Part:B

SMALL BUSINESS
AND ENTERPRISES

Contents as per Latest CBSE Syllabus

Cont
eneurship Development (ED): Concept, Characteristics and Need.
Entr
Process of Entrepreneurship Development: Start-up India Scheme, Ways to fund start
Intellectual Property Rights and Entrepreneurship
10.
as defined by MSMED Act, 2006 (Micro, Small and Medium
Small scale enterprise
Enterprise Development Act)
in India with special reference to rural areas
Role ofsmall business
National Small Industries
IGovernment schemes and agencies for smallscale industries: rural,
with special reference to
and District Industrial Centre (DIC)
Corporation (NSIC)
backward areas

1.ENTREPRENEURSHIP
DEVELOPMENT (ED): CONCEPT,
CHARACTERISTICS AND NEED

1.1 The Concept of Entrepreneurship

ENTREPRENEUR (PERSON)

Entrepreneurship (Process)

Enterprise (Outcome)

Fig. 1

Why Seek an Enterprise? resuits in

creating goods
and services which hrina
becauseit
enterprise 1Or a world
ks for full ofhappiness,
worid full joy, comfort
happiness, joy, comfor
Entrepreneur seeks being looks
an
human
Every oPportunities for
for converting challer
converting challeng
comfort and peace. ks for
looks TOr opportunities
happiness,joy.
ppiness, joy,
this, the
entrepreneur
venture, which brings about change.
and peace. In order to bring is setting up
a venture,
enterprise
fort. Setting up of
into comfo an
 236 Part: B Finance & Trade

1.2 Need and Importance of Entrepreneurship

Entrepreneurship is important for national growth and social development. M
developing countries have the history of long years of foreign domination. They have Most of the
freedom recently. The most common problem attained
they are facing is to conserve the outflow ofli..
national wealth and fulfilling the demand for consumer
goods and services by locally produ
importcarucing
them. They are also
facing the problem of foreign exchange. These countries need to
goods and technology and the major source of foreign exchange is export. capital
In short, we can
say that the present conditions demand developing countries to:
(i) Produce import substitute
goods to stop outflow of national wealth.
(ii) Produce more and more consumer
goods and services to meet the increasing demand of
these goods locally.
(1i) Produce goods for export
purpose to earn more and more foreign exchange.
All the above mentioned
requirements can be met by more and more
entrepreneurs,
Entrepreneurs bear the cost and risk oflaunching a new venture,
adapting new technology and developing new markets. So, developing new
products
entrepreneurs ofter a new
strategy of
development.
Fig. 2 shows how
entrepreneurship helps in increasing national production.

Import Substitute Goods

Entrepreneurship must raise

production of Consumer goods and services
Increase in national
production

Export productions
and services

Fig. 2

Need for entrepreneurship can be made more clear from the following points:
1.
Life line of a nation: Entrepreneurship 1s a yardstick to measure
the development of
any
country as no country can prosper and 8row witnOut development of
We can see that in U.S., U.K., and other developed countries, entrepreneurship.
there are well developed
and well established enterprises. So every nauon i e s to
increase its trade by having
more enterprises.

2. Provide innovation: Entrepreneur is an innovaor wno tries new

methodsof
He
of production,
nroduction. ods
new technology, new ways of marketing etc. develops new businese
them into action to enhance the process of economic development
 Chapter: 8 Small Business and Enterprises 25/

GrOwth of economy: Th Entrepreneurs adapt to changes as changes take place in the

ronment.
nvironment. The
The changes adopted by entrepreneurs in enterprises even bring changes
society and economy. Latest technology used by enterprises not only brings growtn
i nt h e .

enterprises but it also brings growth of economy at large.

inthe en

reased profits:
4. Increased p entrepreneur always tries to minimise cost. He always tries to get
An

imum utilisation of resources. The reduction of cost and increase in efficiency always
increase in profit.
result in self-
the scope for
Employment opportunities: Entrepreneurship not only provides
in the case or
employment to large number of people
as
but alsoo ofers
mployment
em and more
activities leads to more

SICcessful enterprises. Growth in entrepreneurial

su
employment.
and raise the

benetits: Entrepreneurs always try

adopt latest technology
to
6. Social lowest cost. By
products and services at
standard of living by providing
good quality growth. By
to bring balanced regional
in backward areas, they try
setting up enterprises resources
of society.
utilisation of resources, they save scarce
making optimum
2.PROCESS OF ENTREPRENEURSHIP

Following is
of steps betfore starting an enterprise.
a sequence
have to follow
Entrepreneurs
and
entrepreneurship. his strengths
the process of entrepreneur
assesses
what are

