where
and how to market the food processor. The objectives of market and demand analysis in this case
may be;
 Who are the buyers of mixer-grinder?
 What is the total current demand for mixer-grinder?
 How is the demand distributed temporally (pattern of sales over the year) and
geographically?
 What is the nature of demand for mixer-grinder of different sizes?
25
 How can potential customers be convinced about the superiority of the food processor?
Page
 What price and warranty will make sure that customers accept the new food processor?

 What channels of distribution are most suited for the food processor?
 What trade margins will influence distributors?
STEP 2: COLLECTION OF SECONDARY INFORMATION:

 In order to answer the questions listed above in the objectives of the market study,
information may be obtained from secondary and primary sources.
 Secondary information is information that is already available. Primary information means
information that is collected for the first time.
 We must always start from secondary information. If that is not available then we must go
for primary data.
General Sources of Secondary Information: Some important secondary sources of information

in India are;
1. Census of India: A decennial (means every 10 years) publication of the Government of
India. It provides information on population, demographic characteristics, and household
size.
2. Economic Survey: An annual publication of the Ministry of Finance, it provides the latest
data on industrial production, wholesale prices, consumer prices, exports, agricultural
production, national income, etc.
3. Guidelines to Industries: An annual publication of the Central Statistical Organisation, it
contains information on various aspects of industry: number of units and state-wise
distribution, average number of working days, employment, materials consumption,
quantity of products, etc.
4. Annual Reports of the Development Wing, Ministry of Commerce and Industry: An annual
publication, it gives a detailed review of industries. It also provides information about new
items manufactured for the first time in India and the list of protected industries.
5. Annual Bulletin of statistics of Exports and Imports: An annual publication of the Ministry
of Commerce, it provides data on imports and exports for a very large number of items and
as per international classification.
6. Monthly Studies of Production of Selected Industries: A monthly publication of the Central
Statistical Organisation, it provides all India data on production, number of units installed
capacity, state-wise break-up, stock level, etc., for several selected industries.
7. Publications of Advertising Agencies: The leading advertising agencies like Clarion,
McCann and Thompson publish market data regarding Indian market.
STEP 3: CONDUCT OF MARKET SURVEY:

 Secondary information is less costly and easy to obtain. But it always does not provide
detailed information for market analysis. Primary information is also required along with
secondary data to get complete idea regarding the project that is being studied. Primary
data can be collected with the help of a sample survey as follows;
Steps in a Sample Survey (RESEARCH PROCESS): Typically, a sample survey consists of the
following steps:
1. Define the Target Population: In defining the target population the important terms should be
carefully and clearly defined. The target population may be divided into various segments which
may have differing characteristics. For example, all television owners may be divided into three to
four income groups.
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2. Select the Sampling Scheme and Sample Size: There are many sampling methods: simple
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random sampling, cluster sampling, sequential sampling, stratified sampling, systematic sampling,

and non-probability sampling. Each method has its advantages and limitations. Sample size is also
very important to get reliable data.
3. Develop the Questionnaire: The questionnaire is the main instrument for getting information
from the respondents. The effectiveness of the questionnaire depends on its length, the types of
questions, and the wording of questions.
4. Recruit and Train the Field Investigators: Recruiting and training of field investigators must
be planned well. Great care must be taken for recruiting the right kind of investigators and
imparting the proper kind of training to them.
5. Obtain Information as per the Questionnaire: Respondents may be interviewed personally,
telephonically, or by mail for obtaining information. Personal interviews get a high rate of
response. They are expensive and likely to result in biased responses because of the presence of
the interviewer. Mail surveys are economical. The response rate is often low. Telephonic
interviews have very limited applicability in India because telephone tariffs are high.
6. Analyse and Interpret the Information: After gathering the data, it must be edited for
analysing it. For statistical analysis, a variety of methods are available. They may be divided into
two broad categories: parametric methods and nonparametric methods. Analysed data must be
properly interpreted for results.
STEP 4: CHARACTERISATION OF THE MARKET:

Based on the information gathered from secondary sources and through the primary survey, the
market analysis can be described in the following points;
1. Demand: Demand can be analysed in the following ways;
(i) Effective Demand in the Past and Present
 The effective demand in the past and present, can be calculated with the formula as given
below :
Production + Imports - Exports - Changes in stock level
(ii) Breakdown of Demand
 To get a deeper knowledge into the nature of demand, the total market demand may be
broken down into (i) nature of product (ii) consumer group, and (iii) geographical division.
 Nature of Product : for example - commercial vehicles include trucks and buses of various
capacities
 Consumer Groups: Consumers of a product may be divided into industrial consumers and
domestic consumers. Industrial consumers may be subdivided industry wise. Domestic
consumers may be further divided into different income groups.
 Geographical Division: Demand can be divided geographically. For example: North India,
South India, East India, West India.
2. Price: It may be helpful to study the following types of prices: (i) manufacturer’s price quoted
as FOB (free on board) price or CIF (cost, insurance, and freight) price, (ii) price for imported
goods, (iii) wholesale price, and (iv) retail price.
3. Methods of Distribution And Sales Promotion: The methods of distribution may change with
the nature of product. Capital goods, industrial raw materials, and consumer products have
different distribution channels. Similarly, methods used for sales promotion (advertising,
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discounts, gift schemes, etc.) may change from product to product.

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4. Consumers: Consumers are of many types in the market. They must be properly analysed.
Consumers may be characterised along two dimensions: demographic and attitudinal;
Demographic Attitudinal
Age Preferences
Sex Intentions
Income Habits
Profession Attitudes
Social background Responses
5. Supply and Competition:

 It is necessary to know the current sources of supply and whether they are foreign or
domestic.
 For domestic sources of supply, information along the following lines may be gathered:
location, present production capacity, planned expansion, capacity utilisation level,
bottlenecks in production, and cost structure.
 Competition from substitutes should also be specified because any product can be replaced
by some other product if there is any change in price, quality, availability, promotional
effort etc.
6. Government Policy:
 Government also plays a role in influencing the demand for a product.
 Governmental plans, policies, Acts, and orders affect the demand for the product.
 Government policies might affect the production targets in national plans, import and
export trade controls, import duties, export incentives, excise duties, sales tax, industrial
licensing, preferential purchases, credit controls, financial regulations, and
subsidies/penalties of various kinds.
DEMAND FORECASTING
Generally, there are two approaches to demand forecasting. The first approach involves
forecasting demand by collecting information regarding the buying behaviour of consumers from
experts or through conducting surveys. On the other hand, the second method is to forecast
demand by using the past data through statistical techniques. Thus, we can say that the techniques
of demand forecasting are divided into qualitative / survey methods and quantitative / statistical
methods. The qualitative method is generally for short-term forecasting, whereas quantitative
methods are used to forecast demand in the long run. These two approaches are shown in Figure-
10 below:
Survey Method / Qualitative Method:

Survey method is one of the most common and direct methods of forecasting demand in the short
term. This method encompasses the future purchase plans of consumers and their intentions. In
this method, an organization conducts surveys with consumers to determine the demand for their
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existing products and services and anticipate the future demand accordingly.
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The survey method undertakes three exercises, which are shown in Figure-11 below:
The exercises undertaken in the survey method (as shown in Figure-11) are discussed as follows:
i. Expert Opinion Poll:

It refers to a method in which experts are requested to provide their opinion about the product.
Generally, in an organization, sales representatives act as experts who can assess the demand for
the product in different areas, regions, or cities. Sales representatives are in close touch with
consumers; therefore, they are well aware of the consumers’ future purchase plans, their reactions
to market change, and their perceptions for other competing products. They provide an
approximate estimate of the demand for the organization’s products. This method is quite simple
and less expensive.
Limitations:
a. Provides estimates that are dependent on the market skills of experts and their experience.
These skills differ from individual to individual. In this way, making exact demand forecasts
become difficult.
b. Involves subjective judgment of the assessor, which may lead to over or under-estimation.
c. Depends on data provided by sales representatives who may have inadequate information
about the market.
d. Ignores factors, such as change in Gross National Product, availability of credit, and future
prospects of the industry, which may prove helpful in demand forecasting.
ii. Consumers opinion survey:

 Buyers are asked about future buying intentions of products, brand preferences and
quantities of purchase, response to an increase in the price, or an implied comparison with
competitor’s products.
 Census Method: Involves contacting each and every buyer
 Sample Method: Involves only representative sample of buyers
 Merits
 Simple to administer and implement.
 Suitable when no past data is available.
 Suitable for short term decisions regarding product and promotion.
 Demerits
 Expensive both in terms of resources and time.
 Buyers may give incorrect responses.
 Investigators’ bias regarding choice of sample and questions cannot be fully
eliminated.
iii. Delphi Method:

 It refers to a group decision-making technique of forecasting demand.
 In this method, questions are individually asked from a group of experts to obtain their
opinions on demand for products in future.
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 These questions are repeatedly asked until a consensus is obtained.

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 In addition, in this method, each expert is provided information regarding the estimates
made by other experts in the group, so that he/she can revise his/her estimates with respect
to others’ estimates.
 In this way, the forecasts are cross checked among experts to reach more accurate decision
making.
 Every expert is allowed to react or provide suggestions on other’s estimates. However, the
names of experts are kept anonymous (name is not disclosed) while exchanging estimates
among experts to facilitate fair judgment and reduce halo effect.
 Merits
 Decisions are enriched with the experience of competent experts.
 Firm need not spend time, resources in collection of data by survey.
 Very useful when product is absolutely new to all the markets.
 Demerits
 Experts’ may involve some amount of bias.
 With external experts, risk of loss of confidential information to rival firms.
QUANTITATIVE METHODS: These methods depend upon the calculation of demand on the
basis of different formula. Some important demand forecasting methods are;
1. Time series methods: these methods use past data to calculate demand for future.
2. Moving average method
3. Exponential smoothing method
4. Moving average method
5. Leading indicator method.
1. Exponential smoothing method:

 Exponential smoothing is a very popular approach for short-term forecasting.
 This method determines values by computing exponentially weighted system.
 The weights assigned to each value show the degree of importance of that value.
 More recent values are assigned greater weight than previous period values.
 It may be noted that weights (w) are so assigned that w lies between zero and one (0<w<l).
 To describe the process of exponential smoothing, let Y be the observed value of the series at
time t, and St is the smoothened value at time t. The smoothing scheme begins by setting
smoothened value equal to observed value for the first period (t=l) : S 1=Y1 and for any
succeeding time period t, the smoothened value St is found with help of the equation:
St = wYt + (l-w)St
 This is the basic equation of exponential smoothing. The weight ‘w’ is also called smoothing
constant. In the exponential smoothing scheme, the contribution of remote values to St
becomes less at each successive time period. However, the rate at which this contribution
declines depends on the value of w. If value of w is near 0 the impact of remote values
dampens slowly, while if w is near 1 it dampens out quickly. Though the rigorous
mathematical technique of selecting the best value of ‘w’ is beyond the scope of the lesson,
rule-of-the-thumb may be prescribed for its selection:
i) When the magnitude of the random variations is large, give a lower value to w so as
to average out the effects of the random variation quickly;
ii) When the magnitude of the random variation is moderate, a large value is assigned
to die smoothing constant w.
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2. Moving Average Method:

