CH-09

Small Business
Introduction: In this chapter we will study about the concept of small-scale enterprises as
defined by MSMED Act 2006 (Micro, Small and Medium Enterprise Development Act), role
of small business in India, government schemes and agencies for SSI (Small scale Industries),
concept of Entrepreneurship Development and Intellectual Property Rights.
S.M.Q’s
Q.1 Explain the role of small Business in India, especially in rural areas.
Ans. The small business plays a significant role in socio-economic development of the
country. The following points justify the statement: -
a. Generation of Employment: Small scale industries provide employment
opportunities in rural areas, especially for the weaker section of the society. About
95% of industrial units in the company concert of small industries.
b. Output Generation: Small scale industries contribute almost 40% of gross-industrial
value added. These industries can produce more output with less capital as compared
to large scale enterprise. SSI provides a large variety of products such as readymade
garments, domestic utensils, stationary items, etc. They also provide large variety of
electronic and engineering goods like television, agricultural tools, pharmaceuticals
etc.
c. Rural Industrialisation and Balanced regional development: Development of
village and rural areas took place because of industrialisation. SSI produce simple
products using simple technology and local resources. Hence, benefits of
industrialisation are spread in every region and therefore it ensures balanced regional
development.
d. Reduction in Income Inequalities: SSI ensures equitable distribution of national
income and wealth by reducing income inequalities between rural and urban areas.
e. Prevent Migration: Development of Rural and village industries can prevent
migration of rural population to urban areas in search of employment opportunities.
Q.2 Explain the problems faced by small scale industries in India.
Ans. Small Scale Industries are at distinct disadvantage as compared to large scale industries.
In the course of their operations, they face number of problems which are explained below:
a. Finance: SSI are mostly organised in the form sole proprietorship, partnership and
because of absence of funds, they are unable to purchase advance machinery,
equipments, raw material, etc. They find it difficult to borrow loans from bank at
reasonable rate of interest because of low assets base.
b. Raw material: They are often unable to obtain raw material of good quality at
reasonable price because they can't afford to purchase raw material in bulk quantity at
cheap rates.
c. Management Skills: Small business is generally promoted and operated by a single
person or a group of persons who may not possess all the managerial skills required to
run a business.
d. Labour: Small business cannot afford to pay higher salaries to the employees. As a
result, labour productivity is low and labour turnover is high.

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 e. Global competition: SSI face competition not only from medium and large-scale
industries but also from MNC's. For example, China has destroyed small industries in
India.
Q.3 Explain the measures taken by govt. of India for protection of SSI.
Ans. Keeping in view the contribution of small business in employment generation, output
generation and balanced regional development etc. The govt. of India has taken several
measures for the protection of SSI which are as discussed below: -
a. National small Industries corporation (NSIC): The was established in 1995 to
promote and foster the growth of small business in India. Its main functions are:
i To provide imported machines and raw material on easy terms and conditions.
ii To export the products of SSI and develop export worthiness.
iii To provide technological assistance
iv To provide advisory services.
b. Marketing Assistance Scheme: The objective of this scheme was growth and
survival of micro, small and medium enterprises.
The other objectives of this scheme are:
i To provide platform to MSME's for interaction with the large buyers.
ii To show the competencies of MSME's.
iii To enhance the marketing skills of MSME’s.
iv To enhance market capabilities and competitiveness of MSME's
c. Small Industries Development Bank of India (SIDBI): SIDBI is an apex bank
which provide direct or indirect financial assistance under different schemes to meet
the credit needs of small business. It also coordinates the functions of other
institutions working for same objective. It was setup in 1989.
d. National Bank for Agriculture and Rural Development (NABARD):
i NABARD was established on 15 July 1982 to provide financed to rural areas.
It is an apex institution which coordinates the functions of different financial
institutions working for the expansion of rural credit.
ii Its objective is to promote healthy strength of credit institutions.
iii Besides providing finance to credit institutions NABARD also provides
financial support to non-farm sectors to promote integrated rural development
and prosperity of backward rural areas.
e. The Rural Small Business Development Centre (RSBDC): It was setup by the
World Management Association for small and Medium Enterprises and is sponsored
by NABARD. It aims at providing management and technical support to current and
prospective entrepreneurs in rural areas.
Q.4 Explain the classification of Manufacturing and Service enterprises under MSME's
Act 2006.
a. Manufacturing Enterprise:
i Micro Enterprise: Where investment in plant and machinery does not exceed
Rs 25 lakh.
ii Small Enterprise: Where investment in plant and machinery is more than 25
lakhs but does not exceed 5 Crore.
iii Medium Enterprise: Where investment in plant and machinery more than Re
5 Crore but does not exceed 10 Crore.

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 b. Service Enterprise:
i Mico Enterprise: Where investment in equipments does not exceed Rs 10
Lakh.
ii Small Enterprise: Where the investment in equipment is more than Rs 10
lakh but does not exceed Rs 2 Crore.
iii Medium Enterprise: Where the investment in equipment is more than Rs2
crore but does not exceed Rs 5 Crore.
Q.5 Explain the concept of Entrepreneurship Development:
Ans. Entrepreneurship Development is the process of improving the skills and knowledge of
entrepreneurs through various training & classroom programs.
Entrepreneurship is the process of setting up one's different from pursuing any other
economic activity, whether it is employment or some profession.
An entrepreneur is a person or group of persons who establishes an enterprise, take the risks
& accumulates all the resources to carry out the process of production. In other words, the
person who set up his business is called an entrepreneur. The output of the process i.e., the
business unit is called an Enterprise.
Entrepreneur Entrepreneurship Enterprise

