MSME and Business Entrepreneurship

CLASS 11 CBSE
CHAPTER 9
VIVA the School
MICRO, SMALL AND MEDIUM ENTERPRISES
are called Small Businesses in India
 Chapter -9 Class 11
Business Studies
VIVA the School
Professor & Lawyer Puttu Guru Prasad
VIVA VVIT Nambur Guntur
B.Com,M.Com,LL.B,LL.M,M.Phil,M.B.A,PGDFTM,
APSET,DIRM,DSRM,IBSCMF,
“Diploma in Psychology from YALE University”
Pre PhD (PhD)from JNTUK., 
Amar, Akbar and Anthony are three good friends who have completed a vocational
course in entrepreneurship, after their school education.
Finding the job market tough, they were contemplating the idea of setting up a small
business, using the skills they had learnt in their course.
However, they knew very little about business. They were wondering what business to
start, where to locate it, how to procure machinery and materials needed for the
business, how to raise money and how to market.
They came across a notification given by the District Industries Centre located near the
Industrial Estate in Balanagar, Ranga Reddy district of Andhra Pradesh regarding a
seminar on government’s assistance for a small business, aimed at young
entrepreneurs.
Excited with the news, the three friends decided to attend the seminar. They were told
about the financial and other assistance offered by the Central and State Governments
under the Rural Employment Generation Programme to the educated youth.
They found that toys were in demand and decided to manufacture toys. They started a
small scale industry in their village by taking financial assistance with the help of Khadi
and Village Industries Commission.
Today, they are successful makers of toys and in the near future, they plan to get into
export market as well.
9.2 MEANING AND NATURE OF SMALL BUSINESS
In India, the ‘village and small industries sector’ consists of both
‘traditional’ and ‘modern’ small industries.
This sector has eight subgroups.
They are Handlooms,
Handicrafts,
Coir,
Sericulture,
Khadi and Village Industries,
Small Scale Industries and
Power Looms.
The last two come under the modern small industries, while the others
come under traditional industries. Village and small industries together
provide the largest employment opportunities in India.
POWER LOOM
Ground Nut Oil Expeller
KUMAR WATER PUMPS
HANDLOOMS at MANGALAGIRI KONDAPALLI BOMMALU

SERICULTURE
 Terracotta POTS
LEPAKSHI
EMPORIUM

COTTON SHOES
A.P. State Handloom Weavers’ Cooperative Society Ltd. (APSHWCS), popularly called APCO .
Definition of Guerilla Marketing
Guerilla marketing is a type of
marketing where companies use
unconventional tactics to sell
their products and services.
250 Cr.
250 Cr.
GARMENTS INDUSTRY
On the basis of the capital invested, small business units can be
categorized into various categories, which include:-
1. Small Scale Industry,
2. Ancillary Small Industrial Units,
3. Export Oriented Units,
4. Small Scale Industries owned and managed by Women
Entrepreneurs,
5. Tiny Industrial Units,
6. Small Scale Services and Business (Industry related)
Enterprises,
7. Micro Business Enterprises,
8. Village Industries and Cottage Industries.
PROUD of MSME Sector in India
Ramraj Cotton was set up in 1983 is a star production house of Dhotis,
Shirts, Inner Wears, Knit Wears, fabrics, Kids & Women’s Collection.
Ramraj Cotton is giving the value addition to the life style of every Indian.

The company is located in Tirupur, the hub of Indian knit garment

industry near to the textile city of Coimbatore in Tamilnadu, the southern
state of India.The company is constituted by the enterprising technocrat
Shri.K.R.Nagarajan. He has provided the vision continually and is the
reason behind the growth of RAMRAJ Cotton.