 Moving Average: forecasts on the basis of demand values during the recent past.
n
Dn= D
i 1
i ; where Di = demand in the ith period, n= number of periods in the
n moving average
 Weighted Moving Average: forecast the future value of sales on the basis of weights
given to the most recent observations. The formula for computing weighted moving
average is given as:
n
Dn=
w D
i 1
i i
where Di= demand in the ith period, wi= weight for the ith period,
n= number of periods in the moving average
************************************************************
TECHNICAL ANALYSIS
MEANING:
Technical analysis is concerned with the detailed study of various requirements of the project. It is
an in-depth study of the following aspects of the project;
1) Materials inputs & utilities
2) Manufacturing process or technology
3) Location and site
4) Project engineering
5) Manpower planning
Technical analysis tries to answer following two questions:
 Is the project feasible? (i.e. whether all inputs are available)
 Is the formulation of the project optimum? (i.e. whether inputs are of best quality)
DETAILED TECHNICAL ANALYSIS

Technical analysis is concerned with analysing in detail following requirements of the project;
1) MATERIALS INPUTS AND UTILITY:
 Material inputs means raw material required for the project.
 An important part of technical analysis is knowing details about the raw material and
utilities that is required in the project.
 The properties, qualities and supply of raw material and utilities must be clearly defined.
 It is necessary to know about the raw materials and utilities so that there may not be any
problem in the supply of it in future.
 Materials inputs and utilities may be classified in the following categories:
b. Raw material
c. Utilities.
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1. Raw Material
Raw material processed on semi processed may be classified into 4 types:
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a) Agricultural products.
b) Mineral products.
c) Forest products.
d) Marine products.
The entrepreneur who wants to start the project must study the above types of raw materials in
detail before starting the project. Let us try to study these raw materials in detail as below;
i. Agricultural products:
 Certain projects require agriculture products as their raw material. For example, BALAJI
WAFERS require Potatoes as their raw material.
 Hence such types of companies must try to analyse the agricultural raw material in detail.
 In studying the details about the agricultural products, the quality of it must be first
examined.
 Then an analysis must be made about the quantity available (currently and future)
 Following questions must be asked while analysing the agricultural products for the
project
What is the present production level of the agricultural product required for the project?
What is the present area under cultivation? (Means area in which the product is grown)
What is the yield per area? (Yield means production)
What shall be the increase in the area of cultivation in future?
What shall be the increase in yield per area in future?
ii.Mineral products:
 Certain companies require mineral products as their raw material. For example, TATA
STEEL Company requires IRON ORE as their raw material.
 Hence such types of companies must try to analyse the agricultural raw material in detail.
 In studying the details about the mineral raw materials, information is required on the
quantity of mineral deposit available in the soil
 Information is also required about the qualities of such minerals.
 The study should also provide details about the location, size and depth of deposits of
minerals.
 In addition information is also required about the impurities in such types of minerals.
 Physical, chemical and other properties of minerals must also be analysed.
iii.Forest products:
 Certain companies require forest products as their raw material. For example, furniture
manufacturing companies require wood as their raw material.
 Wood, Rubber etc. are some of the forest products which are required by the companies as
raw materials.
 Hence such types of companies must try to analyse the forest products in detail.
 In studying the details about the forest product, Secondary source of data is often required
from government sources.
 Information is also required about the availability of such types of products in different
parts of India.
 Future availability and governmental controls regarding forest products must be critically
analysed before starting the product
iv.Marine products:
 Certain companies require marine products as their raw material. For example, GEMS and
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JEWELLERY types of companies require oysters as their raw material.

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 Fish, oysters etc. are some of the marine products which are required by the companies as
raw materials.
 Hence such types of companies must try to analyse the marine products in detail.
 In studying the details about the marine product, secondary source of data is often required
from government sources.
 Information is also required about the availability of such types of products in different
parts of sea / ocean.
 Future availability, pollution in sea, cost of collection of such marine products etc.
information is required before starting the project
 Some companies require fish and other sea animals for producing medicines.
B. Utilities:
 Companies also require utilities for their project.
 Utilities required for the project are power, water, steam, fuel etc.
 Since the successful operation of a project depends on proper availability of utilities.
 In analysing the utilities required for the project, following questions must be answered;
What quantities are required in the project?
What would be future availability in case of shortage of utilities?
What is the source of supply?
What measures may be taken to increase supplies if it is required in more quantity in
future?
2) MANUFACTURING PROCESS AND TECHNOLOGY:

A product can be manufactured through alternative technologies available, for example;
a. Steel can be produced by - Open hearth process OR - Bessemer process
b. Cement may be manufactured by wet or dry process.
Factors affecting choice of technology: The choice of technology is influenced by various

factors as discussed below;
a) Plant capacity: To meet given capacity requirement only a certain technology may be possible.
Every technology has its potential in producing the given amount of products. Hence before
making a final choice of technology, it is very important to decide plant capacity.
b) Inputs: The choice of technology depends on the principle inputs available for the project, for
example the quality of limestone determines whether the wet or dry process should be used for
a cement plant. There it may be emphases that the technology based on domestic inputs
because of uncertainties in imports.
c) Production cost: Every technology involves its own cost. It includes cost of acquisition and its
maintenance. The effect on an alternative technology on the production cost over a period of
time should be carefully assessed.
d) Used by other units: The technology adopted must be proven successful by the other units
preferably in India. The successful implementation of technology by other units is an important
pre-requisite for adopting or making a final choice of technology.
e) Latest development: The technology adopted must be based on latest development in order to
avoid obsolete technology in the near future.
f) Ease of absorption: The ease with which a particular technology can be absorbed can influence
the choice of technologies. We may not get trained personnel to handle those technologies.
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Acquiring technology: Technology can be acquired in following three ways;

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 Technology licensing: A popular method of acquiring technology is license holding. It is said

that financial participation of the technology supplier may strengthen his motivation to
transfer the improvements immediately.
 Buying: Direct purchasing the technology from the technology supplier
 Joint venture: This method involves the supplier of the technology as a joint venture partner
with the buyer of the technology.
Appropriateness of technology - Appropriate technology refers to those methods of production

which are suitable to local economic, social, cultural conditions. The technology should be
evaluated in terms of following questions;
 Whether the technology utilises local raw materials?
 Whether the technology utilises local man power?
 Whether the goods and services produced satisfy the basic needs?
 Whether the technology protects ecological balance?
 Whether the technology is harmonious (matching) with social and cultural conditions?
3) LOCATION AND SITE:

The factors affecting the selection of location and site can be divided into following categories;
a) Primary factors:
i. Supply of raw materials - It is necessary to consider the adequate supply of raw material and
the nature of raw materials. If the supply of raw materials is not regular, it may lead to frequent
stoppage and breakages in production. The time and the cost of transporting raw material are
also important. Therefore, industrial units are located near sources of raw materials.
ii. Nearness to market - Nearness to market is important from the point of view of his control
over the market. Nearness to market is important for supplying goods to the customers in a
minimum period of time. Nearness to market reduces the cost of transporting finished goods to
market. Nearness to market is an important factor in the case of industries producing light,
delicate, and perishable goods .e.g. glass, cosmetics, food products.
iii.Transport facilities - Speedy transport facilities are needed for the regular and timely supply of
raw materials at low cost and for transporting finished products on time to the market. A
producer has to choose a speedy and cheap means of transport after making a comparison of
transport e.g. roads, railways, water ways etc.
iv. Supply of labour - The supply of labour at low-cost is important. If the supply of labourers is
not regular, man-hours, and machines hours are lost forever. Producer’s needed to of labourers
by reducing absenteeism and strikes due to unsatisfactory working conditions.
v. Power - Power is necessary for the process of production and for transporting finished goods
and raw materials. Power may be diesel, atomic energy. Power storages lead to be tremendous
losses due to the stoppage of machinery. Therefore, industries must have a sufficient and regular
supply of power. Continuity in production is to be maintained and if industries are to be operate
all the capacity.
vi. Supply of capital - Industries requires capital for initial promotion and expansion. Therefore,
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a capital market must be developed in industrial centres. Large scale production mechanization
and big industries require large amounts of equity capital and debenture capital for a long
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period. It is therefore necessary that development banks or (like the U.T.I., I.F.C., etc.) are
developed.
b) Secondary factors
i. Natural factors - Land, water, climate, sources of raw materials and agricultural climate are
some natural factors which are important for some industries like cotton, textile, and sugar and
jute. These industries depend on a good climate and source of natural raw materials.
ii. Political factors - The government’s policy of licensing and encouraging the development of
industries in undeveloped regions determines the location of industries such a policy may cause
the dispersal of industries. The location of defense industries depends on the political policy of
the government.
iii. Government subsidies and facilities - The government may encourage the dispersal of
industries in undeveloped areas by making capital, land, water and power available at subsidies
rates. By giving about the development of industries in backward areas and this result in the
regional balancing of industries.
iv. Initial start and goodwill - Some industries get located at a place because some industrialist
the industry at that place at an early stage e.g. Jamshedpur (tats) was developed into an
industrial city the iron and steel industry received its initial start there. The motor car industries
were at a place where MR.FORD started his workshop. Once one industry is started, other
industries also developed at that place.
v. Miscellaneous factors - The following factor also affects the location of the industries unit.
 Sufficient water supply, if water is consumed in large quantities in the production processes.
 Disposal of waters.
 Strategic factors like dangers of air attacks.
 Availability of fire fighting’s facilities.
 Availability of recreational, medical and educational facilities.
4) PROJECT ENGINEERING:
Project engineering consists of -
a) Building structures and civil works
b) Project charts layouts
a) Building structures and civil works

Structures and civil works may be divided in three categories;
i. Site preparation and development - Site preparation and development covers levelling of site,
demolition and removed of existing structures, relocation of existing pipelines, cables, roads,
power lines etc. Connection from the utilities to the site like electric power, water,
communication etc.
ii. Structures and civil works - Building structures may be divided in to
 Factory or processed buildings.
 Ancillary buildings required for stores, ware houses, utilities centres, maintenance, services
etc.
 Administrative buildings, staff welfare building, canteens, medical services centres.
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 Residential buildings
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iii. Outdoor works - Outdoor works covers