Under this step,

work
1. Self-discovery: and his Self discovery

what all he enjoys doing

weaknesses,

experience. tries to
step, he
ldentifying opportunities
Under this
2ldentifying
opportunities:
so that he can get an
and problems
the need,
want
and fulfil
the need. ideas
hind out Generating and evaluating
o v e r c o m e
the problems
to various
oPportunity Through
ideas:
evaluating creativity
and
.Generating brain storming, Planning
discussion,
new ideas
such as develop
measures tries to
he expectations
of
experiences,
the
and his own meet Raising start-up capital
and
problems
Overcome
o
conducts
research,
customers. entrepreneur
Start-up
Under this step,
4. Plannin
ing: strategies.
and using business plan,
business
business plan using
makes
capital:
By and partners, Growth
capitalist
start-up venture
5. Raising attract
t r i e s to
entrepreneur

Harvest

Fig. 3
 238 Part: B Finance & Trade
his enterprise and tries.
to
6. Start-up: Under thisstep,
also
the entrepreneur
makes changes
launches
as per changes
in the environment develop
m o r e c u s t o m e r s . He
enterprise.
Growth: Entrepreneurtries
to expand and grow the
7.
the business and
harvesting the reward. Many entr.
Many ntrepreneurs
m e a n s selling
8. Harvest: This
venture.
and start a new
sell their existing business

2.1 Startup INDIA SCHEME

first
Startup India is an initiative of Government of India.
The campaign was
nounced by
announs

15 August, 2015.
Minister, Mr. Narendra Modi in his speech
on
Prime

develop an eco-system to promote and nurhs

Startup India is an action plan to rture
the country. Government is offering various bank financing schemes
entrepreneurship across

promote Startups.
2.2 Meaning/Definition/What is Startup?
A Startup is a business enterprise in the form of private ltd. company, partnership, limited
liability partnership or sole proprietor, registered in India, which was started less than five years
ago and have annual turnover of less than 25 crore.

To be eligible for Startup, the enterprise should not have formed by splitting up or
reconstruction and its turnover should not have exceeded 25 crore since its existence.

2.3 Various Schemes and Ways to fund startup by Government of India

The Government of India is taking lot of steps to encourage startup projects. Common
schemes/benefits offered by government are:
1. No inspection under this scheme no
inspection would be carried out at startups for three
years regarding labour laws, etc., as they need only self-certification.
2.
Registration: The Government has launched a mobile app in April 2016 and a portal that
will allow startup to get
registered in one day. In addition there will be a single window tor
clearance, approvals and registration.
3. Income Tax Exemption:
Income tax exemption is available
for first three years. Inis
exemption is available only after obtaining a certificate from
for this purpose. inter-ministerial board ser up
4. Capital gain tax exemption: The startup can claim
three years. capital gain tax exemption also l01 frst
b.
5. Benefit in Patent and
Intellectual property: In patent cost, startup can claim an % r bate
that means if
a startup applies for patent the &00
faster patent government will give 80% rebate in
fees
registration and protection for intellectual ovided
under this scheme. property rights are also Pro
 Chapter: 8 Small Business and Enterprises 239

10,000 crore fund for new

Funding
Shemes
hemes
for startup: GOvernment has announced
to
d500
a r t u p s a n d5 0 0 . crore for credit guarantee scheme. Even foreign aid is also provided
softbank
example aa softba of Japan invested $ 2 billion in Indian startups.
tartups,tor example
raise capital.
1stsof 10 funding options startups help
for to
nmg
are.
later stage investors may get
To start business selt funding is first option on
ding:
S e l lundin

tracted of funding
Funding Option: Crowdfundingis
one of the newer ways
as a loan, pre-order
Crowdiudfunding
popularity lately. It's like taking a
that has
been gaining lot of
startup than one person at
the same time.
investments from
more
ot his
antribution or a detailed description
oni

will put up
how crowding
works-An entrepreneur
of his business, plans for
This is mention the goals
He will investors
on à
crowdfunding platform. etc. and then
business he needs and for what reasons,
wil
how much funding idea. Those giving
money
making a profit, if they like the donation.
about the
business and give money or giving a
read the product
can of pre-buying believe i
with the promise
make online pledges a business
that they really
contribute money
toward helping with surplus
cash
Anyone
can
investors are
individuals
In Your Startup:
Angel have helped to startup
Investment investors
Get Angel startups. Angel This
alternative
3.

invest in upcoming Alibaba.

