Entrepreneurial Management for BBA Regular Bangalore University.pptx

Entrepreneurial Management for VI semester students of BBA course

1. Entrepreneurial Management

2. UNIT I Entrepreneurship Concept of Entrepreneurship: The word “entrepreneur” is derived from the French verb enterprendre , which means ‘to undertake'. This refers to those who “undertake” the risk of new enterprises. An enterprise is created by an entrepreneur. The process of creation is called “entrepreneurship”. Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of something new and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the enterprise.

3. “Entrepreneurship is essentially a creative activity or it is an innovation function. The process of innovation may be in the form of Introduction of a new product Use of a new method of production Opening of a new market. The conquest of new source of supplying raw materials. A new form of organization” -Joseph A. Schumpeter “Entrepreneurship is neither a science nor an art. It is practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in practice is largely defined by the ends, that is, by the practice.” -Peter F. Drucker

4. Concept of Entrepreneur: Basically an entrepreneur is a person responsible for setting up a business or an enterprise. He has the initiative , skill for innovation and who looks for high achievements. He is catalytic agent of change and works for the good of people . He puts up new green field projects that create wealth, open up many employment opportunities and leads to growth of other sectors. An entrepreneur is a person who starts an enterprise. He searches for change and responds to it. A number of definitions have been given of an entrepreneur-The economists view him as a fourth factor of production along with land labor and capital.

5. Meaning of Enterprise: Organization or Enterprise means to plan a business, to start it and run it. It means to bring the factors of production together, assign each its proper task, and pay them remuneration when the work is done. It implies not only running of a business, but also shouldering the loss, if any. The man who undertakes all this work is called an organiser , or, more commonly, an entrepreneur. Organising and risk-taking are the two main functions of the entrepreneur.

6. Difference Between Entrepreneur and Entrepreneurship: An entrepreneur is someone who locates the need of society and tries to meet the same, with his/her innovative idea. On the other hand, ‘ entrepreneurship’ which refers to the process of establishing a business entity, intending to get profit, as a return in the future.

7. Comparison Chart

8. Entrepreneurial Process: Entrepreneurship is a process, a journey, not the destination; a means, not an end. All the successful entrepreneurs like Bill Gates (Microsoft), Warren Buffet (Hathaway), Gordon Moore (Intel) Steve Jobs (Apple Computers), Jack Welch (GE) GD Birla, Jamshedji Tata and others all went through this process.

9. 1. Idea Generation: To generate an idea, the entrepreneurial process has to pass through three stages: a. Germination: This is like seeding process, not like planting seed. It is more like the natural seeding. Most creative ideas can be linked to an individual’s interest or curiosity about a specific problem or area of study. b. Preparation: Once the seed of interest curiosity has taken the shape of a focused idea, creative people start a search for answers to the problems. Inventors will go on for setting up laboratories; designers will think of engineering new product ideas and marketers will study consumer buying habits. c. Incubation: This is a stage where the entrepreneurial process enters the sub­conscious intellectualization. The sub-conscious mind joins the unrelated ideas so as to find a resolution.

10. 2. Feasibility study: Feasibility study is done to see if the idea can be commercially viable. It passes through two steps: a. Illumination: After the generation of idea, this is the stage when the idea is thought of as a realistic creation. The stage of idea blossoming is critical because ideas by themselves have no meaning. b. Verification: This is the last thing to verify the idea as realistic and useful for application. Verification is concerned about practicality to implement an idea and explore its usefulness to the society and the entrepreneur.

11. Importance of Entrepreneurship: 1. Development of managerial capabilities: The biggest significance of entrepreneurship lies in the fact that it helps in identifying and developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives, compares the alternatives in terms of cost and benefits implications, and finally chooses the best alternative. This exercise helps in sharpening the decision making skills of an entrepreneur. 2. Creation of organizations: Entrepreneurship results into creation of organizations when entrepreneurs assemble and coordinate physical, human and financial resources and direct them towards achievement of objectives through managerial skills.

12. 3. Improving standards of living: By creating productive organizations, entrepreneurship helps in making a wide variety of goods and services available to the society which results into higher standards of living for the people. Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are pointers to the rising living standards of people, and all this is due to the efforts of entrepreneurs. 4. Means of economic development: Entrepreneurship involves creation and use of innovative ideas, maximisation of output from given resources, development of managerial skills, etc., and all these factors are so essential for the economic development of a country.