– Treatment of wastages influent

– Transportation and traffic arrangement (roads, railways, tracks, parking areas, shades,
garages etc.)
– Outdoor lighting.
– Endorser like boundary wall, fancy gates, doors, security post etc.
b) Project charts and layouts

Once the details are available on the major aspect of the projects like market size, raw material,
plant capacity, production technology, machineries and equipments building and civil works etc.,
project charts and layouts are prepared.
i. Material flow diagram - These show the flows of materials wastages. Along with the
material flow diagram, a quantity flow diagram showing the quantities of flow may be
prepared.
ii. Production line diagram - This diagram will show all the stages of production and their
progress.
iii. Transport layout - This shows the distances and means of transport outside the
production line.
iv. Communication layout - This shows how the various part of the projects wail be
connected with telephone, telex, intercom, internet etc.
v. Organization layout - This shows the organization structure of the project along with
information on personnel required for various departments.
vi. Utility, consumption layout - This shows the principle consumption points of utilities
(power, water, gas, compressed air etc.)And their required quantities and qualities.
vii. Plant layout - The plant layout is concerned with the physical layout of the entire project.
The important consideration in preparing plant layout is:-
 Smooth flow of goods from one stage to another.
 Proper utilization of space.
 Scope of expansion.
 Minimization of cost.
 Safety of personnel.
5) MANPOWER PLANNING
 For a better future development, a company must always plan its human resource properly.
Hence before a project is set-up, manpower must be planned properly. Manpower planning
includes planning for skilled and unskilled workers.
 There are many factors which affect manpower planning. These factors can be divided into
macro and micro factors;
A. MACRO FACTORS:
All those factors which are not under the control of a single company are known as macro factors.
These factors include the following;
Demographic environment
Social environment
Cultural environment
Technological environment
Economic environment etc.
1. Demographic environment: Demographic environment includes factors like - age, - income, -
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occupation, - family size, - gender, - education etc. During manpower planning the above factors
are very important to be considered. For example, India has more than 50% of population in the
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age group of less than 24 years. Hence, during manpower planning, if a company requires young
people, India offers an advantage because young population in India is much higher than other
countries. Similarly, gender is also an important factor while planning for manpower. Education is
another important factor while deciding for manpower.
2. Social environment: Every country has its own social environment. Social environment
includes the norms of the people of a particular society. For example Indian social environment is
very different from American society. We prefer to stay more with the family and American
people are more independent in their social behaviour.
3. Cultural environment: Culture means beliefs, values, principles, customs, and traditions of a
particular society. While planning for manpower, it is important to understand the culture of the
people. For example, in Fiji country, people meet their families three times in a day. Hence every
company has to give 3 recesses during the day time. This will allow people to meet their families
3 times a day. Hence culture plays an important role while planning for manpower
4. Technological environment: Technological environment also affects manpower planning. If a
country is technically advanced, then a company will require less number of workers. If a country
is less technically advanced, then it will have to employ more people in the organization.
5. Economic environment: manpower planning is done according to the economic environment
of a country. If economic environment is in recession, then less manpower must be planned and
during the times of prosperity, more manpower can be planned.
B. MICRO FACTORS:
Micro factors are those factors which are more under the control of a company. Some of the
important micro factors are;
- Company’s financial resources, - Plant capacity, - Training facilities, - Management philosophy,
- Type of company etc.
1. Company’s financial resources: While doing manpower planning, it is very important to
consider the financial resources available with the company. If a company is not very strong
financially, then it cannot plan for more manpower. Similarly, if a company is financially strong,
then it can plan more manpower and also quality manpower.
2. Plant capacity: Manpower planning also depends on the plant capacity of the firm. If the
capacity of the plant is more, then more number of manpower is required and if the plant capacity
is not high, then less manpower will be required.
3. Training facilities: If a company has its own training facilities, then it can recruit fresh people
in its organization. Company can train them afterwards. But if a company does not have proper
training facilities, then it must recruit trained staff for its organization.
4. Management philosophy: In some organizations, management philosophy is to recruit enough
manpower according the level of work in the company. Whereas in some other organizations,
management philosophy is to always recruit less people and give them more burden of work.
5. Type of Company: Manpower planning depends on the type of company. If the company is
labour intensive, then it will have to plan more labour for its firm. If the company is capital
intensive, then it will have to plan less labour and skilled labour for its firm.
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SCOUTING FOR PROJECT IDEAS / SOURCES OF GOOD

PROJECT IDEAS
Project identification stage of Project management involves two things;
1. Sources of project ideas
2. Preliminary screening of project ideas
A. SOURCES OF PROJECT/ BUSINESS IDEAS

It is the first task of an entrepreneur to find out suitable business which is promising. Therefore,
he has to first search for a good business idea. There are many sources from where good ideas can
come. Some of them are;
1. Analysis the performance of existing industries:
 A study of existing industries regarding their profitability and capacity utilisation is very
helpful.
 The analysis of profitability and break-even level of various industries gives us an idea of
some promising investment opportunities. Opportunities must be profitable and relatively
risk free.
 An examination of capacity utilisation of various industries provides information about the
potential for further investment.
2. Examine the inputs and outputs of industries:
 An analysis of the inputs (raw materials) required for various industries may also give us
different project ideas.
 Opportunities exist when;
o Raw materials are presently being purchased from different sources time lag and
transportation costs and
o Several firms produce internally some components/parts which can be supplied at a
lower cost by a single manufacturer who can enjoy economies of scale.
 A study of the output (finished goods) of existing industries may also show us
opportunities for further processing of such products. This can also be a new idea for the
project.
3. Examine imports and exports:
An analysis of import statistics for a period of last five to seven years is helpful in understanding
the trend of imports of various goods. If an entrepreneur can produce the same products in his
own country then that is also a good project idea. Such idea can
- improve the balances of payment situation
- provide market for supporting industries and services
- provide employment
Similarly an examination of export data is also useful in knowing about the exports possibilities of
various products.
4. Government guidelines:
The government plays a very important role in our economy. Government publishes many reports
which tell us about various project opportunities in different types of industries and products.
5. Suggestions of financial institutions:
In order to promote development of industries in their respective states, state financial
38
corporations (SFC), state industrial development corporations etc. conduct studies, prepare reports
and offer suggestions to entrepreneur. These suggestions can also give good ideas for project.
Page

6. Investigate Local materials and resources: A search for project ideas may begin with an
investigation into local resources and skills. This can also give good project ideas.
7. Analysing economic and social trends: A study of economic and social trends is helpful in
getting good project ideas. Changing economic conditions provide new business opportunities.
People nowadays have less time. Hence the demand for time saving products like ready-made
food items, microwave ovens etc. has been increasing. Such change in society creates demands for
different types of products and services.
8. Check the possibility of reviving sick units: Industrial sickness is at very high level in the
country. There are more than 20,000 units which are now sick. These units are either closed or
about to be closed. A large proportion of sick units can be revived once again if proper care is
taken. Buying such types of sick units could also prove to be good project ideas.
9. Identify unfulfilled psychological needs of society: In order to get some project ideas, the
entrepreneur must also try to study and identify if there is any psychological need of the society
which is still not fulfilled. For example, people have a need for fuel saving bikes. So, there is an
opportunity in such types of products.
10. Visit to trade fairs: Attending the National and International trade fairs provides an excellent
opportunity to know about new products and new development.
B. PRELIMINARY SCREENING OF PROJECT IDEAS

Business opportunity may be defined as an attractive project idea which an entrepreneur accepts
for his investment decision. A good business decision has following two characteristics;
a. Good market.
b. Attractive return on investment.
Meaning: The entrepreneurs have to prepare a list of project ideas from various sources. All these
ideas must be evaluated on the basis of certain criteria in order to find out few good ideas. This
evaluation of project ideas is called preliminary screening of project ideas. Preliminary screening
is used to reject some project ideas which are not promising. The criteria used for preliminary
screening are;
1. Compatible with the promoter – the idea must be compatible (matching) with the interest,
personality and resources of the entrepreneur. Good project idea should have following
characteristics;
1. It should match with the personality of entrepreneur i.e. his ability and experience.
2. It should be accessible to the entrepreneur.
3. It has future of fast growth and high profit.
2. Consistent with the governmental priority – the project idea must be matching with the
national goals and government priorities. Following questions must be answered;
1. Is the project matching with national goals and priorities?
2. Are there any environmental hazards of the project?
3. Can the foreign exchange requirement of project be easily obtained?
4. Will there be any difficulty in obtaining license for project?
3. Availability of inputs – the resources and inputs required for the project must be easily
obtained. To analyse this, the following questions should be answered;
1. Is the capital requirement of project manageable?
39
2. Can the technical knowledge required for the project be obtained?

3. Is the raw material requirement for the project available domestically at reasonable
Page
costs? If the raw material is to be imported, will there be any problem?

4. Is the power supply for the project reasonably available from various sources?
It should be noted that in India business traditionally faces some major problems like;
b. Shortages of certain inputs like power, foreign exchange and imported raw materials.
c. Fluctuating supply of agricultural raw material such as cotton, jute and oil seeds.
4. Adequate market size - the size of present market must offer enough sales volume for a
profitable return on investment. For this, the following factors have to be examined;
1. Total present domestic market
2. Competitors and their market share
3. Export market
4. Future increase in their consumption level
5. Patent protection
6. Selling and distribution pattern
5. Reasonable cost – the cost structure of the proposed project must have acceptable profit level
with the competitive price. The following structure of cost should be taken into consideration;
1. Cost of labour
2. Cost of material
3. Overhead cost
4. General administrative cost & 5. Service cost etc.
6. Risk level - the selection of the project idea is dependent on the risk bearing capacity of it.
Following factors must be analysed to find out the risk of the project?
1. Will the project be able to bear the change of business cycle?
2. Will the project be able to bear fast changes in technology?
3. What would be the level of competition from imported products?
4. What would be the level of competition from substitute products?
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FACETS OF PROJECT ANALYSIS
The important facets of project analysis are as follows;
MARKET ANALYSIS:
Market analysis is associated primarily with two questions:
o What would be the collective demand of the planned product / service in future?
o What would be the market share of the project under evaluation?
To answer the above questions, the market analyst needs a broad variety of information and
suitable forecasting methods. The kinds of data required are:
o Consumption trends in the past and the present expenditure level
o Past and present supply situation
o Production potential and constraints
o Imports and exports
o Formation of competition
o Cost structure
o Flexibility of demand
o Consumer manners and conduct, intentions, motivations, attitudes, preference, and needs.
o Allocation channels and marketing guidelines in use
o Administrative, technical, and legal constrictions.