The company has the dedicated, dynamic and experienced management

and staff who keep the company in elevation always. The company
started with the wide exposure of dhotis, marketing them as the Indian
cultural style and to reach from town to villages.
Administrative setup:
The administrative setup for small-scale industry consists of two ministries
viz.,
the Ministry of Small Scale Industries and Ministry of Agricultural and
Rural Industry, Government of India,
The Ministry of SSIs is the nodal ministry for the formulation of policy and
coordination of central assistance, for the promotion and development of
SSIs in India.
Similarly, the ministry of Agro and Rural Industries is the nodal agency for
the coordination and development of village and Khadi Industries, Tiny
and Micro Enterprises in both urban and rural areas.
State Governments also execute different promotional development
projected schemes to provide a number of supporting incentives for the
development and promotion of SSIs in their respective states.
 A business which operates on a small
scale and required less capital, less
labour and less machines is called small
business.
 A small scale enterprise according to
MSMED Act, 2006 is defined as one where
the investment in Plant and Machinery is
more than 25 lacs but does not exceed
Rs. 5 crore.(MSMED-2020)
Q.1. What is the definition of MSME
Union Ministry of Micro, Small and Medium
Enterprises (M/o MSMEs) has issued Gazette
notification to pave way for implementation of the
upward revision in the definition and criteria of
MSMEs in the country.
The new definition and criterion will come into effect
from 1st July, 2020.
After 14 years since the MSME Development Act came
into existence in 2006, a revision in MSME definition was
announced in the Atmnirbhar Bharat package on 13th
May, 2020.
As per this announcement, the
definition of Micromanufacturing
and services units was increased
to Rs. 1 Crore of investment
and Rs. 5 Crore of turnover.
The limit of small unit
was increased to Rs. 10
Crore of investment
and Rs 50 Crore of
turnover.
Similarly, the limit of
medium unit was
increased to Rs. 20 Crore
of investment and Rs. 100
Crore of turnover.
The Government of India on
01.06.2020 decided for further
upward revision of the MSME
Definition.
For medium Enterprises, now it
will be Rs. 50 Crore of investment
and Rs. 250 Crore of turnover.
 1.Small scale Industries
 2. Ancillary small
 Industrial Unit parent unit
 3. Women Enterprises Any of the Owned and
managed by woman
 4. Mirco Business
 5. Village Industries Investment
 6. Cottage Industries
Role of small business in India: Small Scale Industries play a very
important role in the socio economic development of the country.
These industries account for 95 per cent of industrial units, contributing
up to 40 per cent of the gross industrial value added and 45 per cent of
the total exports.
SSIs are the second largest employers of human resources, after
agriculture and produce a variety of products for the economy.
These units contribute to the balanced regional development of
the country by using locally available material and indigenous
technology.
These provide ample scope for entrepreneurship; enjoy the
advantage of low cost of production; quick decision making, and
have quick adaptability and are best suited to customized
production.
Employment : Small scale Industries are second largest
employers of human resources after Agriculture. It has 95% of
the industrial unit in the country.
Variety of product : Small scale Industries produce an enormous
variety of goods e.g. readymade garments, stationery, soaps,
Leather s goods, Plastic and rubber goods.
Export : The share of product from SSI is 45% of total export
from India. So it earn valuable foreign exchange and solve the
problem of balance of payment.
Balance regional development : S.S.I can be set any where in the
country. They use local resources. Less capital and simple
technology.
Low cost of production : S.S.I. also enjoy the advantage of low cost of
production because they used local resources in their product.
Role of small business in rural India: Small
business units provide multiple
source of income,
in wide range of non agricultural
activities and provide employment
opportunities in rural areas,
especially for the traditional artisan
and weaker sections of the society.
 Provides Employment in Rural
Areas
 Utilisation of Local Resources
 Equitable distribution of national
Income
 Balanced Regional development
 Improve Economic Condition
Problems of small industries: Small Industries suffer
from various problems including that of
(i)Finance,
(ii) Non-availability of raw material,
(iii) Managerial skills
(iv) Skilled labor
(v) Marketing of their goods
(vi) Maintaining Quality standards
(vii) Low capacity utilisation,
(viii) Use of traditional technology
(ix) Prevalence of sickness and
(x) Facing global competition.
INSTITUTIONAL SUPPORT :
 I. National small Industries Corporation (NSIC) was setup in 1955
 II. District Industries Centre (DIC) This concept of DIC came
during 1977
 National Bank for Agriculture and Rural Development (NABARD)
 The Rural Small Business Development Centre (RSBDC)
 Small Industries Development Bank of India (SIDBI)
 The National Commission for Enterprises in the Unorganized Sector
(NCEUS)
 Ruraland Women Entrepreneurship Development (RWED)
 World Association for Small and Medium Enterprises
(WASME)
 Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
1. Power : Some states supply power at a concessional rate of 50%.
2. Tax holidays : Exemption from payment of tax for 5 years.
3. Land and Water : Availability of land at concessional rate. Water is
supplied on no profit no loss basis.
4. Octroi : Most of the states have abolished octroi.
5. Protective Measures :- The government reserved 800 items for
exclusive production by the small scale Industries and give priority in
allocation of raw materials and machines.
6. Marketing Assistance : - Government tries to solve their marketing
problem by improving information and in order to provide guarantee for
sale of goods.
7. Finance Subsidy of 10-15% for building capital asset. Loans are offered
at concessional rates.
8. Sales Tax In all Union Territories, small industries are exempted from
sales tax while some states give exemption of 5 years.
Governmental assistance to small industries:
In view of the contribution of small business in various areas including
employment generation, balanced regional development, and promotion
of export the central and state government have been providing
assistance in respect of infrastructure, finance, technology, training etc.,
to SSI units.

Some of the major institutions providing support include National Bank

for Agriculture and Rural Development, Rural Small Business
Development Centre, National Small Industries Corporation, Small
Industries Development Bank of India (SIDBI)), The National Commission
for Enterprises in Unorganized Sector (NCEUS), Rural and Women
Entrepreneurship Development (RWE), World Association for Small and
Medium Enterprises (WASME), Scheme of Fund for Regeneration of
Traditional Industries (SFURM) and the District Industries centre (DIC).
 9.8 THE FUTURE
 The present era is the regime of the World Trade Organisation (WTO), in which the
rules of trade are subject to frequent changes as per global expectations.
 As a founder member of WTO, India too has committed itself to the policy
framework of WTO.
 As a result, small business is also moving away from the pre-liberalization era of
protection.
 With the Indian economy getting integrated with the global economy, it is
inevitable for the small businesses to gear up their capabilities to explore,
penetrate and develop new markets.
 They have to steadily reorient themselves to face the challenges posed by increased
competition, domestically and internationally too.
 With their dynamism, flexibility and innovative entrepreneurial spirit, small
businesses have to adapt themselves to the fast changing needs of the market
driven economy.
 Government should reorient its assistance to the small business sector by acting as
a facilitator and promoter and not as a regulator.
 9.8 THE FUTURE
 New strategies have to be evolved to foster partnership between large
and small industries, adopt cluster approach, develop creative
marketing, improve technological skills by upgradation, building export
competitiveness by identifying the core competencies of the small
businesses.
 In fact small business sector should view globalization as an
opportunity for its active participation as suppliers of specialized
component and parts.
 If small businesses are to maintain their market share and healthy
growth, they have to create a level-playing field for themselves.
 The long-term competitive position for the small businesses will
depend on how well they learn to manage, adopt and improve their
competitive strength.
 In short, the mantra of
success for Small
Businesses in this
modern era has to be
‘think global, act local.’
Pradhan Mantri Mudra Yojana
The Pradhan Mantri Mudra Yojana is a
refinancing scheme for lending to small and
micro enterprises in the manufacturing, trading,
or service sector. The loans offered by this
scheme are also called MUDRA loans (Micro
Units Development Refinance Agency). This
MSME scheme provides banks with
refinancing facilities against the loans offered
to small businesses. 
Credit Guarantee Fund Scheme for
Micro and Small Enterprises 
The Indian Government launched the 
Credit Guarantee Fund Scheme for Micro and Small Enterprises
(CGS)
 to provide credit guarantees on collateral-free term loans for
MSMEs.
This scheme covers the funds that MSMEs have borrowed from
lending institutions and provides a percentage of the term loan to
the lender in case of default or the loan turning into a non-
performing asset (NPA).
This MSME scheme builds confidence in lending collateral-free
loans to MSME units and ensures swift financial assistance.
Credit Linked Capital Subsidy 
The Credit Linked Capital Subsidy (CLCS) aims to help MSMEs improve
their technology to boost revenue generation.
Often, MSMEs in rural and semi-urban areas are forced to work
with obsolete technologies because they don’t have enough funds
to upgrade their machinery.
The CLCS facilitates technology upgradation for MSMEs
through an upfront capital subsidy of 15% on loans from
financial institutions.
The upper limit for the subsidy is ₹1 crore. The key objective of
this MSME scheme is to equip MSMEs with state-of-the-art
technology with or without expansion.
Khadi, village, and coir industrial units are also included in this
MSME finance scheme.
Micro Finance Program
The Micro Finance Programme has been launched
for under-served States and under-served pockets of
other States. 
Existing micro-credit programs had limited reach an
d fulfilled only up to 10% of the credit requirements
of MSMEs
.
The Micro Finance Program was started to improve
the reach of micro-credit programs and reduce the
financial burden on micro finance institutions
Prime Minister’s Employment
Generation Programme 
The Prime Minister’s Employment Generation
Programme (PMEGP) was introduced by the
Khadi and Village Industries Commission
(KVIC) to offer financial assistance to new
servicing or manufacturing businesses.
The MSME funds are in the form of subsidy
assistance in the bank.