Class 11 business studies Chapter 9 Small Business
NCERT Notes for Class 11 business studies Chapter 9 Small Business, (business studies) exam are Students are taught thru NCERT books in some of state board and CBSE Schools. As the chapter involves an end, there is an exercise provided to assist students prepare for evaluation. Students need to clear up those exercises very well because the questions with inside the very last asked from those.
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NCERT Notes for Class 11 business studies Chapter 9 Small Business
Class 11 business studies Chapter 9 Small Business
- In our country there are large numbers of small and large industries exist.
- Several parameters can be used to measure the size of business units.
- In India small scale industries are defined by measuring investments in plant and machinery.
Meaning and nature of small scale business unit
- Government of India considers investment in plant and machinery as the criteria to describe small industries.
- Small business is organized by individuals in the private sector.
- In this business capital investment is small and generally restricted to one crore.
- Taking capital investment as the basis, small business units in India fall under any of the followings categories:
1- Small scale industry
- Industrial units, wherein investment in fixed assets of plant and machinery does not exceed rupees one crore are categorized as small scale industry.
- The investment ceilings for those small scale industries, which are concerned with export promotion and modernization is rupees 5 crores.
2- Tiny enterprises
- A business enterprise whose investment in plant and machinery does not exceed rupees 25 lakhs is known as tiny enterprises.
3- Micro business enterprises
- Within tiny and small business sector, micro enterprises are those whose investment in plant and machinery does not exceed rupees one lakh.
4- Village industry
- Any industry which produces any goods, renders any services with or without power and in which the fixed capital investment per worker does not exceed to rupees 50000 and located in rural area is called village industries.
5- Cottage industries
- Cottage Industry is a specialized form of small scale industry where the production of the commodity takes place in the homes and the labor is supplied by the family members only.
- The basic characteristic feature of Cottage Industry is that it is basically unorganized in nature and come under the group of small scale industry type.
According to The Micro, Small and Medium Enterprises Development Act (MSMED) 2006 small enterprises are classified into two major categories . They are:
- Small scale industries concerned with manufacturing.
- Small scale industries providing services.
Manufacturing
These industries are engaged in manufacturing some articles. They can again classify into three.
- Micro enterprises: Where the investment in plant and machinery does not exceed twenty five lakhs.
- Small enterprises:Where the plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees.
- Medium enterprises: Where the investment in plant and machinery is more than five crore but does not exceed ten crores rupees.
Services
These industries are engaged in providing some services. They can also classify into three.
- Micro enterprise: Where the investment in equipment does not exceed ten lakh rupees.
- Small enterprise: Where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees.
- Medium enterprises: Where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.
Role of small business in India
- Small industries play an important role in our economy.
- Indian economy is a developing economy.
- Population has been increasing at faster rate.
- Our agriculture and industries at present are not capable of absorbing all unemployed persons.
- Unemployment has been increasing like epidemic and the solution lies only in the development of cottage and small scale industries, which have been contributing 40% of our production.
- Following points reveals the significance or importance of small scale industries in India.
1- Provide more employment opportunities
- Small industries are labour intensive.
- They require more workers and lesser machines and equipment.
- Thus, it will be suitable for Indian economy, where unemployment is widespread.
2- Small capital and simple management
- These industries can be started with small capital and simple machines.
- In this way these industries can be owned and operated by persons of ordinary skill also.
3- Quick yielding
- The formation of these industries is simple and does not take long period for establishment.
4- More equality in income distribution
- In case of large scale industries the income concentrates in the hands of few industrialists.
- In case of small scale industries, there is large number of small industrialists and thus income can be distributed among large people.
- Thus equitable distribution of income is possible in small scale industries.
5- Balanced regional development
- A major problem seen in India is the tendency of large scale industries getting concentrated in some areas only.
- This has led to the concentration of the economic power areas and causes regional inequalities.
- Small business is useful in achieving balanced regional development as they are wide spread.
6- Helps in mobilizing capital
- Small scale industries are helpful in mobilizing capital.
- These industries can be started with small capital.
- It can be sole proprietorship, partnership or a co-operative society.
- Persons desirous of establishing these industries save their income and also mobilize savings from other people.
Problems of small business
Small scale industries in India face a number of problems today. They are:
1- Lack of managerial experience
- Small business is generally promoted and operated by a single person, who may not possess all managerial skills required to run the business.
2- Inadequate finance
- Generally small business begins with a small capital base.
- These units frequently suffer from lack of adequate working capital.
- Banks generally do not lend money without adequate collateral security.
- As a result they heavily depend on local financial resources and are frequently the victims of exploitation by money lenders.
3- Irregular supply of raw materials
- The quality, quantity and regularity of supply of raw materials are another problem of small scale industries.
- They depend local sources for raw materials requirements and regular supply can’t be ensured.
- Further, units are forced to go for small quantity purchase and pay high prices.
- They can’t enjoy economies of bulk purchase.
4- Problem of marketing
- Small units find it difficult to popularize the brand name of their products due to the tough competition from big business houses.
- They can’t undertake costly advertisement campaigns.
