BEG 102
BUSINESS
ENTREPRENEURSHIP - II
M.Com. Part I
Semester I
YASHWANTRAO CHAVAN MAHARASHTRA OPEN UNIVERSITY
Dnyangangotri, Near Gangapur Dam, Nashik 422 222, Maharashtra
Copyright © Yashwantrao Chavan Maharashtra Open
University, Nashik.
All rights reserved. No part of this publication which is material
protected by this copyright notice may be reproduced or transmitted
or utilized or stored in any form or by any means now known or
hereinafter invented, electronic, digital or mechanical, including
photocopying, scanning, recording or by any information storage or
retrieval system, without prior written permission from the Publisher.
The information contained in this book has been obtained by
authors from sources believed to be reliable and are correct to the best
of their knowledge. However, the publisher and its authors shall in no
event be liable for any errors, omissions or damage
arising out of use of this information and specially disclaim any implied warranties or merchantability or fitness for any
particular use.
YASHWANTRAO CHAVAN MAHARASHTRA OPEN UNIVERSITY
Vice-Chancellor : Dr. M. M. Salunkhe
Director (I/C), School of Commerce & Management : Dr. Prakash Deshmukh
State Level Advisory Committee
Dr. Pandit Palande
Hon. Vice Chancellor
Dr. B. R. Ambedkar University
Muaaffarpur, Bihar
Dr. Suhas Mahajan
Ex-Professor
Ness Wadia College of Commerce
Pune
Dr. V. V. Morajkar
Ex-Professor
B.Y.K. College, Nashik
Dr. Mahesh Kulkarni
Ex-Professor
B.Y.K. College, Nashik
Dr. J. F. Patil
Economist Kolhapur
Dr. Ashutosh Raravikar
Director, EDMU,
Ministry of Finance
New Delhi
Dr. A. G. Gosavi
Professor
Modern College, Shivaji Nagar, Pune
Dr. Madhuri Sunil Deshpande
Professor
Swami Ramanand Teerth Marathwada
University, Nanded
Dr. Prakash Deshmukh
Director (I/C)
School of Commerce & Management
Y.C.M.O.U., Nashik
Dr. Parag Saraf
Chartered Accountant Sangamner
Dist. AhmedNagar
Dr. S. V. Kuvalekar
Associate Professor and
Associate Dean (Training)(Finance )
Dr. Surendra Patole
Assistant Professor
School of Commerce & Management
National Institute of Bank Management ,
Y.C.M.O.U., Nashik
Pune
Dr. Latika Ajitkumar Ajbani
Assistant Professor
School of Commerce & Management
Y.C.M.O.U., Nashik
Authors & Editors
Instructional Technology Editing &
Programme Co-ordinator
Dr. Madhuri Sunil Deshpande
Professor
Swami Ramanand Teerth Marathwada
University, Nanded
,
Dr. Latika Ajitkumar Ajbani
Assistant Professor
School of Commerce & Management
Y.C.M.O.U., Nashik
Dr. Latika Ajitkumar Ajbani
Assistant Professor, School of Commerce & Management, Y.C.M.O.U., Nashik
Production
Shri. Anand Yadav
Manager, Print Production Centre
Y.C.M. Open University, Nashik - 422 222.
Copyright © Yashwantrao Chavan Maharashtra Open University, Nashik.
(First edition developed under DEC development grant)
First Publication
:
September 2015
Type Setting
:
Omkar Computers and Printers
Cover Print
:
Printed by
:
Publisher
:
Dr. Prakash Atkare, Registrar, Y.C.M.Open University, Nashik - 422 222.
CONTENTS
M.Com. Part I (Business Entrepreneurship - II)
Semester - I
Contents
Pages
Unit 1 : Entrepreneurial India
11 to 26
Unit 2 : Entrepreneurship and Economic Development
27 to 42
Unit 3 : Entrepreneurship and Education
43 to 59
Unit 4 : Ethics and Social Responsibilities of an Entrepreneur
61 to 73
Unit 5:
74 to 89
Recent Trends in Entrepreneurship
Unit 6 : Entrepreneurship Development and Government-I
90 to 108
Unit 7 : Entrepreneurship Development and Government - II
109 to 127
Unit8 :
128 to 149
Entrepreneurship Development and Government - III
Unit 9 : Institutional Support for MSMEs - I
150 to 166
Unit 10 : Institutional Support for MSMEs - II
167 to 188
Unit 11 : Institutional Support for MSMEs - II
189 to 210
Unit 12 : Institutional Support for MSMEs- IV
211 to 230
INTRODUCTION
This book of self-instructional material is based on the syllabus for the subject
“Business Entrepreneurship” (M. Com. ).
This book deals with various aspects of entrepreneurship development such
as history of entrepreneurship in India, role of entrepreneurship in economic
development, entrepreneurship education, ethics and social responsibilities of
entrepreneurs, recent trends in entrepreneurship regarding intrapreneurship,
social entrepreneurship, rural entrepreneurship, women and entrepreneurship,
role of government in entrepreneurship development, and institutional set up
for MSMEs etc.
Keeping in view the needs of student of distance education, it is attemped to
make this book simple, flexible, exciting and interesting to perform the functions
of a live teacher wth emphsis on explicit objectives and activve learning.
Necessary examples and diagrams are used wherever required for explanation.
Comments, and suggestions for improvement are welcome.
Nashik
Dr.Mrs. Madhuri Sunil Deshpande
BUSINESS ENTREPRENEURSHIP - II
M. Com. Part I
NOTES
SYLLABUS
UNIT 1 :Entrepreneurial India
Entrepreneurial India
Entrepreneurship in Ancient India
Entrepreneurship in British Period
Entrepreneurship in the Period of East India Company
Entrepreneurship from 1857 to 1947
Entrepreneurship in Post-Independence Period
Impact of Globalization
Impact of WTO
UNIT 2 :Entrepreneurship and Economic Development
Role of Entrepreneurship in Economic Development
Entrepreneur as a Contributor to the Process of Economic Growth
Entrepreneur as a Contributor to the Stability of Economy
Entrepreneur as a Creator of Employment Opportunities
Entrepreneur as an Agent of Balanced Regional Development of Industries and Social Stability
Entrepreneur as a Contributor to Export Promotion Program and Foreign Exchange Earning
Entrepreneur as a Contributor to Import Substitution Program
Entrepreneur as a Supplier of Local Demand
UNIT 3 :Entrepreneurship and Education
Study of Entrepreneurship as a subject
Entrepreneurship education
Importance of Entrepreneurship Education
Contents of Entrepreneurship Education
Obstacles to Entrepreneurship Education
6
Business
Entrepreneurship - II
BUSINESS ENTREPRENEURSHIP - II
M. Com. Part I
SYLLABUS
NOTES
UNIT 4 :Ethics and Social Responsibilities of an Entrepreneur
Entrepreneur and Business Ethics
Nature of Business Ethics
Scope of Ethics
Need of Ethics in Business
Social Responsibilities of an Entrepreneur
Role of Mission, Vision and Code of Conduct
UNIT 5:Recent Trends in Entrepreneurship
Intrapreneurship
Social Entrepreneurship
Women Entrepreneurship
Rural Entrepreneurship
UNIT 6 :Entrepreneurship Development and Government-I
An Overview of Industrial Policies in India
Five-year Plans
UNIT 7 :Entrepreneurship Development and Government - II
Ministry of MSME
Schemes of M/o MSME
Office of the Development Commissioner (MSME)
Schemes and Programmesof O/o DC(MSME)
UNIT 8:Entrepreneurship Development and Government - III
Policy initiatives of the Government
Business
Entrepreneurship - II
7
BUSINESS ENTREPRENEURSHIP - II
M. Com. Part I
SYLLABUS
NOTES
UNIT 9 :Institutional Support For MSMEs - I
National level institutions
UNIT 10 :Institutional Support for MSMEs - II
Institutional set up for financial assistance
Institutional set up for export promotion
UNIT 11 :Institutional Support for MSMEs -III
Industries department, Government of Maharashtra
Directorate of Industries (DIs) of the State Government
MSME Development Institute, Mumbai
District Industries Centre
Industry Related Policies of Maharashtra Government
MSME Schemes of Maharashtra
UNIT 12 :
Institutional Support for MSMEs -IV
Industry Associations
Institutional Set-up for Maharashtra State
8
Business
Entrepreneurship - II
NOTES
Business
Entrepreneurship - II
9
NOTES
10
Business
Entrepreneurship - II
UNIT 1: ENTREPRENEURIAL INDIA
Entrepreneurial India
NOTES
Structure
1.0 Introduction
1.1 Unit Objectives
1.2 Entrepreneurial India
1.3 Entrepreneurship in Ancient India
1.4 Entrepreneurship in British Period
1.4.1Entrepreneurship in the Period of East India Company
1.4.2Entrepreneurship from 1857 to 1947
1.5 Entrepreneurship in Post-Independence Period
1.5.1Impact of Globalization
1.5.2Impact of WTO
1.6 Summary
1.7 Key Terms
1.8 Questions and Exercises
1.9 Further Reading
1.0
Introduction
This unit is proposed to present a historical sketch of Indian
entrepreneurship. Over a period of time, significant changes took place with
reference to socio-economic growth. Economic history and entrepreneurial history
of a country go together. The chronological sequence of events in the history of
entrepreneurial development India is characterized by the phases of preindependence, post-independence, and the planned era of modern India.
1.1
Unit Objectives
After going through this unit, you will be able to
 Be aware about the background for understanding Entrepreneurship in
Indian society
 Trace out the evolution and development of Entrepreneurship in India
 Explain the role of Entrepreneurship in Indian society
 Present impact of globalization, liberalization, WTO on small
enterprises
Business
Entrepreneurship - II
11
Entrepreneurial India
NOTES
1.2
Entrepreneurial India
“The problem with Indians is that we have lost the habit of thinking big!
My advice to young entrepreneurs is not to accept defeat in the face of odds. I
believe that ambition and initiative will ultimately triumph. The success of the
young entrepreneur will be the key to India’s transformation in the new millennium”.
- Dhirubhai Ambani
Indian entrepreneurship has a long tradition. For understanding growth of
entrepreneurship, it is necessary to know economic history of the country. For the
sake of convenience, history of entrepreneurship in India can be divided into the
following phases:
Entrepreneurship in Pre Independence
Ancient Times
British Period
Entrepreneurship in Post-Independence
Post-Independence Period
Post Globalization Period
1.3
Entrepreneurship in Ancient India
The evolution of Indian entrepreneurship can be traced back to Rigveda
when metal handicrafts existed in the society. Handicraft entrepreneurship in India
was as old as the human civilization itself. It was nurtured by the craftsmen as a
part of their duty towards the society.
Even in ancient India, the economy was agro-based. Agriculture was the
basic activity. It provided occupation to majority of the population. Obviously the
other occupations were also dependent on agriculture. Even artisans and craftsmen
depended on agricultural produce.
Indian economy in the ancient period consisted of isolated and economically
self-sufficient villages and towns, which were mainly the centres of administration,
pilgrimage, trade and commerce. The villages had a simple division of labour.
Farmers cultivated the soil and tended the cattle. Artisans provided services and
essential manufactures to the villages. They consisted of weavers, goldsmiths,
carpenters, potters, oil-pressers, washer men, cobblers, barbers etc. known as
‘Balutedars’. They were the people doing the entrepreneurial work in the ancient
society. All these occupations were hereditary and used to pass on from one
generation to the next. The business was undertaken on family level. Due to
hereditary nature of occupation, the society was divided into various classes, each
specializing in a particular economic occupation. These classes slowly became
castes and the society was divided into various castes and sub castes resulting
into the system of ‘Chaturvarna’ (four classes). Initially people had the freedom
to change their occupations, later on the change in the economic occupation was
not allowed and ultimately the community became weak and disintegrated.
12
Business
Entrepreneurship - II
Ancient literature like Manusmriti has provided a clear idea about
entrepreneurial class of people during ancient period (pre-vedic). As mentioned in
Manusmriti, people belonging to Vaisya caste were regarded as entrepreneurs
who were specialized to maintain livestock, to give charity, perform sacrifices,
study scriptures, and undertake business and banking. Vaisyas were the specialized
class of people carrying entrepreneurial activities in these days. They carried on
trade in agriculture, industry and banking sectors. Agriculture, crafts and handicrafts
were the basic sources of occupation for the people in Gupta and post-Gupta
period. The occupational development during this period comprised ownership of
land pasture grounds, trees, forests, water reservoirs, mines etc.
Entrepreneurial India
NOTES
The caste-based diversion of workers consisted of farmers, artisans and
religious priests (the Brahmins). The majority of artisans were treated as village
servants. Such kind of compact system of village community effectively protected
village artisans from the onslaughts of external competition. This was one of the
important contributing factors to the absence of localization of industry in ancient
India.
In this manner, a particular type of economic and social system was seen
in village community in India. The Indian towns were mostly religious and aloof
from general life of the country.
Besides agriculture, industrial entrepreneurship was seen concerned with
manufacturing of handicrafts, metal works, stone carving, and jewellery designing.
These communities known as Banias, Parsis, Chheriars, Gujaratis etc. actually
laid the foundation of entrepreneurship by carrying on trade and commerce at
initial stage and later they started establishing manufacturing centres. Cottage
industries manufactured woodcraft items, jewellery designing, stone carvings, iron
work, horn works etc. Village industries comprised handloom and textile production,
brass and bell metal works developed in clusters.
Organized industrial activity was observable among the Indian artisans in
a few identifiable products in the cities of Banaras, Allahabad, Gaya, Puri and
Mirzapur which were established on their river basins. This might be on account
of rivers served as a means of transportation. These artisan industries flourished
over the period due to support of Royal patronage. The workshops called
‘karkhanas’ came into being. The craftsmen were brought into an association
called as ‘guild system’. Perfection in art, long durability, and good looks were the
distinguishing qualities inherent in the Indian craftsmanship. The muslin of Dacca,
chintzes of Lukhnow, dhotis and dupattas of Ahmadabad, corah of Bengal, silk
bordered cloth of Nagpur and Hurshidabad, shawls of Kashmir, metal wares of
Banaras were world famous products. In this manner, in ancient times, India was
an industrialized economy. India was known as a leading exporter of various
products as mentioned above. In the excavation in Harappan and Mohanjodaro,
the handicraft items and molded items were found. Entrepreneurship to make
handicraft items existed in India around 2500 BC. The chief industry spread over
the whole country was textile handicraft. The Egyptian mummies dating back to
2000 B.C were wrapped in Indian muslin. Indian craftsmanship in metal war was
concerned with manufacture of household utensils, arms and weapons for battle
forces, ornaments for rulers, etc. The traders, known as ‘Vaishas’, used to move
from place to place for marketing various essential commodities.