TECHNICAL ANALYSIS:
Examination of the technical and engineering characteristics of a project needs to be done
repeatedly when a project is made. Technical analysis seek out to decide whether the
fundamentals for the successful commissioning of the project has been considered and reasonably
good options have been made with respect to location, size, process etc. The important questions
raised in technical analysis are the following
o Whether preliminary tests and studies have been done?
o Whether the availability of raw materials, power, and other inputs has been recognized?
o Whether the production method opted is suitable?
o Whether the equipment and machines chosen are suitable?
o Whether supplementary equipments and auxiliary engineering works have been given for?
o Whether provision has been made for handling of effluents?
o Whether the planned layout of the site, building, and plant is sound?
o Whether work schedules have been reasonably drawn up?
o Whether the technology planned to be employed is suitable from the social plant of view?
FINANCIAL ANALYSIS:
Financial analysis tries to ascertain whether the planned project will be financially feasible in the
sense of being able to meet the saddle of servicing debt and whether the planned project will
convince the return expectations of those who provide the capital. The feature that have to be
looked into while conditioning financial appraisal are the following:
o Investment pay out and cost of o Cash flow of the project
project o Investment worthwhile ness judged in
o Means of financing terms of a variety of standards of
o Cost of capital merit
o Projected profitability o Projected financial position
o Break-even point o Level of risk
ECONOMIC ANALYSIS:
Economic analysis is also referred to as social cost benefit analysis and is concerned with
evaluating a project from the larger social point of view. In such a judgement the focus is on the
social costs and benefits of a project which may usually be different from its economic costs and
benefits. The questions sought to be answered in social benefit analysis are the following
o What are the direct economic benefits and costs of the project measured in terms of
efficiency prices and not in terms of market prices?
o What would be the impact of the project on the allocation of income in the society?
o What would be the outcome of the project on the level of savings and investment in the
society?
o What would be the involvement of the project towards the achievement of certain merit
wants like self-sufficiency, employment, and social order?
ECOLOGICAL ANALYSIS
In recent years, environmental concerns have assumed a great deal of importance – and rightly so.
Ecological analysis should be done particularly for major projects which have significant
ecological inference like plants and irrigation schemes, and environmental – polluting industries
like bulk drugs, chemicals and leather processing. The key questions raised in ecological analysis
are the following
o What is the likely harm caused by the project to the environment?
o What is the cost of reinstatement measures needed to make sure that the damage to the
environment is contained within acceptable limits?

NATURE OR NURTURE PLAY A KEY ROLE IN EDP / ARE

ENTREPRENEURS BORN OR MADE?
An entrepreneur is a person or an individual who creates a business which could either be a big or
a small business venture. He or she is an innovator with great business plans, new ideas, and
services. This helps in the development of a countries economy and also providing employment
opportunities. The three most important resources that an entrepreneur requires is capital, land,
and labour. Without these, he or she will not be able to achieve their dream venture.
An entrepreneur has the ability and skills which can either lead him to the path of success where
he can rise to fame. They then look for further growth opportunities. It can also lead to a failure
where he will have to bare financial risks and also may become less popular in the market. Having
said this, the important and an age-old question that arises is – Are entrepreneur’s born or made?
Are Entrepreneurs Born?

To some extent, there is truth in this statement that an entrepreneur is born. There are two types of
entrepreneurs born. First is the one who is born into a family which already owns a business. The
second type of entrepreneur is the one who has no resources and no knowledge when it comes to
investment but he or she is full of ideas.
 It is not necessary that an entrepreneur’s son or daughter has to become an entrepreneur.
However, it becomes easy for an individual who is born into a family who already runs a
business venture to get into the family business. It is because entrepreneurship runs in the
family.
 Entrepreneurs requires resources like capital, land, and labour. It is usually not that difficult
to achieve these since these resources are already available in the family business.
 In such situations the drawback is that the entrepreneur born in a business family shy’s away
from starting their own business. He or she focuses only on running the family business and
to carry forward the name attached to the business for generations to come.
Are Entrepreneurs Made?

There are many such individuals who shape themselves to own a business. Who dares to dream
big and this is because they have a very strong burning desire to be self-employed. Such
individuals also go to any extent to take up risks.
 Yes, Entrepreneurs are made. These are individuals who are positive and with very strong
self-confidence. They want to be admired as a self-made man or woman.
 Such individuals do not grow overnight, they grow with time. It could be a dream or a vision
that they have always wanted to achieve since their childhood.
 Over the years they have successfully observed the surrounding environment. Maneuvered
through many obstacles and experiences in life which has helped them to become an
entrepreneur.
 It is their passion to create something new which makes them an entrepreneur. It can also be
said that an entrepreneur is created through education. With the knowledge that he or she
receives through lessons which help the individual to be exposed to new ideas.
 Education helps individuals discover the skills and the natural talents that they already
possess. It helps them to successfully use those skills in becoming an entrepreneur.
 However, there is one thing that education cannot teach and that is to take risks. A self-made
entrepreneur has the ability to bear risks and take up new challenges.
So we can conclude by saying that yes an entrepreneur is born by continuing the family business
that he or she is born in. At the same time, we can conclude that an entrepreneur is also made
through education and the natural talents and skills that he or she already possesses. However,
there is a big difference in just being an entrepreneur and being a successful entrepreneur.

ENTREPRENEURSHIP DEVELOPMENT PROGRAMMES

(EDP)
MEANING:
 EDP is a programme meant to develop entrepreneurial abilities among the people.
 In other words, it refers to inculcation, development, and polishing of entrepreneurial skills
into a person needed to establish and successfully run his / her enterprise.
 Thus, the concept of entrepreneurship development programme involves equipping a
person with the required skills and knowledge needed for starting and running the
enterprise.
OBJECTIVES OF ENTREPRENEURIAL DEVELOPMENT PROGRAMMES:
1. To Promote First Generation Businessman and Industrialists
 We know that the son of businessman has the tendency to become a businessman as they
are hearing and looking the intricacies of business, since birth, the habit of bearing loss is
in their blood and the nature for making investments in developed, by way of inheritance.
 But for persons of such families where the business does not exist, the environment of
business is lacking, who does not know anything about business, then entrepreneurial
development programmes provide inspiration to enter into trade, industry, and business.
2. To Create Awareness about Availability of the Resources
 Various and special types of resources, like raw material, labour, techniques, and
technologies are available in all parts of our own country and in foreign countries. But,
due to lack of proper knowledge about them, these remain underutilized or even utilized.
 Hence, entrepreneurial development programmes (EDP) aim at providing information to
people about these resources, so that their proper utilization is possible. Intrapreneurship:
Meaning, Concept, Features, Differences.
3. To Promote Small, Cottage & Local Industries
The aim of the entrepreneurial development programme is to provide inspiration to people for
setting up small, local Industries, by utilization of resources available in the nearby areas and
areas of their links. Local resources may be channelized in industrial development.
4. To Encourage Self Employment Tendencies
Persons have two sources of livelihood, either by service or my own business, which are known as
wage employment and self-employment, respectively.
5. To Provide Knowledge about Government Plans and Programmes
The government has introduced various schemes for self-employment. But, they become
significant only when people have sufficient knowledge about them. Hence, entrepreneurial
development programmes (EDP) aimed at dissemination of detailed knowledge and information
about self-employment, like how to make use of the government schemes, where from and how to
obtain the required reliable information, which department will provide information and
assistance about finances, techniques, and technologies, etc.
6. To Make a Successful Entrepreneur
The success of an entrepreneur depends upon certain qualities. Hence, entrepreneurial
development programmes aim at developing all such qualities in them, which may make them a
successful entrepreneur. These qualities include self-confidence, farsightedness, maturity,

dynamic approach, dedication, leadership qualities, qualities for innovations, decision making
power, etc.
7. To Provide Training to Operate Business
Entrepreneurial development programmes also aim to provide training for successful operation for
the business. In this programmes, the entrepreneurs are trained, how to do the business, how to
make business dealings with various parties, how to develop cordial relations, how to establish the
business balance between various components of the business and how to combat the difficulties
arising during the course of business, etc.
8. To Create Awareness about Marketing
In the present age, it is easy to produce goods, but the selling of goods is most difficult.
Entrepreneurial development programme (EDP) provides information about the markets, to
facilitate the sale of goods. The techniques of sustaining from competitions are also made known
and the abilities to take suitable decisions in different situations are also developed.
9. To Develop Entrepreneurs in all Areas of the Country
Normally, it is observed that people establish business and industries and those places, where
there are already well established. As a result, their localization and development take place, but
other places or areas remain deprived of the industries and business. In such situations,
entrepreneurial development programmes aim to develop in all parts of the country.
10. To Remove Doubts of Entrepreneurs, Give Solutions and Suggest Remedies of Problems
Whenever a person establishes his own business and industry, he feels many doubts, various
problems also arise and he is visualizing several shortcomings. The entrepreneurial
development programmes aim at removing the doubts and suggesting remedial measures for the
problems and shortcomings.
NEED FOR EDP:

That, entrepreneurs possess certain competencies or traits. These competencies or traits are the
underlying characteristics of the entrepreneurs which result in superior performance and which
distinguish successful entrepreneurs from the unsuccessful ones.
Then, the important question arises is: where do these traits come from? Or, whether these traits
are in born in the entrepreneurs or can be induced and developed? In other words, whether the
entrepreneurs are born or made? Behavioural scientists have tried to seek answers to these
questions.
A well-known behavioural scientist David C. McClelland (1961) at Harvard University made an
interesting investigation-cum-experiment into why certain societies displayed great creative
powers at particular periods of their history? What was the cause of these creative bursts of
energy? He found that ‘the need for achievement (n’ ach factor)’ was the answer to this question.
It was the need for achievement that motivates people to work hard. According to him, money-
making was incidental. It was only a measure of achievement, not its motivation.
In order to answer the next question whether this need for achievement could be induced, he
conducted a five-year experimental study in Kakinada, i.e. one of the prosperous districts of
Andhra Pradesh in India in collaboration with Small Industries Extension and Training Institute
(SIET), Hyderabad.
This experiment is popularly known as ‘Kakinada Experiment’. Under this experiment, young
persons were selected and put through a three-month training programme and motivated to see
fresh goals.