13. Role of an Entrepreneur in Economic Development: The major roles played by an entrepreneur in the economic development of an economy is discussed in a systematic and orderly manner as follows. (1) Promotes Capital Formation (2) Creates Large-Scale Employment Opportunities (3) Promotes Balanced Regional Development (4) Reduces Concentration of Economic Power (5) Wealth Creation and Distribution (6) Increasing Gross National Product and Per Capita Income (6) Improvement in the Standard of Living (7) Promotes Country’s Export Trade (8) Facilitates Overall Development

14. Factors affecting Entrepreneurship Development: I. Economic Factors: The economic factors that affect the growth of entrepreneurship are the following: 1. Capital 2. Labor 3. Raw Materials 4. Market II. Social Factors: 1. Caste Factor 2. Family Background 3. Education 4. Attitude of the Society 5. Cultural Value

15. III. Psychological Factors 1. Need Achievement 2. Withdrawal of Status Respect 3. Motives 4. Others IV. Compelling factor 1.Strong desire to be independent 2.Govt incentives 3.To make use of technical and professional skills. 4.Excess funds laying idle. 5.Responsibility of maintenance of large families, shortage of funds.

16. Types of Entrepreneurs: Depending upon the level of willingness to create innovative ideas, there can be the following types of entrepreneurs: 1. Innovative entrepreneurs: These entrepreneurs have the ability to think newer, better and more economical ideas of business organisation and management. They are the business leaders and contributors to the economic development of a country. Inventions like the introduction of a small car ‘Nano’ by Ratan Tata, organised retailing by Kishore Biyani , making mobile phones available to the common may by Anil Ambani are the works of innovative entrepreneurs.

17. 2. Imitating entrepreneurs: These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They imitate innovative entrepreneurs because the environment in which they operate is such that it does not permit them to have creative and innovative ideas on their own. Such entrepreneurs are found in countries and situations marked with weak industrial and institutional base which creates difficulties in initiating innovative ideas. In our country also, a large number of such entrepreneurs are found in every field of business activity and they fulfill their need for achievement by imitating the ideas introduced by innovative entrepreneurs. Development of small shopping complexes is the work of imitating entrepreneurs. All the small car manufacturers now are the imitating entrepreneurs.

18. 3. Fabian entrepreneurs: The dictionary meaning of the term ‘fabian’ is ‘a person seeking victory by delay rather than by a decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in visualising and implementing new ideas and innovations wait for some development which would motivate them to initiate unless there is an imminent threat to their very existence.

19. 4. Drone entrepreneurs: The dictionary meaning of the term ‘drone’ is ‘a person who lives on the labor of others’. Drone entrepreneurs are those individuals who are satisfied with the existing mode and speed of business activity and show no inclination in gaining market leadership. In other words, drone entrepreneurs are die-hard conservatives and even ready to suffer the loss of business. 5. Social Entrepreneur: Social entrepreneurs drive social innovation and transformation in various fields including education, health, human rights, workers’ rights, environment and enterprise development. They undertake poverty alleviation objectives with the zeal of an entrepreneur, business practices and dare to overcome traditional practices and to innovate. Dr Mohammed Yunus of Bangladesh who started Gramin Bank is a case of social entrepreneur.

20. CENTRAL LEVEL INSTITUTIONS SUPPORTING ENTREPRENEURS : SMALL SCALE INDUSTRIES BOARD (SSIB) : The government of India constituted a board, namely, Small Scale Industries Board(SSIB) in 1954 to advice on development of small scale industries in the country. The SSIB is also known as central small industries board. The range of development working small scale industries involves several departments / ministries and several organs of the central/state governments. Hence, to facilitate co-ordination and inter-institutional linkages, the small scale industries board has been constituted. It is an apex advisory body constituted to render advice to the government on all issues pertaining to the development of small-scale industries

21. NATIONAL SMALL INDUSTRIES CORPORATION (NSIC) : The National Small Industries Corporation (NSIC), an enterprise under the union ministry of industries was set up in 1955 in New Delhi to promote aid and facilitate the growth of small scale industries in the country. NSIC offers a package of assistance for the benefit of small–scale enterprises. 1. Single point registration: Registration under this scheme for participating in government and public sector undertaking tenders. 2. Information service: NSIC continuously gets updated with the latest specific information on business leads, technology and policy issues. 3. Raw material assistance: NSIC fulfils raw material requirements of small-scale industries and provides raw material on convenient and flexible terms. 4. Meeting credit needs of SSI: NSIC facilitate sanctions of term loan and working capital credit limit of small enterprise from banks. 5. Performance and credit rating: NSIC gives credit rating by international agencies subsidized for small enterprises up to 75% to get better credit terms from banks and export orders from foreign buyers.

22. SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) : SIDO is created for development of various small scale units in different areas. SIDO is a subordinate office of department of SSI and ARI. It is a nodal agency for identifying the needs of SSI units coordinating and monitoring the policies and programmes for promotion of the small industries. It undertakes various programmes of training, consultancy, evaluation for needs of SSI and development of industrial estates. Khadi and Village Industries Commission (KVIC) : Statutory body created by an act of Parliament It is charged with planning, promotion, organization and implementation of the program for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development KVIC’s functions also comprise building up a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials and provision of marketing of KVIC products KVIC is entrusted with the task of providing financial assistance to institutions or persons engaged in the development and operation of Khadi and village industries and guide them through supply of designs, prototypes and other technical information

23. National Small Industries Corporation Ltd. (NSIC) Established in 1955 by GOI with the main objectives to promote, aid and foster the growth of SSIs in the country Over four decades of transition and growth in the SSI sector, NSIC has provided strength through a progressive attitude of modernization, up gradation of technology, quality consciousness, strengthening linkages with large and medium-scale enterprise and boosting exports of products from small enterprises • Main services provided by NSIC are: Machinery and Equipment (Hire Purchase / Lease scheme) Financial Assistance Scheme Assistance for Procurement of Raw Material Government Store Purchase Program Technology Transfer Centre (TTC) Marketing Assistance

24. National Science and Technology Entrepreneurship Development Board (NSTEDB) : • Established in 1982 by GOI, is an institutional mechanism to help promote knowledge-driven and technology-intensive enterprises • Major objectives are: - promote and develop high-end entrepreneurship for S&T manpower as well as self-employment by utilizing S&T infrastructure and by using S&T methods facilitate and conduct various informational services relating to promotion of entrepreneurship – network agencies of support system, academic institutions and R&D organizations to foster self-employment using S&T with special focus on backward areas - act as a policy advisory body with regard to entrepreneurship

25. National Institute for Small Industry Extension and Training (NISIET) : Set up in early 1950s, NISIET acts an important resource and information centre for small units and undertakes research and consultancy for small industry development An autonomous arm of the Ministry of Small Scale Industries, the institute achieves its objectives through training, consultancy, research and education, to extension and information services In 1984, UNIDO has recognized NISIET as an institute of meritorious performance under its Centre of Excellence Scheme to extend aid.

26. National Institute for Entrepreneurship and Small Business Development (NIESBUD) : NIESBUD is an autonomous body under the administrative control of the Office of the DC(SSI) NIESBUD established in 1983 by the Ministry of Industry, GOI, as an apex body for coordinating and overseeing the activities of various institutions/agencies engaged in Entrepreneurship Development particularly in the area of small industry and business The policy, direction and guidance to the institute is provided by its Governing Council whose chairman is the Minister of SSI. Besides conducting national and international training programs, the institute undertakes research studies, consultancy assignments, development of training aids etc.

27. Entrepreneurship development institute of India : The Entrepreneurship Development Institute of India (EDI), an autonomous and not-for-profit Institute, set up in 1983. Objectives: Augment the supply of trained entrepreneurs through training Generate multiplier effect on opportunities for self employment Improve managerial capabilities of small scale industries Contribute to dispersal of business ownership and thus expand social base of the Indian entrepreneurial class Contribute to the creation and dissemination of new knowledge and insight into entrepreneurial theory and practice through research. The Augment supply of trainers motivators for entrepreneurship and development Participate in institutional Promote micro enterprise at rural level Inculcate the spirit of entrepreneurship among youth

28. STATE LEVEL INSTITUTIONS Directorate of Industries (DIs) : At the State level, the Commissioner/ Director of Industries implements policies for the promotion and development of small-scale, cottage, medium and large scale industries. The Central policies for the SSI sector serve as guidelines but each State evolves its own policy and package of incentives. The Commissioner/ Director of Industries in all the States/UTs, oversee the activities of field offices, that is, the District Industries Centers (DICs) at the district level.