From the time immemorial till the earlier years of the eighteenth century,
India enjoyed international trade of its handicrafts. Unfortunately, so much
prestigious Indian handicraft industry, which was basically a cottage and small
sector, declined at the end of eighteenth century for various reasons such as:
Disappearance of the Indian Royal Courts, who patronized the crafts earlier;
Business
Entrepreneurship - II
13
Entrepreneurial India
The lukewarm attitude of the British Colonial Government towards the Indian
crafts;
Imposition of heavy duties on the imports of the Indian goods in England;
NOTES
Low-priced British-made goods produced on large scale which reduced the
competing capacity of the products of the Indian handicrafts;
Development of transport in India facilitating easy access of British products even
to remote parts of the country;
Changes in the tastes and habits of Indians, developing craze for foreign products;
Unwillingness of the Indian craftsmen to adapt to the changing tastes and needs
of people.
In the medieval days the Indian society and economy became very weak
due to certain intrinsic effects, the feudalistic structure prevalent in this period
divided society into two groups – the rulers and the ruled. The rulers started
exploiting the masses which resulted in creating inequality in the Indian social
structure. The ‘Chaturvarna’ and the caste system had been firmly rooted by that
time and resulted in occupational inflexibility and the loss of social interaction.
Within these castes inequality was created, some castes started getting recognized
as upper caste and some lower.
With the downfall of the powerful central rule of Mughals, a number of
small feudal kings declared independence which increased fighting among them,
the British invaders made one Indian kingdom fight the other. In this manner India
got divided socially and politically.
Traditional minded and orthodox Indian society did not accept new ideas
and new knowledge. Various new social and scientific experiments, innovations
and inventions were being observed in England and Europe in the same medieval
period.
The Indian society suffered from stagnation, the urge to make changes
and accept progressive thoughts was totally lost. The Industrial revolution took
place in England and other western European countries at the end of the medieval
period because the need for revolution was felt there. India even before the arrival
of the British rule was almost ready for this takeover.
Entrepreneurship, as it is understood today was not very developed. The
manufacture, trading and other business activities were undertaken in traditional
and caste like system where families specialized in a particular activity for
generations.
1.4
Entrepreneurship in British Period
The British rule lasted in India for nearly 150 years and changed not only
the political map of India but also the socio economic conditions. For the purpose
of study, British rule can be divided under two broad heads:
1. Period of East India Company .i.e. before the first war of Independence
in 1857 and
2. Period from 1857 to the Indian Independence in 1947.
14
Business
Entrepreneurship - II
1.4.1 Entrepreneurship in the Period of East India
Company
Indian Handicrafts which were once considered the best in the world had
received a severe setback due to the British colonialism. The prestigious Indian
handicrafts industries, which were basically cottage and tiny sector, declined at
the end of the 18th century because of lukewarm attitude of British towards Indian
craft, low priced British goods, imposition of heavy duty on imports of Indian
crafts, disappearance of royal patronage to the handicrafts. The decline of Indian
handicrafts laid to unemployment on a vast scale, the unemployed craftsmen and
artisans shifted to agriculture and thus increased the proportion of population
dependant on land. This was progressive ruralization or deindustrialization of India.
Industrial revolution in Great Britain had reduced India to the status of a material
supplier and a consumer market for the finished products manufactured in Britain.
Entrepreneurial India
NOTES
This period witnessed economic exploitation of India through trade policies
which were against Indian interest; it was done by exploitation of cultivators to
boost indigo exports, exploitation of artisans through company agents to deliver
cotton and silk fabrics much below market price, exploitation through manipulation
of import export duties for destroying Indian industry etc.
Industrial entrepreneurship suffered a lot due to discriminatory economic
policy of the British government for Indian entrepreneurs. The enterprises were
not given proper protection. The British government did not encourage establishment
of heavy industries like heavy machinery, iron, steel which were necessary for
rapid industrialization. Political turmoil, abolition of princely states, prevalence of
multi-currency system affected business environment. There were almost no
facilities for technical education. There was lack of transportation and
communication facilities. The railway freight charges were higher for locations
not nearer to the ports. This made transportation of goods manufactured for the
Indian markets more expensive than goods meant for export. The British imposed
exorbitant tariffs on India made goods. Entrepreneurs were constantly harassed
for getting licenses and finance to establish and run industries.
East India Company established its first ship-building industry in Surat
where from 1673 onwards the Parsis built vessels for the Company. The most
important was shipwright Lowjee-Nushirvan, who migrated to Bombay. He
belonged to Wadia family which gave birth to many leading ship-builders of Bombay.
In 1677, Manjee Dhanjee was given a contract for building the first large gunpowder-mill in Bombay for East India Company. Besides, a Parsi foreman of a
gun factory belonging to the company established a steel industry in Bombay in
1852.
The actual emergence of manufacturing entrepreneurship can be noticed
in the second half of the nineteenth century. Prior to 1850, some stray failure
attempts, indeed, made by the Europeans to set up factories in India. The Parsis
were the founder manufacturing entrepreneurs in India.
Ranchodlal Chotalal was the first Indian to think of setting up textile
manufacturing on modern factory lines in 1847, but failed. In his second attempt,
he succeeded in setting up a textile mill in 1861 at Ahmedabad. But before this, the
first cotton textile manufacturing unit was already set up by a Parsi, Cowasjee
Nanabhoy Davar in Bombay in 1854 followed by Nawrosjee Wadia, who opened
his textile mill in Bombay in 1880. Credit for expansion of textile industries up to
1915 goes to Parsis. Out of 96 textile mills existing in 1915, 43 per cent (41) were
set up by Parsis, 24 per cent (23) by Hindus, 10 per cent (10) by Muslims and 23
Business
Entrepreneurship - II
15
Entrepreneurial India
NOTES
per cent (22) by British citizens. Later, the Parsis invaded other fields, mainly iron
and steel industry, also Jamshedjee Tata was the first Parsi entrepreneur who
established the first steel industry in Jamshedpur in 1911.
Indian leaders adopted the movement of swadeshi and boycott to
counteract the discriminatory policy of the British government. Swadeshi movement
meant manufacturing and using indigenous goods by the Indians. The movement
was aimed to achieve various objectives: to promote indigenous industries by the
Indian entrepreneurs, to provide employment opportunities to the Indian craftsmen,
to rejuvenate cottage and handicraft sector, to open up a vast captive market for
sale of products manufactured indigenously through a network of Swadeshi stores.
The movement encouraged Indians to plunge into entrepreneurship.
The Swadeshi campaign i.e. emphasis on indigenous goods, provided,
indeed, a proper seedbed for inculcating and developing nationalism in the country.
It was the influence of Swadeshi that Jamshedji Tata even named his first mill
‘Swadeshi Mill’. P. C. Roy founded the Bengal Chemical Works. V.O.
Chidambaram Pillai set up the indigenous Steam Navigation Company at Tuticorin,
Tamil Nadu. The spirit of indigenousness strengthened its roots so much in the
country that Krishna Mills in its advertisement of Tribunal of April 13 made the
following appeal: “Our concern is financed by native capital and is under native
management throughout”.
Due to Swadeshi movement, indigenous entrepreneurship developed in
various activities such as textiles, soap, matches, oil, tanneries, potteries etc. even
banks and insurance companies grew up through Swadeshi endevaour. During
this period, the Europeans took active efforts particularly in plantation and jute.
The second wave of entrepreneurial growth in India began after the First
World War. Indian entrepreneurs were given opportunities to produce more during
the First World War because of increase in demand for India-made goods and
reduction of import of goods from Britain. For various reasons, the Indian
Government agreed to ‘discriminating’ protection to certain industries, even
requiring that companies receiving its benefits should be registered in India with
rupee capital and have a proportion of their directors as Indians. The advantages
of these measures were mostly enjoyed by the Indians. The Europeans failed to
harness the protectionist policies to their interests. These measures helped in
establishing and extending the factory manufacturing in India during the first four
decades of the twentieth century. During this time, the relative importance of
Paris declined in comparison with Gujaratis and Marwari Vaishyas.
16
Business
Entrepreneurship - II
In the post-war period, the policy of protection by the government provided
stimulant to certain industrial activities. Managing agency system is a remarkable
feature of this period. This system was initiated by Dwarakanath Tagore who
glorified the formation of joint stock companies and emphasized that the management
of enterprise must be retained in the hands of the firm rather than in the hands of
any individual. The emergence of Managing Agency System which made its own
contribution to Indian entrepreneurship can be traced back to 1936 when Carr,
Tagore and Co. assumed management of Calcutta Steam Tug Association. Credit
for this initiation goes to an Indian, Dwarakadas Tagore, who encouraged others
to form joint-stock companies and invented a distinct method of management in
which management remained in the hands of the ‘firm’ rather than of an ‘individual’.
After the East India lost monopoly in 1813, the European Managing Agency Houses
entered business, trade and banking. And, these houses markedly influenced eastern
India’s Industrial scene. It is stated that the Managing Agency Houses were the
real entrepreneur for that period particularly in Eastern India.
During this period, though the Indian entrepreneurs grew in numbers and
made great headway in cotton, textiles and steels, they still faced various problems
such as shortage of technical manpower due to lack of technical and vocational
education, lack of managerial skills, lack of technical know-how, low level of
confidence in accomplishing the jobs.
In view of the above mentioned problems, the Tatas were forced to employ
foreign technicians and managers. However, industries such as cement, sugar,
cotton textiles, paper, coal, iron and steel were developed after Second World
War. As such, indigenous entrepreneurship grew at a rapid pace with the
emergence of entrepreneur classes such as Paris, Marwaris, and Gujaratis on the
eve of independence of India.
The period of East India Company saw development of foreign
entrepreneurship, some officers and servants of the company and some private
businessman started various business activities. Till 1850, entrepreneurship means
British private enterprises like plantation, coal mines, banking and insurance. The
entrepreneurial activities before 1857 were mainly confined to British businessman
and trading firms. Participation of Indian people was a rare case. Dwarkanath
Tagore, Ram Tanu Labiri, Rustamji Cowasji were the Indian stalwarts in these
entrepreneurial activities.
1.4.2 Entrepreneurship during 1857 – 1947
The period after 1857 witnessed slow growth of Indian entrepreneurship.
The introduction of railways in 1853 led to the beginning of Indian entrepreneurship.
In this period there was the rise of ‘Managing agency system’, a distinct method
of management in which management remained in the hands of ‘firm’ rather than
of an ‘individual’. The British businessmen who had earlier setup trading firms
acted as pioneers and promoters of several industrial units. They raised the required
finances also. Such businessmen also accepted the responsibility of managing the
enterprises setup by them. These persons were later called as managing agents.
Entrepreneurial India
NOTES
Check Your
Progress
1. —— was the first
Parsi entrepreneur
who established the
first steel industry in
Jamshedpur in 1911.
2. —— were the
founder manufacturing entrepreneurs in
India.
3. —— was the first
Indian to think of setting up textile manufacturing on modern
factory lines in 1847,
but failed.
4. The first cotton textile manufacturing unit
was set up by ———
in Bombay in 1854.
The emergence of managing agency system can be traced back to 1936
when Carr, Tagore and Co. assumed management of Calcutta Steam Tug
association. The credit for this initiation goes to an Indian Dwarakanath Tagore
who encouraged others to form joint-stock companies. The European Managing
Agency Houses entered business, trade and banking.
Though the British managing agency played a dominant role, the Indians
also started entrepreneurial activities in this period. Cowasjee Dower and
Maneckjee Petil established first textile mill in Bombay 1854. Rao Bahadur
Randchorlal chotalal setup his mill in Surat in 1856. Rao Bahadur Mangaldas
Karamchand, Hutheesing Kesarsingh, Rao Bahadur premabhai were some of the
prominent Indian entrepreneurs in those days. Dharamsee Punajbhai Thackersey,
Khatau, Jamshedji Nusarvanji Tata, Nowrosjee Wadia undertook entrepreneurial
activities at a time when the government was not encouraging them.
In eastern part of India, entrepreneurship was mainly European, engaged
in export oriented industries like jute, coal, textile, tea etc. The entrepreneurship in
western part of India was mostly among the Indians. It was possible due to its
relatively longer political independence and the advantages availed by all the
communities of western India. British exploitation was not directly imposed.
In 1905, Indian leaders like Lokmanya Tilak gave the call for Swadeshi
movement and provided favourable environment for starting new industries and
for strengthening the existing ones. The basic objectives of Swadeshi movement
Business
Entrepreneurship - II
17
Entrepreneurial India
NOTES
Check Your
Progress
5. In 1905, Indian leaders like ———gave
the call for Swadeshi
movement and provided favourable environment for starting
new industries and for
strengthening the existing ones.
6. The basic objectives of Swadeshi
movement were
were to promote indigenous industries by Indian entrepreneurs, to rejuvenate
cottage and handicraft sector, to provide employment opportunities to Indian
craftsmen and to open up a vast captive market for sale of products manufactured
indigenously through a network of Swadeshi. The founders of Indian industry
were patriots who helped the industrial and economic liberalization of India.
Another factor which helped the Industrial development was the World
War I. Britain was left with no other option but to encourage industries in India. So
the Department of Industries was setup. The main activities of the department
were supply of commercial intelligence to private sectors, professional or technical
advice and assistance to minor industries and demonstration in cottage Industries
especially weaving.
The World War II affected the Indian industries on a very large scale.
During the war there were large scale purchases for war activities on the Eastern
front. The destruction of British industrial setup also led to the expansion of Indian
industries. Some communities such as Gujaratis, Marwaris, and Vaishyas of south
India also emerged as a strong group of entrepreneurs in addition to Parsis. By the
time India got independence, the Indian industries had developed remarkably despite
discriminatory practices of the foreign rulers.
Indian history indicates that India had trade relations with Greece, Yemen
and other Arabian and African Countries. Indian businessmen were enterprising
but they could not get opportunity for application of their enterprising spirit.
1.5
Entrepreneurship in Post-Independence Period
In the post-Independence period, the government of India identified the
need for rapid industrialization. However, there was a poor start to the spirit of
entrepreneurship. Due to the oppressive rule of the British, the country had lost its
self-confidence. After attaining independence in 1947, India adopted mixed
economy with existence of both public and private sector. The immediate
requirement was with reference to strengthening of the macro economy and stress
was laid on state controlled enterprises rather than encouraging free entrepreneurial
spirit. The focus was on stability and not on risk taking.
Some business houses such as Tatas, Birlas, Mafatlals, Singhanias,
Kirloskars made a mark during the early years after independence followed by
Dhirubhai Ambani, Rahul Bajaj etc. They grew from small to medium and from
medium to large scale industries.
