Small Business Notes Class 11th Business Studies


1. Small Business The definition of small business by the Government of India is based on the investment in Plant and Machinery, This approach is justified because we have scarce capital and abundant labour. ‘the small scale industries includes.

(i) Small scale industries
(ii) Ancillary industrial undertaking
(iii) Export-oriented units
(iv) Tiny units
(v) Small scale industries owned by women
(vi) Cottage industries
(vii) Khadi and village industries
(viii) Agro based industries

2. Nature of Small Scale Industries

(i) The business is organised by individuals in the private sector.
(ii) The use of family labour and locally available talent is made.
(iii) Simple equipments are used.
(iv) Capital investment is small, generally restricted to one crore.
(v) The use of indigenous technology.

3. Administrative Setup for the Small Scale

(i) Agro and Rural Industries

(a) The government of India created the Ministry of small scale industry and Agro and Rural Industries as the nodal ministry for formulation of policy.

(b) This ministry was divided into following two separate ministries in September 2001 .

  • Ministry of Small Scale Industries
  • Ministry of Agro and Rural Industries

(c) A part from the ministries state government also makes various promotional and development projects for SSI and then are executed.

4. Role of Small Business in India In developing countries like India there is a greater scope for small business enterprise. The following factors help in the scope of small business enterprises

(i) Limited resources
(ii) Flexibility of operation
(iii) Personal attention
(iv) Individual attitude
(v) Suppliers of large scale business
(vi) Social utility

5. Role of Small Business in Rural India

Small scale industries provide the following benefits in rural area.

(i) Employment
(ii) Improves economic condition
(iii) Promotion of artistic and creative sense
(iv) Rural development
(v) Mobilisation of local resources

6. Problems of Small Business in India

(i) Shortage of Fund Small enterprises have a chronic shortage of finance both for fixed and working capital requirement.

(ii) Shortage of Raw Materials and Power Most of the small factories have shortage of raw materials and other equipments because of limited means to buy in bulk and suppliers hesitate to provide credit policy (facility) to small business.

(iii) Old Techniques of Production and Lack of Latest Technical Knowledge Most of the small scale enterprise use old techniques of production because they cannot afford new technique.

(iv) Marketing Problems Small scale industries face many difficulties in marketing their products because of many reasons

(a) The cost of production is high.
(b) They cannot afford to have their own marketing organisation.
(c) Products of many small firms are not having uniform quality.

(v) Personal Problem Securing the right type of personal is a major problem of small business. A more important problem is the problem of proper training reasonable compensation etc.

(vi) In perfect Organisational Setup In most of the small enterprise the ownership and management functions are performed by the owner himself. Generally the owners may not have the necessary skill to manage the business also.

7. Government Assistance and Special Schemes for Industries in Rural Backward and Hilly Areas Some of the support measures and programmes meant for the promotion of small and rural industries are grouped in following two categories.

(i) Institutional Support

(a) National Bank for Agriculture and Rural Development (NABARD) The NABARD provides loans and advances to State Government for a period not exceeding 20 years to enable to State Government.

(b) The Rural Small Business Development Centre (RSBDC) It is set up by the World Association for small and medium enterprises and is sponsored by NABARD. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.

(c) National Small Industries Corporation (NSIC) Its main focus was on

• To supply indigenous and imported machines in easy instalments.
• To procure and supply imported raw materials.
• To export of products of SSI.

(d) Small Industries Development Bank of India (SIDBl) SlDBI was established in 1989 as a public corporation. Its main object is to promote. Finance and develop the small scale sector in India.

(e) The National Commission for Enterprises in the Unorganised Sector (NCEDS)The NCEUS was constituted in September 2004, with the following objectives

  • TO improve productivity of small scale enterprises.
  • To generate more employment opportunities.

(f) Rural and Women Entrepreneurship Development (RWED) This programme encourages rural people and women RWED provides the following

  • Enhancing human and institutional capacities.
  • Providing training for women entrepreneurs.

(g) World Association for Small and Medium Enterprises (WASME) Common schemes offered by WASMe are

  • Integrated Rural Development Programme
  • Prime Minister Rozgar Yojana
  • Training of Rural Youth for self-employment
  • Jawahar Rozgar Yojana

(h) Scheme of Fund for Regeneration of Traditional Industries (SFURTl) This fund is used

  • To improve the technology of traditional units.
  • To create sustained employment opportunities.
  • To set up traditional industries in various parts of the country.

(i) The District Industries Centre (DIC) The DIC Programme was started on 1 May 1978 to provide assistance to small scale industries at the district level.

These centres provides all the promotional activities such as identification of suitable scheme preparation of feasibility report arranging for credit etc.

(ii) Incentives Some of the common incentives offered are below

(a) Land
(b) Power
(c) Water
(d) Sales Tax
(e) Octroi
(f) Raw materials
(g) Finance
(h) Industrial estates
(j) Tax holiday

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