Unit – I

Entrepreneur - meaning - importance-definition - types- functions -

qualities of an entrepreneur – entrepreneurship as a career
INTRODUCTION
Entrepreneur
The term Entrepreneur refers to businessmen and the term
entrepreneurship refers to a process. When a businessman converts his ideas
into a successful company, the process is called entrepreneurship. His hard
work, his risk, how he runs the business, and then converts it into a successful
enterprise- all come under this umbrella term of entrepreneurship. According
to Professor Parekh and Manohar Nadkarni “entrepreneurship refers to the
general trend of setting up new enterprises in a society”. According to
Professor Roy and Mehta “can be described as a creative and innovative
response to the environment”.
An entrepreneur is an individual who takes the risk to own a business
on the basis of an idea they gave the order to create a product or a service
and keeping the assumptions of most of the risks in mind. The process of
setting up a business, starting from an idea to the realization is referred to as
entrepreneurship.
Entrepreneurs work for themselves to
make profits. They also play a prominent role in
the upliftment of the economy. The government
keeps coming up with new ideas and policies to
develop entrepreneurship in India like the
Mudra Yojna.
An entrepreneur supplies risk capital as a
risk taker, and monitors and controls the
business activities.
The entrepreneur is usually a sole proprietor, a partner, or the one who
owns the majority of shares in an incorporated venture. If one desires to be an
entrepreneur, the given equation is what describes, what an entrepreneur
actually is Entrepreneur + Capital = Products + Customers = Business.

1
DEFINITIONS
Let us now consider some definitions to understand who an
entrepreneur is:
(i) According to Oxford Dictionary an entrepreneur is “A person
who sets up a business or businesses, taking on financial risks in the hope of
profit”.
(ii) According to the International Encyclopaedia, an entrepreneur
is “An individual who bears the risk of operating a business in the face of
uncertainty about the future conditions”.
(iii) Schumpeter‟s Definition – The entrepreneur, in an advanced
economy is an individual who introduces something new in the economy – a
method of production not yet tested by experience in the branch of
manufacturing, a product with which consumers are not yet familiar, a new
source of raw material or of new markets and the like”.
(iv) Adam Smith‟s definition – “The entrepreneur is an individual, who
forms an organization for commercial purpose. She/he is proprietary capitalist,
a supplier of capital and at the same time a manager who intervenes between
the labour and the consumer. “Entrepreneur is an employer, master,
merchant but explicitly considered as a capitalist”.
(v) Peter F. Drucker‟s Views on Entrepreneur – “An entrepreneur is
the one who always searches for change, responds to it and exploits it as an
opportunity. Innovation is the specific tool of entrepreneurs, the means by
which they exploit changes as an opportunity for a different business or
different service”.
(vi) In the 20th century the theorist Arthur H. Cole defined an
entrepreneur as an „organization builder‟.
HISTORY OF THE TERM „ENTREPRENEUR‟
The term entrepreneur is a French word, and is derived from the
French word “enterprendre”. It means “to undertake”. It is commonly used
to describe an individual who organizes and operates a business or
businesses, taking on financial risk to do so.

2
 Around 1700 A.D. the term was used for architects and contractor
of public works. In many countries, the term entrepreneur is often associated
with a person who starts his/her own new business.
IMPORTANCE OF ENTREPRENEURSHIP
i. Basis of Economic Development of the Country- Development of any
country depends on entrepreneurship, it depends on the businessmen of a
country, how successful or not the country is. The more the businessmen in a
country understand these simple words, the more successful the business will
be, the more the country will develop. That's why a successful business shows
how developed the country is.
ii. It Helps in establishing New Enterprises- Entrepreneurship also
motivates others, so that others can start their own business or their new
enterprises. For example, if you are a successful businessman, then you can
also help others to become successful through your experience and they are
motivated to start a business.
iii. Contribution in Development and Expansion of Existing Enterprises-
Today's entrepreneurs help old businessmen to expand their business. The
old businessmen who do not know about today's system, tell them to expand
their business, because of which the country's economic system is good.
iv. Helps in Developing New Products and Techniques- With the help of
businessmen, new products come in the market, new technology will not
come in the market until they invent by their production, and the consumer will
not get to use anything new. So it is only because of the businessmen that we
are able to use new products today.
v. Opportunity to Get Full Human Potential- Whenever a business starts,
whatever people work there, this businessman ensures that the people who
are working in his company give their 100%. He wants his workers to give
their 100% and they also have the skills to get their work done completely by
the workers as they also motivate them.
vi. Creation of Employment Opportunity- The more businesses, and
enterprises will be successful, the more profitable companies will become, and
the more employment they can provide. The larger the company or
enterprises, the more will be the requirement of workers. In order to produce
3
resources, to handle staff, all these things will be fulfilled by hiring employees.
This, in turn, creates new employment opportunities.
vii. Promotes Capital Formation- When the business earns a good profit, it
earns a lot of money, then the money will go to the government through tax.
When the company will earn a good profit, then people will get a lot of money
in the form of salary, then somewhere through the income of the employers,
the money will go to the government, in this way the government is getting tax
from the individual people also. Tax is also being received from the company,
due to which the economy of the country will be good, in this way the benefit
of everyone is through the enterprises.
viii. Balances Economic Development- Both the urban sector and the rural
sector will be balanced economically due to entrepreneurship. It means that
enterprises help in reducing the gap between the rich and the poor.
Entrepreneurs start the business by going to the rural sectors, they provide
jobs to the people of the rural areas and help in the development of that area.
ix. Helps in the Execution of Government Policies and Plans-
Entrepreneurship helps the government as well. The government creates new
rules and helps entrepreneurs in promoting those rules and regulations. For
example, businessmen follow the GST rules imposed, and in a way, they are
promoting it. Entrepreneurship helps in implementing government planning
and rules in this way.
x. Helps in Social Change- The more entrepreneurship will be successful,
the more it will help to develop the society, the more donations will be made,
the standard of living will improve and employment opportunities will also
increase when entrepreneurship is at a good level.
TYPES OF ENTREPRENEUR
1. On the Basis of Economic Development:
i) Innovating Entrepreneurs: These entrepreneurs have the ability to
think newer, better and more economical ideas of business organisation and
management. They are the business leaders and contributors to the economic
development of a country. Inventions like the introduction of a small
car „Nano‟ by Ratan Tata, organised retailing by Kishore Biyani, making

4
mobile phones available to the common man by Anil Ambani are the works of
innovative entrepreneurs.
(ii) Imitating Entrepreneurs – These entrepreneurs are people who
follow the path shown by innovative entrepreneurs. They imitate innovative
entrepreneurs because the environment in which they operate is such that it
does not permit them to have creative and innovative ideas on their own. In
our country also, a large number of such entrepreneurs are found in every
field of business activity. Development of small shopping complexes is the
work of imitating entrepreneurs. All the small car manufacturers now are the
imitating entrepreneurs.
(iii) Fabian Entrepreneurs – Fabian entrepreneurs are those
individuals who do not show initiative in visualising and implementing new
ideas and innovations. On the contrary, they like to wait for some
development, which would motivate them to initiate unless there is an
imminent threat to their very existence.
(iv) Drone Entrepreneurs – Drone entrepreneurs are those individuals
who are satisfied with the existing mode and speed of business activity and
show no inclination in gaining market leadership. In other words, drone
entrepreneurs are „die-hard conservatives‟ and even ready to suffer the loss
of business.
(v) Social Entrepreneurs – Social entrepreneurs drive social
innovation and transformation in various fields including education, health,
human rights, workers‟ rights, environment and enterprise development. Dr.
Mohammed Yunus of Bangladesh who started Gramin Bank is a case of
social entrepreneur.
2. On the Basis of Type of Business:
a. Trading Entrepreneur
 They procure the finished products from the manufacturers and sell
these to the customers directly or through a retailer.
 These serve as the middlemen as wholesalers, dealers, and retailers
between the manufacturers and customers.
b. Manufacturing Entrepreneur:
 The manufacturing entrepreneurs manufacture products.
5
  They identify the needs of the customers and, then, explore the
resources and technology to be used to manufacture the products to
satisfy the customers‟ needs.
c. Agricultural Entrepreneur:
 The entrepreneurs who undertake agricultural pursuits are called
agricultural entrepreneurs.
 They cover a wide spectrum of agricultural activities like cultivation,
marketing of agricultural produce, irrigation, mechanization, and
technology.
3) Based on the Use of Technology:
a. Technical Entrepreneur: The entrepreneurs who establish and run
science and technology-based industries are called „technical
entrepreneurs.‟ Speaking alternatively, these are the entrepreneurs who
make use of science and technology in their enterprises.
b. Non-Technical Entrepreneur: Based on the use of technology, the
entrepreneurs who are not technical entrepreneurs are non-technical
entrepreneurs. They are concerned with the use of alternative and imitative
methods of marketing and distribution strategies to make their business
survive and thrive in the competitive market.
c. Professional Entrepreneur:
Professional entrepreneur is an entrepreneur who is interested in
establishing a business but does not have interest in managing it after
establishment. A professional entrepreneur sells out the existing business
on good returns and starts another business with a new idea. Such an
entrepreneur is dynamic and conceives new ideas to develop alternative
projects.
4. Based on Ownership:
a. Private Entrepreneur: A private entrepreneur is one who as an
individual sets up a business enterprise. He / she it‟s the sole owner of the
enterprise and bears the entire risk involved in it.
b. State Entrepreneur: When the trading or industrial venture is
undertaken by the State or the Government, it is called „state
entrepreneur.‟
6
 c. Joint Entrepreneurs: When a private entrepreneur and the
Government jointly run a business enterprise, it is called „joint
entrepreneurs.‟
5. Based on Gender:
a. Men Entrepreneurs: When business enterprises are owned,
managed, and controlled by men, these are called „men entrepreneurs.‟
b. Women Entrepreneurs: Women entrepreneurs are the enterprises
owned and controlled by a woman or women having a minimum financial
interest of 51 per cent of the capital and giving at least 51 per cent of
employment generated in the enterprises to women.
6. Based on the Size of Enterprise:
a. Small-Scale Entrepreneur: An entrepreneur who has made
investment in plant and machinery up to Rs 1.00 crore
b. Medium-Scale Entrepreneur: The entrepreneur who has made
investment in plant and machinery above Rs 1.00 crore but below Rs 5.00
crore
c. Large-Scale entrepreneur: The entrepreneur who has made
investment in plant and machinery more than Rs 5.00 crore

Other Entrepreneurs
A. First-Generation Entrepreneurs: A first-generation entrepreneur is
one who starts an industrial unit by means of an innovative skill. He
is essentially an innovator, combining different technologies to
produce a marketable product or service.
B. Inventors & Challenger Entrepreneurs – Inventor entrepreneurs
with their competence and inventiveness invent new products. Their
basic interest lies in research and innovative activities & Challenger
entrepreneurs plunge into industry because of the challenges it
presents. When one challenge seems to be met, they begin to look
for new challenges.
C. Life-Timer Entrepreneurs – These entrepreneurs take business as
an integral part to their life. Usually, the family enterprise and