Marwaris had developed a lot in building new and small enterprises in the
beginning of post-Independence era. It is believed that 60 per cent of the assets of
the Indian industries were owned by the Marwaris. The Monopolies Inquiry
Commission listed 147 large industries of Marwaris in almost all areas.
After independence, the Birla group set up rayon mill at Gwalior which
had been the largest mill of its kind till 1964. In 1964, the Bajaj group laid down the
foundation of Hind Lamps and in 1949 Dalmia group established a cement factory
in Orissa. Before Independence, the Marwaris controlled only 6 companies; but
after Independence, they had 618 directorships which rose to one-fourth of the
total in 1951.
18
Business
Entrepreneurship - II
The government also started its own infrastructure industries in public
sector. As a result, several ancillary units sprang up to support these large scale
enterprises – both public and private. Several state governments followed central
government and offered numerous incentives, subsidies, concessions, infrastructural
facilities etc to prospective entrepreneurs. This has widened the base of industrial
entrepreneurship in the country as a whole.
Government of India came forward with the first Industrial Policy which
provided clear-cut guidelines for industrial and entrepreneurial development. It
was announced in 1948 and was revised from time to time. The Government in
various industrial policy statements identified the responsibility of the State to
promote, assist and develop industries in national interest. It explicitly recognized
the vital role of private sector in accelerating industrial development and, for this;
enough field was reserved for the private sector. The Government took three
important measures in industrial resolutions: i) to maintain a proper distribution of
economic power between private and public sector; ii) to encourage the tempo of
industrialization by spreading entrepreneurship from the existing centres to other
cities, towns and villages, and iii) to disseminate the entrepreneurship acumen
concentrated in a few dominant communities to a large number of industrially
potential people of varied social strata.
Entrepreneurial India
NOTES
To achieve these objectives, the Government accorded emphasis on
development of small scale industries in the country. Since the Third Five Year
Plan, the Government started to provide various incentives and concessions in the
form of capital, technical know-how, markets and land to the potential entrepreneurs
to establish industries in industrially potential areas to remove regional imbalances
in development. Several institutions like directorate of Industries, financial
Corporations, Small scale industries Corporations and Small Industries Service
Industries were also established by the Government to facilitate the new
entrepreneurs in setting up their enterprises.
The Industrial Policy Resolution of 1956 emphasized on the need for rapid
industrialization through the establishment of heavy industries and expansion of
public sector and co-operative enterprises. This had given rise to a complete
transformation of socio-economic and industrial environment in the country.
Besides the mercantile class, several new communities slowly entered into the
entrepreneurial activity and widened the entrepreneurial and industrial base of the
country.
However, till the year 1991, the creation of enterprises was in the hands
of few influential and wealthy individuals. For a common person, entrepreneurship
was never a career option due to discouraging environment.
The policy of liberalization adopted by the Indian government changed
the business scenario on the Indian landscape. It provided a huge boost to
entrepreneurs. Indian business houses could enjoy the benefits of de-regulation
and the freedom from ‘license raj’. The most significant outcome of liberalization
was the birth of a number of first generation entrepreneurs. Now creation of
large enterprises is not restricted to rich and influential people, anyone with a
strong desire and determination could script a success story.
With planned economic growth of the country, entrepreneurship
development had gained a new momentum with favourable government policy
and facilitating environment in the form of infrastructural development, development
of money market and capital market, establishment of institutional support system,
formation of specialized institutions like NSIC, KVIB, TCOs, SFCs etc, formation
of entrepreneurial development institutions at national as well as state level such
as EDII, NIMSME, NIESBUD, IEDs, CEDs etc, foreign collaboration, technical
Business
Entrepreneurship - II
19
Entrepreneurial India
NOTES
know-how. The Government started providing incentives, subsidies and other inputs
at concessional rates to entrepreneurs to set up and manage small enterprises.
The development schemes of the government are aimed at increasing the
pace of industrialization by spreading the spirit of entrepreneurship to various cities,
towns, villages so as to reach people of varied socio-economic strata.
Today, the entrepreneurial ecosystem in India presents a favourable
scenario. India is one of the largest economies in the world with a large and
rapidly growing consumer market. A large number of scientists, engineers,
technicians, managers, in all human resources of all kinds, are available at
competitive cost. A majority of population understands and speaks English. The
policy reforms provide for freedom of entry, investment, location, choice of
technology, export, import, production. There are abundant mineral and agricultural
resources. Infrastructure for R & D, technical and marketing services is well
developed.
To protect, support and promote small enterprises, government undertakes
various protective and promotional measures such as institutional support in respect
of credit facilities, supply of machinery on hire purchase basis, provision of developed
sites for construction of sheds, special incentives for setting up enterprises in
backward and rural areas, provision of training facilities, assistance for domestic
as well as export marketing, technical consultancy and financial assistance for
technological up gradation.
Due to the above narrated scenario, a large number of people are getting
attracted towards entrepreneurship.
Impact of Globalization
Globalization means international integration : It is concerned with opening
up of world trade, development of advance means of communication
internationalization of financial markets, growing importance of MNCs, population
migrations and increase mobility of persons, goods, capital data’s and ideas.
Economic impact of globalization can be viewed in the form of multi-lateral
agreements in trade, taking on such new agendas as environmental and social
conditions; new multilateral agreements for services, intellectual properties,
communications and more bindings on national governments rather than any previous
agreements; market economic policies spreading around the world with greater
privatization and liberalization than in earlier decades; growing global market in
services. People can now execute trade services globally.
Problems with Globalization
Poor people, tribal groups were not affected by globalization and remain
poor and poorest as they were; increase in gap between rich and poor. Ethical
responsibility of business has been diminished. Price hike of daily usable
commodities decreased consumption of commodities. Young generation leaving
their studies at an early stage and joining call centers to earn easy money, there by
losing their social life and getting habituated to work, multi-party rule, political
ideology, intervened globalization through reservation labour law reformation etc.
20
Business
Entrepreneurship - II
India is getting a global recognition, it is slowly moving towards being a
major player in economic and political field. In spite of rapid development basic
problems like unemployment rural poverty, political instability, corruption remains
unsolved. The process of globalization has changed the industrial pattern and has
an impact on Indian trade system. Globalization of economic, social, and cultural
structure happened. Previously the pace of progress has slow, today with the
advent of information technology, the world has become a global village.
Globalization has resulted in increasing in production of range of goods MNCs
entered all over the world. Credit cards boosted consumerism and pushed many
house hold indebtedness. A consumerist mentality adversely affected on the habit
of saving, today people can buy goods and services even if they do not have
adequate purchasing power, raising loans become easy.
Entrepreneurial India
NOTES
The process of economic reforms since 1991 has a major impact on small
enterprises in India. These initiatives, on one hand, created tremendous opportunities
for their growth; on the other hand, they have thrown up new challenges for them.
Issues like building global competitiveness, technology up gradation, and achieving
world class quality have become essential for survival and growth of small
enterprises. Prior to reforms, government has overprotected small enterprises.
They never had a strong desire to grow to medium and large scale because of the
protection given to them. Now they have to face severe competition from domestic
and multinationals large enterprises. Competition from multinational companies
has made survival difficult for small enterprises. They are facing problems like
delay in project implementation, lack of infrastructural facilities, inadequate
availability of finance and credit, cheap and low quality products, delay in payment,
technology obsolescence, lack of proper knowledge about markets, stiff competition,
lack of managerial skills etc. Small enterprises suffer since lending institutions and
promotional agencies serve multinationals and big players on a priority basis.
In the changed environment after globalization and liberalization, the policies
for small enterprises need to be effective and growth oriented so as to achieve
competitiveness.
Impact of World Trade Organization (WTO)
The WTO was established to deal with all the major aspects of international
trade and it had far reaching effect not only on India’s foreign trade but also on its
internal economy. India is signatory to WTO. WTO has altered the framework of
international trade. The main outcome of WTO stipulated requirements will be
brought about through reduction in export subsidies, greater market access, removal
of non-tariff barriers, and reduction in tariffs. There will also be tighter patent
laws through regulation of intellectual property rights under Trade Related
Intellectual Property Rights (TRIPS) agreements, which laid down what is to be
patented, for what duration and on what terms. SME sector is most vulnerable to
impact of WTO. The impacts are:
Import of consumer goods from East Asia and China
Shift in procurement by large companies from SMEs to overseas suppliers
Inability of SMEs to implement anti-dumping measures and counter other
unfair practices such as moves by competitors to patent traditional Indian products
and brands
Continuing of imports through illegal channels via neighboring countries.
WTO has both favourable and non favourable impact on the Indian
economy.
Favorable Impact :
Increase in export earnings: Increase in in export earnings can be viewed
from growth in Merchandise exports and growth in service exports. Establishment
Business
Entrepreneurship - II
21
Entrepreneurial India
NOTES
of WTO has increased the exports of developing countries because of reduction
in tariff and non-tariff trade barriers. WTO introduced GATS (General Agreement
on Trade in Services) that proved beneficial for countries like India.
Agricultural exports : Reduction of trade barriers and domestic subsidies
raise the price of agricultural products in international market. India hopes to
benefits from this in the form of higher export earnings from agriculture. Textile
and clothing; the phasing out of MFA will largely benefit the textile sector. It will
help the developing countries like India to increase the export of textile and clothing.
Foreign Direct Investment : As per the TRIMs agreement, restrictions on
foreign investment have been withdrawn by the member nations of WTO. This
has benefited developing countries by way of foreign direct investment, Euro equities
and portfolio investments.
Multilateral rules and discipline: It is expected that fare trade conditions
will be created due to rules and disciplines related to practices like anti-dumping,
subsidies and countervailing measures safe guards and dispute settlement. Such
conditions will benefit India in its attempts to globalize its economy.
Unfavorable Impact:
TRIPs : Protection of intellectual property rights has been one of the
major concerns of WTO. As a member of WTO India has to comply with the
TRIPs standards. However, the agreement on TRIPs goes against the Indian
Patent Act, 1970 in the following ways –
Pharmaceutical Sector - Under the Indian patent act 1970 only process
patents are granted to chemical, drug and medicine. Thus the company can legally
manufactures one it had the product patterns. So Indian pharmaceutical company
could sell good quality products (medicines) at low prices. However under TRIPs
agreement product patents will also be granted, that will raise the prices of
medicine. Fortunately most of drugs manufacture in India are off patents and so
will be less affected.
Agricultural – Agreement on TRIPs extends to agriculture the MNG with
their huge financial resources may also take over seed production and will eventually
control food production. Large majority of Indian population depends on agriculture
for their lively hood. These developments will have serious consciences.
Under TRIPs agreement, patenting has been extended to microorganism
as well. These mills largely benefits MNCs and not developing countries like India.
TRIMS : The agreement on TRIMS favours develop nations. There are
no rules in the agreement to formulate international rules for controlling business
practices of foreign investors, also complying with the TRIMS agreement will
contradict our objective of self-reliant growth based on locally available technology
and resources.
GATS : The agreement on GATS also favour develop nations more. The
rapidly growing service sector in India. Now have to compete with joint foreign
firms. Foreign firms are allowed to remit their profits, dividends and royalties to
their parent companies, it will cause foreign exchange burden of India.
22
Business
Entrepreneurship - II
Trade and Non-Tariff Barriers : Reduction of trade and non-tariff barriers
has adversely affected sports on various Indian products have been hit by nontariff barrier. These include marine product, textile, floriculture, pharmaceutical,
basmati rice, leather goods etc.
LDC Exports : Many member nations are agreed to provide duty free
and quota free market access to all products originating from least developed
countries. India will have to now bear the adverse effect of competing with chief
LDC exports. Moreover LDC exports will also come to the Indian market and
thus compete with PETE domestically produced goods.
Entrepreneurial India
NOTES
WTO is a powerful body that will enact international laws on various matters.
It will also globalize many countries and make them to develop their competitive
advantages and seek benefits from advance technology of other nations. Countries
like India will face serious problems by compiling to WTO agreements. Of course
it can also benefit can it by taking advantage of the changing international environment.
1.6
Summary
Emergence of entrepreneurship is as old as our ancient history.
Entrepreneurship is regarded as closely associated with economic history of India.
It dates back to the pre-Vedic period when Harappa culture flourished in India.
During ancient times, our country made unparalleled economic progress utilizing
all available resources. The society was structured on the basis of trade and business.
Those dealing with business were actively engaged in commercial activities. Spices,
textile products etc. were the trade. Such kind of economic progress and prosperity
resulted in growth of wealth and this attracted several outsiders towards India.
The Turks, the Huns, the Moghuls invaded India. Due to these foreign invasions,
there was exploitation of Indian economy. With British raj, trade with Britain was
encouraged and trade with other countries was reduced. Indian resources were
exploited for the benefit of the British industry and running industries were closed
down. Indian industry was exploited and destroyed by discriminatory practices of
British government. However, during this time, infrastructural development took
place for the benefit of British industry.
Prior to 1850, manufacturing entrepreneurship of artisans was
undeveloped due to inadequate infrastructure and lukewarm attitude of the
Government towards entrepreneurship. However, East India Company, Managing
Agency Houses, and various socio-political movements like Swadeshi campaign
contributed for the beginning towards emergence of manufacturing
entrepreneurship from 1850 onwards.
After Second World War, entrepreneurship development gained
satisfactory impetus. Since then there has been a significant increase in
entrepreneurial activities.
In immediate post-independence period, significant efforts were not
observed for entrepreneurship development. Efforts were made for strengthening
of the economy. Several public sector enterprises were developed with an intention
of societal welfare. Development of basic infrastructure was considered the top
priority. Stability was considered important. Risk taking was not encouraged. People
lost enterprising spirit, their confidence due to oppressive British rule, and economic
exploitation. There was stagnation in economy. Significant industrial development
was not observed. During early years after independence, only few business
houses and enterprising personalities were seen. Small entrepreneurs were
dominated by business communities. Ordinary persons from the society were not
seen participating in businesses. After Third Five Year Plan, there was increase
in the number of entrepreneurs, but they lack entrepreneurial ability. Of course,
there were some successful entrepreneurs who grew from small to medium scale
and from medium to large scale industries. Various family business houses like
Business
Entrepreneurship - II
23
Entrepreneurial India
NOTES
Tata, Birla, Kirloskar, Mafatlal, Dalmia and others grew beyond expectation and
provided inspiring examples and role models to the society.
After liberalization there was a significant change in Indian business.
After opening of Indian economy in 1991, due to de-regulation and freedom from
licence-raj, new business opportunities opened up. A number of business success
stories of first generation entrepreneurs were seen. Several businesses grew
drastically. IT industry flourished in a sweeping manner. Along with wealth creation,
immense job opportunities were generated by the IT players. Until yet, large
enterprises were created and managed by wealthy, powerful, influential business
tycoons with strong business background. Now anyone who dreams about setting
up a business is seen making it happen.