29. District Industries Centers (DICs) : In order to extend promotion of small-scale and cottage industries beyond big cities and state capitals to district headquarters, DIC program was initiated in May, 1978, as a centrally sponsored scheme. DIC was established with the aim of generating greater employment opportunities especially in rural and backward areas in the country. At present DICs operate under respective Sate budgetary provisions. DICs extend services of the following nature – ( i ) economic investigation of local resources (ii) supply of machinery and equipment (iii) provision of raw materials (iv) arrangement of credit facilities (v) marketing (vi) quality inputs (vii) consultancy.

30. Small scale industries development of India: The SIDBI was established in 1990 as the apex refinance bank. The SIDBI is operating different programmes and schemes through 5 Regional Offices and 33 Branch Offices. The financial assistance of SIDBI to the small scale sector is channelized through the two routes – direct and indirect.

31. 1. Indirect assistance a) SIDBI’s financial assistance to small sector is primarily channelized through the existing credit delivery system, which consists of state level institutions, rural and commercial banks. b) SIDBI provides refinance to and discounts bills of Primarily Lending Institutions (PLI). c) The assistance is available for  Marketing of SSI product  Setting up of new ventures  Availability of working capital  Expansion  Modernisation  Human resource development  Diversification of existing units for all activities

32. 2. Direct assistance a) The loans are available for new ventures, diversification technology up gradation, modernization and expansion of well run small scale enterprises. Assistance is also available for private sector. b) Small scale sector is eligible for maximum debt-equity ratio of 3:1 c) Foreign currency loan for import of equipment are also available to export oriented small scale enterprises. d) SIDBI also provide venture capital assistance to the entrepreneurs for their innovative ventures if they have a sound management team, long term competitive advantage and a potential for above average profitability leading to attractive return on investment.

33. New Initiatives of SIDBI a) Two Subsidiaries viz. SIDBI Venture Capital Limited and SIDBI Trustee Company Limited formed to oversee Venture Capital. b) Technology Bureau for Small Enterprise formed to oversee Technology Transfer, Match making Services, Finance Syndication and facilitating Joint Ventures. c) SIDBI Foundation for Micro Credit has been launched to provide financial assistance to the poor and to meet emerging needs of the micro finance sector especially in rural areas.

34. National Bank for Agriculture and Rural Development (NABARD) is an apex development : bank in India having headquarters based in Mumbai (Maharashtra) and other branches are all over the country. It was established on 12 July 1982 by a special act by the parliament and its main focus was to uplift rural India by increasing the credit flow for elevation of agriculture & rural non farm sector and completed its 25 years on 12 July 2007 It has been accredited with "matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India". RBI sold its stake in NABARD to the Government of India, which now holds 99% stake.

35. UNIT II Small Scale Industries Essentially small scale industries comprise of small enterprises who manufacture goods or services with the help of relatively smaller machines and a few workers and employees. Basically, the enterprise must fall under the guidelines set by the Government of India. At the time being such limits are as follows, For Manufacturing Units for Goods: Investment in plant and machinery must be between 25 lakhs and five crores . For Service Providers: Investment in machinery must be between 10 lakhs and two crores . In developing countries like India, these small scale industries are the lifeline of the economy. These are generally labour -intensive industries, so they create much employment. They also help with per capita income and resource utilization in the economy. They are a very important sector of the economy from a financial and social point of view.

36. Characteristics of Small Scale Industries: Ownership: Such units are generally under single ownership. So it is a sole proprietorship or sometimes a partnership. Management: Both the management and the control generally is with the owner/owners. So the owner is actively involved with the daily running of the business. Limited Reach: Small scale industries have a restricted area of operations. So they meet local and regional demand. Labor Intensive: These small scale industries tend to use labour and manpower for their production activities. So their dependence on technology is pretty limited. Flexibility: These units are more adaptable to their changing business environment. So in case of sudden changes or unexpected developments, they are flexible enough to adapt and keep carrying on. Large industries do not have this advantage. Resources: They use local and readily available resources. This also helps the economy with better utilization of natural resources and less wastage.

37. Role of Small Scale Industries in the Indian Economy: Total Production These enterprises account for almost 40% of the total goods and services produced in the Indian economy. Employment These small scale industries are a major source of employment in the country. Contribution to Export Nearly half of the goods (45-55%) of the goods that are exported from India are produced by these small enterprises. About 35% of direct exports and 15% of the indirect exports are from the small scale industries. Welfare of the Public Other than economic reasons, these industries are also important for the social growth and development of our country.