One of the significant conclusions of the experiment was that the traditional beliefs did not seem
to inhibit an entrepreneur and that the suitable training can provide the necessary motivation to the
entrepreneurs (McClelland & Winter 1969). The achievement motivation had a positive impact on
the performance of entrepreneurs.
In fact, the ‘Kakinada Experiment’ could be treated as a precursor to the present day EDP inputs
on behavioural aspects. In a sense, ‘Kakinada Experiment’ is considered as the seed for the
Entrepreneurship Development Programmes (EDPs) in India.
The fact remains that it was the ‘Kakinada Experiment’ that made people appreciate the need for
and importance of the entrepreneurial training, now popularly known as ‘EDPs’, to induce
motivation and competence among the young prospective entrepreneurs.
Based on this, it was the Gujarat Industrial Investment Corporation (GIIC) which, for the first
time, started a three-month training programmes on entrepreneurship development. Impressed by
the results of GIIC’s this training programme, the Government of India embarked, in 1971, on a
massive programme on entrepreneurship development. Since then, there is no looking back in this
front. By now, there are some 686 all-India and State level institutions engaged in conducting
EDPs in hundreds imparting training to the candidates in thousands.
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SHORT NOTES
PROCEDURE TO SET UP A NEW UNIT / MSME

REGISTRATION IN INDIA
Registration Process:
1. To do the registration the small and medium scale industry owner has to fill a single form
which he can do online as well as offline.
2. If a person wants to do registration for more than one industry then also he/she can do
individual registration.
3. To do the registration he/she has to fill a single form which is available at the website
which is listed below.
4. The document required for the registration is Personal Aadhar number, Industry name,
Address, bank account details and some common information.
5. In this, the person can provide self-certified certificates.
6. There are no registration fees required for this process.
7. Once the detail-filled and upload you would be getting the registration number.
Benefits of MSME Registration

1. Due to the MSME registration, the bank loans become cheaper as the interest rate is very
low around ~ 1 to 1.5%. Much lower than interest on regular loans.
2. There are various tax rebates offered to MSME.
3. It also allowed credit for minimum alternate tax (MAT) to be carried forward for up to 15
years instead of 10 years
4. There are many government tenders which are only open to the MSME Industries.
5. They get easy access to credit.
6. Once registered the cost getting a patent done, or the cost of setting up the industry reduces
as many rebates and concessions are available.
7. Business registered under MSME are given higher preference for government license and
certification.
8. There is a One Time Settlement Fee for non-paid amounts of MSME.
Documents Required for MSME Registration

The unit has to submit documents like business address proof, copies of purchase and sale bill,
and licenses from regulatory bodies.
Business Address Proof: If the premise is self-owned– Allotment letter, possession letter, lease
deed or property tax receipt. If there is a municipal license in the business name or in the name of
the proprietor, partner or director of the business, no other possession document is required to be
submitted. If the premise is rented– Rent receipt and a no objection certificate from the landlord is
required. Also, any utility bill or document evidencing the landlord’s ownership is to be
submitted.

Copies of Sale Bill and Purchase Bill: Business is required to submit a copy of sale bill related
to each end product that it will supply. Also, for each raw material that it will purchase, a purchase
bill has to be submitted.
Partnership Deed/ MoA and AoA: If the business is a partnership firm, it has to submit its
partnership deed. If the partnership firm is registered, it has to submit registration certificate also.
In case of a company, a copy of Memorandum of Association and Articles of Association, and
certificate of incorporation has to be submitted. With it, a copy of the resolution passed in general
meeting, and the copy of board resolution authorizing a director to sign the MSME application is
also to be submitted.
Copy of Licenses and Bills of Machinery Purchased: In few cases, the applicant has to submit a
copy of industrial license which is to be obtained by giving an application to Govt. of India.
Further, all bills and receipts related to purchase and installation of plant and machinery have to
be kept safe and required to be submitted on demand.
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VENTURE CAPITAL
Meaning:
 The term venture capital comprises of two words, namely, ‘venture’ and ‘capital’. The
term venture literally means a course or proceeding, the outcome of which is uncertain and
there is also a risk of ‘loss’. On the other hand, the term capital refers to the resources to
start the enterprise.
 According to narrow sense, the capital which is available for financing the new business
ventures is called venture capital.
 In the broad sense, venture capital is the investment of long-term equity finance where the
venture capitalist earns his returns primarily in the form of capital gain.
 ‘Venture Capital’ is an important source of finance for those small and medium- sized
firms, which have very few avenues for raising funds.
Features of Venture Capital
1) For New Entrant: Venture Capital investment is generally made in new enterprises that use
new technology to produce new products, in expectation of high gains or good returns.
2) Continuous Involvement: Venture capitalists continuously involve themselves with the

client’s investments, either by providing loans or managerial skills or any other support.
3) Mode of Investment: Venture capital is basically an equity financing method, the investment
being made in relatively new companies when it is too early to go to the capital market to raise
funds.
4) Long-term Capital: The basic objective of a venture capitalist is to make a capital gain on
equity investment at the time of exit, and regular return on debt financing. It is a long-term
investment in growth- oriented small/medium firms. It is a long-term capital to enable the
business to grow at a rapid pace, mostly from the start-up stage.
5) Hands-On Approach: Venture capital institution take active part in providing value – added

services such as providing business skills, etc., to investee firms. They do not interfere in the
management of the firms nor do they acquire a majority / controlling interest in the investee firms.
6) High risk- return Ventures: Venture capitalists finance high risk-return ventures. Some of the
ventures yield very high return in order to compensate for the heavy risks related to the ventures.
Venture capitalists usually make hug capital gains at the time of exit.
7) Source of Finance: Venture capitalists usually finance small and medium- sized firms during
the early stages of their development, until they are established and are able to raise finance from
the conventional industrial finance market. Many of these firms are new, high technology-
oriented companies.
8) Liquidity: Liquidity of venture capital investment depends on the success or otherwise of the
new venture or product. Accordingly, there will be higher liquidity where the new ventures are
highly successful.
Dimensions of Venture Capital in India:

Venture capital in India is available in four forms:
1. Equity Participation: The venture capital finances up to 49% of the equity capital and the
ownership remains with the entrepreneur.
2. Conventional Loan: Under this, a lower fixed rate of interest is charged to the unit till its
commercial operation. After normal rate of interest is paid, loan is to be repaid as per the
agreement.
3. Conditional Loan: A conditional loan is repayable in the form of royalty ranging between 2
and 15% after the venture is able to generate sales and no interest is paid on such loans.
4. Income Notes: The income note combines the features of conventional and conditional
loans in a way that the entrepreneur has to pay both interest and royalty on sales at low
rates.
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PROJECT REPORT
Meaning: The project report provides all necessary details of the proposed unit to be established
either from the manufacturing of a product or for a service. It is also used as a tool for anticipating
and solving problem that may arise during the course of running the project a later stage. It is
nothing but a blue print of all those activities that an entrepreneur proposes to work with.
Parties interested in project report: Following are the parties that are originally interested in the
project report;
1. Entrepreneur 2. Banks / Financial Institutions 3. Government
A project report is an important document for obtaining financial assistance from financial
institutions. Therefore the report should provide a complete presentation of all the information
that would be required by financial institution for appraising the project.
SCOPE OF PROJECT REPORT:
The project report includes information on the following aspects

Economic aspect – economic aspect of the project should provide economic justification for the
investment. It should provide the analysis of the market for the product to be manufactured.
Market analysis mainly consist of the following issue

-how big the present market is?
-how much it is likely to grow?
-how much of the future market the proposed project can capture after following
a margin for future entrants?
Technical aspect- the appropriate project should give a detail about the technology needed,
equipments and machinery required and the source of availability.
Production aspect- it should contain the description of the production related aspects selected for
manufacturing and the reason for the selection. The report should also bring out the fact whether
the project should be exported. It should also give the detail of the design of the product
Managerial expect- the report should contain qualification and experience of the person to be put
on management of the job. If the entrepreneur will look at the management, the report must
emphasize as to how he is qualified to manage the project
Financial expect- the report should indicate the total investment required including sources of
finance and the entrepreneurs contribution. It should present a comparison of cost of capital with
return on capital
CONTENTS OF PROJECT REPORT /FEASIBILITY REPORT SETTING:
A project report may be prepared in different ways by different entrepreneurs. There is no

standard pattern for it. However, it must contain all the necessary information necessary to
appraise it and take a financial design by lending institution. The relevant information should be
given under the following heads;
1. general information
2. project description
3. market potential
4. capital cost and source of finance
5. assessment of working capital requirement
6. financial consideration
7. economic and social consideration
1. General information-includes
 name and adders of the entrepreneur
 qualification ,experience and capabilities of the entrepreneur
 profile of the industry to which the project belongs
 constitutional and organizational structure of the enterprise whether sole trade or
partnership if partnership then registered or unregistered
 registration certificate from directors of industries or DIC, whether obtained or to be
obtained
 range of products to be manufactured and their utility
 competitive advantage of the proposed product over its substitutes
2. Project description includes

 Site  Transport and communication
 Raw material  Machinery ,equipment and common
 Infrastructure facilities
 Skilled labour requirement  Manufacturing process/technology
 Consumables/utilities  Balancing of plant and machinery
 Disposal of waste  Research and development
3. Market potential
It is very important that the entrepreneur should state in his project report the potentialities for the
marketing of his product. It is preferable to prepare detailed market survey report providing

information about demand and supply position, competitor position; price expected etc. It is
advisable to obtain few letters from further clients, machinery, raw material, supplier to make the
project report more credible.
4. Capital cost and sources of finance

An estimate of financial expenditure has to be incurred by the unit on various items should be
given in the report. The various components are;
 Land and building cost
 Cost on plant and machinery
 Installation charges
 Other miscellaneous assets like furniture and fixtures ,vehicles, tools etc.
 Preliminary expenses
 Contingency provision against future rise in price or to meet unforeseen expenditure
 Margin or working capital
 Owners contribution towards proposed ventures
 Capital subsidy from state/central government if any
 Loans and deposits proposed to be raised
 Credit limits expected from financial institution
 Finance from friends and relatives
 Adequacy of total fund available to meet the total cost of the project
5. Assessment of working capital requirements

As already stated, while estimating the capital costs margin for working capital has to be taken
into account, since no unit can function without the availability of adequate working capital
finance. The working capital involves the following;
Expenditure to be incurred on raw material stock,
Expense or goods under process,
Cost involved in finished goods stock
6. Financial consideration
The proposed project should earn suitable lively hood only when it is financially sound and the
products that should be taken up for production are profitable. For this purpose profit and loss
statements should be prepared.
7. Economical and social consideration

The socio economic benefits that may accrue should also be stated in the report. The example of
some of these areas is mentioned below;
a) Promotion of employment the member of person proposed to be employees in relation to
the employment situation of that area may be mentioned.
b) import substitution-the extent to which the manner in which the proposed unit would
achieve import substitution and the probable benefits that may be expected can be
mentioned in the report
c) promotion of ancillary –whether the unit would promote ancillary units to meet its sub-
contracting requirements in case this units require sub .-contracting function .it must be
specially given in the report
d) Expert potential –whether the unit has export potential and to that extent its product could
be expected to other countries should be mentioned in the profit
e) utilization of local resources –the possibility off utilizing the local resources which are
presently a waste .should be stated in the report
f) Development of the area –to what extent the unit will bring out an overall development of
the local area should be stated in the report