Now Indian business environment is favourable for entrepreneurial
culture. Government is supporting and motivating entrepreneurs with various
initiatives such as policy measures, incentives, subsidies, benefits etc. Nongovernmental agencies also are doing their best for encouraging entrepreneurial
ventures. Society also is looking towards entrepreneurs as heroes.
1.7
Key Terms
 Globalization: The process of international integration arising from the
interchange of world views, products, ideas and other aspects of culture.
 World Trade Organization (WTO): The only international organization
dealing with the global rules of trade between nations. Its main function is
to ensure that trade flows as smoothly, predictably and freely as possible.
1.8
Questions and Exercises
Questions
1. Give an account of the evolution and growth of entrepreneurship in India.
2. Write an essay on growth of entrepreneurship in India.
3. Describe entrepreneurial growth in India after independence.
4. Give a review of entrepreneurial scene in India before independence.
5. Explain the impact of globalization on small enterprises.
6. What are the barriers for non-development of entrepreneurship during
pre-Independence era?
7. What is the impact of WTO on small enterprises? Explain.
8. Discuss the pros and cons of entrepreneurial development in India.
9. Explain briefly the emergence of entrepreneurial class in India.
Exercises
24
Business
Entrepreneurship - II
1. Meet five entrepreneurs from your city and discuss with them the impact
of globalization and WTO on small enterprises.
Multiple Choice Questions
Entrepreneurial India
1. Which one of the following statements is false?
i.
Handicraft entrepreneurship was as old as the human civilization
itself
ii.
Even in ancient India, the economy was agro-based
iii.
Both i and ii are true
iv.
Both i and ii are false
NOTES
2. As mentioned in Manusmriti, people belonging to ————caste were
regarded as entrepreneurs.
i.
Arya
ii.
Vaisya
iii.
Shudra
iv.
All of the above
3. Pick one the wrong pair
i.
Muslin of Dacca
ii.
Chintz of Lucknow
iii.
Shawls of Ahmedabad
iv.
Silk bordered cloth of Nagpur
4. Managing agency system was initiated by —————————
i.
Dwarakanath Tagore
ii.
Jamshedji Tata
iii.
P. C. Roy
iv.
Nawrosjee Wadia
5. Which one of the following is alternatives is wrong?
i.
Indian economy in the ancient period consisted of isolated and selfsufficient villages and towns.
ii.
Balutedars were the people doing the entrepreneurial work in the
ancient society
iii.
Both i and ii are wrong
iv.
Both i and ii are right
Answers
Check Your Progress
1. Jamshedjee Tata
Business
Entrepreneurship - II
25
Entrepreneurial India
2. The Parsis
3. Ranchodlal Chotalal
4. Cowasjee Nanabhoy Davar
NOTES
5. Lokmanya Tilak
Multiple Choice Questions
1. iv
2. ii
3. iii
4. i
5. iii
1.10 Further Reading
Khanka S. S., Entrepreneurial Development, S. Chand & Co.,
www.slideshare.net
26
Business
Entrepreneurship - II
UNIT 2 : ENTREPRENEURSHIP AND
ECONOMIC DEVELOPMENT
Entrepreneurship and
Economic Development
NOTES
Structure
2.0 Introduction
2.1 Unit Objectives
2.2 Role of Entrepreneurship in Economic Development
2.3 Entrepreneur as a Contributor to the Process of Economic Growth
2.4 Entrepreneur as a Contributor to the Stability of Economy
2.5 Entrepreneur as a Creator of Employment Opportunities
2.6 Entrepreneur as an Agent of Balanced Regional Development of
Industries and Social Stability
2.7 Entrepreneur as a Contributor to Export Promotion Program and Foreign
Exchange Earning
2.8 Entrepreneur as a Contributor to Import Substitution Program
2.9 Entrepreneur as a Supplier of Local Demand
2.10 Summary
2.11 Key Terms
2.12 Questions and Exercises
2.13 Further Reading
2.0
Introduction
In the words of Meir and Baldwin, “development does not occur
spontaneously as a natural consequence when economic conditions are in some
sense right; a catalyst, or agent is needed, and this requires an entrepreneurial
activity”. Economy of a nation depends on the quality and quantity of
entrepreneurship available in the society. Entrepreneurs do not seek but create
jobs with their vision and innovative skills. Entrepreneurs combine the available
resources and produce goods and services. They apply their creativity, energy,
time and efforts in organizing these resources. Every entrepreneur plays a definite
role in the particular economic situation in which he/she works. In this unit, we
shall discuss the different roles which an entrepreneur plays in the economy.
2.1
Unit Objectives
After going through this unit, you will be able to
 Appreciate the role of entrepreneurship in economic development
Business
Entrepreneurship - II
27
Entrepreneurship and
Economic Development
NOTES
Check Your
Progress
1. Entrepreneurs ——
jobs but they ———
jobs with their vision.
(generate, do not seek)
2.2
Role of Entrepreneurship in Economic
Development
Entrepreneur plays a significant role in economic development of a country.
Economy of a country depends on the number and nature of entrepreneurs present
in the society. Industrial development, entrepreneurial development and economic
development are interrelated and interdependent on each other. Entrepreneurship
is the cause and result of economic development and growth. Schumpeter visualized
entrepreneurs as the key figure in economic development because of his/her role
in introducing innovations. Parson and Smelser described entrepreneurship as
one of the two necessary conditions for economic development, the other being
increased output of capital. According to Harbison, entrepreneurs are prime movers
of innovation. Say describes entrepreneur as a dynamic force. It is also opined
that development does not occur spontaneously as a natural consequence when
economic conditions are in some sense ‘right’; a catalyst or agent is needed, and
this requires entrepreneurial ability. It is this ability that he/she perceives opportunities
which either others do not see or care about. Essentially, entrepreneur searches
for change, sees need and then brings together manpower, material and capital
required to exploit the opportunity. Entrepreneurs do not seek jobs but they generate
jobs with their vision. Entrepreneur perceives business opportunity, converts it into
a viable business venture. He/she performs crucial economic functions like
developing new products/services, opening new markets, creating new customers
etc. Entrepreneur while initiating and promoting his/her business venture contributes
to the objectives of employment creation, balanced regional development, skill
formation, technological up gradation, export promotion, import substitution and
economic growth. According to NIESBUD, entrepreneurship helps solving problems
related to employment generation, national production, and dispersal of economic
power, balanced regional development, and harnessing youth vigor. The important
role that entrepreneurship plays in economic development of any country is
discussed in the sections below.
There are two interpretation of the term entrepreneurship: first,
entrepreneurship refers to owning and managing a business, this is the occupational
notion of entrepreneurship i.e. creation of new business; second, entrepreneurship
refers to entrepreneurial behavior in the sense of seizing an economic opportunity.
This is the behavioral notion of entrepreneurship.
Development economists define three main stages of development: in first
stage economy specializes in the production of agricultural products and small
scale manufacturing; second stage, the economy shifts from small scale production
toward manufacturing; third stage, with increasing wealth the economy shifts away
from manufacturing towards services.
The first stage is about high rates of non-agricultural self-employment,
sole proprietorship of the self-employed which means small manufacturing firms
and service firms. Almost all economists go through this stage.
The second stage is marked by rates of decreasing self-employment. As
economies become more developed, entrepreneurial activity decreases. As
economy becomes more developed, fewer people pursue entrepreneurial activities.
28
Business
Entrepreneurship - II
The third stage is about increase in entrepreneurial activity which is moving
from small firms towards larger organizations. Entrepreneurial activity increases
in the final stage of economic activity. Service firms provide more opportunities
from entrepreneurship. Improvement in information technology etc. may increase
the rewards associated with entrepreneurship.
Opportunity entrepreneurship represents the voluntary nature of
participation. Necessity entrepreneurship indicates an individual’s perception about
entrepreneurship as the best option available for employment.
Entrepreneurship and
Economic Development
NOTES
Ratio of opportunity to necessity entrepreneurship is a key-indicator of
economic development. When more and more people get involved in opportunity
entrepreneurship and more people leave necessity entrepreneurship which is
basically self-employment, there is increasing level of economic development.
Entrepreneurs create new enterprises and new businesses. New
enterprises and new businesses generate new jobs. New businesses intensify
competition. Entrepreneurs introduce innovations. They introduce new technology
which leads to increase productivity. Entrepreneurship in this manner results into
high levels of economic growth.
Necessity entrepreneurship is concerned with the choice of
entrepreneurship as the last resort. Since there was no other option, the individual
entered into entrepreneurship.
Opportunity entrepreneurship is the active choice to start a new venture
so as to convert an unexplored business opportunity into a profitable, attractive
business. Opportunity entrepreneurs expect their ventures to produce to provide
more new jobs and to produce more growth. Countries, where more
entrepreneurship is motivated by an economic opportunity recognized than by
necessity, have higher levels of income.
Necessity entrepreneurship had no effect on economic development while
opportunity entrepreneurship has positive and significant effect.
Entering into entrepreneurship by launching a new venture to exploit a
promising business opportunity would lead to economic development.
Being pushed into entrepreneurship / self-employment as the last and the
only career option can possibility lead to under development.
All countries have both opportunity and necessity entrepreneurship. The
ratio of opportunity to necessity entrepreneurship can be considered as an indicator
of economic development. Both of these types show higher levels in developing
countries than in developed countries. The relationship between necessity
entrepreneurship and economic development is most likely negative in low income
countries, while the relationship between entrepreneurship and economic
development in high income countries is most like positive. Some low income
countries like India and China have high level of opportunity entrepreneurship at
least in certain parts of the country. Countries like Japan have very low level of
opportunity entrepreneurship and low growth.
If we perceive entrepreneurship as self-employment either in agriculture
or small enterprise, then mostly entrepreneurship will not lead to economic
development. In fact it is seen that self-employment declines as economies become
more developed. It is only when economies are able to remove people from selfemployment then an increase in development is seen. In the words of Adam
Smith,”When the division of labour increases, so will economic development”.
Entrepreneurship is critical to development and wellbeing of the society.
Entrepreneurs are the change agents and the catalysts for economic growth and
competitiveness.
Business
Entrepreneurship - II
29
Entrepreneurship and
Economic Development
NOTES
Check Your
Progress
2. Entrepreneurship
and small business are
related concepts. Are
they synonymous?
Entrepreneurship and small business are related concepts. Generally these
two terms are used as if they are synonymous. Entrepreneurial activity is
characterized as the behavior which focuses on opportunities. This may occur in
small business, large business and also outside the business i.e. in other areas of
human endeavors. Small businesses may be initiated by innovating entrepreneurs
or by imitators. Fabian as well as drone entrepreneurs may also be associated
with small businesses. Several times individuals initiate, run and own a business
for making a living.
Schumpeter in, ‘The Theory of Economic Development”, emphasizes the
role of entrepreneur as the prime mover of economic development. He describes
how the innovating entrepreneur challenges incumbent firms by introducing new
inventions that makes current technologies and product obsolete.
Schumpeter says, “Everyone is an entrepreneur when he actually carries
out new combinations. Finding new combinations of factors of production is a
process of entrepreneurial discovery that will become the engine that drives
economic growth”. These new combinations constitute better ways to meet existing
demand or create new products, often making current technologies.
Entrepreneurship is very closely linked to economic growth. Entrepreneurs
have vision. They think far ahead of their times. With their intuition, common
sense and financial rationale they convert ideas into economic opportunities and
produce need satisfying, useful products and services to the society. Entrepreneurs
are change agents. With innovation as the instrument, entrepreneurs improve
productivity and economic competitiveness.
Entrepreneurial activity originates at the individual level. It is often
attributable to the entrepreneur. Entrepreneurship is initiated by an individual with
a peculiar mindset, motives, skills, attitudes and psychological traits.
Entrepreneur and entrepreneurial activities are influenced by the surrounding
environment and the context in which he/she is working - the family environment,
education, training and development, social forces, cultural factors, economic variables,
demographic parameters, Government policies, infrastructure, etc.
Entrepreneurship originates at the individual level but it gets manifested at
the firm level. Entrepreneurship is the driving force for initiating business ideas,
mobilizing human, financial and physical resources for establishing and expanding
enterprises and generating jobs. Vast majority of jobs are generated by small and
medium enterprises in the private sector.
Reynolds, Hay, Bygrave, Camp and Autio carried on an extensive study
of entrepreneurship in twenty one countries and concluded that successful
entrepreneurial activity is strongly associated with economic growth. Their
research was subsumed under the ‘Global Entrepreneurship Monitor (GEM)’, a
joint research initiative conducted by Babson College and London Business School
and supported by Kauffman Centre for Entrepreneurial Leadership. They analysed
the role of entrepreneurial process in country’s economic development based on
surveys of the adult population of each country, in-depth interviews of experts on
entrepreneurship in each country and the use of standardized national data.
30
Business
Entrepreneurship - II
The GEM conceptual model suggests that the social-cultural-political
contexts with in a country must foster certain ‘General National Framework
Conditions’ which can generate not only the opportunities for entrepreneurship
but also the capacity of entrepreneurship- in particular, the skills and motivation
necessary to succeed. Together, the entrepreneurial opportunities on one hand
and the skills and motivation on the other, lead to business dynamics that yield
creative destruction, a process in which new firms are created and older, less
efficient firms are destroyed. The overall result for a country is economic growth.
Entrepreneurial framework conditions comprises eight factors – Availability
of financing, Supportive Govt. policies, Education and Training, Cultural and Social
Norms, R&D Transfer, Commercial and Legal Infrastructure, Internal Market
Openness and Access to Physical Infrastructure. The first three factors –
availability of financing for new entrepreneurs, the need for Govt. policies, which
are supportive of entrepreneurial efforts, and the opportunities for education and
training in entrepreneurship – are highlighted as especially important by Reynolds
and others.
Entrepreneurship and
Economic Development
NOTES
Recent research on entrepreneurship around the world indicates that the
cultural characteristics that can foster successful entrepreneurial activities and its
related economic benefits are a strong education base, the necessary financial
support, opportunities for networking among entrepreneurs and a well-defined
minimal role for the Government.
There are many empirical studies on entrepreneurship which worked on
relationship between entrepreneurial activity and economic performance. The
empirical analyses suggest that entrepreneurship doesn’t have an effect on economic
growth in low income countries. In high income countries, growth oriented
entrepreneurship contributed strongly for economic growth. The different types
of entrepreneurs in developed and developing countries are expected to be
responsible for such results.
There is an extensive literature on the impact of entrepreneurship on
economic performance. The role of entrepreneurship on economic growth began
with the ideas of Adam Smith whose overriding goal was to understand the wealth
creation process whereas division of labour is limited by the extent of the market.