38. Ancillary Industries: These are industrial undertakings having fixed investment in plant and machinery not exceeding Rs. 1 crore engaged in or proposed to engage in, (a) The manufacture of parts, components, sub-assemblies, tooling or intermediaries, or (b) The rendering of services supplying 30 percent of their production or services as the case may be, to other units for production of other articles. Tiny Units: These refer to undertakings having fixed investment in plant and machinery not exceeding Rs. 25 lakhs . These also include undertakings providing services such as laundry, Xeroxing, repairs and maintenance of customer equipment and machinery, hatching and poultry etc. Located m towns with population less than 50,000.

39. Household/Cottage Industries: These cover artisans skilled craftsman and technicians who can work in their own houses if their work requires less than 300 square feet space, less than 1 Kw power, less than 5 workers and no pollution is caused. Handicrafts, toys, dolls, small plastic and paper products electronic and electrical gadgets are some examples of these industries.

40. Products Range: The small scale sector contributes nearly 40% of the gross industrial value added in the Indian economy. In order to encourage the growth of small scale industries the government has reserved certain products to be manufactured by them. Large and medium units can manufacture the reserved items only if they export 50% or more of the production.

41. Some of the products reserved for small scale industries are: 1. Agricultural implements 2. Air / Room Coolers 3. Basket Cane 4. Battery Charger 5. All types of bags 6. Bath tubs 7. Brushes of all types

42. 8. All types of buckets 9. Canvas Products 10. Cleaning Powder 11. Chokes for light fitting 12. Claw Bars and Wires 13. Chappals and sandals 14. Coir fibre and Coir yarn 15. Conduit pipes -

43. Capital Investment: 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 Enterprises More than 5 crore rupees but does not exceed 10 crore rupees Service Sector Enterprises Investment in equipments Micro Enterprises Does not exceed 10 lakh rupees: Small Enterprises More than10 lakh rupees but does not exceed 2 crore rupees Medium Enterprises More than 2 crore rupees but does not exceed 5 core rupees

44. 10 Major Problems faced by the Small Scale Industries of India: This sector can stimulate economic activity and is entrusted with the responsibility of realizing various objectives generation of more employment opportunities with less investment, reducing regional imbalances etc. Small scale industries are not in a position to play their role effectively due to various constraints. The various constraints, the various problems faced by small scale industries are as under: 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 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.

45. Raw Material: Small scale industries normally tap local sources for meeting raw material requirements. These 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 the 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. 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.

46. 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. 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.

47. 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. 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 are thus making best possible use of their machinery and equipments. 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.

48. 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. 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.

49. 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 counseling for developing his managerial skills will add to the problems of entrepreneurs.

50. Measures to Remove Difficulties faced by Small-Scale Industries in India: Technical Assistance: The elaborate institutional structure consisting of the State Direc­torate of Industries, the Small Industries Service Institutes and the Small Scale Industries Develop­ment Corporation provide technical assistance to the SSIs. The SISI also arrange for training pro­grammes for entrepreneurs, managers and work­ers. In 1978, the scheme of District Industries Centres (DICs) was introduced. The objective of this scheme was to provide a “focal point” for the development of small industries. The DICs were given the responsibility of providing all the services and support required at pre-investment and post-invest­ment stages to the small scale entrepreneurs. The DICs provide a package of assistance and credit facilities, raw materials, training, marketing etc., including the necessary help to unemployed edu­cated young entrepreneurs in general.

51. Physical Facilities: Industrial Estates: An in­dustrial estate programme has been in operation since 1955. An industrial estate is a planned clustering of industrial enterprises offering standard factory buildings erected in advance of demand. It offers all infrastructure facilities like sheds, water, power, communication, transportation etc. Industrial estates were established in India to encourage the growth of small scale industries, to shift small business units from congested areas to estate premises in order to increase their produc­tivity, to achieve decentralised development in towns and villages and to encourage growth of ancillary industries in the townships surrounding major in­dustrial concerns. Supply of Raw Materials: The scarce raw materials are distributed through an allocation sys­tem. In order to ensure the availability of the scarce raw materials to small industries, the State Small Scale Industries Corporation have been entrusted with the responsibility of distribution these mate­rials through the distribution centres located in dif­ferent parts of each State.