7
 businesses which mainly depend on exercise of personal skill fall in
this type/category of entrepreneurs.
FUNCTIONS OF ENTREPRENEURS
There are many functions of entrepreneurs in the economy. The economy
can be seen as an area where production, trade, distribution, and
consumption of goods take place. The economy follows the simple rule of
supply and demand. If the consumers demand something, then that is
supplied by the producers in the country‟s economy. When there is a
consumer need recognized by society, an entrepreneur comes into the picture
to satisfy these needs. He makes sure to do his work efficiently, which in turn
will convert to profits for him.
1. Contribution to the GDP
GDP is the monetary value of the final services and goods that are
produced by an economy in a particular time frame, which is usually a year.
Entrepreneurs in the economy provide these services and goods.
In a country like India, which is currently developing at a fast pace; the
entrepreneurs have a pivotal role to play to produce the right amount of
services and goods to satisfy the people's demands. In a situation where there
were no entrepreneurs, the country would only be dependent on imports and
its multinational companies, which in turn would either affect or even collapse
the GDP. That's the reason why entrepreneurs are necessary to generate
GDP for the economy.
2. Foreign Exchange Earnings: There are many Indian industries like the
handloom industry that produce goods not just to meet the local demands but
also to export them. These goods are sold to foreign countries, and this, in
turn, lets the manufacturing country earn foreign exchange. This again adds to
the economic growth of any country.
3. Generates Employment: When someone starts any new venture, then
there is a need for various resources. This also includes humans working for
them. There are people recruited to perform different kinds of functions in any
organization. So entrepreneurs play a crucial role in the economy of the
nation, which is to generate employment.

8
4. Tax Generation: When there is more employment created, this also
leads to more taxes for the government. Tax revenues are increased, which
can be used by the government for the improvement and the development of
the country and to improve the standard of living of its people.
5. Eradicating Poverty: India is a highly labor-intensive country. This is
because the country has a large population. The entrepreneurs are capable of
generating employment which in turn helps the government as it brings down
the unemployment number and thus poverty of the nation. When there is more
income, people too can afford better things.
6. Entrepreneurs Introduce New Technology: Entrepreneurs have
introduced many new technologies to the country‟s economy. These
technological advancements uplift the country and are another reason why the
government helps entrepreneurs.
7. Entrepreneurs Help Other Industries in the Economy
 The industries in the economy are interconnected. Some industries use
the products of other industries. This lets one generate more services
and goods as well as more revenue for the economy.
 For example, flour is the finished product for a company that has its flour
mill and manufactures flour. However, the same flour now works as a raw
material to produce biscuits. One product or idea of an entrepreneur's
business develops another product or service, and this forms a chain.
 Specific Tax Revenue: The entrepreneurs pay direct and corporate taxes
to the state government. Without this tax, the state government cannot
function. The entrepreneurs help to generate additional taxes for the
country.
8. Bringing in FDI
 A lot of entrepreneurship startups are funded by companies in foreign
countries. This lets the economy bring in more foreign investments. The
RBI helps these startups as it relaxes the policies that it puts on the FDI.
 All these points clearly explain the role of entrepreneurs in economic
development. They are a massive asset to the country. The functioning of
the economy has a significant role to play, depending on the existence of
entrepreneurship.
9
  There are many functions an entrepreneur fulfills in the economy.
Entrepreneurship creates wealth for the country and also gives rise to
many related businesses. The entrepreneurs drive change because of
innovation as they develop new products and bring in new technologies
that help the economy to grow as a whole.
QUALITIES OF AN ENTREPRENEUR
In order to organize and run a business successfully, an entrepreneur
must possess certain traits important for driving success. Some of them
are –
 Self-confidence − Others will trust you only when you trust yourself.
This is the most important trait of an entrepreneur, who should have the
confidence to take one‟s own decisions.
 Risk-taking ability − Business is all about taking risks and
experimenting. Entrepreneurs need to have a risk-taking ability.
 Decision-making ability − Entrepreneurs should have the willingness
and capability to take decisions in favor of the organization all the time.
 Competitive − Entrepreneurs should always be ready to give and face
competition.
 Intelligent − Entrepreneurs always need to keep their mind active and
increase their IQ and knowledge.
 Visualization − Entrepreneurs should have the ability to see things from
different point of views.
 Patience − This is another virtue which is very important for
entrepreneurship as the path to success is often very challenging and it
requires a lot of patience for sustenance.
 Emotional tolerance − The ability to balance professional and personal
life and not mixing the two is another important trait of an entrepreneur.
 Leadership quality − Entrepreneurs should be able to lead, control and
motivate the mass.
 Technical skill − To be in stride with the recent times, entrepreneurs
should at least have a basic knowledge about the technologies that are
to be used.

10
  Managerial skill − Entrepreneurs should have the required skill to
manage different people such as clients, employees, co-workers,
competitors, etc.
 Conflict resolution skill − Entrepreneurs should be able to resolve any
type of dispute.
 Organizing skill − They should be highly organized and should be able
to maintain everything in a format and style.
 High motivation − Entrepreneurs should have high level of motivation.
They should be able to encourage everyone to give their level best.
 Creative − They should be innovative and invite new creative ideas from
others as well.
 Reality-oriented − They should be practical and have rational thinking

ENTREPRENEURSHIP AS A CAREER
Willingness to initiate, experiment and innovate regularly are the main
requirements of self employment. In order to meet the ever changing
demands and situation on a regular basis, it is very important to be decisive
and innovative all the time. The term entrepreneur can also be explained as a
person who is self-employed and this is the reason behind considering self-
employment as a part of entrepreneurial career.
If an individual chooses entrepreneurship as a career, he will
experience something which is altogether different from the conventional jobs
in any organisation. Commitment to the venture, risk taking, readiness to face
the volatility of the venture, performing multiple rules at a time (like worker,
sales person, accountant or owner), decisiveness. etc., are the key features of
entrepreneurial career. That is why, some entrepreneurs find it challenging to
be in this career.
Having greater freedom, flexibility in the life, more money and avoiding
organisational politics and bureaucracies are the main driving forces behind
self-employment. But it does not mean that it is always advantageous.
Problems like difficulty in maintaining the work-life balance and job autonomy,
loss of social life, and handling various responsibilities are the main concerns
which one has to deal with while being a self-employed individual.
11
Positive and Negative Aspects of Entrepreneurial Career
The both positive and negative aspects of entrepreneurial career are
discussed below :
1) Positive Aspects:
The various positive aspects associated with entrepreneurship as a
career are as follows :
 The entrepreneur enjoys the decision-making power. He/she is the boss
of the organisation and can take any kind of decision. No one is there to
order him/her.
 A number of self-development opportunities are there before the
entrepreneur.
 The satisfaction achieved by getting the rewards for work done by self is
very different than in a job.
 One can receive higher monetary advantages than his/her competence,
capabilities, and expectations.
 One would earn lot of respect and honor from his friends and family
members, which can be seen as an intangible benefit.
 One becomes able to offer jobs to others, instead of working under
someone.
 He can also play a vital role in the economic, social and structural
development of the country and feel proud about it.
 By fulfilling the career goals and proving the achievements, one can be
a great achiever.
2) Negative Aspects:
The different negative aspects associated with entrepreneurial career
are as follows:
Despite being the boss, an entrepreneur is not a real boss of
himself/herself as he/she has to work as per the desires of financiers,
suppliers, customers, labourers and so on.
 Sometimes due limited resources, organisational activities will tend to
be limited which will create sense of frustration in the in the
entrepreneur.

12
 Entrepreneur has to spend long hours in office to make his/her
enterprise sustainable which can hamper his/her family and social life.
 As it is not necessary that whatever entrepreneur plans happens in
same manner thus, frustration and depression arises sometimes.
 Due to involved risk in the entrepreneurial venture, a kind of tension is
always there.