As market grew, entrepreneurship would lead to innovation, which would lead to
an increasing division of labour and increased productivity. However,
entrepreneurship has not played a central role in economic theory. Traditionally
the economic output of a country is viewed as a function of capital and labour
inputs, combined by technological changes. In Solow model, the growth rate is
completely determined by advances in knowledge or technological progress. In
traditional model of economic growth, investment in capital, labour and technology
is sufficient to realize economic growth. New models of economic growth see
these investments as a necessary complement to entrepreneurship, but not as a
sufficient explanation for economic growth in its own right.
Some could possibly detect the existence of an implicit entrepreneur included
by the notion of knowledge. Lucas differentiated between physical and human
capital. This implies that the relative importance of capital could be more than
acknowledged by the Solow model, especially if there are positive externalities in
human capital accumulation. There are different types and sources of technology or
knowledge such as basic scientific research, R&D, innovation, or learning by doing
Business
Entrepreneurship - II
31
Entrepreneurship and
Economic Development
Fig 2.1: Role of an Entrepreneur
Social Stability
Employment
Economic Growth
NOTES
Business
Enriching
Lifestyles
Check Your
Progress
State whether true or
false.
3. Necessity entrepreneurship indicates an
individual’s perception
about entrepreneurship as the best option
available for employment. —
4. Opportunity entrepreneurship is the active choice to start a
new venture so as to
convert an unexplored
business opportunity
into a profitable, attractive business. —
5. Countries, where
more entrepreneurship
is motivated by an economic opportunity recognized than by necessity, have higher
levels of income. —
Entrepreneur
Services
Export Promotion
2.3
Production
Local Demand
Innovation
Trade
Balanced
Regional
Development
Import
Substitution
Entrepreneur: As a Contributor to the Process
of Economic Growth
Entrepreneur is one of the crucial factors of economic growth. He/she
plays a vital role in the process of economic growth. He/she initiates, stimulates
and accelerates the pace of economic growth. G. M. Meier and R. E. Baldwin
have rightly stated, “Development doesn’t occur spontaneously as a natural
consequence when economic conditions are in some sense right. A catalyst or
agent is needed and this requires entrepreneurial activities.”
Indian Planning Commission defined underdeveloped country as one which
is characterized by co-existence, in greater or less degree of unutilized or
underutilized manpower on one hand and unexploited natural resources on the
other. Excessive dependence on agriculture, insufficient capital formation, population
growth, disguised unemployment, underutilization of natural resources, and low
level of industrial activities and lack of entrepreneurial development are some of
the typical characteristics of an underdeveloped country. People in underdeveloped
countries are generally backward, ignorant, rigid and orthodox. Entrepreneurs do
not receive the status and recognition in such societies. The economic environment
results in certain social consequences also. In the face of the economic limitations
and such kind of stagnated socio-cultural environment, Fabian and drone
entrepreneurs are mostly found. Innovators are rare in their occurrence in such
economies and social conditions. Imitators also are not dynamic in adopting
meaningful innovations in such kind of static environment. Promotion and growth
of new enterprises is not satisfactory. It is slow in its occurrence. Underdeveloped
economy needs imitating entrepreneurs also since all cannot be innovators.
Innovators are dynamic enough to change the face of an underdeveloped economy
and bring about rejuvenation in the form of vibrant economic activity.
An underdeveloped country aims at increase in industrial and commercial
activities, rise in income, increased capital formation, creation of adequate
employment opportunities and move towards a stage of economic development.
The only solution available is development of entrepreneurship.
32
Business
Entrepreneurship - II
Entrepreneurs have to play a role as an agent of change in an
underdeveloped economy. As an agent of change, he/she has to be an innovator/
imitator. Let us discuss the role of an entrepreneur as an agent or catalyst of
change, as an innovative entrepreneur, and as an imitating entrepreneur in the
process of economic development.
The process of economic growth arises out of changes of various kinds –
in economic activities, in economic parameters, their combinations etc. Along with
economic changes social, cultural changes are also needed for economic growth.
Entrepreneurship and
Economic Development
NOTES
Peter Drucker says, “Entrepreneurs see changes as the norm and as
healthy. Usually, they do not bring about the changes themselves. But the
entrepreneur always searches for change, responds to it and exploits it as an
opportunity”. An innovating entrepreneur, on his/her own introduces new ideas,
new products/services, new methods, new techniques and brings about the required
change. An imitator brings about changes by adopting innovations of other
successful entrepreneurs.
Entrepreneur as an Agent of Change: As a catalyst or agent of change,
entrepreneur performs various important functions. He/she is required to search
for opportunities and areas where changes are necessary. Entrepreneur foresees
the prospective changes in the economic and social environment and many times
he/she acts as an instrument of change. He/she brings about new combinations of
resources. In the economies with underutilized resources this function helps in
utilization of resources and stimulates the process of development. He/she also
brings about technological changes by adopting innovations and inventions. He/
she is responsible for making an attitudinal change in a typically under developed
economy where people are traditional and conservative in their attitudes and outlook.
They lack initiative and do not desire to undertake anything new. As an agent of
change, an entrepreneur has to bring about a revolution. He/she changes a
traditional, religious minded, orthodox, static social structure into a dynamic,
progressive and rational society. Entrepreneur doesn’t merely help the change to
take place, but also tries to exploit that change. He/she brings about technological
advancement and managerial development.
Role of Innovative Entrepreneur: As an innovator, entrepreneur brings
about new combinations by introduction of new products, introduction of new
techniques of production, opening of new markets, conquest of new sources of
supply of raw materials or semi-finished goods, setting up of a new organization
etc. He/she makes use of potential technical knowledge for continuous technological
progress.
Like Schumpeter, Drucker also emphasized the role of entrepreneur as
an innovator. He pointed out that purposeful and systematic innovation begins
with an analysis of opportunity and a successful innovation should aim at leadership.
This quality is one of the most crucial attributes to bring about economic
development. Entrepreneurs with innovative traits are more common in developed
countries than in under developed countries.
According to Hoselitz, the founders of early industrial establishment were
men with mechanical rather than financial and commercial skills. The earliest
entrepreneurs were men who worked with their hands, whose innovations were in
the field of technology and who in their majority came from lower socio economic
class. Technology innovations and creativity played a crucial role in encouraging
entrepreneurship and economic development.
Innovations give rise to utilization of innovative talents which initiate and
improve the economic growth by improvement in per capita income, increase in
capital formation, generation of employment opportunities, balanced growth,
Business
Entrepreneurship - II
33
Entrepreneurship and
Economic Development
NOTES
improvement in standard of living, economic independence, backward and forward
linkages, technological advancement, establishment of new form of organization,
entrepreneurial competency development.
Role of Imitating Entrepreneurs: Though innovative entrepreneurs are needed
in developing economies, they are rarely found there since the environment in these
countries is not conducive to the development of innovative entrepreneurship. The
technological development, investment climate, infrastructural facilities, socio cultural
factors are not encouraging to development of entrepreneurship. Majority of the
population of developing economies is not educated. They are usually traditional,
conservative and rigid in their approach. They are commonly not receptive to new
ideas and new thoughts. In such a situation, there is less chance of innovating
entrepreneurs to emerge. Even if someone is courageous to innovate, and introduce
something new in the society; there is a possibility of non-acceptance. Such innovations
are not accepted by the backward society. In such a situation, imitating entrepreneurs
are of immense help to developing countries; they imitate the innovations and inventions
of successful entrepreneurs of developed countries and lay the foundation of industrial
and economic development.
Entrepreneurs in general and innovative entrepreneurs in particular are
instrumental in achieving the three basic components of the process of economic
growth- the sustained rise in national output, ability to provide a wide range of
goods, and technological advancement. No economic growth is possible without
entrepreneurial development.
Check Your
Progress
6. Though ————
entrepreneurs are
needed in developing
economies, they are
rarely found there.
34
Business
Entrepreneurship - II
Although underdeveloped countries need innovators capable of achieving
substantial transformations; such kind of dynamic and enterprising entrepreneurs
are very rare in their occurrence in undeveloped countries due to non-existence of
conducive environment, absence of industrial background, lack of skilled labour, lack
of infrastructure, lack of funds, and lack of institutional support. In such nations,
non-innovative entrepreneurs i.e. imitators, Fabian and drone entrepreneurs are
noticed. They lack initiative, motivation, urge required for initiating any development
activity. Obviously they cannot bring out any significant improvement in the economy
in which they function. After attaining a certain level of economic, social, educational,
technical progress i.e. in favourable climate of entrepreneurship, innovators are found
working in such an advanced country. Otherwise imitating entrepreneurs are found
in developing and underdeveloped countries. Underdeveloped economies need
innovating entrepreneurs. They need imitating entrepreneurs also.
The role of an entrepreneur in economic development varies from economy
to economy. Underdeveloped regions are less conducive to emergence of innovative
entrepreneurs. In such areas, people with high achievement motivation behave in
an entrepreneurial way. They intend to change the situation, they are not happy
with the present status in the society. Entrepreneurs in such regions may not be
innovators. They are imitators. They copy innovations introduced by innovators of
developed regions. In the face of resource constraints, and imperfect market in
underdeveloped regions; entrepreneurs launch their enterprises on a small scale.
Imitation requires lesser funds than innovation. However, it does not mean that
such imitation requires in any way lesser ability on the part of entrepreneurs.
According to James Berna, “It involves often what has aptly been called ‘subjective
innovation’, that is, the ability to do things which have not been done before by the
particular industrialists, even though unknown to him, the problem may economic
stability have been solved in the same way by the others”. Imitation of innovations
introduced in developed regions on a massive scale can bring about rapid economic
development in under developed regions also.
2.4
Entrepreneur: As a Contributor to Stability of
Economy
Economic functions create instability which is harmful for the economy.
Economic stability indicates an economy which is free from cyclical changes and
unexpected, and sharp fluctuations. Entrepreneur is capable to establish and
maintain economic stability. Entrepreneur plays a vital role in avoiding the
fluctuations and maintaining economic stability. The roles entrepreneurs play in
stabilization of economy can be described as follows:
Entrepreneurship and
Economic Development
NOTES
Innovative entrepreneurs take risks and launch an innovation in the market.
Once the innovation is accepted by the market, imitators adopt the successful
innovations.
Imitating Entrepreneurs are very cautious and do not take undue risk,
they follow the successful innovations of innovating entrepreneurs. They are
responsible for keeping the investment rising with rising demand; these
entrepreneurs, being cautious, reduce business activities in slack periods.
Entrepreneurs especially imitating entrepreneurs help in stabilization of
prices. They are responsible for adjusting supply to demand. When demand starts
increasing imitating entrepreneurs get attracted and start producing more. The
supply thus adjusts with demand and price stability is established. Due to steady
rise in demand and prices, supply is also steadily increased. This results in avoiding
price fluctuations.
The condition of economic stability is characterized by steady employment
growth. For launching a new innovation, entrepreneurs require investment. With
new investments, additional employment opportunities are created. By creating
new employment opportunities, entrepreneurs help stabilization of the economy.
With creation of new jobs income level also increases. This results in gradual rise
in demand which helps imitating entrepreneurs to take advantage of the situation.
The role played by an entrepreneur is significantly important in a mixed
economy as it permits the growth of both public and private sector.
Concentration of economic power i.e. concentration of wealth in few
hands is one of the undesirable consequences of economic development. Economic
opportunities are denied to the vast majority and there is dependence on a very
small section of population for job opportunities. With more and more people
assuming entrepreneurial roles, economic wealth gets dispersed among the entire
population. Entrepreneurship development helps provide economic opportunities
for setting up enterprises which act as generators of employment. Entrepreneurship
thus leads towards dispersal of economic power.
2.5
Entrepreneur: As a Creator of Employment
Opportunities
Unemployment particularly educated unemployment is a major problem. It
may have serious consequences for society. A sizable part of unemployed population
is youth. Unemployed youth may become frustrated and may divert their energies to
destructive activities. Unemployed youth could get misdirected; they could turn towards
antisocial, terrorist activities. Attracting them towards entrepreneurship channelizes
Business
Entrepreneurship - II
35
Entrepreneurship and
Economic Development
NOTES
the youth power towards productive activities and directs the same towards economic
development. If the country is able to ‘catch them young’ it will benefit immensely
through their contribution to development process.
Entrepreneurship provides an opportunity for self-employment, to earn
their livelihood. It helps to develop self-confidence. Entrepreneur plays a significant
role in generation of employment opportunities. Government jobs are limited in
comparison with the size of unemployed population. Once the vacancies are filled,
until their retirement they are blocked. Wage employment is self-saturating. On
the other hand, with more and more people turning towards entrepreneurship,
along with creating employment opportunities for themselves, innumerable job
opportunities will be created for many more. With growth of these enterprises,
direct and indirect employment will be provided to many more.
The problems of unemployment and mass poverty can be effectively
minimized by activating the latent human talent through entrepreneurship by means
of self-employment and wage employment avenues for large number of people.
Entrepreneurship in small, cottage, tiny, micro, rural sector industries -both and
manufacturing and service sectors - has a crucial role to play in generation of
employment opportunities.
Entrepreneurs create enterprises. Creation and growth of enterprises
generates more and more jobs for people in the society thereby ensure sustenance
to a large number of families. Along with creation and distribution of wealth,
socio-economic development is also achieved through entrepreneurship. Elimination
of poverty, improvement in infrastructural facilities, better standard of living, social
stability are some among the innumerable benefits of entrepreneurship.
2.6
Entrepreneur : As an Agent of Balanced Regional
Development of Industries and Social Stability
Generally industries are established in and around big cities due to availability
of infrastructural facilities. Availability of suitable land, water, power, labour, raw
material, market, transportation facilities etc attract industries to be established in
and around certain facilities and conveniences. On the other hand, growth of
industries and business leads towards development of various facilities such as
road transport, health, education, entertainment etc. With increasing industrialization
in selected big cities, the development gets limited to these cities. Concentration of
industries leads to concentration of economic activities in specific areas only.
Employment opportunities are created in these regions only.
Increasing industrialization and consequent urbanization creates an
imbalance in development of urban and rural areas. Migration of rural population
towards urban areas leads towards various unwanted economic as well as social
consequences. Increasing slum areas, increasing social tensions, unrest, increasing
burden on scarce civic amenities and such kind of problems arise due to urban
industrialization and migration of rural population to urban industrialized areas. To
balance the development of rural and urban areas, entrepreneurs play a crucial
role in bringing about social stability and balanced regional development. India
being a federal state, balanced growth is necessary for India for keeping her
federal structure intact. If one region is developing rapidly and others are remaining
behind, it creates unrest and disturbs social and political unity of the country.
