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 powerlooms. 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.
The MSMED (The Micro, Small and Medium Enterprises Development) Act, 2006 came into force w.e.f., October, 2006. Accordingly, enterprises are classified into two major categories viz., manufacturing and services.
In the case of enterprises engaged in the manufacture or production of goods.
there are three types of enterprises:
(i) Micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees.
(ii) Small enterprise, where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees.
(iii) Medium enterprise, where the investment in plant and machinery is more then five crore rupees but does not exceed ten crores rupees.
In the case of enterprises engaged in providing or rendering of services there are three types of enterprises:
(i) Micro enterprise, where the investment in equipment does not exceed ten lakh rupees.
(ii) Small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees.
(iii) Medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.
Village industries: Village industry has been defined as any industry located in a rural area which produces any goods, renders any service with or without the use of power and in which the fixed capital investment per head or artisan or worker is specified by the central government, from time to time. (In plain area -Rs 100,000 and 1,50,000 in hilly areas)
Cottage industries: These are also known as Rural Industries or Traditional Industries. They are not defined by capital investment criteria as in the case of other small scale industries. However, cottage industries are characterised by certain features like the following:
• these are organised by individuals, with private resources;
• normally use family labour and locally available talent;
• the equipment used is simple;
• capital investment is small;
• produce simple products, normally in their own premises;
• production of goods using indigenous technology.
Difference between small scale and cottage industries:
In Small scale industry outside labour is used whereas in cottage industries family labour is used.
Small Scale Industry (SSI) uses both modern and traditional techniques. Cottage industries depend on traditional techniques of production.
ADMINISTRATIVE SETUP FOR THE SMALL SCALE, AGRO AND RURAL INDUSTRIES
The Government of India created the Ministry of Micro, Small and Medium Enterprises as the nodal ministry for formulation of policy and coordination of central assistance for the promotion and development of small scale industries in India. The Small Industries Development Organisation (SIDO), also known as the Office of the Development Commissioner (SSI) which is attached to this ministry is responsible for implementing and monitoring of various policies and programmes formulated.
Ministry of Agro and Rural Industries is the nodal agency for coordination and development of Village and Khadi industries, tiny and micro enterprises in both urban and rural areas. It also implements Prime Minister’s Rojgar Yojana.
ROLE/ IMPORTANCE OF SMALL BUSINESS IN INDIA
Small Scale Industries in India enjoy a distinct position in view of their contribution to the socio-economic development of the country. The following points highlight their contribution.
- Provide more employment opportunities: MSME are second largest employers of human resources after Agriculture. It has 95% of the industrial unit in the country.
- Variety of product: MSME produces an enormous variety of goods e.g. readymade garments, stationery, soaps, Leather s goods, Plastic and rubber goods.
- Export: The share of product from MSME is 45% of total export from India. So it earns valuable foreign exchange and solves the problem of balance of payment.
- Balance regional development: MSME can be set anywhere in the country. They use local resources, less capital and simple technology.
- Complementary to large scale Industries: MSME supplies various types of components, spare parts, tools, which are required by large scale enterprises.
- Low cost of production: MSME also enjoys the advantage of low cost of production because they used local resources in their product.
- Quick and timely decisions: Due to the small size of the organisation, quick and timely decisions can be taken without consulting many people.
- Development of entrepreneurship: MSME provides opportunity of young men and women to start their own business.
ROLE OF SMALL BUSINESS IN RURAL INDIA
- Provides Employment in Rural Areas: – Cottage and rural industries provide employment opportunities in the rural areas as these are labour oriented enterprises. In Indian rural areas ample labour is available
- Improve Economic Condition: Small business provides multiple source of income to the rural households. MSME improve economic conditions and standard of living of people living in those Areas.
- Prevent migration: Development of rural and village industries can also prevent migration of the rural population to urban areas in search of employment.
- Utilisation of Local Resources: MSME use local resources e.g. coir, wood and other products.
- Equitable distribution of national Income: MSME and cottage Industries ensure equitable distribution of national income. This helps to reduce the gap between rich and the poor in the country.
- Balanced Regional development – These enterprises are often dependent on local source of production. This way, industries do not just limit themselves to a particular place but diversify. This helps in balanced regional development.
PROBLEMS OF SMALL BUSINESS
In general the small businesses are faced with the following problems:
- Finance: One of the severe problems faced by SSIs is that of non-availability of adequate finance to carry out its operations.
- Raw materials: Another major problem of small business is the procurement of raw materials
- Managerial skills: Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business.
- Labour: Small business firms cannot afford to pay higher salaries to the employees, which affects employee willingness to work hard and produce more.
- Marketing: marketing is a weaker area of small organisations. These organisations have, therefore, to depend excessively on middlemen, who at times exploit them by paying low price and delayed payments
- Quality: Many small business organisations do not adhere to desired standards of quality.
- Capacity utilisation: Due to lack of marketing skills or lack of demand, many small business firms have to operate below full capacity.
- Technology: Use of outdated technology is often a serious problem to the MSME
- Sickness: the chance of sickness is more in case of MSME
- Global competition: In the era of globalization MSME also face global competition.
A. Institutional support:
1.NABARD-(National Bank for Agriculture and Rural Development) It was setup-1982 To promote integrated rural development It provide credit and non-credit facilities.
2.RSBDC( Rural Small Business Development Centre) Its aim is to provide management and technical support to micro and small entrepreneurs.
3.NSIC(National Small Industries Corporation) It was setup in 1995. This is to promote and foster the growth of small enterprises.
It offers various services viz-
d) Other support service like TBI
e) Performance credit rating (to sensitise the need for credit rating and to maintain good financial track record)
Marketing Support to MSMEs by NSIC
1. Organising International Technology Exhibitions in Foreign countries and Participation in International Exhibitions
2. Organising Domestic exhibitions and participations in Exhibitions
3. Co sponsoring of exhibitions
4. Buyer ,Seller meets ( Bulk buyers and departments-Railways, Defense)
5. Intensive Campaigns and Marketing Promotion Events
6. Other support activities
4.SIDBI(Small Industries Development Bank of India)-1989 It provide financial assistance to small scale business.
Functions of SIDBI
A. Factoring service
B. Leasing service
C. Loans ( Long term, Medium term and Short term)
D. Financial assistance for modernisation and diversification
E. Working capital loans
F. Revival of sick units
G. Technical and financial assistance for product development and marketing
5.DICs(District Industries Centers) It was setup 1978.It is the focal point for economic and industrial growth at the district level
6.NCEUS ( National Commission for Enterprises in the Unorganised Sector)
7.RWED ( Rural and Women Entrepreneurship Development)
8.SFURTI (Scheme of Fund for Regeneration of Traditional Industries)
9.WASME ( World Association for Small and Medium Enterprises –An international NGO based in India)
Entrepreneurship is the process of setting up one’s own business. The person who set-up his business is called an entrepreneur. The business unit is called an enterprise. It is interesting to note that entrepreneurship besides providing self-employment to the entrepreneur it also generates employment opportunities to others.
As per the notification dated February 17, 2017, issued by the Ministry of Commerce and Industry, a startup means:
(i) An entity incorporated or registered in India.
(ii) Not older than five years.
(iii) Annual turnover does not exceed ` 25 crore in any preceding year.
(iv) Working towards innovation, development or commercialisation of products/service/ processes driven by technology or IPRs and patent.
Characteristics of entrepreneurship:
(i) Systematic Activity: Entrepreneurship is a systematic, step-by-step and purposeful activity. It has certain skill and other knowledge and competency requirements that can be acquired, learnt and developed, both by formal educational and vocational training as well as by observation and work experience.
(ii) Lawful and Purposeful Activity: The object of entrepreneurship is lawful business. Purpose of entrepreneurship is creation of value for personal profit and social gain.
(iii) Innovation: Entrepreneurship is creative also in the sense that it involves innovation,introduction of new products, discovery of new markets and sources of supply of inputs, technological breakthroughs as well as introduction of newer organisational forms for doing things better, cheaper and faster
(iv) Organisation of Production: Production, implying creation of form, place, time personal utility, requires the combined utilisation of diverse factors of production, land, labour, capital and technology.
(v) Risk-taking: It is a fact that entrepreneurs take high risks. In case of entrepreneurship, there is no “assured” profit.
Startup India Scheme
The term startup refers to a company in the first stages of operations. Startups are founded by one or more entrepreneurs who want to develop a product or service for which they believe there is demand.
Startup India scheme is an important government scheme that was launched on 16th January 2016 with an aim to promote and support the start-ups in India by providing bank finances and other supports. The Startup India Scheme is a flagship initiative of the Government of India with an objective to carve a strong ecosystem for nurturing innovation and startups in the country.
The scheme specifically aims to:
(i) activate an entrepreneurial culture and inculcate entrepreneurial values in the society at large and influence the mindset of people towards entrepreneurship,
(ii) create awareness about the charms of being an entrepreneur and the process of entrepreneurship, especially among the youth,
(iii) encourage more dynamic startups by motivating educated youth, scientists and technologists to consider entrepreneurship as a profitable, preferred and viable career, and
(iv) support the early phase of entrepreneurship development, including the pre-startup, budding, as well as, early post startup phase and growth enterprises.
Startup India Initiative: Action Points
Startup India Action Plan is the detailed list of sequential activities to be performed under the Startup India initiative by the Government of India.
1. A single point of registration for startups: The government introduced a mobile app and a portal, which will enable startups to register their company in a day.
2. A simplified regulatory regime based on self-certification:
To reduce the regulatory burden for startups, the government will allow startups to selfcertify submission on nine labour and environment laws through the startup mobile app. No inspections will be conducted in case of the labour laws for a period of three years.
3.A fast-track mechanism filing patent applications: Launched on a pilot basis for a year, the Central Government shall bear the cost of patents, trademarks and designs for a startup, with an 80 percent rebate to encourage the creation and protection of its intellectual property.
4.A credit guarantee fund for startups: A credit guarantee mechanism willl help startups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI,
5. Tax exemption for three years, and capital gains: Aimed at facilitating growth and help retain capital, startups will be exempted from income-tax for a period of three years.
6. A startup india hub for collaboration: The Startup India Hub will serve as a single point of contact for startup ecosystem players. The hub will assist startups in obtaining financing, and organise mentorship programs to encourage knowledge exchange.
7. Faster exits for startups: Startups may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.
8.Atal innovation mission to encourage entrepreneurship and innovation: The Atal Innovation Mission will establish sector specific incubators and 500 ‘Tinkering Labs’ to promote entrepreneurship, provide pre-incubation training and a seed fund for high-growth startups.
9. Innovation focused programs for students: An innovation core program targeted at school kids aims to source 10 lakh innovations from five lakh schools, out of which the the best 100 would be shortlisted and showcased at an Annual Festival of Innovations, to be held in Rashtrapati Bhavan.
Ways to fund startup
In addition to the government plans that offer startup capital and bank loans, the funding for startups can also be availed in the following ways:
(i) Boot strapping: Commonly known as self financing. Bootstrapping refers to the process of starting a company with only personal savings, including borrowed or invested funds from family or friends, as well as income from initial sales .It demonstrates the entrepreneur’s commitment and determination.
(ii) Crowdfunding: It is the pooling of resources by a group of people for a common goal. The emergence of platforms that promote crowdfunding is fairly recent to India. These platforms help startups or small businesses to meet their funding requirements. (iii) Angel investment: Angel investors are individuals with surplus cash who have keen interest to invest in upcoming startups. They also offer mentoring or advice alongside capital.
(iv) Venture capital: There are professionally managed funds which are invested in companies that have huge potential. They also provide expertise and mentorship to startups.
(v) Business incubators and accelerators: Early-stage business can consider incubator and accelerator programmes as a funding option. These programmes assist hundreds of startup businesses every year. These two are generally used interchangeably. However, incubator is like a parent who nurtures the business (child), whereas, accelerator helps to run or take a giant rise in business.
(vi) Microfinance and NFBCs: Micro finance is basically access to financial services to those who either do not have access to conventional banking services or have not qualified for a bank loan. Similarly, NBFCs (Non Banking Financial Corporation) provides banking services without meeting legal requirement/definition of a bank.
INTELLECTUAL PROPERTY RIGHTS (IPR)
Intellectual property (IP) refers to products of human mind,just like other types of property, the owners of IP can rent, give or sell it to other people. Holders of intellectual property rights have a monopoly on the usage of property or items for a specified time period. Intellectual property is everywhere, i.e., the music you listen to, the technology that makes your phone work, the design of your favourite on car, etc. The most noticeable difference between intellectual property and other forms of property is that intellectual property is intangible i.e., it cannot be defined or indentified by its own physical parameters. It exists in all the things you can see—all are the products of human creativity and skill, such as inventions, books, paintings, songs, symbols, names, images, or inventions of creations begin with an ‘idea’.
Why Is IPR Important for Entrepreneurs?
It encourages creation of new, path breaking inventions, such as cancer cure medicines. It incentivises inventors, authors, creators, etc., for their work. It allows the work created by a person to be distributed and communicated to the public only with his/her permission. Therefore, it helps in the prevention of loss of income. It helps authors, creators, developers and owners to get recognition for their works.
Types of Intellectual property(IP)
1. Copyright Copyright is the right to “not copy”. It is offered when an original idea is expressed by the creator or author. The copyright is an exclusive right of the creator to prohibit the unauthorized use of the content which includes reproducing and distributing copies of the subject matter. The unique feature of copyright is that, the protection of work arises automatically as soon as the work comes into existence. The registration of the content is not mandatory but is essential to exercise exclusive rights in case of an violation.
A trademark is any word, name, or symbol (or their combination) that lets us identify the goods made by an individual, company, organization, etc. A trademark helps in distinguishing similar products in the market from its competitors. A competitor cannot use the same, or similar trademark to sell their product in the market as the same fall under the concept of deceptive similarity which may be defined as phonetic, structural or visual. similarity. The registration of trademark is not mandatory under the Trademark Act 1999, but registration of trademark helps establish exclusive rights over the mark. Example: 7 O’CLOCK for shaving razors (Gillette U.K. Ltd., England),BBC (British Broadcasting Corporation)
A patent is the exclusive right over any idea or invention. If you have a patent, you have the exclusive right to do what you want with your idea or invention. It also means that no one can use it for commercial purposes without your consent. Patent can only be filed to get rights over an invention and not discovery. (Newton saw the apple fall and discovered gravity which is considered to be a discovery. On the other hand, the father of telephone Alexander Graham Bell invented telephone.) The purpose of patent is to encourage innovation in the scientific field. A patent grants exclusive rights to the inventor for a period of 20 years, during which anybody else who wishes to use the patented subject-matter needs to seek permission from the patentee, by paying certain costs for the commercial use of such an invention. This process of seeking exclusive rights of the patentee for a fee is called Licensing. Once the term of a patent expires, the invention is free for use by people.
A ‘design’ includes shape, pattern, and arrangement of lines or colour combination that is applied to any article. It is a protection given to aesthetic appearance or eye-catching features. The term of protection of a design is valid for 10 years, which can be renewed for further 5 years after expiration of this term, during which a registered design can only be used after getting a license from its owner and once the validity period is over, the design is in public domain.
Intellectual Property (IP )and Business
Intellectual property covers a wide range of business assets, from copyright to trade marks and patents to design rights. It’s important to protect your intellectual property rights and avoid invading the rights of other intellectual property owners. Safeguarding intellectual property is critical for every business and cannot be overlooked. Intellectual property helps in developing and maintaining company’s long term revenue streams and increase shareholder’s value. IP also helps companies to protect technology innovations and gain competitive advantage.
1) An apex bank set up in India to provide financial assistance to small business organisation is ………….
a) SIDBI b) RSBDC c) IDBI d) IBRD (March 2018)
2) List out any three features of cottage industries. 3 (March 2018)
3) a) …………….. are also known as rural industries or traditional industries.
b) Write any three features of these industries. 4 (March 2017)
Ans : Cottage Industries
4) The role of SSI units in the Indian Economic development is very important still they struggle to exist because of many problems. Discuss. (4) (March 2016)
5) Mr. Amar, Mr. Akbar and Mr. Antony have started a small scale industry in their village by taking financial assistance with the help of Khadi and Village Industries Commission. In this context, explain the significance of small enterprises in rural India. (March 2015)
6) Small Industries Development Bank of India (SIDBI) has been set up in the year 1990 with a view for the promotion and development of small industries in India. Mr. Gautham, a small industrialist, wants to know the functions of SIDBI. Write any two functions to satisfy him. 2 (March 2014)