52. Marketing Assistance: Marketing of their products is perhaps the most crucial problem fac­ing the small scale enterprises. The assistance pro­vided by the Govt. in this area in these forms: (a) Exclusive purchase of specific products of SSIs for the Govt. (b) Price preference to small scale enterprises in public sector purchases and (c) Assist­ing the sale of small enterprises products though State-owned cooperatives. Fiscal Incentives: Both the Central and State Govts , have provided a number of fiscal in­centives for the growth of the SSIs like: ( i ) Tax holi­day for new industrial undertakings, (ii) Capital subsidy to industries in backward areas, (iii) Excise duty exemption, (iv) A price preference of 15% over large industries.

53. Financial Assistance: A number of schemes have been introduced from time to time for providing finance to small scale and cottage industries under liberal terms. Thus the Govt. of India introduced a Credit Guar­antee Scheme with the object of enlarging the sup­ply of institutional credit to the small scale sector. The Industrial Development Banks of India pro­vides funds to the Commercial Banks and the State Finance Corporations through its scheme of refi­nancing. The State Govts , provide seed capital and margin money assistance to small scale entrepre­neurs in order to enable them to secure loans from the commercial banks and the State Finance Cor­poration. A significant development has been the setting up of Small Industries Development Fund by IDBI in 1992. It has also taken a number of other measures like bringing the State Small Industries Development Corporations within the purview of assistance of IDBI, increasing the extent of refinance against loans from banks to small sector.

54. A National Equity Fund has been set up to promote small in­dustries. Further, a Small Industries Development Bank of India an apex all India financial institu­tion with an equity of Rs. 250 crores has been set up. This Bank will administer both the National Eq­uity Fund and the Small Industries Development Fund. SIDBI will function as the principal financial institution for the promotion, financing and devel­opment of industry in the small scale sector and to co-ordinate the functions of institutions engaged in promoting the small units. SIDBI has started func­tioning from 1990, through its 25 offices located in different States of the country. With a view to en­suring larger flow of financial and nonfinancial as­sistance to small scale sector, SIDBI’s immediate at­tention is on: ( i ) Initiating steps for technological upgradation and modernisation of existing units, (ii) Expanding channels for marketing products of SSIs in domestic and overseas markets and (iii) Pro­motion of employment oriented industries to cre­ate more employment opportunities.

55. Government Policies for Development and Promotion of Small-Scale Industries in India: Some of the Government Policies for development and promotion of Small-Scale Industries in India are: 1. Industrial Policy Resolution (IPR) 1948, 2. Industrial Policy Resolution (IPR) 1956, 3. Industrial Policy Resolution (IPR) 1977, 4. Industrial Policy Resolution (IPR) 1980 and 5. Industrial Policy Resolution (IPR) 1990.

56. Industrial Policy Resolution (IPR) 1948: The IPR, 1948 for the first time, accepted the importance of small-scale industries in the overall industrial development of the country. It was well realized that small-scale industries are particularly suited for the utilization of local resources and for creation of employment opportunities. However, they have to face acute problems of raw materials, capital, skilled labour , marketing, etc. since a long period of time. Therefore, emphasis was laid in the IPR, 1948 that these problems of small-scale enterprises should be solved by the Central Government with the cooperation of the State Governments. In nutshell, the main thrust of IPR 1948, as far as small-scale enterprises were concerned, was ‘protection.’

57. Industrial Policy Resolution (IPR) 1956: The main contribution of the IPR 1948 was that it set in the nature and pattern of industrial development in the country. The post-IPR 1948 period was marked by significant developments taken place in the country. For example, planning has proceeded on an organised manner and the First Five Year Plan 1951-56 had been completed. Industries (Development and Regulation) Act, 1951 was also introduced to regulate and control industries in the country. The parliament had also accepted ‘the socialist pattern of society’ as the basic aim of social and economic policy during this period. It was this background that the declaration of a new industrial policy resolution seemed essential. This came in the form of IPR 1956.

58. The IPR 1956 provided that along with continuing policy support to the small sector, it also aimed at to ensure that decentralised sector acquires sufficient vitality to self-supporting and its development is integrated with that of large- scale industry in the country. To mention, some 128 items were reserved for exclusive production in the small-scale sector. Besides, the Small-Scale Industries Board (SSIB) constituted a working group in 1959 to examine and formulate a development plan for small-scale industries during the, Third Five Year Plan, 1961-66. In the Third Five Year Plan period, specific developmental projects like ‘Rural Industries Projects’ and ‘Industrial Estates Projects’ were started to strengthen the small-scale sector in the country. Thus, to the earlier emphasis of ‘protection’ was added ‘development.’ The IPR 1956 for small-scale industries aimed at “Protection plus Development.” In a way, the IPR 1956 initiated the modem SSI in India.