IMPORTANCE OF PROJECT REPORT:
Project report is an important for setting up any enterprise. It is a business plan that converts a
business idea into a productive unit. It is like a blue print for any constructive activity. Following
points indicate the importance of project report;
1. It is a master plan - for a successful management, effective planning is very much
necessary. A project report serves as a business plan. This plan shows the objectives or
goals of the enterprise and also the details about how these objectives are going to be
achieved at various stages of the enterprise.
2. Gives direction – a project report is like a road map. It describes the direction in which
the enterprise should go and how to reach the goal. Without well-defined goals and
methods (as shown in the report) most organizations find themselves in problems in future.
3. Forecast requirements - a project report enables an entrepreneur to realize in advance
about what he needs for implementing the project. It gives idea of various resources
requirement like raw material, manpower, finance, infrastructure etc. It also shows how to
obtain those resources. Thus, it enables an entrepreneur to foresee his requirement in
advance and help him to take suitable decision accordingly.
4. Shows feasibility - a project report also shows the feasibility of the proposed project and
the profitability of achieving profit. Whether a project is feasible from different angles-
economic, financial, commercial, social etc. can be known while preparing a project
report.
5. Indicates profitability - it gives an indication of future returns and benefits which the
entrepreneur can get from his venture. This profitability indication will help an
entrepreneur to take an important investment decision. Thus, the future profits of the
project can be seen in advance.
6. Helps in decision making - Important decisions have to be made at various stages of
production:
a. How much to produce to achieve breakeven level?
b. How to fix the repayment schedule of loans?
Such important decisions can be taken with the help of project report prepared well in
advance. Project report can also anticipate problems in advance so that suitable decisions
can be taken to solve those problems.
7. Financial assistance - the preparation of a project is very important for those enterprises
which apply for financial assistance from different financial institutions and banks. Banks
make their decision of giving loans based on this project report. Thus, it shows the way
for financial assistance which is the life blood of an enterprise.
8. Survival - the survival of any business depends upon the marketability of its products. The
project report shows in advance about the demand and supply position, competitors’
position in the market, expected price etc. and thus gives an idea about the survival of the
business unit.
There is no doubt that a project report is a very essential document for an entrepreneur.
PROFORMA OF PROJECT REPORT:

(1) Introduction
 Scope
 Products (give specification. Viz. ISS/BSS/ASS)
 Process
 Marketability
 Location
 Sources of finance/repayment schedule.

A.) Land & Building: (Owned/rent or leased)
B.) Machinery and Equipment:
(Give detailed specification/capacity/imported or indigenous). For import machine
allowances (for duty on imported items, dock clearance changes freight and insurance
and local freight)
C.) Testing Equipment:
D.) Other Fixed investments:
a) Packing and forwarding chargers.
b) Electrification and installation charges.
c) Cost of tools/jigs/fixtures.
d) Cost of office equipment.
E.) Total non-recurring Expenditure(A)+(B)+(C)+(D):
F.) Staff and labour:
a) Indirect labour nos. and wages/p.m.
b) Direct labour nos. and wages/p.m.
Total salaries p.m. [(a) + (b)]
G.) Raw Material and consumables:(Per month on single shift basis with specifications)
a) Indigenous.
b) Imported.
Total: Rs:
H.) Other items of expenditure:(Per month on single shift basis)
a) Power and water charges.
b) Advertising and travelling.
c) Transport.
d) Communication to distribution/agents.
I.) Total recurring expenditure:(f)+(g+(h)
J.) Working capital for 3 months recurring exp.:
K.) Total investments required:
a) Non-recurring exp.
b) Working capital for 3 months.
Total: Rs:
L.) Total cost of production:
a) Total recurring on machinery and equipment.
b) Depreciation on machinery and equipment.
c) Depreciation on Building
d) Maintenance charges.
e) Interest on total investment.
f) Welfare for staff.
g) Office stationary and postage, etc.
Total:
M.) Profit and loss accounts:
a) By sale of..... (Qty)of.....@Rs…..(Ex- factory exclusive of applicable of taxes).
b) Cost of Production.
c) Profit (a.)-(b.) approx. Percentage of the total Capital employed.
Total:
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NABARD
NABARD is a development bank established under statutory provisions. Let us briefly go through
important characteristics of this development bank to get a clear understanding of its role and
functions.
Role and Functions of NABARD:

The National Bank for Agriculture And Rural Development is popularly referred to as NABARD.
NABARD is designated as an apex development bank in the country. This national bank was
established in 1982 by a Special Act of the Parliament, with a mandate to uplift rural India by
facilitating credit flow in agriculture, cottage and village industries, handicrafts and small-scale
industries. It is also required to support non-farm sector while promoting other allied economic
activities in rural areas. NABARD functions to promote sustainable rural development for
attaining prosperity of rural areas in India.
It is basically concerned with “matters concerning policy, as well as planning and operations in
the field of credit for agriculture and other economic activities in rural areas in India”. It is worth
noting with reference to NABARD that RBI has sold its own stake to the Government of India.
Therefore, Government of India holds 99% stake in NABARD.
Role of NABARD:
 It is an apex institution which has power to deal with all matters concerning policy,
planning as well as operations in giving credit for agriculture and other economic activities
in the rural areas.
 it is a refinancing agency for those institutions that provide investment and production
credit for promoting the several developmental programs for rural development.
 It is improving the absorptive capacity of the credit delivery system in India, including
monitoring, formulation of rehabilitation schemes, restructuring of credit institutions, and
training of personnel.
 It co-ordinates the rural credit financing activities of all sorts of institutions engaged in
developmental work at the field level while maintaining liaison with Government of India,
and State Governments, and also RBI and other national level institutions that are
concerned with policy formulation.
 It prepares rural credit plans, annually, for all districts in the country.
 It also promotes research in rural banking, and the field of agriculture and rural
development.
Functions of NABARD:
 NABARD gives high priority to projects formed under IRDP.
 It provides refinance for IRDP accounts in order to give highest share for the support for
poverty alleviation programs run by IRDP.
 Other than the activities included under IRDP, it also makes the service area plan, to
provide backward and forward linkages and also infrastructural support.
 NABARD also prepares guidelines for promotion of group activities under its programs
and provides 100% refinance support for them.
 It is making efforts to establish linkages between Self-help Group(SHG) that are organized
by voluntary agencies for poor and needy in rural areas and other official credit agencies.
 It refinances to the complete extent for those projects that are taken under the ‘National
Watershed Development Programme‘ and the ‘National Mission of Wasteland
Development‘.

 It also has a system of District Oriented Monitoring Studies, under which, study is
conducted for a cross section of schemes that are sanctioned in a district to various banks,
to ascertain their performance and to identify the constraints in their implementation. It
also initiates appropriate action to remedy them.
 It also supports Vikas volunteer Vahini programs which offer credit and development
activities to poor farmers.
 It also inspects and supervises the cooperative banks and RRBs to periodically ensure the
development of the rural financing and farmers’ welfare.
 NABARAD also recommends about licensing for RRBs and Cooperative banks to RBI.
 NABARD also provides assistance and support for the training and development of the
staff of various other credit institutions that are engaged in credit distributions.
 It also runs programs for agriculture and rural development.
 It is engaged in regulations of the cooperative banks and the RRB’s, and manages their
talent acquisition through IBPS CWE conducted across the country.
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SIDBI
Need for SIDBI:

The best way of improving rural economy is by creating more employment through dispersal of
various industrial activities so that there will be development of backward areas and at the same
time improvement in the standard of living of the people. The above object could be achieved
easily by the promotion of small scale industry as it contributes nearly 40% of the manufacturing
sector in the country.
In India, small scale industry’s contribution during 1998-99 was INR 5,38,357 crores as against
INR. 4,65,171 crores in 1997-98. The growth of SSI was 8.43 per cent. It has an employment
potentiality of 171.58 lakhs. Hence, it is important to create an apex institution which can provide
finance to small scale industries.
Origin of SIDBI
In order to promote small scale industries in the country, a special Act was passed in Parliament in
April 1990 for starting of Small Industries Development Bank of India. SIDBI is a wholly owned
subsidiary of IDBI. It is providing assistance to all those institutions which are promoting small
scale industries.
Capital of SIDBI
SIDBI has an authorised capital of Rs. 1000 crores which can be increased to Rs. 1000 crores. The
RBI has also allocated INR 10,000 Crores to SIDBI for various venture capital activities and
company start-ups in 2015. The entire operations of IDBI connected with small scale industries
are now handed over to SIDBI.
Objectives of SIDBI
1. To promote marketing of products of small scale sector.
2. To upgrade technology and also undertaking modernization of small scale units.
3. To provide more financial assistance to small scale ancillary and tiny sector.
4. To encourage employment oriented industries.
5. To coordinate all the other institutions involved in the promotion of small scale industries.

Functions of SIDBI
Coordinating and financing the various institutions involved in the development of small
industries are undertaken by SIDBI.
lts functions are
Refinance to SSI:
Refinancing loans and advances provided by commercial banks to small scale industrial units.
Different types of loans are given to small scale industries and as per the recommendations of
Nayak Committee, additional funds have been given to commercial banks for promoting more
borrowings of small scale industries. In fact, there are commercial banks with separate branches
meant exclusively for small scale industries.
Discounting the bills of SSIs:

Apart from discounting the bills of small scale industries, even hurdles arising out of financing
small scale industries are being discounted. The bank credit has gone up to Rs. 2,18,219 crores.
The percentage of bank credit to SSI has gone up to 17.5.
SIDBI offers assistance to exports:

Direct assistance to export oriented units and also to import substituting units in the small scale
sector is given the highest priority. There has been a simplified procedure for the exports of small
scale industries. Products of SSI exporters are displayed in international exhibitions with the help
of SIDBI. Other export related expenditures are borne by SIDBI. Latest packing standards and
training programmes on packing for exports are also financed by SIDBI. Trade delegations and
sales and study teams are sponsored for small scale sector under Marketing Development
Assistance scheme.
Seed capital and also soft loan Assistance:

Seed capital is provided for starting of SSI units. Under this, the initial expenditure in starting the
small scale units are being met by SIDBI. In addition to that, SIDBI, under this scheme,
undertakes the following activities:
 Identification of potential entrepreneurs in the district.
 Providing training facility for these entrepreneurs.
 Linkage with banks for financial assistance
 Follow-up and monitoring the progress
Under soft loan, SIDBI provides long-term loan repayable in a period of 15 to 20 years with a
very low rate of interest.
Non finance services:

Under this scheme, SIDBI undertakes with the help of other institutions marketing survey and the
potentialities of small scale industries in the particular area. Wherever possible, it helps in the
procurement raw materials.
Factoring, Leasing and HP finance:

In factoring services, SIDBI finances 80% of the bills to the seller and after obtaining the
remaining 20% balance, it repays to the seller and for this service it obtains a factoring
commission.
Leasing:
After the increase in the fixed capital limit of Rs. 1 crore to SSI, there has been increasing demand
for leasing equipment. The small scale industries have expanded their activities as lease finance
institutions have enabled them to obtain costly equipment which are otherwise, not possible

within the purview of small scale industries, In fact, this has helped them in modernizing their
industry.
HP finance:
Hire purchase financing has also helped small scale industries in acquiring machinery of a higher
value. In fact, certain machinery are even imported from foreign countries on a deferred payment
basis.
Assistance to other financial institutions:

In every State, State Finance Corporations have been promoted for financing small scale
industries. They are under the control of respective state governments. At the national level, a
separate corporation is promoted for financing small scale industries called National Small Scale
Industries Corporation. This was started in 1995 to promote, aid and ensure faster growth in small
scale industries.
Automatic finance scheme:

Refinance facilities under automatic finance scheme is also provided which was initially for Rs.
50 lakhs. Now with the increase in the capital limit of small scale industries, this finance scheme
has also increased its limit to Rs. 2 crores.
Modernization:
The technology development which has taken place in various industries has also spread to small
scale industries and to meet the requirements of technology upgradation, a separate fund has been
set up by SIDBI, through which it provides Technology upgradation equipment finance.
Venture capital:
Venture capital fund for the promotion of new entrepreneurs has been set up. For this purpose,
IDBI, the holding company of SIDBI provides funds. New ventures in different areas with high
technical know-how is encouraged under the scheme. Though this scheme is in the initial stage,
this will promote more new small scale industries.
Single window scheme:

This scheme was introduced by SIDBI for providing finance to commercial banks which in turn
will give all kinds of assistance to small scale industries. That is, from registration units to
marketing of products will be undertaken under this scheme.
The creation of SIDBI has certainly improved the growth of small scale industries in the country.
Apart from financing, banks have identified the weak areas of small scale industries and have
attempted to improve the same. This will go a long way in not only strengthening SSI units but
also in the creation of employment opportunities in rural areas.
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EXIM BANK
INTRODUCTION:
 Export-Import Bank of India (Exim Bank) was set up by an Act of the Parliament “THE
EXPORT-IMPORT BANK OF INDIA ACT, 1981” for providing financial assistance
(help) to exporters and importers, and for functioning as the main financial institution for
co-ordinating the working of institutions engaged in financing export and import of goods
and services with a view to promoting the country’s international trade.

 Exim Bank has two broad business areas: one, the traditional export finance and two,
financing of export oriented units. Since beginning, Exim Bank has been the main
financial institution in the country for financing project exports and exports on deferred
credit terms.
 Exim Bank provides funded and non-funded facilities for overseas turnkey projects, civil
construction contracts, technical and consultancy service contracts as well as supplies.
OBJECTIVES:
EXIM Bank is Export-Import bank of India. The objectives of EXIM bank are;
- To provide financial assistance to exporters and importers
- It helps the exporters in promoting goods in foreign countries.
- It provides services like overseas investment finance, export credit, agriculture finance etc.
- EXIM bank also provides consultancy services to exporters related to international
business.
- EXIM bank also functions as co-ordinator. It co-ordinates with exporters and government
of India in order to provide better services and policies for the exporter
- Hence EXIM bank is financer, co-ordinator, consultant and promoter of India’s foreign
trade.
FUNCTIONS OF EXIM BANK / POLICIES OF EXIM BANK –

Following are the types of assistance provided by EXIM bank;
A. LOANS TO INDIAN COMPANIES:

1. Deferred Payment finance: Term finance is provided to Indian exporters of eligible
goods and services which enable them to offer deferred credit to overseas buyers. Deferred
credit can also cover Indian consultancy, technology and other services. Commercial
banks participate in this programme directly or under risk syndication arrangements.
2. Pre-shipment credit: finance is available form Exim Bank for companies executing
export contracts involving cycle time exceeding six months. The facility also enables
provision of rupee mobilization expenses for construction/turnkey project exporters.
3. Term loans for export production: Exim Bank provides term loans/deferred payment
guarantees to 100% export. Oriented units, units in free trade zones and computer software
exporters. In collaboration with International Finance Corporation. Exim Bank provides
loans to enable small and medium enterprises upgrade export production capability.
Facilities for deeded exports; Deemed exports are eligible for funded and non- funded
facilities from Exim Bank.
4. Overseas investment finance: Indian companies establishing joint ventures overseas are
provided finance towards their equity contribution in the joint venture.
5. Finance for export marketing: This programme, which is a component of a World Bank
loan, helps exporters implement their export market development plans.
B. LOANS TO FOREIGN GOVERMENTS, COMPANIES AND FINANCIAL

INSTITUTIONS
1. Overseas buyer's credit: Credit is directly offered to foreign entities for import of eligible
goods and related services, on deferred payment.
2. Lines of credit: Besides foreign governments, finance is available to foreign financial
institutions and government agencies to on-lend in the respective country for import of
goods and services from India.

3. Relending facility to banks overseas: Relending facility is extended to banks overseas to
enable them to provide term finance to their clients world-wide for imports from India.
C. LOANS TO COMMERCIAL BANKS IN INDIA EXPORT BILLS REDISCOUNTING:
1. Refinance of export credit: Authorized dealers in foreign exchange can obtain from Exim
Bank 100% refinance of deferred payment loans extended for export of eligible Indian
goods.
2. Guaranteeing of obligations: Exim Bank participates with commercial banks in India in
the issue of guarantees required by Indian companies for the export contracts and for
execution of overseas construction and turnkey projects.
MUDRA BANK
The government will set up the Micro Units Development and Refinance Agency (MUDRA)
Bank through a statutory enactment. It was announced in the Union Budget 2015-16.
Objectives of MUDRA Bank:

The MUDRA Bank will be responsible for regulating and refinancing all Micro-finance
Institutions (MFI) which lend to micro and small business entities that are engaged in
manufacturing, trading and services activities.
 It would also partner with state level and regional level coordinators in order to provide
finance to the Last- Mile-Financer of the small or micro business enterprises.
Functions of MUDRA Bank:

The MUDRA Bank will primarily perform the following functions in quest of its objectives –
1. It will lay down policy guidelines for the micro and small enterprise (SME) financing
businesses.
2. Registration of Micro Finance Institutions (MFI) entities.
3. Regulation of the Micro Finance Institutions (MFI) entities
4. The MUDRA bank will provide accreditation and ratings of the MFI entities
5. It will lay down the ‘responsible financing practices’ to ward off issues of indebtedness
and also ensure proper ‘client protection principles’ and methods of recovery.
6. It will be responsible for development of standardised set of rules to govern last mile
lending to the micro and small enterprises.
7. MUDRA bank will be promoting right technology solutions for the last mile lending.
8. It will also formulate and run a Credit Guarantee scheme to provide guarantees to the
loans which are being extended to the Small and micro enterprises.
9. The MUDRA bank will create a good architecture for the Last Mile Credit Delivery to
micro business units under the scheme of Pradhan Mantri Mudra Yojana.
Government Finance
 A sum of Rs 20,000 crores would be allocated to the MUDRA Bank from the money that
is available from shortfalls of Priority Sector Lending in order to create a Refinance Fund
meant to provide refinance to the Last Mile Financers.

 Another Rs 3,000 crore funding will be provided to the MUDRA Bank from the Union
Budget 2015-16 to create a Credit Guarantee corpus for guaranteeing the loans being
provided to the micro enterprises under Pradhan Mantri Mudra Yojana.
How MUDRA bank will be helpful?

The above mentioned measures will not only help in increasing the access of finance to the
unbanked sections of economy but also bring down the cost of finance from the Last Mile
Financers to the micro and small enterprises in the informal sector.
 Mudra Bank will help the small enterprises access loans at a cheaper rate.
 MUDRA bank will give priority to SC/ST enterprises to increase the confidence of young,
educated or skilled workers so that they will be able to become first generation
entrepreneurs.
 MUDRA bank will also enable existing small businesses to expand their activities by
ensuring credit to them at reasonable rates. These existing SMEs are known as ‘missing
middle’ because they are not funded either by banks or by the microfinance institutions
(MFI).
 By floating MUDRA bank, the government has identified Non-Banking Financial
Companies (NBFCs) as a good means to reach out to existing small and micro
entrepreneurs.
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INDUSTRIAL SICKNESS – Definition, Causes and

Remedies
DEFINITION OF SICKNESS
According to Companies (Second Amendment) Act, 2002: "'Sick Industrial Company' means
an industrial company which has -
 The Accumulated losses in any financial year equal to 50 per cent or more of its average
net worth during four years immediately preceding such financial year; or
 Failed to repay its debts within any three consecutive quarters on demand made in writing
for its repayment by a creditor or creditors of such company".
According to SICA (Sick Industrial Companies Act): “Sick industrial unit is defined as a unit
or a company (having been in existence for not less than five years) which is found at the end of
any financial year to have incurred accumulated losses equal to or exceeding its entire net worth”.
MAJOR CAUSES OF SICKNESS IN SMALL SCALE INDUSTRIES

Small Scale Industries (SSIs) play vital role in the economic development of a country. Some
SSIs turn out to be sick due to various reasons. Some of the major causes for sickness in small
scale industries are dealt in brief.
1. INADEQUACY OF WORKING CAPITAL
Some units turn out sick due to inadequacy of working capital. There may exists delay in sanction
of working capital by financial institutions. Industrial units find it difficult to meet out day to day
operations due to the time gap between sanction of term loan and working capital needs. Shortage
of Working Capital is one of the main reasons for sickness.