interest to Yahoo and
and a keen
including Google,
investors
with
companies, of growth,
many
prominent
occurs in a company's early stages investment for higher
generally risks in
form of investing to take
more
prefer
30% equity. They
expecting a upto
professionally
managed funds
Venture capitalsare
returns.
Business: business against
for your invest in a
Venture Capital potential. They usually
4. Get
that have huge
companies
who invest in IPO or an
acquisition.
when there is
an entrepreneurs
and exit the first place that
equity Loans: Normally, banks are
Bank
Through
Raise Money
about funding. For instance, leading
go when thinking
various progranms.
finance through different options to
offers than 7-8
bank in India have more
Almost every Axis banks
ICICI and
HDFC,
banks-SBI,
Indian loans.
business financial companies

offer collateral
free
option. Non Banking
There is an baking
NBFCs: conventional
from a c c e s s to
Loans not have
6, Get Business
who would and
those are limited
services to those whose requirements
(NBFC) provide for
popular
becoming
services. It is increasingly bank.
not
favoured by Government ofIndia has
launeched

Capital: 'The
are
credit ratings Startup
that Offer ecosystem in India,
Government Programs
Union Budget
to improve startup
Fund in the
various schemes
such as
10,000 Crore Startup launched
has also
further the government
 240 Part: B Finance & Trade

Central Government Schemes order to boOst innovativ

ive product
(i) programme-in
Innovations
(a) Bank of Ideas
and

companies and Refinance Agencv I:.

Development
Micro Units medium enterprises
Pradhan Mantri and
(6)
extent benefits
to 10 lakh small
(MUDRZ)- To also offer business loan..
Bank of ndia
Development
SIDBI-Small Industries
(c)
MSME sector.

(ii) State Government Schemes Mission (KSSEDM),

Development
(a) Kerala State Self Entrepreneur
Development,
Maharashtra Centre for Entrepreneurship
(b)
(c) Rajasthan Startup Fest, etc.
small business in India.
Ihese schemes are set up to boost up
Action Plan.
Read about Indian government's Startup India
ENTREPRENEURSHIP
3. INTELLECTUAL PROPERTY RIGHTS AND
critical in helping new ventures transform their
Property (IP) systems can be
Intellecutal
innovation potential and creativity into market value
and competitiveness. Intellectual Property
their inventions. It also give an edge over
rights (IPR) allow innovative entrepreneurs to protect
your competitor.
3.1 What is the IP System?

General definition of intellectual property rights (IPR)

Intellectual Property (IP) is divided into two categories:
1. Industrial property, which includes inventions (patents), trademarks, industrial designs
and geographic indications; and
2. Copyright, which includes literary and artistic works.
Intellectual property rights (1PR) refer to the general term for the assignment of property
rights on these assets)

The IP system as an asset for innovative entrepreneurship

The Intellectual Property Right, i.e., IPR is very very important and beneficial for innova ve

entrepreneur in the following way:

1. Innovative potential get market value.

2. Specially upcoming entrepreneur can make their name and place in market with IPK.
3. Research shows more than 25% patent are taken by new and upcoming entrepreneuib
4. IPR gives the
entrepreneur property right on intangible assets.
 Chapter:8 Small Business and Enterprises 241

PR givean edge
over your competitor and help you to become leader in your field.
givean
ctual Property include
itelle

. C o p y r i g h t s

2 Patents

3. T r a d e m a r k s

the work,
protection gives the copyright holder the exclusive right copy
to
Copyright
the work
is, create derivative works"), and distribute, perform and display
modify it (that
publicly
inventions that are "novel, "non-obvious
protect proceses, methods and
Patents
Patents: on selling, using, making
or importing
gives monopoly
and "useful. If granted, patent
a you
are complex.
'The requirements for a patent
invention.
an
symbol(s) that represent
A trademark is like a brand name. It is any word(s) or
in the marketplace.
Trademarks:

and distinguish it from other products

a product to identify
is trademark of Nikecompany.
Example'Nike' else can use this trade mark.
that no one
Trademark gives you a legal protection

4.SMALL BUSINESS: INTRODUCTION

like
but in a developing country
of the world,
enterprises exist in every country of capital and
abundance of
Small-scale as there is scarcity
a special place
small-scale enterprises occupy techniques.
ndia, labour-intensive or capital-saving
use
2bour and small-scale
enterprises

Meaning of Small Business

Definition Immediately after independence

was
defined by
small-scale industry
and Regulation
Development
dustries which employs
enterprise
Act, 1951 as Any
when uSing power
PMore than 50 persons and with
power
and 100 when not using
5 lakh'.
exceeding
capital assets n o t 1975,
1959,
1960, 1966,
in
Later on, revised.
was
definition
80, 1990 the
 business as per MSMED ACT, 2020
020 (Micro
Meaning and new classification of small
Small and Medium Enterprise Act)

Revised MSME Certification

Turnover
Investment and Annual
Composite Criteria:

Micro Small Medium

Classification

Manufacturing Investment < 1 crore

Investment < 10 crore Investment < 20 crore
and
and and
and
Services Turnover< 5 crore Turnover< 50 crore Turnover <7 100 crore

Case Study
Q.1. Do Well is manufacturing unit to produce all kinds of school and office stationerv
such as pencils, pens, paper, notebooks, etc. in Gurgaon. The total investment ofthe
company in plant and machinery is 3 crore. Identify the category into which this
business will fall as per MSMED Act, 2006.
Ans. The investment of 'Do well' is more than 25 lakhs but less than F5 crore. Hence as per
MSMED Act 2006, "Do well' is a Small Enterprise.