13
 Unit –II
Business promotion – Product selection – Form of ownership
– Plant location – land, building, water and power, raw
material, machinery, power and other infrastructural
facilities – Licensing, registration and local bye laws.
Introduction
Different organisations and brands use various marketing
strategies, such as business promotion, to attract new customers,
spread messages to their target audiences and boost the sale of
goods and services. They may use diverse techniques, such as
direct marketing, personal selling and PR, to achieve their intent.
Selecting the appropriate business promotion technique can help
you increase organisational revenue and create a strong brand
image.
Business promotion is a strategy that businesses use to
increase sales of their products and services. It's one component of
the marketing mix, comprising product, price, place and promotion.
Business promotion involves using different platforms to encourage
consumers to purchase items.
Types of business promotion
Direct marketing
Direct marketing, also known as direct response, is a
promotion technique where businesses communicate directly with
consumers. This technique eliminates their requirement for
intermediary marketing. Companies can directly inform customers
about promotions through:
 emails
 text messages
 flyers
 social media ads
 website ads
14
Personal selling
Personal selling involves sending sales representatives directly
to the consumers. They inform customers about offers, free samples
or coupons and convince them to purchase items. This method
allows sales representatives to get customer feedback, which
businesses can use to improve their products.
Advertising
Advertising is one of the most common business promotion
strategies that companies use. It involves spreading awareness
about a company's product, service or brand on paid platforms,
such as radio, television and print. Advertising can increase costs,
so conducting a cost-benefit analysis to determine the value of
running advertisements can be useful to decide if it's a worthwhile
venture.
Public relations
The way consumers perceive a business can affect sales.
Companies can improve sales by collaborating with charity
organisations or sharing their environmentally friendly values. Public
relations ventures involve maintaining the company's image by
issuing press releases and editing content on its website and social
media profile. The company also manages and analyses the data
from customer reviews about company products.
Sales promotion
Sales promotion is a technique that businesses use to
encourage consumers to make immediate purchases. This technique
is effective when the business limits the promotion to a specific
period or product quantity. For example, selling the first 100 pairs of
shoes at a discounted rate can increase sales. Examples of sales
promotion techniques are:
 buy one, get one free (BOGOF)
 discounts
15
  coupons
 free samples or accompanying items
 loyalty cards
 free trials
Benefits of business promotion
Here are several benefits of using business promotion
techniques:
 Reaching new customers with the same products
 Introducing new products
 Identifying target markets
 Increasing revenue
 Improving customer loyalty
 Differentiating company products
 Getting feedback
 Clearing inventory
 Increasing website traffic
 Upselling and cross-selling
Product Selection
Goods and services are necessary for satisfying the needs of
society. Such goods/services or goods along with services or simply
an idea can be called as a product. In simple terms, product is
anything that is offered for sale into the marketplace. This makes
product an important constituent of marketing and an important
consideration in managerial decision-making.
In past, it was relatively easier for entrepreneurs to choose a
particular product. He had complete freedom to choose any product
which according to him can satisfy the needs of the market and is
money-making in nature. Before launching the product,
entrepreneur use to consider different criteria like technological
requirement, needed financial resources, an approximate idea about
the product's demand, etc. However, in this age, the selection of a
16
product has become a very complex task as the market conditions
have become very complicated. Nowadays, when an entrepreneur
wants to select a product, he needs to consider complex parameters
like satisfaction level of the customers, attitudes of the customers,
competitors' strengths, support of the dealers, existing
infrastructural facilities, prevalent macro conditions of the economy,
etc.
Product Selection in Entrepreneurship
There are various sources for collecting the vast array of
information regarding product selection. These sources include
government publications. development agencies, management and
technical journals, public sector units like ITI, HAL, BHEL, etc, and
various research laboratories. In many cases, entrepreneurs may
hire specialized institutions or individuals to carry out the process of
product selection on their behalf. Similarly, the task of market
survey may be conducted by the entrepreneur himself or by hiring
experts or consultants.
Criteria to Select a Product
An entrepreneur makes use of several criteria before selecting
a product. These are as follows:
Criteria for Selection of Product
1) Technical Know-how:
Technical know-how is an important guiding factor for an
entrepreneur while selecting a product. An entrepreneur can easily
decide what product should be manufactured if he belongs to the
product-related field. Similarly, knowledge in manufacturing or
marketing field enables the entrepreneur in selection of an
appropriate product.
2) Availability of Market:
The availability of a large market for a particular product also
helps in its selection. If the demand for a product is huge, then the
17
market risk of launching it becomes less. Thus, it is very essential
that the entrepreneur have a good knowledge about the product's
market in terms of how and where the product can be sold.
3) Financial Strength:
Relative financial of the entrepreneur also serves as guiding
force in selection of a product. Manufacturing a product generally
requires heavy investment in research and development, capacity
creation, plant and machinery, etc., which is generally beyond the
expenditure capacity of a small-sized firm. Thus, it is advisable for
an entrepreneur to analyse its financial strength prior to product
selection.
4) Competitive Rivalry:
The returns from a product are greatly influenced by the
degree of competition prevailing in the market. Factors like market
dominance by the competitors, availability of substitutes, any
barrier to entry, etc., play significant role in determining the viability
of the product.
5) Product Category:
In many cases, certain products fall in the priority sector
category while some others may be reserved for small scale.
sectors. The level and extent of competition for these product
categories among small sectors is lesser than that seen in other
sectors of the economy. There are also certain products which the
Government has earmarked as exclusively to be purchased from the
small scale sector. In the case of such products, the entrepreneur
will definitely give a greater importance to a product which falls in
this category.
6) Consistency in Demand:
When there are not many fluctuations in the demand of a
product then the market for such products can be considered to be
stable. Seasonal products are contrary in the sense that their
18
demand fluctuates a lot. The seasonality of a product also plays a
large part in its selection or non-selection as this is directly linked to
the stability in the demand for the same. The entrepreneur should
definitely prefer a product which has a consistent and stable
demand.
7) Restriction on Imports:
The foreign trade policy of the government may restrict the
import of some products. In such cases, those products gain
attraction from general public and consequently an entrepreneur
should prefer those products that are part of such restricted
category.
8) Availability of Raw Materials:
Availability of raw material is a very important factor for
selecting a particular product. An entrepreneur should ensure that
supplies required for smooth conduct of business operations are
mostly available in desired quantity around the year.
9) Government Incentives and Subsidies:
Government often provide a number of subsidies and
incentives for the promotion of certain businesses. These incentives
and subsidies are generally in the form of tax holidays, exemptions
from customs, concessions, etc. An entrepreneur must consider the
availability of such governmental schemes as they greatly support
an entrepreneur in setting up a new business.
10) Ancillary Products:
When the product is in the nature of an ancillary product (a
product required for manufacturing another product), then its
increases the attraction for the entrepreneur. This is because the
product will have a ready market in the parent industry. For
example, an ancillary unit of Maruti.

19
11) Location of Business:
Business location is also important for selecting a particular
product as certain products are earmarked for production in special
zones like free trade zones, export promotion zones, etc.
Government also provides incentives and tax breaks for such
products.
12) Licensing System:
There are overtime changes in the governmental licensing
policies. For some products, it is mandatory for the entrepreneur to
have the required license issued by the concerned authority. Under
particular conditions, capital addition is also monitored. Moreover,
the process of obtaining license is burdensome for certain products.
Thus, products which require a lot of licensing approvals will not be
very attractive to entrepreneurs.
13) Government Policy:
The selection of product also has to be done keeping in mind
the government policies and their likely impact. The entrepreneur
should choose a product which falls in a sector with favorable
Governmental policies. For example, products which are not socially
beneficial like tobacco and alcohol do not receive government
support.
Precautions Regarding Product Selection
An entrepreneur has to be careful while selecting a product.
There are certain precautions that he should take while selecting a
product, which are outlined below:
1) The production process should not be very long or time-taking.
2) The employed production process should be smooth and
straightforward.
3) There should be adequate and consistent demand for the
selected product.

20
4) The product industry must have potentials for growth and
development.
5) The product should be accepted by consumers and a healthy
competition should exist for the same.
6) There should be easy availability of plant and machinery and
other equipment required for the production of the product.
7) There should be availability of adequate raw materials. In case
local raw materials are not available, then suppliers from non-local
regions should be able to provide the raw materials in the shortest
possible time.
8) Personnel required for technical, artistic and manual work/labour
should be easily available at reasonable costs.
9) The product should be capable of introducing in overseas
markets.
Forms of Business Ownership
From the standpoint of ownership, business organizations may
be of the following types;

Sole Proprietorship
A sole proprietorship is a for-profit business owned by one
person. The owner may operate on his or her own or may employ
others. The owner of the business has unlimited liability for the
debts incurred by the business.
Partnership
A partnership is a form of for-profit business owned by two or
more people. In most forms of partnerships, each partner has
unlimited liability for the debts incurred by the business.

21
Company
A company is a limited liability business that has a separate
legal personality from its members. The company can be either
privately-owned or government-owned, and privately the owned
companies can organize either for-profit or not-for-profit.
A privately-owned, for-profit company can either be privately
held or publicly held. A for-profit company’s shareholders elect a
board of directors to direct the corporation and hire its managerial
staff.
Cooperative Society
Often’ referred to as a “co-op,” a cooperative is a limited-
liability business that can be organized for-profit or not-for-profit.
A for-profit cooperative differs from a for-profit corporation in
that it has members, as opposed to shareholders, who share
decision-making authority.
Cooperatives are typically classified as either consumer
cooperatives or worker cooperatives. Cooperatives are fundamental
to the ideology of economic democracy.
State Enterprise or Government Company
Generally, an enterprise owned by the state is known as a
state-owned enterprise, state enterprise, or government company.
For the expansion of the business, rapid industrialization and
development, and to remove individual monopoly and to establish
public interest and ownership, the state interferes in the business
sector.
Plant Location
Plant location refers to the choice of the region where men,
materials, money, machinery and equipment are brought together
for setting up a business or factory.
Identifying an ideal location is very crucial, it should always
maximize the net advantage, must minimize the unit cost of
22
production and distribution. Plant location decisions are very
important because once the plant is located at a particular site then
the organization has to face the pros and cons of that initial
decision.
Factors affecting the plant location
Primary factors
Availability of raw materials:
Availability of raw materials is the most important factor in
plant location decisions. Usually, manufacturing units where there is
the conversion of raw materials into finished goods is the main task
then such organizations should be located in a place where the raw
materials availability is maximum and cheap.
Nearness to the market:
Nearness of market for the finished goods not only reduces the
transportation costs, but it can render quick services to the
customers. If the plant is located far away from the markets then
the chances of spoiling and breakage become high during transport.
If the industry is nearer to the market then it can grasp the market
share by offering quick services.
Availability of labor:
Another most important factor which influences the plant
location decisions is the availability of labor. The combination of the
adequate number of labor with suitable skills and reasonable labor
wages can highly benefit the firm. However, labor-intensive firms
should select the plant location which is nearer to the source of
manpower.
Transport facilities:
In order to bring the raw materials to the firm or to carrying
the finished goods to the market, transport facilities are very
important. Depending on the size of the finished goods or raw

23
materials a suitable transportation is necessary such as roads,
water, rail, and air. The transportation costs must be kept low.

Availability of fuel and power:

Unavailability of fuel and power is the major drawback in
selecting a location for firms. Fuel and power are necessary for all
most all the manufacturing units, so locating firms nearer to the
coal beds and power industries can highly reduce the wastage of
efforts, money and time due to the unavailability of fuel and power.
Availability of water:
Depending on the nature of the plant firms should give
importance to the locations where water is available.
For example, power plants where use water to produce power
should be located near the water bodies.

24
Secondary factors
Suitability of climate:
Climate is really an influencing factor for industries such as
agriculture, leather, and textile, etc. For such industries extreme
humid or dry conditions are not suitable for plant location. Climate
can affect the labor efficiency and productivity.
Government policies:
While selecting a location for the plant, it is very important to
know the local existed Government policies such as licensing
policies, institutional finance, Government subsidies, Government
benefits associated with establishing a unit in the urban areas or
rural areas, etc.
Availability of finance:
Finance is the most important factor for the smooth running of
any business; it should not be far away from the plant location.
However, in the case of decisions regarding plant location, it is the
secondary important factor because financial needs can be fulfilled
easily if the firm is running smoothly. But it should be located
nearer to the areas to get the working capital and other financial
needs easily.
Competition between states:
In order to attract the investment and large scale industries
various states offer subsidies, benefits, and sales tax exemptions to
the new units. However, the incentives may not be big but it can
help the firms during its startup stages.
Availability of facilities:
Availability of basic facilities such as schools, hospitals,
housing and recreation clubs, etc can motivate the workers to stick
to the jobs. On the other hand, these facilities must be provided by
the organization, but here most of the employees give preference to
25
work in the locations where all these benefits/facilities are available
outside also. So while selecting plant location, organizations must
give preference to the location where it is suitable for providing
other facilities also.
Disposal of waste:
Disposal of waste is a major problem particularly for industries
such as chemical, sugar, and leather, etc. So that the selected plant
location should have provision for the disposal of waste.
Licensing, registration and local bye laws
Basic Legal & Regulatory Registrations for Every Business
1. PAN (Permanent Account Number) and TAN (Tax
Deduction Account Number)
The quintessential of all the registrations that are required by
any business irrespective of it is a Company, LLP, Partnership Firm
or even a Hindu Undivided Family, is to have a PAN and TAN in the
name of the business or in the name of the individual in case of Sole
Proprietorship (in whose name the transactions are to be made).
PAN and TAN are two ten-digit unique alphanumeric numbers issued
by the Income Tax Department. Every person who deducts or
collects tax at source has to apply for the allotment of TAN. As per
the recent changes, AADHAR can be used in place of PAN for filing
IT Returns but PAN is still essential when it comes to making
payments exceeding Rs 50,000.
2. Trade License / Shops and Establishment License
Trade License and Shops and Establishment license are to be
obtained from your municipal corporation, or panchayat, depending
on the jurisdiction of your business for setting up of any shop or
commercial establishment and running a trade (the municipality
usually issues a list of trades which mandatorily needs a trade
license). Shops and Establishment license is to be obtained by any

26
establishment having more than 10 employees from the labor
commissioner.
3. GSTIN Registration
Under the GST regime, tax is payable if the turnover of Rs.20
lakhs (Rs. 10 lakhs for North Eastern states & Special Category
States) is achieved. All business liable to pay GST shall register and
obtain GSTIN – a unique Goods and Services Tax Identification
Number (GSTIN).
4. Company / LLP / Start-up/ Partnership Firm Registration
Any business entity wanting to start a business in India as a
Company or Limited Liability Partnership, shall register itself under
the Ministry of Corporate Affairs. A Partnership firm may opt for
registration of its partnership deed under the Indian Partnership Act
1932, and Start-ups may opt for registration under Start-up India
Scheme to avail the benefits granted by the Government under
various laws, although it is not mandatory.
5. EPF Registration
Employees Provident Fund registration is mandatory for all
establishments having 20 or more persons (10 persons in some
states in India). In such cases, employees with monthly income less
than Rs 15000 shall be mandatorily covered under EPF.
6. ESI Registration
Employees State Insurance Registration is to be obtained by
all establishments (excluding Factories) in ESI notified areas, having
more than 10 employees. Employees earning less than Rs 21,000
per month are covered under this scheme. Any establishment that is
exempted from obtaining ESI registration shall obtain an Exemption
Certificate.
7. Professional Tax Registration
Professional Tax is the tax levied by the local municipality on
the salary paid to every individual. The tax rate varies from state to
27
state. For payment of the professional tax, most states issue a
registration certificate or an enrollment number, which will be used
as a reference for remitting the tax.
8. Contract Labour Registration
Contract Labour license will be applicable if the business – ie
Principal Employer, employs more than 10 contract labors. Contract
labor registration is to be obtained by both the Principal Employer
and Contractor from the Labour Department of the concerned State.
9. Pollution Consent
Pollution Consent is required to be obtained by business falling
within Red, Green and Orange category of industries notified by the
Pollution Control Board. Pollution Consent is of two types, Consent
to Operate (CTO) and CFE (Consent for Establish). Consent to
Establish is to be obtained before construction/ set up of the
establishment and Consent to Operate is to be obtained after the
construction/ setup but before the commencement of operations.
This certificate will be subject to renewal as mentioned on the
consent.
10. Motor Vehicle Registration
Every business entity who wishes to own vehicles in its name
shall obtain, Registration Certificate of the vehicle, Pollution
Certificate (not applicable for vehicles purchased less than a year),
Fitness Certificate and pay Road Tax.

28
Unit - III
Institutional arrangements for entrepreneurship development – DIC,
SIDCO, NSIC, SISI – institutional finance to entrepreneurs – TIIC,
SIDBI, commercial banks – incentives to small scale industries
Institutional arrangements for entrepreneurship
development
DISTRICT INDUSTRIES CENTERS (DIC)
The District Industries Centre Program began in 1978 as a
government initiative to bring all assistance and programs to the
village and small-sized entities under one roof, in order to
effectively grow all small size businesses in the nation’s rural areas
and villages. The DIC Program's major focus is on the establishment
of these kinds of production plants, which will provide a large
number of jobs in remote and semi-urban regions.
A District industries Centre is a district-level entity that assists
in the establishment of small businesses in the rural areas of India.
Before establishing a DIC, a potential entrepreneur must visit
various organisations in order to obtain the necessary support and
facilities, and in many instances, most of them will be located
outside of their neighbourhood.
So, there were a lot of delays, as well as the entrepreneur
having to incur many expenses which they can’t afford. Due to
these inconveniences, several agencies of the state authority have
now been assigned appropriately in charge to the DIC. Thus, an
entrepreneur may obtain all of the help they require in setting up
their business from a single institution, namely DIC.
Role of District Industries Centres (DICs)
District Industry Centres exist only to promote and support the
businesses of their respective states. The Department of Commerce
and Industry in each state forms DICs. Alongside DICs, Sub-District
Industries Centres provide assistance. DIC's responsibilities include:
29
  DIC assists an entrepreneur in the DIC programs and
guarantees continuous support during the establishment of
their business.
 DIC offers young business owners a single-window clearing
system that allows them to settle their business-related
problems quickly.
 DIC encourages the expansion and development of many
manufacturing industries in rural and urban communities.
 Under the Standup India Scheme, DIC provides financing for
MSMEs, start-ups and growing companies.
 DIC provides self-employed individuals with machinery and
tools to help them with their businesses.
 DIC also carries out a periodic assessment of their programs
and schemes to ensure proper implementation and operation.
Schemes Under the District Industries Centres (DICs)
Below is the list of DIC schemes:
 Prime Minister’s Employment Guarantee Program: This
program started its operations in 2008. This scheme's purpose is
to assist educated but jobless persons in rural and urban
regions. It offers adequate job related skills.
 DIC Loan Scheme: This scheme is accessible in cities and rural
regions under one lakh people and a capital investment less than
₹2 lakhs. It assists the self-employed and smaller businesses in
rural regions. Small size Industries Board and Village Industries
locate similar businesses and aid them in obtaining an MSME
loan.
 Seed Money Scheme: This program aids self-employed
individuals who are part of self-employment initiatives or
specialised wage jobs. The financing under the scheme is ₹25
lakhs. For ventures up to ₹10 lakhs, the seed money support will
be 15%. A loan from a bank will cover 75% of the project costs,
30
 with a maximum aid limitation of ₹3.75 lakhs for all SC/ST/OBC
and the total support will be 20%.
 District Awards Scheme: This scheme, as the name implies,
boosts the morale of new and successful businesses by
recognizing them with district-level prizes. Every year, the
District Advisory Committee picks such businesses and honours
them on Vishwakarma Jayanti.
 Entrepreneurship Development Training Program: This
program prepares educated but jobless individuals to get self-
employment or professional jobs. The Entrepreneurship
Introductory Program (Udyojakta Paricha Karyakram),
Entrepreneurship Development Training Program and the
Technical Training Program are the 3 training programs offered
under this scheme.
Eligibility Criteria For Applying for a Training Program Under
the District Industries Centres (DICs)
The eligibility requirements to apply for the various programs
under DIC are different. You can review the requirements for each
scheme separately to see if you qualify for MSME financing. The
following are the prerequisites for a DIC credit for an MSME:
 Candidates must be at least eighteen years old.
 Candidates must have completed the eighth grade.
 The value of the manufacturing company has to be greater
than ₹10 lakhs, and the price of the product or commercial
sector must be greater than ₹5 lakhs.
To obtain a District Industry Centre certificate you will require
only a few documents. And these are Aadhar Card, the name and
address proof of your company, banking information, the date of the
company's inception, the main function of the company, the nature
of business, the count of workers (if there are any), and the
business's financing details.
31
Functions of District Industries Centres (DICs)
 Survey and Investigation: The District Industries Centre
surveys existing conventional and emerging businesses, raw
materials, and people’s capabilities who are employed in the
business. It anticipates the market price for numerous items
used in a manufacturing unit. It also develops techno-economic
viability analysis in order to provide enterprises with investment
recommendations.
 Training Courses: The DIC also offers training classes for
smaller and modest business owners. It functions as a go to
contact point for start-ups and small industry service institutions.
 Machinery and Equipment: The District Industries Centre
advises where one can purchase machinery and tools and can
also organise for the delivery of machinery on a rental basis.
 Raw Materials: The District Industries Centre gathers
information about the resources needed by various units and
arranges bulk purchases of those products. As a result, small
business operations may obtain raw materials at inexpensive
costs.
 Arrangement for Loans: It establishes the required
agreements with Leading Banking and other Financial Firms to
give small businesses financial support. It also evaluates
applications and keeps track of the movement of industrial loans
in its province.
 Marketing: Market studies and market development
opportunities are carried out by the District Industries Centre. It
also arranges marketing channels related to small businesses,
maintains communications with government contracted
organisations, and keeps enterprises up to date on market data.
 Khadi and Village Industries: District Industries Centres
concentrate on the improvement of Khadi and village businesses,
32
 as well as other small producers. It also maintains a strong
working relationship with the State Khadi Authority and
organises training courses for rural craftsmen.
SMALL INDUSTRIES DEVELOPMENT CORPORATION (SIDCO)
Need for Small Industries Development Corporation (SIDCO):
In many state governments, for the promotion of small scale
industries, a separate corporation has been set up which is known
as Small Industries Development Corporation. They undertake all
kinds of activities for the promotion of small scale industries. Right
from the stage of installation, to the stage of commencing
production, these Corporations help small scale industries (SSI) in
many ways. In short, they provide infrastructure facilities to small
scale industries. Due to the assistance provided by SIDCO, many
backward areas in most of the states have been developed. So,
SIDCO has also been responsible in spreading the industrial activity
throughout several states.
Objectives of SIDCO
The following are the main objectives of SIDCO
1. The main objective of SIDCO is to stimulate the growth of
industries in the small scale sector
2. To provide infrastructure facilities like roads, drainage, electricity,
water supply, etc is one of the primary objectives of SIDCO.
3. To promote industrial estates which will provide industrial sheds
of different sizes with all basic infrastructure facilities.
4. To provide technical assistance through training facilities to the
entrepreneurs.
5. To promote skilled labor through the setting up of industrial
training institutes.
Small Industries Development Corporation, Tamilnadu
SIDCO has been set up by the Govt. of Tamilnadu, with the
specific objective of playing a catalytic role in the promotion and
33
development of Small Scale Industries and to hasten the Industrial
dispersal in backward and underdeveloped areas of the State.
The prime function of SIDCO is the formation of potential
growth centers in various parts of Tamil Nadu. SIDCO commenced
activities in 1971 with a comprehensive promotional Programme
designed to stimulate entrepreneurship. Ever since, SIDCO has been
synonymous with the growth of Small Scale Industries in Tamilnadu.
Need for Small Industries Development Corporation (SIDCO)
In many state governments, for the promotion of small scale
industries, a separate corporation has been set up which is known
as Small Industries Development Corporation. They undertake all
kinds of activities for the promotion of small scale industries. Right
from the stage of installation, to the stage of commencing
production, these Corporations help small scale industries (SSI) in
many ways.
In short, they provide infrastructure facilities to small scale
industries. Due to the assistance provided by SIDCO, many
backward areas in most of the states have been developed. So,
SIDCO has also been responsible in spreading the industrial activity
throughout several states.
Objectives of SIDCO
The following are the main objectives of SIDCO
1. The main objective of SIDCO is to stimulate the growth of
industries in the small scale sector
2. To provide infrastructure facilities like roads, drainage,
electricity, water supply, etc is one of the primary objective of
SIDCO.
3. To Promote industrial estates which will provide industrial
sheds of different sizes with all basic infrastructure facilities.
4. To Provide technical assistance through training facilities to
the entrepreneurs.
34
 5. To Promote skilled labor through the setting up of industrial
training institutes.
Functions of SIDCO
SIDCO Supplies Scarce Raw Materials: Some of the scarce
raw materials are procured by the corporation either from the
domestic market or from abroad and are provided to the needy
small scale industries. For this purpose, SIDCO has a number of raw
material depots and these depots are procuring various scarce raw
materials, as per the requirements of small scale industries in the
state.
SIDCO Provides Marketing Assistance: In order to provide
an efficient marketing support to small scale industries, the
corporation has taken up various schemes. In fact, the corporation
participates in the tenders floated by the state government
departments and also with the DGS & D (Director General of
Supplies and Disposal).
SIDCO Assists in Bills Discounting: When small scale units
supply goods to government departments, there is a delay in
receiving payments. In such a situation, the bills drawn on
government departments will be discounted by SIDCO and upto
80% of the bill value is given to the supplier. This helps the SSI
units in solving their working capital crisis.
SIDCO Provides Export Marketing Assistance: To promote
export marketing among the small scale industries, SIDCO has
developed websites because of which it is able to display the
products of the small scale industries in foreign markets and obtain
export orders. Once an export order is obtained, the Common
export manager of SIDCO will make arrangements for extending
various services for export of the product.
SIDCO Set up Captive Power Plants: In order to provide
uninterrupted and good quality power supply, SIDCO has taken up a
35
plan to set up captive power plants in major industrial estates. It is
now planning to set up these plants in 10 industrial estates.
SIDCO Promotes Skill Development Centres: In an effort
to supply skilled laborers to various small scale industries, skill
development centres are being set up in various industrial estates
which will be training workers in varied industrial activities and they
will be trained in modern skill.
SIDCO Promotes Women Entrepreneurs: In addition to the
above, in order to promote women entrepreneurs, a separate
industrial estate for women has been set up at Tirumullaivoyal, near
Chennai, where women entrepreneurs are trained in various fields
of small scale industries.
In addition to SIDCO, there are various corporations that
assists in the promotion of small scale industries such as, Small
Industries Promotion Corporation of Tamilnadu (SIPCOT), Tamilnadu
Small Industries Corporation (TANSI), Industrial and Technical
Consultancy Organisation of Tamilnadu (ITCOT) and Tamilnadu
Industries Investment Corporation (TIIC).
NATIONAL SMALL INDUSTRIES CORPORATION LIMITED
(NSIC):
The national small Industries corporation Ltd.(NSIC), an
enterprise under the Union Ministry of Industries, was set up in
1955 to promote, aid and forster the growth of small scale
industries, in the country. NISC provides a wide range of services,
predominantly promotional in character to small scale industries. It
main functions are:
 To provide machinery on hire – purchase scheme to small
scale industries.
 To provide equipment leasing facility.
 To help in export marketing of the products of small scale
industries.
36
  To participate in bulk purchase programme of the
government.
 To setup small scale industries in other developing
countries on turn-key basis.
National Small Industries Corporation (NSIC)
It was established in the year 1955, aims to support, promote,
develop, and foster the ministry of MSME – Micro, Small, and
Medium Enterprises of India. NISC is an ISO 9001-2015 certifies
organization under the Government of India Enterprise. NSIC has
training plus incubation centers, a network of offices, and technical
centers in the whole country supervised and governed by
professionals.
Offering unified support and manpower services in marketing,
finance, technology, and support, NSIC also facilitates customized
schemes, thus enhancing the competitiveness, diligence, and
growth of the MSMEs and eventually resulting in the overall
development of the country’s economy.
Objectives of NSIC:
The main goals of NSIC are:
 Eventually works on profitability by enhancing efficiency
and productivity within the enterprise
 To enhance business growth by outreaching corporates
and thus creating business opportunities
 Helps in working on a safe ad clean environment to work
conductively
 Helps in training and self-employment
 Upgrades skills of existing and new manpower and
employees
Functions of NSIC:
The main areas of functioning of NSIC are:

37
  Helps the MSMEs to elevate their competitiveness by running
and providing various development schemes
 Provides the MSMEs various integrated support series on
marketing, finance and technology
 Skill Development and Training programs initiated and run by
NSIC in keeping the MSMEs updated and upgraded.
Schemes under NSIC:
Bank Credit Facilitation – NSIC collaborates with various top
banks in India, both public and private, to facilitate the MSMEs with
credit support to meet their capital and financial needs and to help
with the documentation process.
Raw Material Assistance Scheme – This is a beneficial
scheme for MSMEs in the manufacturing unit and has the benefit of
UAM – Udyog Aadhar Memorandum. They have the leverage to take
a customized high-value loan up to Rs. 15 crores for the
procurement of raw material in the form of credit or advance
payment.
MSME Global Mart – B2B Web Portal – Under this scheme,
NSIC offers infomediary services providing vital statistical data and
information on business and technology exhibiting the competence
of the MSMEs. It can help in providing information on the following
topics:
 Tenders on a national level on email
 Trust seal of NSIC
 The Web store of MSMEs
 MSME interactive database
 National Tender
 Centralized emailing system
 Popular products
 LIVE chat and call center support
 Discussion forums
38
  Payment Gateway
 Membership subscription
 Other Value-add services
Single Point Registration Scheme – Launched in 1976, MSMEs
make government purchases via a one-point registration process.
Consortia and Tender Marketing – A consortium is created to
promote small scale products and goods of micro and small-scale
entrepreneurs.
Marketing Intelligence Scheme – This helps in understanding the
current market scenario and understanding the demand, needs,
behaviors, preferences, attitudes, and tastes of the potential
customers.
Technology Incubation – Under the PPP mode – Public-Private-
Partnership, NSICs have set up training and incubation centers –
NSIC-TIC by initiating franchisee agreements and arrangements
with private entities at various locations in the country.
Government Schemes under NSIC – especially designed for the
SC/ST group to help them start-up or develop their businesses.
ASPIRE Scheme– This addresses employment, the standard of
living, and the livelihood of the public of India, in a scenario where
the country’s population is growing by leaps and bounds.
International Cooperation and Consultancy Services – This
works on sustainable business relations and aims to strengthen
international business ties by offering consultancy to other
developing countries.
Benefits of NSIC:
 Through private and public sector banks, NSICs provide credit
and loan facilities to MSMEs
 Priority Sector is promoted
 It gives an option to switch from one financial institution like
banks to the other.
39
  Supporting the documentation process for MSMEs
 Guidance to get the best interest rates for MSMEs
 Assist and direct MSMEs to avail credit
 Holistic support to MSMEs
SMALL INDUSTRIES SERVICE INSTITUTES (SISI’S)
The small industries service institutes (SISI’s) are set-up one
in each state to provide consultancy and training to small and
prospective entrepreneurs. The activities of SISs are co-ordinate by
the industrial management training division of the DC, SSI office
(New Delhi). In all there are 28 SISI’s and 30 Branch SISI’s set up
in state capitals and other places all over the country.
SISI has wide spectrum of technological, management and
administrative tasks to perform.
Functions of SISI
1. To assist existing and prospective entrepreneurs through
technical and managerial counselling such as help in selecting the
appropriate machinery and equipment, adoption of recognized
standards of testing, quality performance etc;
2. Conducting EDPs all over the country;
3. To advise the Central and State governments on policy matters
relating to small industry development;
4. To assist in testing of raw materials and products of SSIs, their
inspection and quality control;
5. To provide market information to the SISI’s;
6. To recommend SSI’s for financial assistance from financial
institutions;
7. To enlist entrepreneurs for partition in Government stores
purchase programme;
8. Conduct economic and technical surveys and prepare techno-
economic feasible reports for selected areas and industries.

40
9. Identify the potential for ancillary development through sub-
contract exchanges;
10. Organize seminars, Workshops and Industries Clinics for the
benefit of entrepreneurs.
Institutional finance to entrepreneurs
1. TAMIL NADU INDUSTRIAL INVESTMENT CORPORATION
LIMITED (TIIC):
It is an institution owned by the government of Tamil Nadu
and is intended as a catalyst for the development of small, medium
and large scale industries in Tamil Nadu. It was established in 1949.
The Tamil Nadu Industrial Investment Corporation Limited (TIIC), a
government company incorporated under the Companies Act 1913
and continues to be a government company under The Companies
Act, 1956. The authorised share capital of the company is Rs.300
Crores and the paid up capital of the company is Rs.283.4956
Crores.
TIIC as a State Level Financial Institution, offers long and
medium term financial assistance to various industries including
service sector in the following forms:
 Term Loans
 Term Loan and Working Capital Term Loans under the Single
Window Scheme.
 Special types of assistance like Bill Financing Scheme, etc.
2. SIDBI - SMALL INDUSTRIES DEVELOPMENT BANK OF
INDIA:
SIDBI, or Small Industries Development Bank of India, is an
entity whose primary objective is to strengthen the country's micro,
small and medium enterprises (MSMEs) sector. It is a subsidiary of
the Industrial Development Bank of India (IDBI) which began its
operations on April 2, 1990. Initially, IDBI was responsible for the
Small Industries Development Fund and the National Equity Fund.
41
Later, SIDBI became responsible for handling these two funds.
Besides providing financial support to the MSME sector, SIDBI also
plays a role in preventing climate change by promoting cleaner
practices in production and efficient use of energy.
Objectives of SIDBI
The Small Industries Development Bank of India has the
following objectives for MSMEs in the country -
 Provide financial aid to micro, small and medium-sized
businesses.
 Provide easy reach to a large population through indirect
lending to banks and other financial institutions.
 Help in the modernisation of small-scale industry and
upgrade technology for improved efficiency.
 Promote products of the small-scale industry through
better marketing strategies.
 Support national plans on climate change.
Benefits of SIDBI
1. Customised Loans
Startups and small-scale industries often find it difficult to
arrange sufficient capital for the business. SIDBI offers several loan
schemes to their customers. But if someone has a special
requirement, the institution provides customised loans as per the
requirement of the business. This tailored approach helps small-
scale businesses acquire loans and credit as per their needs.
2. Attractive Rate of Interest
High-interest rates make things difficult for the MSME sector.
SIDBI makes it easy for enterprises to avail of loans by offering an
affordable interest rate. SIDBI can keep their interest rate low
because they have tie-ups with several national and international
financial institutions like the Japan International Cooperation Agency
and the World Bank.
42
3. Collateral-free Loans
Banks usually provide loans against collateral. SIDBI, on the
other hand, provides security-free loans to its customers, and
MSMEs can take a loan of up to ₹1 crore without the compulsion of
providing collateral.
4. Government Subsidies
When the government decides to provide a subsidy for MSMEs,
SIDBI offers such subsidy loans and schemes to business owners at
a lower interest rate than usual and with easy terms and conditions.
5. No Tempering of Company Ownership
Business owners sometimes have to give away part ownership of
the company to acquire capital for their business. SIDBI safeguards
the interest of business owners by providing them credit and loans
without affecting their ownership of the company.
6. Transparent Procedure
Applying for a loan with SIDBI and its sanction procedure is
very clear, with no hidden charges. The interest rates and other
charges are mentioned to lenders beforehand to maintain a high
level of transparency in the loan process.
7. Special Assistance
SIDBI bank provides loans to MSMEs through different SIDBI
schemes and assists startup companies and entrepreneurs by
providing valuable insights and guidance related to the business.
Their relationship managers help business owners make the right
decisions during the loan process.
Functions of SIDBI
SIDBI coordinates with various institutions in the country to
financially assist and develop small-scale industries. Financial
institutions like commercial cooperative banks, regional rural banks,
industrial development corporations, etc., work along with SIDBI to
strengthen the MSME ecosystem in India. Now let us look at the
43
various functions of the Small Industries Development Bank of
India.
 Refinancing commercial banks and other financial institutions
to grant loans to small scale industries and promote
borrowings by small business units.
 Discounting bills of small business units and rediscounting
further to help the businesses.
 Assisting small-scale units that export their products to other
countries. SIDBI helps display products of such exporters in
international exhibitions and bears involved expenditures.
 Providing seed capital to promising entrepreneurs and soft
loans for sustaining the business. A soft loan has a very low-
interest rate and is repayable in a long span of 15-20 years.
 Conducting surveys in specific geographic locations to figure
out the potential of developing MSMEs in the area. SIDBI also
offers non-financial assistance by helping procure raw
materials for business owners.
 Offering hires purchase financing to help small-scale business
owners acquire expensive machinery.
 Providing factoring services, leasing, etc., to the small-scale
sector.
Schemes Offered by SIDBI
1. Loan Schemes under Direct Financing
SMILE (SIDBI Make in India Soft Loan Fund for MSME)
provides capital to new businesses in the service or manufacturing
sector.
Loan Tenure: 10 years
Loan Amount: ₹10 lakhs to ₹25 lakhs
2. STFS (SIDBI Trader Finance Scheme)
This scheme is for wholesalers, retailers and traders who have
been running their businesses for at least three years.
44
Loan Tenure: Depends on the cash flow of the business
Loan Amount: ₹10 lakhs to ₹1 crore
3. SEF (SMILE Equipment Finance)
This finance scheme helps MSMEs interested in purchasing
new equipment.
Loan Tenure: 72 months
Loan Amount: Minimum ₹10 lakhs
4. TULIP (Top-Up Loan for Immediate Purposes)
Business owners with existing loans can top up their loans
through this finance scheme in 7 days.
Loan Tenure: Maximum 5 years
Loan Amount: 20% of net sales or 30% of existing exposure
5. SPEED (Loan for Purchase of Equipment for Enterprise's
Development)
This scheme entertains both new and existing customers. The
only requirement is that the business is operational for at least
three years.
Loan Tenure: 5 years and a moratorium of 6 months
Loan Amount: Up to ₹1crore for new customers and up to ₹2 crores
for existing customers
6. Loans under Partnership with OEM (Original Equipment
Manufacturer)
Small scale industries can purchase machinery and equipment
directly through the manufacturers under this scheme.
Loan Tenure: 5 years with an eligible moratorium
Loan Amount: Up to ₹1 crore
7. Working Capital (Cash Credit)
Businesses can apply for a flexible loan. With instant approval,
this financial product is a great option to meet the immediate needs
of the business.
Loan Tenure: As per the terms and conditions of the scheme
45
Loan Amount: As per the financial status of the borrower
COMMERCIAL BANKS:
A commercial bank is a type of financial institution that
accepts deposits; offers checking account services; makes business,
personal and mortgage loans; and offers basic financial products
like certificates of deposit (CDs) and savings accounts to individuals
and small businesses. A commercial bank is where most people do
their banking, as opposed to an investment bank.
Important Role of Commercial Bank
1. Mobilising Saving for Capital Formation
The commercial banks help in mobilising savings through
network of branch banking. People in developing countries have low
incomes but the banks induce them to save by introducing variety of
deposit schemes to suit the needs of individual depositors.
2. Financing Industry
The commercial banks finance the industrial sector in a
number of ways. They provide short-term, medium-term and long-
term loans to industry. In India they provide short-term loans. In
India, the commercial banks undertake short-term and medium-
term financing of small scale industries, and also provide hire-
purchase finance.
3. Financing Trade
The commercial banks help in financing both internal and
external trade. The banks provide loans to retailers and wholesalers
tostock goods in which they deal. They also help in the movement of
goods from one place to another by providing all types of facilities
such as discounting and accepting bills of exchange, providing
overdraft facilities, issuing drafts, etc.
4. Financing Agriculture
The commercial banks help the large agricultural sector in
developing countries in a number of ways. They provide loans to
46
traders in agricultural commodities. They open a network of
branches in rural areas to provide agricultural credit.
5. Financing Consumer Activities
People in underdeveloped countries being poor and having low
incomes do not possess sufficient financial resources to buy durable
consumer goods. The commercial banks advance loans to
consumers for the purchase of such items as houses, scooters, fans,
refrigerators, etc.
INCENTIVES TO SMALL SCALE INDUSTRIES (SSI):
Many incentives are provided both by the Central and State
Governments to promote the growth of small-scale industries and
also to protect them from the onslaught of the large-scale sector.
Among the various incentives given to small-scale industries the
following deserve special mention:
1. Decentralization of economic power
Incentives encourages prospective entrepreneurs to take up
industrial ventures and results in decentralization of economic
power in few hands.
2. Balanced regional development
Incentives are given to entrepreneurs establishing industries in
backward areas. Hence, it results in the dispersal of industries over
India’s geographical area and contributes to regional balanced
development.
3. Transformation of Technology
Incentives help in the transformation of traditional technology
into modern technology. Traditional technology is characterized by
low skill; low productivity and low wages, whereas modern
technology is subsequently characterized by improved skills, high
productivity, raising wages and a higher standard of living.

47
4. Overcomes Difficulties
The package of incentives and concessions are given to
entrepreneurs for setting up units both in backward as well as
developed districts. But generally it is given for setting up units in
backward area. It is provided to offset the disadvantages prevailing
in such places.
5. Generates Industrialization
Industrial policy uses incentives both to correct the market
imperfections and to accelerate the process of industrialization in
the country. Regional balances can also lead to effective utilization
of regional resources, removal of disparities in income and levels of
living and contribute to a more integrated society.
6. Encourages Entrepreneurship
The new entrants in the field face many obstacles on account
of inadequate infrastructures. The new entrepreneur is supported by
the government agencies through various incentives. Being a new
entrant, an entrepreneur may lack marketing and entrepreneurial
skills. An entrepreneur requires support from government agencies
to compete with competitors. The subsidies and concessions
motivate the entrepreneur both financially and non financially and
promotes entrepreneurship in the country by removing economic
constraints.
7. Helps to Overcome Competition
Incentives help the entrepreneur to survive and compete with
the competitors. Some of the incentives are concerned with the
survival and growth of industries. Several incentives are confined to
the first few years of the establishment of the unit while a few of
them are made available over a long period.

48
Unit - IV
Project report – Meaning and importance – Project report –
Format of a report(as per requirements of financial institutions) –
Project appraisal – Market feasibility – Technical feasibility –
Financial feasibility and economic feasibility – Break even analysis
Project report
Project Report is a written document relating to any investment. It
contains data on the basis of which the project has been appraised and found
feasible. It consists of information on economic, technical, financial,
managerial and production aspects. It enables the entrepreneur to know the
inputs and helps him to obtain loans from banks or financial Institutions.
The project report contains detailed information about Land and
buildings required, Manufacturing Capacity per annum, Manufacturing
Process, Machinery & equipment along with their prices and specifications,
Requirements of raw materials, Requirements of Power & Water, Manpower
needs, Marketing Cost of the project, production, financial analyses and
economic viability of the project.
Contents of a Project Report
Following are the contents of a project report.
1. General Information
A project report must provide information about the details of the
industry to which the project belongs to. It must give information about the
past experience, present status, problems and future prospects of the industry.
It must give information about the product to be manufactured and the
reasons for selecting the product if the proposed business is a manufacturing
unit. It must spell out the demand for the product in the local, national and
the global market. It should clearly identify the alternatives of business and
should clarify the reasons for starting the business.
2. Executive Summary
A project report must state the objectives of the business and the
methods through which the business can attain success. The overall picture of
the business with regard to capital, operations, methods of functioning and

49
execution of the business must be stated in the project report. It must mention
the assumptions and the risks generally involved in the business.
3. Organization Summary
The project report should indicate the organization structure and
pattern proposed for the unit. It must state whether the ownership is based on
sole proprietorship, partnership or joint stock company. It must provide
information about the bio data of the promoters including financial
soundness. The name, address, age qualification and experience of the
proprietors or promoters of the proposed business must be stated in the
project report.
4. Project Description
A brief description of the project must be stated and must give details
about the following:
• Location of the site,
• Raw material requirements,
• Target of production,
• Area required for the workshed,
• Power requirements,
• Fuel requirements,
• Water requirements,
• Employment requirements of skilled and unskilled labour,
• Technology selected for the project,
• Production process,
• Projected production volumes, unit prices,
• Pollution treatment plants required.
• If the business is service oriented, then it must state the type of
services rendered to customers. It should state the method of providing service
to customers in detail.
5. Marketing Plan
The project report must clearly state the total expected demand for the
product. It must state the price at which the product can be sold in the market.
It must also mention the strategies to be employed to capture the market.
Project report must state the following:

50
 • Type of customers,
• Target markets,
• Nature of market,
• Market segmentation,
• Future prospects of the market,
• Sales objectives,
• Marketing Cost of the project,
• Market share of proposed venture,
• Demand for the product in the local, national and the global market,
• It must indicate potential users of products and distribution channels
to be used for distributing the product.
6. Capital Structure and operating cost
The project report must describe the total capital requirements of the
project. It must state the source of finance, it must also indicate the extent of
owners funds and borrowed funds. Working capital requirements must be
stated and the source of supply should also be indicated in the project.
Proposed financial structure of venture must indicate the expected sources
and terms of equity and debt financing. This section must also spell out the
operating cost
7. Management Plan
The project report should state the following.
• Business experience of the promoters of the business,
• Details about the management team,
• Duties and responsibilities of team members,
• Current personnel needs of the organization,
• Methods of managing the business,
• Plans for hiring and training personnel,
• Programmes and policies of the management.
8. Financial Aspects
In order to judge the profitability of the business a projected profit and
loss account and balance sheet must be presented in the project report. It must
show the estimated sales revenue, cost of production, gross profit and net
profit likely to be earned by the proposed unit. In addition to the above, a

51
projected balance sheet, cash flow statement and funds flow statement must
be prepared every year and at least for a period of 3 to 5 years.
9. Technical Aspects
Project report provides information about the technology and technical
aspects of a project. It covers information on Technology selected for the
project, Production process, capacity of machinery, pollution control plants
etc.
10. Project Implementation
Every proposed business unit must draw a time table for the project. It
must indicate the time within the activities involved in establishing the
enterprise can be completed. Implementation schemes show the timetable
envisaged for project preparation and completion.
11. Social responsibility
The proposed units draws inputs from the society. Hence its
contribution to the society in the form of employment, income, exports and
infrastructure. The output of the business must be indicated in the project
report.
PROJECT APPRAISAL
Project appraisal is the independent assessment of a project by the
lending financial institution. It is made to determine the viability of a project.
It identifies and values the expected costs and revenues of a project. It is
different from project evaluation. Project evaluation is expost analysis of a
project already executed. Project evaluation compares the real costs and
revenues of the project.
Market feasibility
The promoter must estimate the demand for the products proposed to
be manufactured. A market analysis must be made covering the following
aspects.
(1) Total size of the market and the expected share that could be captured by
the proposed unit.
(2) Marketing planning activities.
(3) Organising the marketing process.