36
Business
Entrepreneurship - II
For balanced development, even development is needed among all regions
so that people in every region will get equal opportunities. People with entrepreneurial
skills need to participate actively in economic development of their regions leading
towards balanced development. There is a need to promote the development of
undeveloped regions. Entrepreneurs can play a very positive role in removing this
regional imbalance; they need support and encouragement from the government.
Entrepreneurship development ensures a balanced regional development. with growing
business enterprises, at some point in time, they are required to set up their enterprises
in smaller towns and not in big cities due to increasing competition in and around big
cities and also to avail various benefits and concessions of government for establishing
industries and businesses in industrially less developed and undeveloped areas. This
helps in development of backward regions.
Entrepreneurship and
Economic Development
NOTES
In absence of sufficient number of entrepreneurs in a region, needs of local
population may not be completely fulfilled. Further, to satiate local demand, outside
entrepreneurs may set up their enterprises in these areas. They may not work for
development of that region. They may not reinvest their profits in such regions. This
drainage of wealth further aggravates problems of disparity and imbalance.
Establishment of micro, small enterprises absorbs a large number of workforces
at a relatively low cost; it helps in alleviating poverty, reducing unemployment and
ensures social stability. Small enterprises explore business opportunities in both rural
and urban areas, there by leading to equitable distribution of income and wealth in the
society. It reduces social instability between rural and urban sector. Small enterprises
check expansion of monopolies. Entrepreneurs facilitate economic development and
social stability through creation of social infrastructure like schools, colleges, vocational
institutes, health care centers, sports infrastructure, roads, banking and insurance
facilities, etc consequent upon establishment of industries.
The role of entrepreneur in bringing about balanced regional development
is justified by activities like establishing agro based industries, utilizing indigenous
technology for creation of enterprise in backward areas, developing handicraft
and cottage industries for eliminating regional imbalance and establishing industries
in rural and backward regions and availing concessional finance, investment subsidy,
transport subsidy, etc provided by government to reduce disparity.
2.7
Entrepreneur: As a Contributor to Export
Promotion Program and Foreign Exchange
Earning
International trade relations have become an essential part of international
relations. Every country tries to establish favorable balance of trade’ and ‘favorable
balance of payment’. Favorable balance of payment means a situation when foreign
exchange earnings are more than foreign exchange disbursements.
Every country needs foreign exchange for various reasons. It needs import
of certain products. It needs the imports for stabilization of internal markets, for
defense requirements. Many times, import of capital goods, machinery, raw
materials, technology etc. is needed for increasing the pace of industrialization.
Imports are possible only if the country is having sufficient stock of foreign
exchange. The exports are required to be increased and more foreign exchange
needs to be earned. And imports are required to be reduced, for which import
substitution is absolutely necessary.
Business
Entrepreneurship - II
37
Entrepreneurship and
Economic Development
NOTES
An entrepreneur plays an important role in increasing exports and earning
foreign exchange for the country. Export promotion helps in minimization of
dependence on imports from abroad, exploration of new markets, foreign exchange
earnings, and meeting balance of payment deficits, improving quality of technology
and quality of manufacture, harnessing the available resources, export of handicraft
products etc.
The government is giving various concessions and incentives to
entrepreneurs to motivate them to manufacture exportable products and undertake
export of their manufacture.
2.8
Entrepreneur: As a Contributor to Import
Substitution Program
Import substitution is substitution of a domestic source of supply for a
foreign source of supply. It means expansion of domestic production and
replacement of imports, mainly capital goods. It has a crucial role in reducing the
imports. The imports can be classified as capital goods, raw materials, and consumer
products.
The import substitution results in reducing the imports without a reduction
in the overall supply and availability of the products in the market. The role of
entrepreneur in import substitution can be viewed mainly to achieve self-reliance
in production of as many goods as possible, and to achieve foreign exchange for
import of goods.
Imports are necessary in the early stages of industrialization. Sometimes,
there is a need of foreign technical know-how, imported machinery, imported raw
material and components to import from foreign countries in the initial stage.
However, as industrial development picks up, the process of indigenization needs
to be encouraged. Indigenous manufacturers are required to be encouraged for
manufacturing of spares and components. Entrepreneurs can work as suppliers of
spares and components. Research and development results in developing new
products which ultimately reduces import needs. The measures adopted by
government for import substitution in India are in the form of policy of protection,
heavy import duties; encouragement to use indigenously manufactured
technologies, use of local experience in innovative techniques of production etc.
In our country opportunities exists for entrepreneurs to establish small
enterprises for production and exports of leather goods, plastic materials, processed
food items and software. A large number of constraints such as lack of
infrastructural facilities, inadequate credit facilities and technological constraints
exist in the way of development of exports. At the same time government
encourages entrepreneurs to establish 100 percent Export Oriented Units (EOUs)
and gives a package of incentives like tax holidays, land at cheaper rate etc to the
entrepreneurs.
2.9
38
Business
Entrepreneurship - II
Entrepreneur: As a Supplier of Local Demand
Entrepreneurs can play an effective role as supplier of local demand.
Satisfaction of local dealers at the local level with the help of local entrepreneurs
is beneficial for various reasons. The local entrepreneurs have a better
understanding of local demand, about the local condition and the manner in which
demand is to be satisfied. They can use locally available raw materials; provide
the commodities at lower prices due to low cost of transportation and still can get
better prices for their products due to proximity of markets. They can provide
prompt and efficient service to the customers and establish good relations with
them. Demand for perishable products can be better satisfied by local entrepreneurs.
Local entrepreneurs can enjoy the benefits of locally available skills, resources
and experiences. Government encourages entrepreneurs to create demand for
the goods which are locally manufactured as the prices of goods are normally low
because of low cost of production, due to proper guidance, provision of adequate
incentives in the form of capital investment subsidies, price preferences, tax
exemption, tax holidays, electricity duty exemption, etc provided by the government
from time to time. Specific industries are being promoted to augment local demand
as well as to compete with products of large scale enterprises.
Entrepreneurship and
Economic Development
NOTES
Entrepreneurs can play an effective role as supplier of components, parts
to large organizations. They can work as ancillary industries and can develop a
good network of ancillary enterprises. An ideal industrial structure comprises of
large enterprises specializing in end products and parts and components supplied
by small enterprises. Large enterprises can specialise in the end products and
small enterprises can specialize in parts and components. Entrepreneurs get assured
market for their products. They can get help from the large enterprises whenever
required such as technical know-how, financial support etc. This arrangement is
mutually beneficial.
2.10 Summary
Entrepreneurship is the cause and result of economic development and
growth. It is basically concerned with creating wealth through production of goods
and services. It is the key to economic development. It acts as a positive force in
economic growth by serving as the bridge between innovation and the market place.
Entrepreneurship is needed to encourage micro, small, and medium
enterprises. In the light of resource constraints, it is suitable for a developing
economy like India. Small enterprises are labour intensive. They need less capital.
They have a higher per unit output of capital investment. They are innovative and
flexible. They invest a major part of surplus revenue and help in increasing national
production. They reduce regional imbalances and promote social stability. They
help in dispersal of economic power. They serve small local markets in an efficient
manner. They utilize local resources effectively and solve the problems of
unemployment and underemployment. Entrepreneurship development leads towards
overall industrial development of the country.
Entrepreneurship serves as a catalyst of economic development.
Entrepreneurship promotes capital formation by mobilizing idle saving of people.
It provides immediate large-scale employment. It helps reduce unemployment
problem in the country which is the root of all socio-economic problems. It promotes
balanced regional development. It helps reduce concentration of economic power.
It encourages effective resource mobilization which otherwise remain unutilized
and idle. It stimulates equitable redistribution of wealth, income and even political
power in the interest of the country. It induces backward and forward linkages
which stimulate economic development process. It promotes export trade which
is an important ingredient to economic development. In this manner, it can be said
that, an economy is the effect for which entrepreneurship is the cause.
Business
Entrepreneurship - II
39
Entrepreneurship and
Economic Development
NOTES
LPG has made India one of the strongest upcoming economy. There are
tremendous opportunities and challenges in India. WTO has altered framework of
international trade. Volume of world trade is increasing and it has intensified competition.
SMEs are facing global competition and the need for very high quality at lower costs
has made them restructure to meet these demands of global competitiveness.
2.11 Key Terms
 Stability of economy: A situation in which the frequently occurring
‘Depression, Recovery, Boom, Decline’, cycle is avoided.
 Underdeveloped country: is one which is characterized by co-existence
in greater or less degree of unutilized or underutilized manpower on one
hand and unexploited natural resources on the other. Excessive
dependence on agriculture, insufficient capital formation, population
growth, disguised unemployment, underutilization of natural resources,
low level of industrial activities and lack of entrepreneurial development
are some of the typical characteristics of an underdeveloped country.
 Sustainable development: The development that meets the needs of
the present generation without compromising the ability of future
generations to meet their own needs
2.12 Questions and Exercise
Questions
1. Entrepreneur is the catalyst in the process of economic development. In
the light of this statement, explain the role of entrepreneur in economic
development of a country.
2. Discuss the interaction between entrepreneur and environment.
3. Explain the role played by an entrepreneur in import substitution and
export promotion.
4. Explain the social factors which influence the growth of entrepreneurship.
5. What are the social functions generating entrepreneurial growth?
6. In the Indian context, explain the role that entrepreneurship has fulfilled
in the economic development of the country.
7. How do you differentiate between opportunity entrepreneurship and
necessity entrepreneurship?
8. Necessity entrepreneurship had no effect on economic development while
opportunity entrepreneurship has positive and significant effect.
Comment.
9. Industrial development, entrepreneurial development and economic
development are interrelated and interdependent on each other. Discuss.
40
Business
Entrepreneurship - II
10. Entrepreneurship is the cause and result of economic development and
growth. Do you agree? Justify.
Exercise
Entrepreneurship and
Economic Development
1. Write an essay on how you would like to accelerate entrepreneurship
development in India.
NOTES
Multiple Choice Questions
1. Choose the wrong alternative
i.
Necessity entrepreneurship is concerned with the choice of
entrepreneurship as the last resort.
ii.
Opportunity entrepreneurship represents the voluntary nature of
participation.
iii.
Ratio of opportunity to necessity entrepreneurship is a key-indicator
of economic development.
iv.
i. ii, and iii are wrong
2. Select the correct alternative
i.
Entrepreneurial activity originates at the individual level.
ii.
Entrepreneurship originates at the individual level but it gets
manifested at the firm level.
iii.
Both i and ii are true
iv.
Both i and ii are false
3. ———————————— said, “When the division of labour
increases, so will economic development”.
i.
Adam Smith
ii.
Richard Cantillon
iii.
Carl Marx
iv.
Peter Schumpeter
4. Pick the odd one out
i.
Entrepreneurs are gamblers.
ii.
Entrepreneurship is the cause and result of economic development
and growth.
iii.
Entrepreneurs do not seek jobs but they generate jobs with their vision.
iv.
Economy of a country depends on the number and nature of
entrepreneurs present in the society.
5. Innovating entrepreneurs are very rare in their occurrence in undeveloped
countries due to
i.
Non-existence of conducive environment,
ii.
Absence of industrial background
iii.
Lack of infrastructure
Business
Entrepreneurship - II
41
Entrepreneurship and
Economic Development
NOTES
iv.
All the above reasons
Answers
Check Your Progress
1. do not seek, generate
3. True
4. True
5. True
6. innovative
Multiple Choice Questions
1. iv
2. iii
3. i
4. i
5. iv
2.13 Further Reading
Deshpande Manohar U., Entrepreneurship of Small Scale Industries
Concept, Growth, Deep and Deep Publications, New Delhi
Ghosh A.P., Lowrence M. D., Phadke D. B., Business Entrepreneurship,
Nirali Prakashan, Pune, 1994.
Mohanty Sangram Keshari, Fundamentals of Entrepreneurship, PHI
Learning, New Delhi, 2010.
42
Business
Entrepreneurship - II
UNIT 3 : ENTREPRENEURSHIP AND
EDUCATION
Entrepreneurship and
Education
NOTES
Structure
3.0
Introduction
3.1
Unit Objectives
3.2
Study of Entrepreneurship as a Subject
3.3
Entrepreneurship education
3.3.1
3.0
Importance of Entrepreneurship Education
3.4
Contents of Entrepreneurship Education
3.5
Obstacles to Entrepreneurship Education
3.6
Summary
3.7
Key Terms
3.8
Questions and Exercises
3.9
Further Reading
Introduction
“Entrepreneurs are not ‘born’…..rather they ‘become’ through the
experiences of their lives”- Prof. Albert Shapiro, Ohio State University
Young generation dreams to become doctors, engineers, managers,
government officers etc. Very few of them aspire for entrepreneurial career. Many
of them enter entrepreneurship as a last resort when all other career options fail.
Otherwise very few of them are even aware that they can become entrepreneurs.
Even if some of them are aware about entrepreneurship career option, they may
not be interested; they may not have the ability; they may not be willing to venture
into entrepreneurship. To change this trend, there is a need to increase awareness
about entrepreneurship as a discipline, entrepreneurship as a career option, and
entrepreneurship as a way of life among students from an early age beginning
with primary education, high schooling, and undergraduate level. The education
should continue further at post graduate level and afterwards also. Along with the
objective of creating awareness, entrepreneurship education should aim at
encouraging and motivating the students towards entrepreneurship and imparting
them requisite skills and competencies while providing them opportunities for their
self-appraisal. Entrepreneurship education stimulates entrepreneurship. It molds
an individual to think about business start-up. It lets them to develop their own
enterprises in an effective manner. It develops their competence to pursue their
entrepreneurial ideas within the existing firms. It is the ability of an individual to
translate ideas into action. It enables an individual to plan, organise and direct
action towards achievement of goals. It encompasses creativity, innovativeness
and risk-taking. Entrepreneurship education prepares entrepreneurs, intrapreneurs,
entrepreneurial managers, entrepreneurial persons in particular; overall, it promotes
enterprising behaviour. Rather it is to be seen as education in enterprising behaviour.
Business
Entrepreneurship - II
43
Entrepreneurship and
Education
NOTES
It is rooted in lifelong learning. It deals with a wide range of activities directed at
enhancing entrepreneurship. Efforts are made to imbibe positive attitude, develop
knowledge and skills relating to entrepreneurship and new venture creation, cultivate
entrepreneurial competencies and bring about an entrepreneurial behavior mode
in all activities in work, in home, at play, ….everywhere.
3.1
Unit Objectives
After going through this unit, you will be able to
 Realize that entrepreneurship is a developmental process
 Understand the meaning of entrepreneurship education
 Appreciate the need for entrepreneurship education
 Learn about the objectives of entrepreneurship education
 Know about the obstacles to entrepreneurship education
 Have an idea about contents of entrepreneurship education
3.2
Study of Entrepreneurship as a Subject
It is becoming increasingly clear that entrepreneurship or certain facets of
can be leant / taught. Professionals and academicians have evolved beyond the
“The entrepreneurial mystique! It’s not magic, it’s not mysterious, and it has nothing
to do with the genes. It’s a discipline. And, like any discipline, it can be learned”.
Entrepreneurship has been talked about for over 200 years. However, a
serious thought was given to the study of entrepreneurship only in the last few
decades. There has been an increasing realization about the importance of
entrepreneurship for economic development. Administrators, policy makers,
government and non-government agencies have started paying attention to
development of entrepreneurship among society. Thereafter, the actual application
of thinking about entrepreneurship development and alert observation about the
phenomenon of entrepreneurship has started. The importance of the subject has
been developed over time. Today entrepreneurship is gradually evolving into an
independent discipline commanding focused attention.
Entrepreneurship as a subject has always been associated with some other
discipline. The concept of entrepreneurship has been originated from the philosophy
of economics. Entrepreneurship is traditionally about business start-up and
development. On the basis of content of this subject, it is closely associated with
the discipline of management. Entrepreneurship was logically seen as an integral
part of business and management. In business schools, entrepreneurship education
was structured into curriculum as such under management. Over a period of time,
it is realized that entrepreneurship is not just a form of management. It is now
increasingly being recognized that the subject requires more focused thinking and
that it is to be deemed a subject in its own right going beyond management practices.
In line with this thinking entrepreneurship is evolving into a separate domain by
itself under social sciences discipline just like the subject of management.
44
Business
Entrepreneurship - II
Through different courses and programmes, entrepreneurship education
is being imparted. It is a part of curriculum in management, engineering, polytechnic
and several other faculties. Students learn different aspects of entrepreneurship
in various forms through various programmes. More and more students are getting
attracted towards entrepreneurship.
Theoretical knowledge of entrepreneurship has been built up from practical
experiences. It is a very rare case where practice has preceded the theory.
Component of practice is more prominent in entrepreneurship literature than
theoretical description and philosophy. Entrepreneurship is more about practice
than about theory. Theory is closely related with practice. Entrepreneurship literature
is based on empirical surveys of various types dealing with various perspectives
of entrepreneurship conducted in different regions, case studies of successful as
well as unsuccessful entrepreneurs, different experiences of entrepreneurs, profiles
of their enterprises etc. Success stories and stories of failures also are abundant in
writing of entrepreneurship.
Entrepreneurship and
Education
NOTES
Entrepreneurship education comprises of all activities aiming to foster
entrepreneurial mindsets, attitudes, and skills and covering a range of aspects
such as idea generation, start-up, growth and innovation. Enterprising behavior
refers to innovative and enterprising qualities in an individual. Entrepreneurs are
characterized by innovative behaviour, strategic management and focus on profit
and growth as the prime objectives. Enterprising behavior connotes a positive,
flexible and proactive attitude towards change. It denotes a wider meaning of
entrepreneurship concept. The personal traits characterizing enterprising behaviour
are, according to Gibb, “initiative, strong persuasive power, moderate rather than
high risk-taking, flexibility, creativity, independence/autonomy, need for
achievement, imagination, high internal beliefs of control, leadership and hard work”.
Entrepreneurship education aims to enhance an entrepreneurial spirit and
develop personal qualities and attitudes. It nurtures the ability and willingness to
take the initiative, innovation and creativity, willingness to take risks, self-confidence.
It enables learning of knowledge and skills regarding development of business and
intends to make entrepreneurship a more attractive career choice.
In North America, the term used is ‘entrepreneurship education’ while in
Great Britain and Ireland, the preferred term is ‘enterprise education’. In the words
of Garavan, “The major objectives of enterprise education are to develop enterprising
people and inculcate an attitude of self-reliance using appropriate learning processes.
Entrepreneurship education and training programmes are aimed directly at stimulating
entrepreneurship which may be defined as independent small business ownership or
the development of opportunity-seeking managers within companies”.
Entrepreneurship education comprises of formal education as well as
informal education. Children and youth require primary as well as secondary
education. At the next higher level, higher education is needed and thereafter one
has to provide attention to continuing education. With reference to informal
education, social inclusion has to be taken into consideration to make
entrepreneurship education all-pervasive and comprehensive reaching out to the
all strata of population.
Check Your
Progress
State whether true or
false.
1. Theoretical knowledge of entrepreneurship has been built up
from practical experiences.
2. Entrepreneurship
education aims to enhance an entrepreneurial spirit and develop personal qualities and attitudes.
Entrepreneurship Education
Education is a strong interventional or influencing media that sets values,
develops attitudes and creates motivation in people to move towards perfection,
excellence while developing an independent venture. It has the prime role of molding
human resources in a particular direction. There is a need to develop the curriculum
so as to ensure emergence of entrepreneurial spirit including values, attitudes,
Business
Entrepreneurship - II
45
Entrepreneurship and
Education
NOTES
Check Your
Progress
State whether true or
false.
3. Entrepreneurship is
the outcome of several
environmental variables such as personality traits, personal
skills, family background, financial position, social norms, cultural set up, government policy etc.
4. Education plays a
significant role in developing entrepreneurs
by shaping their
mindset, attitudes, and
overall personality.
motivation and competencies among students and enable them to successfully
take up the entrepreneurial initiatives.
Entrepreneurs are born, they are made also. They are spontaneous, they
may not be spontaneous, they may not emerge on their own; they may be shaped,
influenced and motivated by outside forces. Entrepreneurship is influenced by a
multitude of factors. It is the outcome of several environmental variables such as
personality traits, personal skills, family background, financial position, social norms,
cultural set up, government policy etc. Education plays a significant role in
developing entrepreneurs by shaping their mindset, attitudes, and overall personality.
The core values of entrepreneurship education are belief in boundless
potential of youth, honesty, integrity, excellence, passion in every endeavor, respect
for talent, and creativity. It has to provide hands-on learning opportunities to students
to get outside exposure, to know and acquire the appropriate skills required for
business success along with projecting career role models.
Entrepreneurship education is directed at developing and inculcating
entrepreneurial capabilities among students. Entrepreneurship education reflects
the relevancy of education to classrooms and strives for empowerment.
Entrepreneurship Education: A Lifelong Learning Process
The Consortium for Entrepreneurship Education supports the view that
entrepreneurship education is a lifelong learning process that has at least five
distinct stages of development. This lifelong learning model assumes that everyone
in our education system should have opportunities to learn at the beginning stages,
while the later stages are targeted at those who may specifically choose to become
entrepreneurs.
Stage 1- Basics: at the first stage, the focus is on understanding the basics
of our economy, the career opportunities that result, and the need to master basic
skills to be successful in a free market economy. Motivation to learn and a sense
of individual opportunity are the outcomes at this stage of lifelong leaning model.
Stage 2 – Competency Awareness: the students should learn the language of
business, and see the problems from the small business owner’s point of view. The
emphasis is on beginning competencies that may be taught as an entire entrepreneurship
class or included as part of other courses related to entrepreneurship.
Stage 3 – Creative Applications: At this stage, students should learn to explore
business ideas and a variety of ways to plan business. Although, it is still only an
educational experience students must gain a greater depth and breadth of knowledge
about business. This stage encourages students to create a unique business idea and
carry the decision making process through a complete business plan. The programme
enables students to actually experience the operation of a business. Having the firsthand experience of business at various stages of education, the students can assess
whether they can become entrepreneurs or not.
Stage 4 – Startup: there is a need of special assistance in the form of
training for the sake of successfully initiating a new business enterprise.
Stage 5 – Growth: Existing businesses must grow and prosper. There is a
need of assistance in recognizing potential problems and learning how to solve them.
46
Business
Entrepreneurship - II
According to Saundarjya Borbora, entrepreneurial career has to traverse
through four stages: the Dreaming stage, the Planning stage, the Implementation
stage and the Survival and Growth stage.
Innovation and Entrepreneurship Education: Edupreneurship
The approach to entrepreneurship should be process oriented rather than
content oriented. It is not only information and knowledge based but it is a
combination of skill, attitude (competencies), and knowledge. Entrepreneurship
education is more person oriented and behavior oriented. It focuses more on
learning and development rather than only teaching.
Entrepreneurship and
Education
NOTES
Entrepreneurship education means education about entrepreneurship. It
may also mean entrepreneurship in education i.e. innovative education.
Entrepreneurship education must be enterprising, and innovative. Edupreneurship
or academic entrepreneurship means application of innovative methodologies for
teaching/learning process. A number of classroom activities can be arranged to
make the exercise interesting and to ensure active participation of the students in
the learning process.
Students should be given opportunities to know themselves in a better manner
with the help of techniques like SWOC analysis, ‘Who am I?’ etc. They should be
told specifically to appraise themselves with reference to goal setting, problem solving,
locus of control, decision making, risk bearing, creative and lateral thinking.
In a classroom session students should be given opportunity to talk about
their dreams, ambitions and future plans. The students should be encouraged to
think seriously about their ideas. The class can be divided into groups. Group
leaders should present the views of their group mates followed by open house
discussion. This is a brainstorming kind of activity in which the students get exposed
to a number of ideas regarding ambitions and career goals and get meaningful
suggestions and feedback.
Students should be taught to learn how to think creatively from the works
of Edward de Bono. They should be involved in various brainstorming activities
vigorously so that they would know how to generate new ideas and the role of
brainstorming in developing innovation and creativity.
Students should be asked to make a business plan of their own choice by
choosing a promising business idea on the basis of self-appraisal and market
analysis. They should plan about requirements of the business such as feasibility
of the proposal, market potential, production schedule, arranging finance, manpower
needs, marketing strategy, tackling competition, profitability and so on. Let them
talk about their own ideas, think about themselves as successful entrepreneurs,
anticipate possibilities of failure, dream about their success. A competition of
individual as well as group presentations can be arranged.
For entrepreneurship classroom, cases of successful and creative
entrepreneurs prove to be very effective and useful. Students learn that it is possible
to create something from almost nothing. They should be convinced that they can
also meet with such experiences and opportunities in their lives and get success in
developing business.
Interaction with successful entrepreneurs is one more good option in which
students can clarify their doubts, and apprehensions by having a dialogue and identify
themselves with the persons and get an inspiration to pursue entrepreneurial careers.
The classroom activities should be goal and achievement oriented involving
a variety of approaches and teaching styles. They should be organized in such a
manner so as to encourage students to think creatively and not just to determine
how business operates i.e. they should focus all types of entrepreneurial initiatives
and build confidence of the students.
Business
Entrepreneurship - II
47
Entrepreneurship and
Education
NOTES
Check Your
Progress
5. What is the role of
a teacher in entrepreneurship education?
Effectiveness of entrepreneurship education depends upon knowledge and
skills of faculty and methodology adopted for the teaching learning process.
Updation and up gradation of knowledge and skills of the faculty at frequent intervals
of time is a must. Teachers should be committed; dedication and high level of
involvement of teachers is a must. This calls for putting additional efforts and time
apart from assigned workload and normal working hours. Teachers should be
exposed to trade and industry. There is a need to establish external linkages and
contacts with support agencies involved in training, consultancy, finance, marketing,
technology, infrastructure etc.
Teachers play a critical role in entrepreneurship education. They are inspirational and motivated. Entrepreneurial teachers have a passion for teaching.
They are student oriented and action oriented. They can never make an impact on
the impressionable minds of young generation in absence of being entrepreneurial
on their own part. They make a significant impact in grooming the entrepreneurial
minds with a focus on knowledge, skills and attitude. They engage the students
through interactive approaches to release their creative potential and innovation.
They interact with the students at a personal level, support individual learning
processes and look into the development of personal competencies. They prefer
multidisciplinary and project-based learning. They adopt group activities and they
focus on group processes and interactions. They have a good network. They are
team players.
3.3
Importance of Entrepreneurship Education
“While the key concepts of entrepreneurship can be taught at any time in
a person’s life, the attitudes and values associated with becoming a successful
entrepreneur are more likely to develop if they are explored and nurtured at a
young age. Teaching children about entrepreneurship offers a career path, but
more importantly, students learn of the economic and social benefits that
entrepreneurs provide to their families, to their communities and to their country”.
–Rob Chernow
The term ‘entrepreneur’ is aptly applied to individuals who with their
entrepreneurial mindset and special personality traits exhibit innovative behavior
in organization and application of resources which leads towards value addition,
wealth creation and societal betterment. The term ‘entrepreneurship’ connotes
practice. Those who practice entrepreneurship are entrepreneurs. It is a process
of applying entrepreneurial thinking to practice. Being entrepreneurial i.e. being
an entrepreneur means possessing a unique mindset, a special thinking style which
enables the practice of entrepreneurship. It is not just a career option. It is not just
a way of conducting business. It lays a foundation of a sustained economic
development. It has a socio-economic impact. It is a way of life. It goes beyond
that. It touches the life of people and improves quality of life.
48
Business
Entrepreneurship - II
Can entrepreneurship be taught? Isn’t it an inborn trait? Majority of the
students think that entrepreneurship is not their ‘cup of tea’. It is something to be
done by special people. Ordinary person cannot become entrepreneurs. The
questions raised in the minds of many are: I don’t dream about entrepreneurship.
I am never going to be an entrepreneur, so why should I understand
entrepreneurship? Such questions must be answered. Motivating everyone to learn
entrepreneurship, create awareness about the charms of being an entrepreneur,
providing at least a basic training in entrepreneurship to each and every student is
the need of the hour. Of course, everyone cannot become an entrepreneur but it is
welcome ‘to be entrepreneurial’ on the part of everyone in the society. ‘To be
entrepreneurial’ means being creative and innovative, continuously striving for
excellence and perfection in every area of human endeavour. It indicates risk
taking propensity. It implies original thinking; it is challenging the obvious, traditional,
orthodox and rigid thinking and processes. It is going beyond the obvious. It is
deviating from stereotyped thinking and mindset. It is travelling on the unexplored,
untrodden path. It is exploring untraveled path. It is thinking big. It is visualizing
the destination, planning and ensuring to reach there.
Entrepreneurship is to be applied in every field of human activity. It may
not be always directly associated with business field. Entrepreneurship can be of
various types of which business entrepreneurship/industrial entrepreneurship/trading
entrepreneurship/service entrepreneurship are various kinds. Although in this book,
dealing with the subject of business entrepreneurship, we are using the term
‘entrepreneurship’ with reference to business field and industrial activity; but actually
the term can be used in a broader sense - to indicate its application to every area
of human endeavour. Persons with vision, creativity, innovation, problem solving
attitude, risk taking propensity, an urge for excellence, positive thinking, high selfesteem, confidence, internal locus of control are required everywhere.