The person The process The outcome

Q.6 Explain the characteristics of Entrepreneurship:
a. Systematic Activity: It has certain skill and knowledge and competency which can be
acquired, learnt & developed by formal education & vocational training as well as by
observation and work experience.
b. Lawful and purposeful Activity: Entrepreneurship aims to conduct a lawful
business. The purpose of entrepreneurship is to create value for personal profit and
social gain.
c. Innovation: Entrepreneurship involves a continuous search for new ideas for a firm,
innovation generally means cost saving or revenue-enhancing. It involves introduction
of new products, discovery of new markets, technological upgradation, as well as
adopting new methods of production that causes least harm to the environment.
d. Organisation of Production: Production requires the combined utilisation of factors
of production i.e., land, labour, capital & technology. Entrepreneur mobilises these
resources into a productive enterprise.
Sometimes an entrepreneur may not possess any of these resources but he may just
have the ‘idea’ that he promotes among the resource providers.
e. Risk-Taking: Entrepreneurship involves bigger risk as compared to career in
employment or practice of a profession as there is no assured pay off. Risk is an
unavoidable and inseparable element. If an entrepreneur does not want to take risk,
entrepreneurship would never succeed.
Q.7 Explain the objectives of Start-up India Scheme:
Ans. Through this scheme Government of India aims to prepare a strong environment for
nurturing innovation and start-ups in the country. This will lead to sustainable economic
growth & generate large-scale employment opportunities. The main objectives of this scheme
are: -
i To create the awareness & benefits of being an entrepreneur and the process of
entrepreneurship especially among the youth.

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 ii To support the early phase of entrepreneurship development, including the pre-start-
up phase and growth enterprises.
iii To initiate entrepreneurial culture programme and spread awareness in the society and
influence the mindset of people towards entrepreneurship.
iv To encourage more dynamic start-ups by motivating educated youth, scientists and
technologists to consider entrepreneurship as a preferred and viable career.
Q.8 Explain the action points under Start-up India Initiative.
a. Simplification & Hand-Holding: In order to make compliance for start-ups, friendly
and flexible, simplifications and announced.
b. Start-up India Hub: The objective is to create a single point of contact for the entire
start-up and enable knowledge exchange & access to funding.
c. Tax Exemptions: The profits of start-up initiatives are exempted for income tax for a
period of 3 years.
d. Easy Exit: In the event of business failure and wind-up operations, procedures are
being adopted to reallocate capital and resources towards more productive avenues.
Q.9 Explain five ways to fund Start-ups in India.
a. Boot Strapping: It means starting a business without external help or capital. It is
commonly known as self-financing. It is considered as the first funding option
because entrepreneur uses his personal savings & resources.
However, it is a good option of funding only if the initial requirements is small.
b. Angel Investment: Angel investors are individuals with surplus cash who have
interest to invest in upcoming (new) start-ups.
c. Crowd funding: It is the practice of funding a project by raising money from a large
number of people for a common goal. These platforms help start-ups or small
business to meet their funding requirements.
d. Venture Capital: They are professionally managed funds which are invested in
companies that have huge potential Venture capitalists provide expertise, mentorship
and evaluate business from the point of view of sustainability.
e. Micro finance & NBFC's: Micro finance is basically access to financial services to
those who do not have access to banking services or are not qualified for a bank loan.
Similarly, NBFC’s provides banking services without meeting legal requirements of a
bank.

Q.10 Define Intellectual Property Rights and also explain the types of IP’s.
Ans. It refers to the general term for the assignment of property rights through patents,
copyrights and trademarks.
It refers to the creations of human mind like invention, literary and artistic works, symbols,
names, images & designs used in business.
➢ TYPES of IP's:
i Copyright: Copyright is an exclusive right of the creator to prohibit or prevent the
unauthorised use of the content, which includes reproducing and distributing copies of
the same subject.
1. It is offered when an original idea is expressed by the of creator or author.
2. It is a right given upon the creators of literary, artistic, musical, sound
recording. etc.
3. Its unique feature is that the protection of work arises automatically as soon as
the work comes into existence.

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ii Trademark: A trademark is any word, name or symbol or combination of all that
helps to distinguish the product from that of its competitors.
A trademark helps to know many things about a company's reputation, good will,
products and services etc.
iii Geographical Indication: A geographical indication is an indication which identifies
agricultural, natural or manufactured products (handicrafts, industrial goods) original
from a definite geographical territory where quality or other characteristics are
specific to its geographical origin.
iv Patent: A patent is a type of IPR which protects the scientific inventions which shows
technical advancement over the existing products.
1. It is the right granted by the Government which prevents others from making,
selling, using or importing etc.
2. A patent grants exclusive rights for a period of 20 years. If anybody seeks
permission to use patents rights, he has to pay fee called licensing.
v Design:
1. A design includes shape, pattern and arrangement of lines or colour
combination applied to any article.
2. It is a protection given to aesthetic appearance or eye-catching features.
3. The term of protection of a design is valid for 10 years & it can be extended
for 5 years.
4. Once the validity period is over, the design is in public domain i.e., anyone
can use without obtaining permission, but no one can own it.
vi Plant Variety:
1. Plant variety is essentially grouping plants into categories based on their
botanical categories.
2. It is a type of variety which is breed and developed by farmers.
3. It helps in conserving & improving genetic plants.
4. Such protection promotes investment in R&D, recognizes Indian farmers as
cultivators and facilitates high quality seeds.
5. This leads to the growth of the seed industry.