52
(4) Controlling the deviations, if any points to be considered while formulating
a project report.
1. Capacity to be installed must be carefully determined.
2. Financial analysis projection must be based on true premises.
3. The market study should not be unrealistic.
4. Machinery should be selected without any fault.
5. Pre-operative costs and working capital margin must be considered.
6. Errors in location must be avoided.
7. Technical feasibility must be ensured.
8. Selling price of the product must be carefully fixed.
9. Break-even analysis must be shown.
10. The cash flow statement for the initial years must be stated.
Technical feasibility
The technical feasibility studies location land and buildings, the
adequacy and suitability of the plant, the equipments, etc. It also involves the
following
1) Selection of manufacturing process.
2) Technical engineering services needed.
3) Availability of raw materials and other inputs.
4) Availability of workers.
5) Project design and implementation schedules.
6) Possibilities for expansion and diversification to vlihse the
existing capacity.
Financial feasibility
The financial feasibility examines the following:
1) Cost of the project
2) Cost of production
3) Profitability
4) Cash flow estimates
5) Break-even analysis
6) Debt-equity pattern.
7) Proforma Balance sheets.

53
Economic feasibility:
The economic feasibility is connected with the total supply and demand
for the product proposed. It involves the following:
1) Continuous production
2) Increase in production
3) Increase in employment opportunities
4) Possibility of earnings
5) Higher standard of living of the society
6) Improved income distribution
7) Increased national income
Break-Even Analysis
A break-even analysis is an economic tool that is used to determine the
cost structure of a company or the number of units that need to be sold to
cover the cost. Break-even is a circumstance where a company neither makes a
profit nor loss but recovers all the money spent.
The break-even analysis is used to examine the relation between the
fixed cost, variable cost, and revenue. Usually, an organisation with a low fixed
cost will have a low break-even point of sale.
Importance of Break-Even Analysis
 Manages the size of units to be sold: With the help of break-even
analysis, the company or the owner comes to know how many units need
to be sold to cover the cost. The variable cost and the selling price of an
individual product and the total cost are required to evaluate the break-
even analysis.
 Budgeting and setting targets: Since the company or the owner
knows at which point a company can break-even, it is easy for them to fix
a goal and set a budget for the firm accordingly. This analysis can also be
practised in establishing a realistic target for a company.
 Manage the margin of safety: In a financial breakdown, the sales of a
company tend to decrease. The break-even analysis helps the company to
decide the least number of sales required to make profits. With the
margin of safety reports, the management can execute a high business
decision.
54
  Monitors and controls cost: Companies’ profit margin can be affected
by the fixed and variable cost. Therefore, with break-even analysis, the
management can detect if any effects are changing the cost.
 Helps to design pricing strategy: The break-even point can be
affected if there is any change in the pricing of a product. For example, if
the selling price is raised, then the quantity of the product to be sold to
break-even will be reduced. Similarly, if the selling price is reduced, then
a company needs to sell extra to break-even.
Components of Break-Even Analysis
Fixed costs: These costs are also known as overhead costs. These costs
materialise once the financial activity of a business starts. The fixed prices
include taxes, salaries, rents, depreciation cost, labour cost, interests, energy
cost, etc.
Variable costs: These costs fluctuate and will decrease or increase
according to the volume of the production. These costs include packaging cost,
cost of raw material, fuel, and other materials related to production.
Uses of Break-Even Analysis
New business: For a new venture, a break-even analysis is essential. It
guides the management with pricing strategy and is practical about the cost.
This analysis also gives an idea if the new business is productive.
Manufacture new products: If an existing company is going to
launch a new product, then they still have to focus on a break-even analysis
before starting and see if the product adds necessary expenditure to the
company.
Change in business model: The break-even analysis works even if
there is a change in any business model like shifting from retail business to
wholesale business. This analysis will help the company to determine if the
selling price of a product needs to change.
Break-Even Analysis Formula

55
Example of break-even analysis
Company X sells a pen. The company first determined the fixed costs,
which include a lease, property tax, and salaries. They sum up to ₹1,00,000.
The variable cost linked with manufacturing one pen is ₹2 per unit. So, the
pen is sold at a premium price of ₹10.
Therefore, to determine the break-even point of Company X, the
premium pen will be:

Therefore, given the variable costs, fixed costs, and selling price of the
pen, company X would need to sell 10,000 units of pens to break-even.

56
Unit - V
Entrepreneurship development in India – Women
Entrepreneurship in India – Sickness in small scale industries and
their remedial measures.

Entrepreneurship development in India

 It is the process of identifying, motivating and training people with all
relevant skills required to transform ideas into reality.
 It is an educational process that requires facilitating environment where
entrepreneurs can be trained and motivated to identify gaps in current
systems, develop ideas and exploit opportunities.
 It is a process meant to inculcate entrepreneurial skills and vision among
people.
 Entrepreneurship development encourages and skills the people to take
on new ideas, work around them and to lead from the forefront.
Important elements
It is important for an individual to have complete knowledge about
● Culture
● Infrastructure
● Entrepreneurial Support elements
Objectives
Important objectives of entrepreneurship development programmes can
be stated as
 Accelerating industrial development by enlarging the supply of
entrepreneurs
 developing entrepreneurial qualities and motivating the prospective
entrepreneurs to achieve the goal
 enhancing the growth of small and medium scale Enterprises
 providing productive self employment avenues
 improving performance of small and medium scale Enterprises by the
supply of carefully selected and it rained entrepreneurs and Diversity
find sources of entrepreneurship

57
  Enterprise development in rural and no industry area where local
entrepreneurship is not really available
Government Schemes promoting entrepreneurs
● NI-MSME
● IIE, GUWAHATI
● National institute for entrepreneurship and small business
development (NEISBUD)
Phases of Entrepreneurship Development
The three phases of entrepreneurial development are:
i. Initial Phase: Based on the survey and research an awareness is created on
entrepreneurial opportunities. This awareness programme once created
motivate the prospective entrepreneurs to come forward to take up some or
the other venture.
ii. Development Phase: Here, the entrepreneurs are thoroughly trained in
their chosen field and in various management skills, so that they can manage
their business / enterprise profitably and successfully.
iii. Support Phase: Along with awareness and motivation, necessary
support is provided to the entrepreneurs so that they can start their
enterprises without any obstacles. Support is provided to various
entrepreneurs in the form of financial assistance, infrastructural facilities,
counselling etc.
WOMEN ENTREPRENEURSHIP IN INDIA
Women entrepreneurship is the process in which women initiate a
business, gather all resources, undertake risks, face challenges, provides
employment to others and manages the business independently. Women
Entrepreneurship refers to business or organization started by a woman or
group of women.
Types of Women Entrepreneur
Women entrepreneurs in India are broadly divided into the following
categories:
1. Affluent Entrepreneurs:
Affluent women entrepreneurs are those women entrepreneurs who
hails from rich business families. They are the daughters, daughter-in laws,
58
sisters, sister-in-laws and wives of affluent people in the society. Many of them
are engaged in beauty parlour, interior decoration, book publishing, film
distribution and the like. The family supports the above type of entrepreneur
in carrying out their responsibilities.
2. Pull Factors:
Women in towns and cities take up entrepreneurship as a challenge to
do something new and to be economically independent. These are coming
under the category of pull factors. They belong to educated women who
generally lake up small and medium industries where risk is low. Under this
category, women usually start service centres schools, food catering centres,
restaurants, grocery shops etc.
3. Push Factors:
There are some women entrepreneurs who accepts entrepreneurial
activities to overcome financial difficulties. The family situation forces them
either to develop the existing family business or to start new ventures to
improve the economic conditions of the family. Such categories of
entrepreneurs are termed as push factors.
4. Self-employed Entrepreneur:
Poor and very poor women in villages and town rely heavily on their
own efforts for sustenance. They start tiny and Small enterprises like brooms
making, wax candle making, providing tea and coffee to offices, ironing of
clothes knitting work, tailoring firm etc. Such women are called self-employed
entrepreneurs.
5. Rural Entrepreneurs:
Women in rural areas/villages start enterprises which needs least
organising skill and less risk. Dairy products, pickles, fruit juices, pappads and
jagger making are coming under this category of Rural entrepreneur.
Problems faced by Women Entrepreneurs
Women entrepreneurs, unlike men entrepreneurs, face certain specific
problems in their business. These problems are as follows:
1) Low Risk-Taking Ability: Women in our country lead a protected life.
They are less educated and economically more dependent on others. In other
words, they are economically not independent. Therefore, these factors reduce

59
their ability to take risks involved in business. Risk-taking is an essential
requisite of a successful entrepreneurship. But women entrepreneurs have a
low ability to bear economic and other risks. Inferiority complex, low
education, unplanned but protected growth, lack of infrastructure etc. are the
main factors for their low ability to take or bear risks.
2) Lack of Self-Confidence: Women entrepreneurs generally lack self-
confidence in doing anything independently, particularly in India. They
hesitate to take risks. They are conservative in their outlook. The public in
general look women entrepreneurs with suspicion and they do not support nor
encourage them.
3) Lack of Entrepreneurial Aptitude: Women generally lack
entrepreneurial aptitude. They lack any entrepreneurial bent of mind as well
as entrepreneurial creativity, motivation, behaviour etc.
4) Lack of Mobility: Women, particularly in India, lack mobility. In other
words, their mobility is highly limited due to various reasons. Women cannot
travel alone freely and safely nor can they deal courageously with men or male
officers who always try to humiliate women, when approached for any official
or business work. Travelling is also not possible and feasible for women
entrepreneurs. Thus the mobility of women entrepreneurs is very limited,
particularly in India.
5) Family Problem: In India, it is mainly the duty of a woman to look after
her children and other elderly or old members of the family. Lot of time and
energy will have to be used by the woman in looking after her family affairs.
Therefore, her involvement in family affairs leaves little time and energy for
business. Therefore, married women entrepreneurs have to make a
satisfactory balance between family burden and business burden.
Their success in this connection depends upon the willing support of
their husband and other family members. Because with-out the consent and
full support of her husband and without the cooperation and encouragement
from the other members of her family, no woman entrepreneur can hope to
succeed in her business. Otherwise, there arises a role of conflict for women
entrepreneurs in their business life. Such conflicts prevent them from taking
prompt and sound decisions in their business.