2. NON-AVAILABILITY OF CREDIT
Sickness in SSI sector may be attributed to non-availability of credit. Delay in getting loans may
result in stoppage of work or lead to production loss. Low production may lead to reduced sales
which in turn may lead to financial loss.
3. POOR AND OBSOLETE TECHNOLOGY
Some industrial units use technology which is outdated. Out dated technology may affect the
quantity and quality of production. This results in production loss and reduces demand for the
goods.
4. NON AVAILABILITY OF RAW MATERIAL
Some units may require raw material which are scarcely available. Sometimes, the raw material
required by the unit may not be available in abundance. Hence, this affects the production and the
sales of the goods. If the raw material is not abundantly available, then the industrial units have to
spend a large amount of money to buy them. This may result in financial loss.
5. MARKETING PROBLEMS
Sometimes, the industrial units may not know as to how to create demand for the products. Lack
of marketing knowledge may result in less demand for the goods. Similarly, there may be less
demand for the goods produced by the SSI due to competition or change in the taste of the buyers.
For example, lot of units producing dyes and ceramics have been found sick in Gujarat and
Tirupur.
6. ERRATIC POWER SUPPLY
Shortage in power supply affects the industries. This results in delay in production of goods and
leads to financial losses.
7. LABOUR PROBLEMS
The relationship between the employer and the employees may not be cordial. Some of the labour
problems such as strike, lay off, lock out may lead to industrial sickness.
8. POOR MANAGEMENT
The entrepreneur must be a good planner, organizer and a manager. If the Industrial Unit
promoters lack managerial skills, then it may lead to several problems.
9. INADEQUATE ATTENTION TO R&D
Industries have to allocate a part of money in research and development to survive and compete
with competitors. Failure to focus on the above may lead to industrial sickness.
10. DIVERSION OF RESOURCES
If the employer utilizes the funds obtained for the business for any personal purposes, then
diversion of funds will lead to industrial sickness. The funds used for personal purposes cannot be
regenerated and hence it may result in delay in payment of loans or financial crisis for the
borrower of the loan.
11. GLOBALIZATION
Small scale industrial units may find it very difficult to compete with large scale industries and
foreign competitors. Inability of the units to face growing competition due to liberalization and
globalization may lead to industrial sickness.
12. DISPUTE AMONG PARTNERS
There may arise dispute between the partners or family members running the unit. This results in
stoppage of work and leads to industrial sickness.
13. OVER-AMBITIOUS PROJECTS
The project may not be technically feasible, such an overambitious project is one of the reasons
for industrial sickness.

REMEDIAL MEASURES TO OVERCOME SICKNESS
Some of the remedial measures to curb and overcome sickness in industrial undertakings are as
follows:
1. IDENTIFYING SICKNESS AT INITIAL STAGE
Sickness in Small Scale Industries are not a sudden phenomenon but it is a gradual process taking
5 to 7 years eroding the health of a unit beyond cure. Therefore, the identification and detection of
the sickness at incipient stage is the first and foremost measure to detect and reduce industrial
sickness. Sickness must be identified at initial stage.
2. FINANCIAL ASSISTANCE
Lending agencies need to relax their lengthy process and other norms for extending credit to the
SSIs. To combat the incidence of sickness financial institutions should grant credit without delay
to SSI sector.
A number of initiatives can be undertaken to overcome credit problems such as:
1. Increasing Working capital limit.
2. Enhancing the powers of bank managers of specialized bank branches in offering credit to
SSI.
3. Strengthening the mechanism for discounting bills.
4. Reduced rate of interest.
These measures would improve the flow of credit and keep a check on the incidence of sickness.
3. IMPROVING INFRASTRUCTURE
Infrastructure facilities can be improved by setting up industrial estates. Common testing centres
etc., infrastructural problems can be solved by improving the roadways, waterways, establishing
telecommunication systems.
4. TECHNOLOGY UP-GRADATION
Funds may be provided by the financial institutions for adoption of advanced technology.
Similarly, some sort of training may be provided for use of the latest technology to overcome
technological problems. Technological up-gradation can help to overcome technological
obsolescence.
5. MARKETING ASSISTANCE
Marketing assistance may be provided to entrepreneurs for marketing the goods produced by
them. Government must help to market the goods. Government and Non-Government
Organizations (NGOs) can come forward for marketing the goods produced by the SSI sector. The
problem of poor marketing of the products can be solved by coordinated efforts of entrepreneurs
and promotional agencies.
6. LIQUIDATION
It is better to wind up the business when there is no possibility to revive the unit.
7. GOVERNMENT INTERVENTIONS
Interventions must be made by the government to prevent sickness. Periodic review of financial
statements can help to identify and prevent sickness at initial stage.
8. TRAINING
A proper environment must be created where an entrepreneur will be educated and will have a
proper knowledge, skill and experience about internal and external environment of business to
compete with large-scale industries and multinational companies.

9. REHABILITATION
Potentially viable sick units should be dealt well for the purpose of rehabilitation. Rehabilitation is
a remedy considered for industrial units, which have already become sick and for the units that are
on the verge of collapse.
Under the provisions of SICA, 1985, the Government of India has established Board for Industrial
and Financial Reconstruction (BIFR) in January 1987 for determining the preventive,
ameliorative, remedial and other measures which are required to be taken in respect of sick
industrial company and for expeditious enforcement of rehabilitation schemes.
The main objective of SICA is to determine sickness and speed up the revival of potentially viable
units or closure of unviable units (unit here in refers to a Sick Industrial Company). It was
expected that by revival, idle investments in sick units will become productive and by closure, the
locked up investments in unviable units would get released for productive use elsewhere.
The measures taken by BIFR are;
1. Legal
2. Financial restructuring
3. Managerial
REHABILITATION PROGRAMMES
Taking into consideration the many sick micro, small and medium (MSM) industries, the MSM
policy has provided a separate package for rehabilitation of such industries in India.
The policy proposes to set up a rehabilitation fund for sick industries, which will be managed by
the Industries Commissioner and the Director of Industries and Commerce. Funds will be infused
into the committee based on the recommendation of a State-Level Rehabilitation Committee
(SLRC).
The rehabilitation fund will be used for meeting 75 percent of the cost of the cause that made the
industry unviable, and to sanction an interest subsidy of 4 per cent for two years on
rehabilitation/bridge loans up to Rs.15 lakh to the sick MSM industries.
The rehabilitation measures would ensure that most units under lockout would be able to open at
an early date and appealed to MSM units to avail of the facilities the government was providing
them.
The rehabilitation programme involves the following depending upon the nature of sickness.
1. Change of Management
2. Development of a suitable management information system
3. Settlement with the creditors for payment of their dues in a phased manner, taking into
account the expected cash generation as per viability study.
4. Determination of the sources of additional funds needed to refinance.
5. Modernization of plant and equipment or expansion of an existing programme or even
diversification of the products being manufactured.
6. Concession or relief or assistance allowed by the state level corporation, financial
institutions and Central Government.
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GIDC
 Gujarat Industrial Development Corporation was set up in the year 1962 under Gujarat
Industrial Development Corporations Act, 1962 for rapid promotion of industries and their
orderly development in the state of Gujarat.
 For the purposes of securing and assisting in the rapid and orderly establishment, and
organisation of industries in industrial areas and industrial estates in the state of Gujarat
and for the purpose of establishing commercial centres in connection with the
establishment and organisation of such industries.
 The state Government by notification in the official gazette, a corporation by the name of
the Gujarat Industrial Development Corporation was established.
The following are some of the functions of GIDC in brief.
 Generally to promote and assist in the rapid and orderly establishment, growth and
development of Industries in the state of Gujarat, and
 In particular and without prejudice to the generality to:
(a) Establish and manage industrial estates at places selected by the State Government,
(b) Develop industrial areas selected by the State Government for the purpose and make them
available for understanding to establish themselves,
(c) Develop land on its own account or for the State Government for the purpose of facilitating
the location of industries.
(d) Assist financially by loans to industries to move their factories into estate or areas,
(e) Promote, organise, sponsor or undertake schemes or works, either jointly with other corporate
bodies or institutions, or with Government or local authorities, or on an agency basis.
OBJECTIVES OF GIDC:
The business of corporation's is to achieve following objectives in the field of industrialisation:
 To create appropriate and essential requirements to develop land and factory sheds for
setting up industrial units. The developed plots and industrial sheds are provided with
power connection, approach road connecting with highways, water supply, drainage and
other amenities and facilities.
 The main objective of corporation is to promote and assist in the rapid and orderly
establishment, growth and development of industries in the state of Gujarat.
 To develop industrialisation in backward and tribal areas by setting up industrial estates,
so the balanced growth of industrialisation can be achieved in Gujarat state.
 To provide job opportunities to skill, semi skill and unskilled persons to avoid
unemployment.
 To develop housing zones within the industrial estates with a view to attracting skilled and
semi-skilled labourers to take up jobs in the industrial estates.
 To provide facilities like, fire station, canteens, banks, post offices, housing, schools,
hospitals, shopping centres etc. in major industrial estates. It should also provide
telecommunication system, police-chowkey and security guards. Thus the corporation
bears some social responsibilities also.
 To develop functional estates (areas) to fulfil specific needs of certain industries, like
chemical at Ankleshwar, Panoli and Vapi, an exclusive electronic estate at Gandhinagar,
ceramic estates at Thangadh and Kadi and plastic processing zone at Sarigam.
 To provide sheds to the potential entrepreneur which will be more helpful to them to start
new industry.
******************************************************************************

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Dr.

MBA – SEM 2 (VNSGU)

NEW BUSINESS DEVELOPMENT

LONG ANSWER QUESTIONS

1. Entrepreneurial performance is a function of socio-economic background, motivations,

1. Contents of project report / Contents of Business Plan

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

FACTORS AFFECTING ENTREPRENEURSHIP /

Economic Cultural Social Personal Psycholog Governmental

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

ENTREPRENEURSHIP IS ESSENTIAL FOR ECONOMIC

2. Improvement in Per Capita Income:

reduce the unemployment problem in the country.

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

4. Balanced Regional Development:

5. Improvement in Living Standards:

7. Backward and Forward Linkages:

1. Improvement in Per Capita Income:

3. Balanced Regional Development:

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

4. Improvement in Living Standards:

Factors responsible for Women entering in business:

Role of women as an Entrepreneur:

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

Functions of Women Entrepreneur:

Problems of Women Entrepreneurs in India:

from relatives and family friends.

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

How to Develop Women Entrepreneurs?

designed courses, which build confidence through behavioural games.

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

BUSINESS INCUBATION CENTRES

Main Activities of Business Incubation Centres:

Role of Business Incubation Centres:

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

Start-up incubators in India

Atal Incubation centres (AIM)

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

ROLE/IMPORTANCE OF MSME IN INDIAN ECONOMIC

The Importance of MSME in India has been described below:

driver in India contributing to the tune of 8% to GDP. Considering the contribution of

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

enterprises, for example, buying of clutches and brakes by automobile companies. It is

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

PROBLEMS FACED BY MSME IN INDIA

The various problems faced by small scale industries are as under:

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

SWOT ANALYSIS OF MSME IN INDIA

MSMEs sector are enormous due to the following factors:

Poor quality Lack of service after sales

Lack of precision Brand preferences

Distribution contacts Competitive marketing

INCENTIVES TO MSME IN INDIA

NEW BUSINESS DEVELOPMENT, MBA SEM 2, VNSGU, Surat

2. Preference in Government purchases:

4. Supply of raw materials:

6. RBI’s credit guarantee scheme:

8. Technical consultancy services:

9. Machinery on hire purchase basis: