MBA management

Meaning of Small Business

A small business is a business that is privately owned and operated, with a small number of employs and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships.

The official definition of small business by the Government of India is as follows:

1) Small Scale Industries: A unit in which investment in plant and machinery does not exceed rupees one Crore.
2) Ancillary Units: An undertaking which sells not less than fifty per cent of its output to other industrial undertakings and in which investment in plant and machinery does not exceed rupees one crore.
3) Export- Oriented Units: A unit which exports not less than thirty per cent of its output and in which investment in plant and machinery does not exceed rupees on crore.
4) Tiny Units: A unit with an investment in plant and machinery of not more than rupees twenty five lac.

Small scale industry consists of:

1) Tiny Sector: Tiny sector includes all the tiny small scale units.

2) Cottage Industry: Cottage industry refers to industrial units which are located in residential premises and in which manual techniques and simple tools are used.

3) Rural Industry: Rural industry comprises small scale units located in villages.

Basket- making, bidi- making, carpentry, sericulture, handloom waving, are some examples of cottage and rural industries.

Characteristics of Small Business

The salient features of small business are as follows:

1) Personal Character: A small scale unit is generally owned by a single entrepreneur or a group of persons. Personal character is an outstanding feature of small business, A census of small scale units in India in 1972 revealed that out of that 1.4 lac units, about 61% were sole- proprietorships and 35% were partnership concerns.

2) Independent Management: Management in small business is independent in the sense that owners themselves act as managers. There is little divorce between ownership and control. The management structure is simple not complex, as number of employees is limited. Due to proprietary ownership and management, success of these enterprises and depends upon the initiative, skills and judgment of the owner(s).

3) Limited Investment: A small enterprise requires relatively less capital investment which is provided by the owner(s) through own resources and borrowing. Capital investment is comparatively small because it does not employ highly mechanized means of production.

4) Simple technology: Small enterprises are generally labor- intensive. The machinery and equipment used are not very sophisticated and they are generally operated manually. Amount of working capital is generally bigger than fixed capital indicating their labor intensity. Labor is the primary input.

5) Local Area of operation: A small scale unit depends largely on local resources and its operations are localized. It operates in a compact area is local touch between the employer and the employees. However, the products of small scale industries are exported all over the world.

Role of Small Business in Rural India

India is largely an agricultural country and major part of the population lives in Villages.

Small scale industries are small in size but play a big role in the economic development of a developing country like India. India has adopted the ideal of a socialistic pattern of society with full employment, balanced regional development and self- reliance as the major objectives. Small scale firms are helpful in the achievement of these goals in the following ways:

1) Optimization of Capital: Small scale firms require less capital per unit of output and therefore, greater output can be obtained with small investment. The Annual Survey of industries revealed that fixed capital per employee in case of small scale industry was Rs. 3,706 as compared to Rs. 27,757 in case of large scale industry. Small firms also provide quick returns after their establishment on account of short gestation period. In India, where the rate of capital formation is low, small scale industries are very suitable.

2) Mobilization of Local Resources: Small scale industries facilitate mobilization and utilization of local resources and skills which might otherwise remain latent or unutilized. Small business promotes a new cadre of small entrepreneurs and self- employed and encourages local talent. The growth of small enterprises helps in tapping latent resources like entrepreneurial skills and small savings especially in rural areas. Small scale industries account for ninety five per cent of the industrial units in India and contribute almost forty per cent of the gross industrial value added.

3) Exchange Earnings: Small scale industries help in reducing pressure on the country‘s balance of payments in two ways:
i) They do not require imports of sophisticated machinery and equipment.
ii) They earn valuable foreign exchange through exports of non-traditional items and substitutions of imports through domestic production. Small scale industries for forty five per cent of total exports from India.

4) Feeder to Large Industries: Small scale sector is complementary to the large scale industries. Small scale industries manufacture various types of components, spare parts, tools and accessories which are required by the large scale sector. Small firms also distribute the goods produced by large scale firms.

5) More Employment: These are labor- intensive enterprises. Thus, more labor is required in these industries. In Indian rural areas, ample labor is available. Some of the people in rural areas remain unemployed for the whole year; some others do farming for a part of year and remain idle for the rest of the period. Small businesses are helpful to provide employment for both the categories of people.

6) Opportunity for Artisan: In villages, artisan/ specialist/ artist having expertise in different fields are founds. Because of lack of opportunities their skills do not come into limelight. Small businesses provide opportunities to such people. This provides an impetus to their talent.

7) Balanced Regional development: These enterprises are often dependent on local sources of production. So, these businesses can be carried- on at any place and even in remote areas. In this way, industries do not just limit themselves to a particular place but diversify. This helps in balanced regional development.

8) Promotion of Standard of Living: With the establishment of small businesses in rural or nearby regions, villages get many types of facilities, .g., employment, electricity, water, roads, education, banks, modes of transportation, etc., In such a situation of standard of living is certain/ inevitable.

9) Better Utilization of Local Resources: In rural areas, resources like labor, barren land, raw material, etc., are either remains idle/ unutilized or used in very less quantity. With the establishment of small industries better utilization of these resources is possible.

10) Less Pressure of Population on Agriculture: As more population depends upon land for survival the land is further divided into small pieces. It no longer remains beneficial to do farming on such small fields. Every year there is a further increase of approximately. Thirty lac people who depend on agriculture. So, this has become necessary to reduce this burden on land. This is possible only when people will establish small businesses.

11) Equitable Distribution of Income: With the establishment of these businesses the income of the country is not just concentrated with some handful of city industrialists but is also distributed among many small rural industrialists. This helps to reduce the gap between the rich and the poor in the country.

Problems of Small Business/ Firms in India

The micro, small and medium enterprises face problems at every stage of their operation, whether it is buying of raw materials, manufacture of products, marketing of goods or raising of finance. These industries are therefore not in a position to secure the internal and external economics of scale.

The major problems confronting the sector have been identified as:

1) Technology obsolescence,
2) Managerial inadequacies,
3) Credit and finance,
4) Managerial and organization,
5) Raw material and products,
6) Marketing and exports,
7) Infrastructure and
8) Increased competition.

There is lack of trained and experienced employees because small firms cannot pay high salaries and cannot spend much on training their employees. Small scale firms find it difficult to recruit and motive skilled managerial and technical personnel as they look for better opportunities in thee large scale industries, therefore, thy get the second rate talent or have to depend on family members who do not have diversified skills.

Small scale units have to face several difficulties in the marketing and distribution of their products. Most of them do not have their own marketing network. They find it difficult to sell their output at remunerative prices due to higher cost of production and non-standardized quality of products. They cannot afford to spend much on advertising, sales, promotion, marketing research, etc. They have to sell their products at throwaway prices due to weak bargaining power and immediate need for money. They also face stiff competition from large firms.

There can be many more similar issues hindering the orderly growth of the MSME sector:

1) Technology Obsolescence: Majority of the small scale units use old techniques of production and outdated machinery and equipment. Up- gradation of the technology and achieving economics of scale is one of the major problems facing the sector. They cannot afford new machines and equipment’s and are therefore not development on a continuing basis. Therefore, productivity and quality in small scale firms tends to be low while units cost of production is generally high.

But with liberalization of the economy, the MSMEs are facing stiff competition from imports and need technological up-gradation in order to produce better quality products at cheap rates.

As far as sourcing technology is concerned, small businesses face the following three essential problems:

i) Lack of Technology Knowledge: Obtaining information about technology is the first important issue. For most of them, information about available technology options is through word- of- mouth or from a visit to an advanced unit. Few have access to technical literature, professional journals or information about new product launches. But with the advent of internet, new vistas are opening up through electronic journals, catalogue downloads and advanced search facilities.

ii) Barriers in Implementation: Actual procurement of the technology is the next important issue because even if information is obtained, there are barriers to import of technology and other problems relating to technology transfer, vendor capability, after sales support, import procedures, etc., which impede procurement.

iii) Funding Problem: Acquiring finance for technology up-gradation is also a problem. Small enterprises generally look to external sources of funding for upgrading technology as withdrawing money from business entails its own costs.

2) Managerial Inadequacies: The managerial skills required for the management of small/medium firms are not very much different from those necessary in large scale business. The managerial functions of planning, organizing, staffing, directing and controlling are common to both. But, the scale on which various functions are performed by owner and manager are different and in small scale, the degree of complexity is lower. The organizational structure of later firms is simple due to presence of few employees. The owner himself acts as the manager and can exercise personal control. However as the business grows, owner/ manager finds it difficult to manage even small business effectively. For this, it becomes necessary to increase the amount of manpower in the enterprise.

Hence, several initiatives and steps are required to be undertaken to recognize thee weaknesses in management of small business enterprises, which are largely plagued with difficulties and problems in relation to human resource management. There is lack of trained and experienced employees because small/ medium enterprises find it difficult to afford remunerative salaries as well as to provide adequate training facilities to their employees. Further, they find it difficult to recruit and motive skilled managerial and technical personnel who tend to look for better opportunities in thee large scale industries. Hence, they are not able to get/ hold best talent in the industry and/ or have to depend on family members who do not have diversified and technical skills.

Although, small and medium sector is the second largest employer of human resources after agriculture, providing employment to large number of people in the rural and urban areas of the country. But, it is right to say that small and medium scale enterprises faces huge problem of recruiting required number of manpower and managing effectively the recruited employees, Thus , more initiatives need to be taken at the Centre and the State level to ensure proper management of human resources in the small and medium scale enterprises sector. This would raise their production capacity, improve their marketing and distribution network, set links with people/ industries within different parts of India/or abroad, as well as motive new and talented manpower to join the sector.

3) Credit or Finance: All kinds of business enterprises require sufficient funds in order to meet their fixed as well as working capital requirements. Finance is one of the critical inputs for growth and development of the micro, small and medium enterprises. They need credit support not only for running the enterprise and operational requirements but also for diversification, modernization/ up- gradation of facilities, capacity expansion, etc.

Inadequate access to credit is a major problem facing micro, small and medium enterprises. Generally, such enterprises operate on tight budgets, often financed through owner’s own contribution. Loans from friends and relatives are some bank credit. They are often unable to procure adequate financial resources for the purchase of machinery, equipment and raw materials as well as for meeting day-to-day expenses. This is because, on account of their low goodwill and little fixed investment, thy find it difficult to borrow at reasonable interest rates. As a result, they have to depend largely on internal resources.

In respect of MSMEs, the problem of credit become all the more serious whenever any difficult situation occurs such as a large order, rejection of consignment, inordinate delay in payment, etc. Sometimes thy have to close down their operations due to shortage of funds. Also, there is little or no scope for scale are not available.

4) Managerial and Organizational: Small scale firms are generally managed by the owners who very often do not possess the skills required for the efficient management of the enterprises. There is lack of proper division of work and benefits of specialization are not available. Some owner- managers are reluctant to adopt modern methods of organization and management. Here is instability in business because the sickness and death of the owner manager directly affects thee survival and growth of the small firm.

5) Raw Materials and Products: Non-availability of quality raw materials on a timely basis in an adequate quantity is one of the main problem faced by micro, small and medium enterprises. There is acute shortage of even the basic raw materials required by small scale units. These units are under a handicap in obtaining raw materials of requisite quality at reasonable prices. They do not get the benefits of bulk buying. For example, the handloom industry is facing shortage of yarn. Small scale industries also face shortage of power due to which they are unable to make full utilization of plant capacity. Majority of them cannot afford to install their own power generating plants to ensure uninterrupted operations.

6) Marketing and Export: Out of several problems faced by small and medium scale entrepreneurs, the absence of adequate marketing and export facilities is one of their main concerns. Almost all types of business enterprises face marketing problems, but the small and medium scale enterprises face greater difficulty in the marketing and distribution of their products. Some of these are:

i) Competition from large firms: Small and medium entrepreneurs tend to face tough competition from the products and sales/ marketing strategies of large scale firm’s entrepreneurs. They, at times, find it very difficult to cope with large scale entrepreneurs in terms of cost, quality, standards, popularity, meeting ever- changing demands/ preferences of consumers, etc.

ii) Lack of marketing networks: Most of them do not have their own marketing network. O thy ultimately have to rely on outside sources for distributing their products. This also tends to raise the cost of their products and services.

iii) Lack of marketing concepts: Most of them do not have good knowledge and/or experience of various marketing concepts and strategies. As a result, they are unable to understand quickly and accurately the prevailing as well as constantly changing market trends. Furthermore, in spite of having hug potentialities of extensive market for their products, they are mainly unwilling to opt for efficient marketing techniques.

iv) Lack of resources: They also lack the resources and funds needed for effective sales promotion. Many of such enterprises cannot afford to spend much on advertising, sales promotion, market research, etc.

v) High cost of production: They find it difficult to sell their outpost at remunerative prices because of higher cost of production and non-standardized quality of products.

vi) Low negotiating power: They find it difficult to sell their products at throwaway prices due to their weak bargaining power (specially in dealing with big buyers) and urgent needs of funds.

Thus, it is right to say that most of small and medium entrepreneurs do not correctly understand as to what kind of products are actually needed by the market, how big/ small is the market, when the products are needed and how to deliver such products. All these problems keep them mainly isolated from the market trends and conditions and, thus, tend to restrict their operations.

Besides, small and medium scale enterprises are the most significant contributor in the field of India’s exports. There has been a prominent increase in the exports from this sector of both traditional and non-traditional goods including jewelry, garments, leather, hand tools, engineering goods, software, etc. Also, the enterprises with good export performance have greater stability in the economy. But, there is still lot of problems in exporting the products by small and medium entrepreneurs to other regions/ countries/ areas. They are not very familiar with the steps and formalities involved in exporting goods from India. They need to be made aware of all steps involved in the process, such as, registration of exporters; selection of export market and buyers; receipt of enquiries, letter of intent, letter of credit, bill of lading, etc. Insurance coverage; obtaining shipping order; certificate of origin; sending documents to importers; etc.

7) Infrastructure: Adequate infrastructure facilities are necessary for the overall development of every sector of the economy. In the wake of liberalization and globalization, its presence and importance for the proper growth of small and medium enterprises cannot be underestimated. Both the Central and the State Governments are making continuous efforts to upgrade thee infrastructural set-up of the various States/ Union Territories (UTs)/ Districts of the country. In spite of all this, the small and medium scale entrepreneurs are constantly facing the problem of infrastructural bottlenecks, which restricts their day-to- day business operations as well as their future growth prospects.

Infrastructure needed by entrepreneurs include all types of transportation facilities like railways, waterways, roadways and airways ( depending on the type of small and medium scale firm running by these entrepreneurs) as per the suitability of the business, as well as proper established channels of telecommunication and adequate simply of power. Lack of any of these facility can cause serious damages to the firm’s value chain process, i.e., to the production, consumption and distribution of the products of small and medium entrepreneurs, who already face problems of lack of finance, inadequate marketing facilities, technological obsolescence, etc.

Some of the major problems faced by small entrepreneurs with respect to infrastructure are:
i) Inadequate infrastructural facilities creates the problem of acute shortage of basic raw materials, especially those which are scarce and need to be imported from distant places , needed by small and medium scale enterprises.

ii) Small and medium scale entrepreneurs find it difficult to distribute their products to thee markets which are located at far-off places because of incomplete construction or non-existence of basic roads/ highways.

iii) Lack of proper airways and waterways facilities also restricts the growth prospects of those medium/ small scale firms whose target market is located abroad.

iv) Small and Medium scale enterprises face shortage of power supply, due to which they are unable to make full utilization of plant capacity. Most of them find it difficult to install their own power make full utilization of plant capacity. Most of them find it difficult to install their own power generating plants, so as to ensure their uninterrupted operations, due to lack of required funds.

v) Most of them are located in rural areas or remote areas of the country, due to which they find it difficult to communicate with people outside the resign. This is because of non-existence of proper telecom network.

Hence, small and medium scale entrepreneurs continued to face the problem of infrastructure bottlenecks in terms of presence of inadequate transportation facilities, low/no access to sound power supply, lack of proper communication channels, inadequate marketing facilities, lack of funds, etc. All this affects the long-run profits earning capacity of such entrepreneurs as well as inhibits the chances of survival of enterprises run by them.

8) Increasing Competition: An entrepreneur faces several managerial problems in relation to production, marketing , infrastructure, financing, etc. the basic cause for many of such issues is the existence of intense competition in the market scenario. Large scale firms/ industries that have huge production and distribution network or enterprises that have goodwill in the market or have intellectual property rights/ standardization for their products or produces large range of products, etc., are more likely to dominate the business environment in the country. In contrast, small and medium scale enterprises mainly deal in one specialized line of products, have very small production and distribution network and generally have no protection for their produces. As a result, in spite of having useful and good quality products or having products similar to those produced by large scale firms, they are largely not able to create/ hold demand for their products and tend to lose customers to large scale enterprises owing to cut-throat competition.

Although the Government, both at the Centre and the State level, are making all efforts to create climate conducive for the sound growth of small and medium enterprises with a view to bring them at par with large scale enterprises and thereby , create adequate demand for their products. But still, the competition for small and medium entrepreneurs is intensifying over the years which disrupts the entire business scenario and raises their cost of production and marketing.

In the years after independence, small and medium scale enterprises were largely protected from such competition by following the policy of reservation. Many of the products were reserved for exclusive production by them. However, over the years, several enterprises were de- reserved for encouraging the employment and entrepreneurship activities. Further, over the years, the small/medium scale sector in India has progressed from the production of simple consumer goods to the manufacture of many sophisticated and precision products like electronics control systems, microwave components, electro medical equipment’s , etc. the process of economic liberalization and market reforms has further exposed these enterprises to increasing levels of domestic and global competition.

However, healthy competitive environment is necessary for the proper growth of enterprises so that they can take advantages of new and viable opportunities. In order to provide a continuing forum for enhancing the competitiveness of manufacturing sector, specially of small and medium enterprises sector, the National Manufacturing Competitiveness Council (NMCC) has been set-up by the Government at the Central level. But, as such, the problem faced by small/ medium scale entrepreneurs is that of increasing unhealthy competition within and between firms/ industries.

Further, such entrepreneurs have huge difficulty in accessing technology needs of the sector and maintaining competitiveness. The reasons for this include: poor financial situations and low levels of R&D; risk- averting attitude; non- availability of technically trained human resources; lack of access to technological information and consultancy services; isolation from technology hubs; low focus on production costs; etc.

Governmental Measures

Recognizing the importance of small and medium enterprises in the growth of Indian economy in terms of their contribution to country’s industrial production, exports, employment and creation of entrepreneurial base, the Central and State Governments are undertaking several policy measures and incentives as well as implementing schemes and programmes for promotion and development of these enterprises. For this, entrepreneurship development and training is one of the key steps, particularly, for the first generation entrepreneurs. Entrepreneurship development Programmes (EPS) of various durations are being organized on regular basis by a number of organizations, such as, National and State level Entrepreneurship Development Institutes (EDIs); Micro, Small and Medium Enterprises Development DPs) and Entrepreneurship–cum-Skill Development Programmes (ESDPs) are also being organized by various public as well as private training institutions.

However, these are still widespread variations in the success rate, in terms of actual setting up and successful running of enterprises, by the /DP/ESDP trained entrepreneurs. Also, new entrepreneurs generally face difficulties in availing full benefits under available schemes of the governments/ financial institutions, completing in availing full benefits under available schemes of the governments/ financial institutions, completing and complying with various formalities and legal requirements under various laws/ regulations, in selection of appropriate technology, etc. In order to bridge the gap between the aspirations of the potential entrepreneurs and the realities, there is a need to support and nature the potential first generation entrepreneurs by giving them handholding support during the initial stages of setting up and managing their enterprises. Accordingly, the scheme called ‘Rajiv Gandhi Udyami Mitra Yojana (RGUMY) ’ has been launched to provide handholding support and assistance to the potential first generation entrepreneurs, who have already successfully completed EDP/SDP/SDP or vocational training from ITIs, through the selected lead agencies, like ‘Udyami Mitras’. This helps such entrepreneurs in the establishment and management of the new enterprise, in dealing with various procedural and legal hurdles as well as in completion of various formalities required for setting up and running of the enterprise, etc. The work profile of Udyani Mitras include networking, coordinating and follow-up with various government departments/ agencies / organizations and regulatory agencies for channelizing the benefits available under various schemes to the first generation entrepreneurs and help them in setting-up their enterprise.

Some of the other governmental measures for small and medium enterprises include:

1) The Ministry of Micro, Small and Medium enterprises has been implementing the ‘Scheme of Surveys, Studies and Policy Research’ with a view to regular/ periodically collect, from primary, secondary and other sources, relevant and Reliable data on various aspects and features of Micro, Small and Medium Enterprises (MSMEs) engaged in manufacturing and services (whether in the category of tiny/small scale industries, khadi, village industries or coir) as a composite group or specific segments thereof. It aims to study and analyze, on the basis of empirical data or otherwise, the constraints and challenges faced by the MSMs as well as the opportunities available to them, in the context of liberalization and globalization of the economy. It further aims to use the results of these surveys and analytical studies for policy research and designing appropriate strategies and measures of intervention by the Government, by itself or in public private partnership mode, to assist and enable these enterprise in facing the challenges and availing of the opportunities with a view to enhancing their efficiency and competiveness as well as expanding generation of sustainable employment by them.

2) Micro, Small and Medium Enterprises Development Act, 2006 has been enacted to facilitate the promotion and development as well as enhance the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto. For this, it included the establishment of specific funds, notification of particular schemes/ programmes, progressive credit policies and practices, preference in Government procurements to products and services of these enterprises, following more effective mechanisms for mitigating their problems, etc. It provides the first- ever legal framework for recognition of the concept of ‘enterprise’ which comprises both manufacturing (these engaged in the manufacture/ production of goods pertaining to any industry) and service (those engaged in providing of services) entities. Under the Act, three tiers of enterprises, namely ‘micro, small, and medium’ have been defined for the first time. The Act also provides statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly, these enterprises and with a wide range of advisory functions.

3) The progressive de-reservation of products in the MSMES aimed at providing opportunities for technological up gradation, promotion of exports and economies of scale, with a view to encourage modernization and enhance competitiveness in the sector. As on 13March 2007, 125 items were de-reserved. As on 8th February, 2008, 79 items more de-reserved. At present, the total number of items reserved for exclusive manufacture in the micro and small scale sector is 35.

4) The National manufacturing Competitiveness Programme (NMCP) has been launched to provide support to the manufacturing sector, particularly small and medium enterprises sector, in their endeavor to become competitive. It consists of ten components and programmes as the initiatives for development and promotion of MSMEs.

5) Credit is one of the critical inputs forth promotion of small and medium enterprises. It is a part of the priority sector lending policy of the banks. Accordingly, several schemes and policies have been undertaken to provide adequate credit to such enterprises. One of such scheme is the Credit Linked Capital Subsidy Scheme (CLCSS) which was launched to facilitate technology up gradation by upfront capital subsidy to small, micro and medium enterprises, including tiny, khadi, village and coir industrial units, on institutional finance (credit) availed by them for modernization of their production equipment (plant and machinery) and techniques in specified sub- sectors/ products approved under the scheme.

Besides, the State and Union Territories (UTs) Governments are executing several promotional and developmental projects/ schemes as well as providing a number of supporting incentives for development and promotion of MSME sector in their respective States? UTs. These schemes/ under them to implement Central / State level schemes. Around 30 MSME- Dis and 28 Branch MSME- Dis have been set-up in State capitals and other industrial cities all over the country, with a view to provide assistance/ consultancy to prospective entrepreneurs as well as to existing units; conduct EDPs, Management Development Programmes, Skill Development Programmes, etc. Also, the State Industrial Development and Financial Institutions and ate Financial Corporations look after the needs of the MME sector.

Opportunities for Small Business in India

India is the largest democracy in the world. In terms of population it ranks second in the world. The policy of liberalization pursued by the government after 1991, has transformed the prospects for the Indian economy. Today, India is one of the favored destinations for global investments.

The government has come-up with several incentives like import of capital goods at concessional customs duty (Under condition it fulfills certain export obligations), liberalization of external commercial borrowing norms, tax holiday to encourage investments. Sectors like automobiles, chemicals, food processing, oil and natural gas, petrochemicals, power, services and telecommunications have witnessed tremendous investments.

There are several factors which creates favorable business opportunities in India:

1) India has a huge middle class, with improved purchasing power, due to the high growth in the economy, Increasingly, Indians have become more brand conscious, resulting in increased growth for the retail sector.

2) Presence of vibrant trade links with South Asian Association for Regional Cooperation (SAARC) nations like Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.

3) Improved infrastructure available for business ventures. India’s competitive advantage in information technology can be used to enhance productivity in Industries.

4) Availability of hug pool of technical manpower has heralded the expansion of manufacturing base across different industries.

5) India is rich in natural resources and self-sufficient in agriculture.

6) A well- established banking system consisting of public and private banks and other financial institutions.

7) The capital markets in India are one of the fastest growing markets in the world, attracting hug investments from FII’s.

8) The economic reforms have brought in policy changes in terms of freedom of entry, investment, location, usage of technology, import and export. These changes have created an investment friendly environment.

9) India is a well-established democratic country, with free and fair judiciary.

10) A considerable section of the population is proficient in English.

Global trends have suggested that small business is the biggest contributor to the economy of any country. Small business is big in India too. It is one of the most crucial sectors of the economy in terms of the number of employments generated. As more than 65% of its population lives in rural and semi-rural areas, small business is one of the most viable options for the population lives in rural and semi-rural areas, small business in India is the most viable options for the population residing in these areas. After agriculture, small business in India is the second largest employer of human resources. In India an industrial undertaking that has investments in fixed assets, which do not exceed more than Rs.10 million, falls under the category of small business.

The government of India undertaken several reforms to attract more investors to the small business sector in India. Some of the reforms undertaken include provision of training facilities, availability of machinery on hire-purchase terms, special bonus for setting-up small business in backwards areas, tax deduction for small business and assistance for marketing the products in domestic markets and exports. All small business in India needs to get registration from Director of Industries of the respective state government. Most states across India follow a uniform process of registration, though there may be slight variation from state to state. There are various reasons due to which the small scale business in India has witnessed a spurt of growth. Chief among them are an increase in the export potential of Indian goods, the industry is less capital intensive, the industry has availability of manpower training facility, there is ease of machinery and manpower procurement, goods from some of the sectors are exclusively purchased by government and there is also reservation of exclusive manufacture of goods in this sector.

List of some of the items reserves for exclusive manufacture:
1) Food and allied industries,
2) Textile products including hosiery,
3) Art silk/man-mad fibre hosiery,
4) Wood and wood products,
5) Paper products,
6) Rubber products,
7) Plastic products,
8) Leather and leather products,
9) Chemicals and chemical products.

All small businesses are liable to be deregistered if they are found to be violating any of the mandatory registration norms. Some of the measures taken by small-scale industries that can attract recognition include surpassing the investment limit, manufacturing of any new item that requires industrial license or if the enterprise does not satisfy the condition of being owned, controlled or being the subsidiary of any other industrial undertaking.

The growing business trend in India industries that the small business sector in India is poised for much higher things. Investors in this sector must ensure that they make use of all the resources available to reap the benefits.
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