60
 The movement of women has been slowed down because of the
traditions and family responsibilities, despite modernisation. Further, the
occupational background of the families, and educational level of the
husbands will have a great impact on the development of women
entrepreneurship.
The development of kindergartens, day-time nurseries and creches and
family planning and most important one, desire for a larger income and higher
standard of living, have to some extent helped the women entrepreneurs to
carry on their business without affecting the social prestige of their husbands.
6) Male-Dominated Society: Ours is a male-dominated society. Our
constitution speaks of equality between men and women, but in reality women
are not treated equal to men. Women are looked down upon as weak and
incapable in all respects. Women suffer from male reservations about their
role, ability and capacity. Such an attitude of men towards women acts as a
great barrier to women’s entry into business.
7) Social Attitudes: The biggest problem faced by the women entrepreneurs
is the problem of social attitudes towards women and the constraints in which
women entrepreneurs live and work. Despite constitutional equality, there is a
great discrimination against women. In our society, which is bound by
customs and traditions, women suffer from many reservations imposed by
men on their role and capacity.
This is particularly true in rural India. In rural areas, women face
resistance not only from the male members but also from the elderly female
members who do not accept the principle of equality. The overbearing
presence of the elders in the family restrains the young girls from venturing
out.
Though the rural women have the potential to become entrepreneurs,
they are not properly trained and given scope. It is believed that the skill
imparted to a girl is lost when she is married. Hence, girls, though having
entrepreneurial talent, continue to be helpless in rural handicrafts and small
scale and tiny industries and hence they do not become entrepreneurs.
8) Lack of Education: In India, women are less educated and therefore,
they are not aware of the business technology and market knowledge. Nearly

61
48 percent of women in India are still illiterate as per 2001 census. Lack of
education among women causes low achievement motivation. Therefore, lack
of education creators problems for women in setting up and running business
enterprises. Lack of education leads to lack of information and experience
among women creates still more problems for them in their business i.e.
because of their inability to deal with outsiders.
9) High Cost of Production: Another problem faced by the women
entrepreneurs is the high cost of production, which undermines the efficiency
and restricts the development of entrepreneurship among the woman. The
assistance given by the government and other agencies in the form of grants
and subsidies may enable them to tide over this difficulty but to ensure their
ultimate success and survival, it becomes necessary to increase their efficiency
expand productive capacity and reduce cost of production. But even then, the
women entrepreneurs still face certain problems such as problems of labour,
human resources, infrastructure, legal formalities, lack of family support etc.
10) Low Need for Achievement: Need for high achievement,
independence, autonomy and freedom are the pre-requisites for success in
entrepreneurship. But women, by nature prefer to grow under some assured
shelter and glory of their parents, husbands, brothers, sons etc. They have got
some pre-conceived notions about their role in life and this attitude of women
inhibits their achievements. There should be a keen usage for achievement in
women but it is true that all women cannot be expected for achievement in
women but it is true that all women cannot be expected to have such an urge.
Only these women who have got such exceptional urge for achievement and
independence are most likely to succeed in their business.
Remedies to Solve the Problems of Women Entrepreneurs
The following steps may be adopted to solve the problems of the women
entrepreneurs:
1) Finance Cells: In various financial institutions and banks, special
finance cells should be opened for providing easy finance to women
entrepreneurs. Such finance cells should be managed by women officers and
clerks. The finance cells should provide to women entrepreneurs at low rates
of interest and on easy repayment basis.

62
 2) Marketing Co-Operatives: Women entrepreneurs should be
encouraged and given all assistance for setting up marketing cooperatives. The
Government and semi-government bodies should give highest preference to
such women’s marketing cooperatives while making their purchases. Such
cooperatives will be able to eliminate the middlemen while making their
purchases of inputs and selling their products at remunerative prices.
3) Supply of Raw Materials and Other Inputs: The government
should make necessary arrangements for the supply of scarce and imported
raw materials and other inputs required by the women entrepreneurs. The
government should also give subsidy to the women entrepreneurs to make
their products cost- competitive and sell them at competitive prices.
4) Education and Awareness: Intensive educational and awareness
programmes should be arranged so as to change the negative or unfavourable
attitudes towards women. The attitude of the elders, particularly, the elderly
women whether mothers or mother-in-laws, should be made aware of the
potential of the girls and their due role in the society. The social attitudes of
these people should be made positive so as to enable the women entrepreneurs
to achieve progress in their venture.
5) Training Facilities: Training and skill development are quite
essential for development of entrepreneurs. Special training schemes should
be designed so as to suit the women entrepreneurs so as to create self-
confidence in their mind about the success of their entrepreneurship.
Since family members will not be permitted to go too far distant places
for training, mobile training centres should be arranged. Similarly, part-time
training facilities should also be provided during week-ends and holidays. In
addition, stipend, good hygienic creches, transport facilities, and such other
facilities should also be provided to attract more and more women-
entrepreneurs to the training centres.
MAJOR CAUSES OF SICKNESS IN SMALL SCALE INDUSTRIES
Small Scale Industries (SSIs) play vital role in the economic
development of a country. Some SSIs turn out to be sick due to various
reasons. Some of the major causes for sickness in small scale industries are
dealt in brief.

63
1. Inadequacy of Working Capital
Some units turn out sick due to inadequacy of working capital. There
may exists delay in sanction of working capital by financial institutions.
Industrial units find it difficult to meet out day to day operations due to the
time gap between sanction of term loan and working capital needs. Shortage of
Working Capital is one of the main reasons for sickness.
2. Non-Availability of Credit
Sickness in SSI sector may be attributed to non-availability of credit.
Delay in getting loans may result in stoppage of work or lead to production
loss. Low production may lead to reduced sales which in turn may lead to
financial loss.
3. Poor and Obsolete Technology
Some industrial units use technology which is outdated. Out dated
technology may affect the quantity and quality of production. This results in
production loss and reduces demand for the goods.
4. Non Availability of raw material
Some units may require raw material which are scarcely available.
Sometimes, the raw material required by the unit may not be available in
abundance. Hence, this affects the production and the sales of the goods. If the
raw material is not abundantly available, then the industrial units have to
spend a large amount of money to buy them. This may result in financial loss.
5. Marketing Problems
Sometimes, the industrial units may not know as to how to create
demand for the products. Lack of marketing knowledge may result in less
demand for the goods. Similarly, there may be less demand for the goods
produced by the SSI due to competition or change in the taste of the buyers.
For example, lot of units producing dyes and ceramics have been found sick in
Gujarat and Tirupur.
6. Erratic Power Supply
Shortage in power supply affects the industries. This results in delay in
production of goods and leads to financial losses.

64
7. Labour Problems
The relationship between the employer and the employees may not be
cordial. Some of the labour problems such as strike, lay off, lock out may lead
to industrial sickness.
8. Poor Management
The entrepreneur must be a good planner, organizer and a manager. If
the Industrial Unit promoters lack managerial skills, then it may lead to
several problems.
9. Inadequate Attention to R & D
Industries have to allocate a part of money in research and development
to survive and compete with competitors. Failure to focus on the above may
lead to industrial sickness
10. Diversion of Resources
If the employer utilizes the funds obtained for the business for any
personal purposes, then diversion of funds will lead to industrial sickness. The
funds used for personal purposes cannot be regenerated and hence it may
result in delay in payment of loans or financial crisis for the borrower of the
loan.
11. Globalization
Small scale industrial units may find it very difficult to compete with
large scale industries and foreign competitors. Inability of the units to face
growing competition due to liberalization and globalization may lead to
industrial sickness.
12. Dispute among Partners
There may arise dispute between the partners or family members
running the unit. This results in stoppage of work and leads to industrial
sickness.
13. Overambitious Projects
The project may not be technically feasible, such an overambitious
project is one of the reasons for industrial sickness.
Remedial measures to overcome Sickness
Some of the remedial measures to curb and overcome sickness in
industrial undertakings are as follows:

65
1. Identifying Sickness at initial stage
Sickness in Small Scale Industries are not a sudden phenomenon but it
is a gradual process taking 5 to 7 years eroding the health of a unit beyond
cure. Therefore, the identification and detection of the sickness at incipient
stage is the first and foremost measure to detect and reduce industrial
sickness. Sickness must be identified at initial stage.
2. Financial Assistance
Lending agencies need to relax their lengthy process and other norms
for extending credit to the SSIs. To combat the incidence of sickness financial
institutions should grant credit without delay to SSI sector.
A number of initiatives can be undertaken to overcome credit problems
such as:.
1. Increasing Working capital limit.
2. Enhancing the powers of bank managers of specialized bank branches
in offering credit to SSI.
3. Strengthening the mechanism for discounting bills.
4. Reduced rate of interest.
These measures would improve the flow of credit and keep a check on
the incidence of sickness.
3. Improving Infrastructure
Infrastructure facilities can be improved by setting up industrial estates.
Common testing centres etc., infrastructural problems can be solved by
improving the roadways, waterways, establishing telecommunication systems.
4. Technology Up-Gradation
Funds may be provided by the financial institutions for adoption of
advanced technology. Similarly, some sort of training may be provided for use
of the latest technology to overcome technological problems. Technological
up-gradation can help to overcome technological obsolescence.
5. Marketing Assistance
Marketing assistance may be provided to entrepreneurs for marketing
the goods produced by them. Government must help to market the goods.
Government and Non Government Organizations (N.G.Os) can come forward
for marketing the goods produced by the SSI sector.

66
 The problem of poor marketing of the products can be solved by
coordinated efforts of entrepreneurs and promotional agencies.
6. Liquidation
It is better to wind up the business when there is no possibility to revive
the unit.
7. Government Interventions
Interventions must be made by the government to prevent sickness.
Periodic review of financial statements can help to identify and prevent
sickness at initial stage.
8. Training
A proper environment must be created where an entrepreneur will be
educated and will have a proper knowledge, skill and experience about
internal and external environment of business to compete with large-scale
industries and multinational companies.
9. Rehabilitation
Potentially viable sick units should be dealt well for the purpose of
rehabilitation. Rehabilitation is a remedy considered for industrial units,
which have already become sick and for the units that are on the verge of
collapse.
Under the provisions of SICA, 1985, the Government of India has
established Board for Industrial and Financial Reconstruction (BIFR) in
January 1987 for determining the preventive, ameliorative, remedial and other
measures which are required to be taken in respect of sick industrial company
and for expeditious enforcement of rehabilitation schemes.
The main objective of SICA is to determine sickness and expedite the
revival of potentially viable units or closure of unviable units (unit here in
refers to a Sick Industrial Company). It was expected that by revival, idle
investments in sick units will become productive and by closure, the locked up
investments in unviable units would get released for productive use elsewhere.
The measures taken by BIFR are
1. Legal
2. Financial restructuring
3. Managerial

67