5- Outdated technology
- Use of out dated technology is one of the problem facing small scale industries today.
- It results in low productivity and uneconomical production.
6- Inefficient labour
- Small business firms can’t afford to pay higher salaries to the employees.
- Therefore it is not in a position to attract efficient employees.
7- Lack of proper machinery and equipment
- Because of the financial problems, many small units use outdated machinery and equipment for production.
- This affects the quality and quantity of production. In effect the result will be high cost of production.
8- Lack of technical know- how
- Small business entrepreneurs do not have much knowledge about different alternative technologies to improve the quality of products and thereby reduce costs.
9- Global competition
- Because of liberalization and globalizations, small business firms now face competition not only from medium and large scale industries but also from multinational companies.
Government assistance to small business
A number of measures have been taken by Government to protect this sector from large scale business units and to promote its orderly growth. They are:
1- Reservation of products
- The government has notified that 590 items can be produced exclusively by the small scale units.
For eg: Rubber bands, paper files etc.
2- Infrastructural and institutional support
- Infrastructural and institutional support is provided through industrial estates, District Industries Centre, Small Industries Service Institute etc.
- which provides technical assistance, testing facilities etc.
3- Provide Machinery on Higher Purchase Scheme
- The National Small Industries Corporation (NSIC) arranges supply of machines on higher purchase scheme to small scale units.
4- Supply of raw materials
- Arrangement has also been made for the supply of raw materials, particularly scarce and costly items to the small scale units.
- For eg: bakery units are getting maida, sugar, etc. at concessional rate.
5- Training facilities
- Training for existing and proposed entrepreneurs is offered by Entrepreneurship Developing Institute of India, Technical Consultancy Organization etc. at a concessional fee.
6- Financial assistance
- Financial assistance is provided at concessional terms by various state level financial institutions owned by government.
7- Marketing assistance
- Marketing assistance including export promotion assistance is provided by institutions like Small Industries Development Organization (SIDO), National Small Industries Corporation (NSIC) etc.
8- Development of industrial estates
- For promoting more small scale business units, the government has established many industrial units in different parts.
Institutional assistance to small scale industries
In India there are various institutions which provide financial and technical assistance to small scale industries. They are:
1- National Bank for Agriculture and Rural Development (NABARD)
- NABARD was set up in 1982 to promote integrated rural development.
- Apart from agriculture, it supports small industries, cottage industries, and rural artisans using credit and non-credit approach.
- It offers counseling and consultancy services and organizes training and development programs for rural entrepreneurs.
2- National small Industries Corporation (NSIC)
It was set up in 1955 to promote small business units in the country. It helps small business in the following ways:
- Supply indigenous and imported machinery on easy hire purchase terms
- It distributes indigenous and imported raw materials.
- Export the products of small business units.
- Creating awareness on technological up gradation.
3. Small Industries Development Bank of India (SIDBI)
It is an apex bank set up to meet the credit requirements of small scale sector. It was established in 1990 and its head quarters located at Lucknow. SIDBI provide financial assistance to small scale sector in the following way:
- Refinancing term loans
- Discounting and rediscounting bills of exchange
- Extension of equity type assistance
- Providing of factoring and leasing services
4. State Industrial Development Corporation (SIDCO)
The important functions of SIDCO are as follows:
- To procure and supply of scarce raw materials.
- To supply machinery on hire purchase system.
- To provide marketing assistance.
- To construct industrial estates and providing infra structure facilities.
5- District Industries Centers (DIC)
- It was established in 1978 to coordinate various needs of small entrepreneurs.
- It acts as the chief coordinator in respect of various government departments and other government agencies.
- Registration of small industries is done at the DIC.
- They provide all services support to small entrepreneurs at under a single roof.
- Every district has one DIC to deal with all requirements small entrepreneurs.
The important functions performed by DIC are:
- To conduct techno-economic surveys to fix product lines .
- To arrange artisan training programmes.
- To advise entrepreneurs in matters relating to selecting appropriates machinery and equipments, sources of supply, assessing the requirements of raw materials etc.
- To arrange for the financial assistance with the lead banks in the respective areas.
Incentives allowed to small industries
- Incentives are the financial and promotional assistance provided by the government to the entrepreneurs for boosting up industrial development in all regions.
- Incentives include various financial concessions.
- Subsidy is a lump sum amount given as help to the entrepreneurs by the government.
- Incentives are considered to be the motivational force that influences the entrepreneurs to decide in favor of starting an industry.
Some of the incentives offered by the government are briefly discussed below:
- Land: State governments offer developed land plots for setting up small industries at concessional rate of rent.
- Power & Water: Some states supply power & Water at concessional rate of 50%while others give exemption in the initial years.
- Sales Tax: Some states give sales tax exemption for small business for 5 year period.
- Finance: 10 to 15 percent subsidy is allowed for capital assets. Loan at concessional rates are also offered to these units.
- Octroi: Almost all states have abolished octroi in case of small business.
- Tax holidays: Tax exemption for 5 to 10 years is given to industrial units started in backward, hilly and tribal areas.
- Industrial estates: Some state governments setting up industrial estates in backward areas to encourage small industries in these regions.