59. Industrial Policy Resolution (IPR) 1977: During the two decades after the IPR 1956, the economy witnessed lopsided industrial development skewed in favour of large and medium sector, on the one hand, and increase in unemployment, on the other. This situation led to a renewed emphasis on industrial policy. This gave emergence to IPR 1977. The Policy Statement categorically mentioned: “The emphasis on industrial policy so far has been mainly on large industries, neglecting cottage industries completely, relegating small industries to a minor role. The main thrust of the new industrial policy will be on effective promotion of cottage and small-scale industries widely dispersed in rural areas and small towns. It is the policy of the Government that whatever can be produced by small and cottage industries must only be so produced.”

60. The IPR 1977 accordingly classified small sector into three broad categories: 1. Cottage and Household Industries which provide self-employment on a large scale. 2. Tiny sector incorporating investment in industrial units in plant and machinery up to Rs. 1 lakh and situated in towns with a population of less than 50,000 according to 1971 Census. 3. Small-scale industries comprising of industrial units with an investment of upto Rs. 10 lakhs and in case of ancillary units with an investment up to Rs. 15 lakhs . The measures suggested for the promotion of small-scale and cottage industries included: ( i ) Reservation of 504 items for exclusive production in small-scale sector. (ii) Proposal to set up in each district an agency called ‘District Industry Centre’ (DIC) to serve as a focal point of development for small-scale and cottage industries. The scheme of DIC was introduced in May 1978. The main objective of setting up DICs was to promote under a single roof all the services and support required by small and village entrepreneurs. What follows from above is that to the earlier thrust of protection (IPR 1948) and development (IPR 1956), the IPR 1977 added ‘promotion’. As per this resolution, the small sector was, thus, to be ‘protected, developed, and promoted.’

61. Industrial Policy Resolution (IPR) 1980: The Government of India adopted a new Industrial Policy Resolution (IPR) on July 23, 1980. The main objective of IPR 1980 was defined as facilitating an increase in industrial production through optimum utilization of installed capacity and expansion of industries. As to the small sector, the resolution envisaged: ( i ) Increase in investment ceilings from Rs. 1 lakh to Rs. 2 lakhs in case of tiny units, from Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units and from Rs. 15 lakhs to Rs. 25 lakhs in case of ancillaries. (ii) Introduction of the concept of nucleus plants to replace the earlier scheme of the District Industry Centres in each industrially backward district to promote the maximum small-scale industries there. (iii) Promotion of village and rural industries to generate economic viability in the villages well compatible with the environment. Thus, the IPR 1980 reimphasised the spirit of the IPR 1956. The small-scale sector still remained the best sector for generating wage and self-employment based opportunities in the country.

62. Industrial Policy Resolution (IPR) 1990: The IPR 1990 was announced during June 1990. As to the small-scale sector, the resolution continued to give increasing importance to small-scale enterprises to serve the objective of employment generation. The important elements included in the resolution to boost the development of small-scale sector were as follows: ( i ) The investment ceiling in plant and machinery for small-scale industries (fixed in 1985) was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for ancillary units from Rs. 45 lakhs to Rs. 75 lakhs . (ii) Investment ceiling for tiny units had been increased from Rs. 2 lakhs to Rs. 5 lakhs provided the unit is located in an area having a population of 50,000 as per 1981 Census.

63. (iii) As many as 836 items were reserved for exclusive manufacture in small- scale sector. (iv) A new scheme of Central Investment Subsidy exclusively for small-scale sector in rural and backward areas capable of generating more employment at lower cost of capital had been mooted and implemented. (iv) With a view, to improve the competitiveness of the products manufactured in the small-scale sector; programmes of technology up gradation will be implemented under the umbrella of an apex Technology Development Centre in Small Industries Development Organisation (SIDO). (v) To ensure both adequate and timely flow of credit facilities for the small- scale industries, a new apex bank known as ‘Small Industries Development Bank of India (SIDBI)’ was established in 1990.

64. Unit 4: Starting a Small Industry