5. ROLE OF SMALL BUSINESS IN RURAL INDIA

Small-scale industries provide the following benefits in rural area:
(i) Employment: Small-scale industries are labour-intensive so they provide additional
employment to men and women. Next to agriculture, small business constitutes the most
popular occupation of people of India. They also provide employment to agriculturists wno
remain idle during a part of year.
(ii) Improves Economic Condition: By providing employment opportunities, the small-scal
industries provide more income to people living in rural areas, which improves econo
conditions in villages.
(iii) Promotion of Artistic and Creative
Sense: Small business set up in rural area vides

Scope for the promotion pr

of artistic achievement and creativity that has been d in
rural areas. suppresse
(iv) Rural
Development: Small-scale industry set up in rural areas leads to
which may result in their deveioppment
rural reconstruction, sustained growth and removal g i o n a l

or
disparity. ieo
 Chapter:8 Small Business and
Enterprises 243
Mobilisation of Locaj
teation of Local Resources: Small-scale industries facilitate
and utilisat .ilisation of local resources which mobilisation
might otherwise remain unutilised. This
elps in tapping resources
reso like
entrepreneur skill and small savings specially in rural
a r e a s .

á VERNMENT ASSISTANCE AND SPECIAL SCHEMES

60VEA

rOR INDUSTRIES IN RURAL, BACKWARD AND HILLY AREAS

Keening in view the contribution of SSI to employment generation, balanced regional
of export, the government of India has formed various policies and offered
Owth and promotion
s incentives and benehts tor growth and promotion of small-scale business at central level as
ell
ell
as state level. The government assistance are translated into action through various agencies,
departments and corporations etc.
small and rural
Some of the support measures and programmes meant for the promotion of
industries are grouped in following two categories:

Institutional Support
Incentives offered by the Government to SSI

6.1 Institutional Support

view to
Corporation (NSIC):
This was set up in 1955 with a
1. National Small Industries
the country.
the growth of SSI in
promoting and fostering
Its main focus was on:
machines in easy installments
i) To supply indigenous and imported
raw materials

11) To procure
and supply imported
of SSI
(ii) To export products services
and mentoring
(iv) To provide advisory
assistance
technological
(VTo provide
part and technology transfer
software technology
(vi) To develop or small business is implemented
throuoh
and credit rating
A new scheme of performance
twin objectives:
NSIC with following
industries
about need of credit rating
small
(a) Sensitising financial track record
maintain good
SSI to
(6) Encouraging
 244 Part: B Finance& Trade

2. The DistrictIndustries Centres (DICs): The DIC programme was started on Ma.
y 1, 1978
to provide assistance to small-scale industries at the district level.
These centres provide all the promotional activities such as identification of suitable cel

preparation of feasibility report, arranging for credit etc. scheme,

These centres promote entrepreneur attitude in rural areas. DIC is the institution.
at the
district level which provides all services and support to entrepreneur for setting up sm
small-
scale business, such as identification of suitable scheme, preparation of feasibility ren
arranging for credit etc. eport,
Broadly, DICs are trying to bring change in the attitude of rural
entrepreneurs. The DIC is i
emerging as the focal point for economic and industrial growth at the district level.

6.2 Incentives Offered by Government for Industries in Rural Area

After Independence, some areas in our

country are developing rapidly whereas some areas
remain backward and underdeveloped. But balanced
regional growth and development is a must
due to the following reasons:
(i) To provide employment opportunities in all the areas
(ii) To develop local skills and resources
iii) To restrict the migration of people to urban areas.
To have balanced
regional growth and for the development of rural backward and hilly areas
the government has provided the
following incentives:
i) Availability of land in these areas at concessional rates
(ii) Location of public sector projects in backward areas
(iii) Establishment of industrial estates in backward areas
(iv) Development of infrastructure facilities such as transport, banking, power supply etc.
(v) Offering tax concessions to units located in backward areas
(vi) Finance at concessional rates to industries set up in these areas
(vii) Granting subsidies from time to time. Some of the subsidies offered are:
(a) Transport subsidy for carrying raw materials and finished products in these areas.
(b) Capital subsidy for investment in fixed assets of industries
backward areas
set up in
(c) Infrastructure subsidy. The central government bears apart of the expenses incurrcu
on infrastructure.
(vii) Special programmes for the development of backward areas have been initiated by t
government.