Entrepreneurship and
Education
NOTES
Check Your
Progress
6. Can entrepreneurship be taught?
7. Is entrepreneurship
an inborn trait?
We have seen importance of entrepreneurship and role of an entrepreneur
in economic development of a country (please see the previous Unit 2).
Entrepreneurship education, no doubt, prepares you for initiating, organizing and
managing a business venture; but at the first instance, it gives you an opportunity to
assess your own personality, to appraise your own traits. It enables you to identify
yourself with entrepreneurial personalities, and have a judgement about your own
strengths and weaknesses. If you don’t have interest in being engaged in business
entrepreneurship, still then it is desirable to have at least basic education in
entrepreneurship which would help you in molding your personality in an
entrepreneurial way. Once entrepreneurial spirit is inculcated; such persons excel in
whatever they do, wherever they are. Everywhere they will challenge the conventional
things, the traditional ways, the stereotyped thinking and in this manner, in the real
sense of the term, there would be emergence of an entrepreneurial society.
Box 3.1
The Consortium for Entrepreneurship Education believes
The Consortium for Entrepreneurship Education has established the
following concepts through their experience which they believe are the basic
foundation for the importance of entrepreneurship education:
1. Entrepreneurs are not ‘born’….they ‘become’ through the experiences
of their lives.
2. Entrepreneurs have a great diversity of personal characteristics, the
common one: being willing to take a risk in return for a profit.
3. Anyone can be an entrepreneur at any time of one’s life.
4. Although there is no educational degree requirement to become an
entrepreneur, it is helpful t have developed good support skills including
communications, interpersonal abilities, economic understanding, digital
skills, marketing, management, and math/finance skills.
5. Entrepreneurial ventures are the major source of new jobs in the
economy—for the owner and for new employees.
Business
Entrepreneurship - II
49
Entrepreneurship and
Education
6. Entrepreneurship is NOT leaned by reading a textbook ad then taking
a test to prove you are one.
7. Young people can build confidence in their abilities to become
entrepreneurs in their future as a result of a variety of entrepreneurial
activities provided throughout education.
NOTES
8. Entrepreneurship education activities are a real-life vehicle for
developing academic skills.
9. Entrepreneurship education enables employees to be more successful
as a result of understanding the operations of a small business and the
problems of their boss.
10. Entrepreneurs are found in every occupation or career cluster.
11. Entrepreneurship education opportunities are important at all levels of
education, from experiences for elementary school children through
skill development for existing entrepreneurs.
12. The definition of ‘entrepreneurship success’ varies with reaching the goals
of the individual, from part time income to fast –growing corporate structures.
Source: http://www.entre-ed.org/Standards_Toolkit/nurturing.htm
3.4
Contents of Entrepreneurship Education
Entrepreneurship can be considered as a practice area. In most cases
entrepreneurship is first practiced and then the lessons are learnt. It is studied
from practical, experiential trial and error route and the lessons are consolidated in
such a way that it can be applied back to real life. Theoretical knowledge on
entrepreneurship has been built up from the experiences of successful and
unsuccessful entrepreneurs in the past. Theory is closest to practice. It is a rare
case where practice preceded theory. It has the nature of an applied subject. Its
imminent use in trying to practice it makes this unique. On the basis of experiences
and observation on the field, theories are being developed and it is found that these
are more useful being based on actual practice and coming from the field. With
such awareness, budding entrepreneurs can learn from past experiences and past
mistakes. It saves time and effort in learning entrepreneurship.
Entrepreneurship education is about creating awareness amongst students
with reference to entrepreneurship as a practice. The objective of entrepreneurship
education is to encourage and nurture individuals who possess entrepreneurial
potentiality.
Entrepreneurship education means education about entrepreneurship. It may
also mean entrepreneurship in education i.e. innovative education. Entrepreneurship
education must be enterprising, and innovative. Edupreneurship or academic
entrepreneurship means application of innovative methodologies for teaching/ learning
process. A number of classroom activities can be arranged to make the exercise
interesting and to ensure active participation of students in learning process.
50
Business
Entrepreneurship - II
Students should be given opportunities to know themselves in a better manner
with the help of techniques like SWOT analysis, ‘Who am I?’ etc. They should be
told specifically to appraise themselves with reference to goal setting, problem solving,
locus of control, decision making, risk bearing, creative and lateral thinking.
In a classroom session, students should be given opportunity to talk about
their dreams, ambitions and future plans. The students should be encouraged to
think seriously about their ideas. The class can be divided into groups. Group
leaders should present the views of their group mates followed by open house
discussion. This is a brainstorming kind of activity in which the students get exposed
to a number of ideas regarding ambitions and career goals and get meaningful
suggestions and feedback.
Entrepreneurship and
Education
NOTES
Students should be taught to learn how to think creatively from the works
of Edward de Bono. They should be involved in various brainstorming activities
vigorously so that they would know how to generate new ideas and the role of
brainstorming in developing innovation and creativity.
Students should be asked to make a business plan of their own choice by
choosing a promising business idea on the basis of self-appraisal and market
analysis. They should plan about requirements of the business such as feasibility
of the proposal, market potential, production schedule, arranging finance, manpower
needs, marketing strategy, tackling competition, profitability and so on. Let them
talk about their own ideas, think about themselves as successful entrepreneurs,
anticipate possibilities of failure, dream about their success. A competition of
individual as well as group presentations can be arranged.
For entrepreneurship classroom, discussion about cases of successful and
creative entrepreneurs proves to be very effective and useful. Students learn that
it is possible to create something from almost nothing. They should get convinced
that they can also meet with such experiences and opportunities in their lives and
get success in developing business.
Experience sharing with successful entrepreneurs is an important
component of entrepreneurship education. Interaction with the entrepreneurs in
terms of their success stories narrating their personality traits, family background,
motivating factors, obstacles faced by them, the manner in which the obstacles
were overcome, their challenges; their achievements would be an enriching
experience for the students. This would make them appraise their own personalities,
identify themselves with the entrepreneurial personalities and may motivate them
to explore entrepreneurial career path.
The classroom activities should be goal and achievement oriented involving
a variety of approaches and teaching styles. They should be organized in such a
manner so as to encourage students to think creatively and not just to determine
how business operates i.e. they should focus all types of entrepreneurial initiatives
and build confidence of the students.
Effectiveness of entrepreneurship education depends upon knowledge and
skills of faculty and methodology adopted for the teaching learning process.
Teachers play a crucial role as facilitators of learning and multipliers of
ideas. Updation and up gradation of knowledge and skills of the faculty at frequent
intervals of time is a must since they shape learning processes. They mold students
to achieve entrepreneurial learning outcomes in the form of knowledge, skills and
attitudes.
Teachers should be committed; dedication and high level of involvement
of teachers is a must. This calls for putting additional efforts and time apart from
assigned workload and normal working hours. Teachers should be exposed to
trade and industry. There is a need to establish external linkages and contacts with
support agencies involved in training, consultancy, finance, marketing, technology,
infrastructure etc.
Business
Entrepreneurship - II
51
Entrepreneurship and
Education
NOTES
Check Your
Progress
8. Edupreneurship is
————-------------9. Write the meaning
of entrepreneurship
education?
Entrepreneurship career needs a lot of preparation and efforts to achieve
success. Entrepreneurship is a highly practice-oriented discipline. It should be
taught using case-based methodologies, simulation exercises, internship
programmes, live projects etc along with classroom teaching. It should include the
component of opportunity identification and evaluation, setting up a business
enterprise, securing necessary licenses, approvals and permissions, organizing
resources, marketing, team management etc.
There is a need of entrepreneurial or entrepreneurship-oriented culture
for making entrepreneurship education successful. It has a future-oriented
approach. It empowers individuals to take responsibility and develop competencies.
It encourages them to take action even if it involves risk and uncertainty. Learning
environment needs to be developed. For imbibing entrepreneurial spirit, the emphasis
is on the student - the activities of student with hands-on learning experience in a
real-world setting. The students are encouraged to interact with entrepreneurs,
visit their enterprises and be familiar with all the detail of their enterprises. They
are guided in goal setting and goal achievement, their confidence in their own
capability is reinforced.
The curriculum should involve teaching business skills as well as nurturing
entrepreneurial behavior. Business skills relate to investment skills, financial
rationale, product planning and development, market research, management of
human resources negotiation skills etc. regarding entrepreneurial traits there is a
need to nurture creativity, idea generation, opportunity recognition, project selection,
risk taking, analytical approach etc.
BOX 3.2
Overall Objectives For a Course in Entrepreneurship
 Understand the role of new and smaller firms in the economy
 Understand the relative strengths and weaknesses of different types
of enterprises
 Know the general characteristics of an entrepreneurial process
 Assess the student’s own entrepreneurial skills
 Understand the entrepreneurial process and the product planning and
development process
 Know alternative methods for identifying and evaluating business
opportunities and the factors that support and inhibit creativity
 Develop an ability to form, organize, and work in interdisciplinary
teams
 Know the general correlates of success and failure in innovation and
new venture creation
 Know the generic entry strategies for new venture creation
 Understand the aspects of creating and presenting a new venture
business plan
 Know how to identify, evaluate, and obtain resources
52
Business
Entrepreneurship - II
 Know the essentials of
 Marketing planning
Entrepreneurship and
Education
 Financial planning
 Operational planning
NOTES
 Organization planning
 Venture launch planning
 Know how to manage and grow a new venture
 Know the managerial challenges and demands of a new venture
launch
 Understand the role of entrepreneurship in existing organizations
Source: Robert D. Hisrich, “Toward an Organization Model for
Entrepreneurial Education”, Proceedings, International Entrepreneurship
Conference, Dortmund, Germany (June 1992), p.29
Johnsson and Johnsson argue that the development of following
competences is central to the entrepreneur and hence they are included as didactic
and pedagogical key objectives of entrepreneurship educational prorgrammes of
University of Vaxjo, Sweden:
 The development of communication abilities
 The development of analytical abilities
 The development of the facility in problem solving processes
 The development of social interaction abilities
 The development of global perspective and awareness
Per Blenker, Poul Dreisler, John Kjeldsen noted the most commonly cited
objectives of entrepreneurship education and training programmes as:
 To acquire knowledge germane to entrepreneurship
 To acquire skills in the use of techniques, in the analysis of business
situations, and in synthesis of action plans
 To identify and stimulate entrepreneurial drive, talent and skills
 To undo the risk-averse bias of many analytical techniques
 To develop apathy and support for all unique aspects of entrepreneurship
 To devise attitudes towards change
 To encourage new start-ups and other entrepreneurial ventures
Entrepreneurship education is a tool to spread enterprising culture and enable
people to be more entrepreneurial. It creates awareness about enterprise. This is
learning about how to run a business. It is formal education about enterprise regarding
generation of promising business ideas, estimation of market potential, tackling
competition. Of course, it is not only about running business. It is about inculcating an
entrepreneurial mindset and developing capability and confidence, and acquiring the
Business
Entrepreneurship - II
53
Entrepreneurship and
Education
NOTES
skill of creative problem solving through activities, training and guidance. It enables a
student to translate a dream into reality, to turn ideas into action.
Entrepreneurship education is relevant at all levels of education right from
nursery to higher education. It has to be taught to the students of all the faculties
of knowledge for all the disciplines.
Everyone should get a practical experience concerned with
entrepreneurship while learning. Entrepreneurial skills are supposed to be built
through practical real life experience. Active learning, project based methodology,
independent learning has to be adopted by entrepreneurial teachers. Experiential
learning is the need of the hour. All the students should meet at least one practical
entrepreneurial experience before leaving compulsory education.
3.5
Check Your
Progress
1. What are the objectives of entrepreneurship education?
State whether true or
false:
2. Entrepreneurship
education is relevant
at all levels of education right from nursery
to higher education.
——
3. Entrepreneurship
education has to be
taught to the students
of all the faculties of
knowledge for all the
disciplines. —-
Obstacles of Entrepreneurship Education
Entrepreneurship education is an area which has not received the needed
importance. Entrepreneurs are very few in number in society. It is not practiced
by a majority of individuals; there are a number of popular myths surrounding
entrepreneurship. There are several stories depicting entrepreneurship as a journey
from ‘rags to riches’. There is a popular myth that ‘entrepreneurs are born and
not made’. It is believed that entrepreneur is an exceptionally gifted person. People
still believe that entrepreneurs are blessed with a special ability and wonderful
skills by their birth. Overemphasis on inborn traits and gifted personality of
entrepreneurs discourages common people to choose entrepreneurship career.
Neither academicians nor entrepreneurs are serious in creating a knowledge-bank
and awareness about the entrepreneurship subject.
Now a days students focus on campus placements while making choice
of course and educational institute. Due to high cost of education students look for
a job career with higher starting salaries. Entrepreneurship is a risky proposition
with an uncertainty about its outcome in terms of income, market acceptability
and societal sanction.
To encourage students to look at entrepreneurship as an alternate career
option the subject of entrepreneurship has to be taught effectively. The student
should be made to practice entrepreneurship in their institutes. They should be
given opportunity to practice entrepreneurship under the close supervision and
proper guidance of experienced businessman. There is a need to provide follow
up guidance so that students could learn the taste of success.
Being a practice-oriented discipline, the component of industry interaction
is found to be inadequate. The need of the subject is sharing of experiences and
continuous interaction with industry practitioners.
Entrepreneurship is offered not as a compulsory subject. Mostly it is offered
for extra-curricular or co-curricular programmes. The number of institutions
specializing in entrepreneurship education is few. Their focus is not sharp. There
are very few full-time courses on entrepreneurship offered by a few institutions.
There is a need of greater emphasis on promotion of such programmes to attract
talented students. Some orientation is required at high-school level, and at
undergraduate level.
54
Business
Entrepreneurship - II
Faculty should be strong in research. There should be a mix of academic
staff and practicing entrepreneurs. The subject should be taught in a structured
manner. Teaching community should engage in research; develop theories; test
those theories. Theoretical abstractions based on the varied experiences of the
practicing entrepreneurs would be beneficial for learners. Knowledge creation
and knowledge dissemination should be taken up as a continuous activity. Most of
the educational institutions concentrate more on knowledge delivery rather than
knowledge creation. However, nowadays in our country increasingly researchers
are being attracted towards entrepreneurship research; but less importance is
being given to basic research. However in developed countries, especially in US
and UK, social scientists and management thinkers are working on
entrepreneurship. Research in many universities in these countries has identified
entrepreneurship as a special domain, and the ongoing research appears to be
adding a lot to the knowledge base. This has resulted in better understanding of
the entrepreneurship process and various aspects around it. However, in emerging
economies like India, there is very little emphasis given to the parallel development
of research and learning.
Entrepreneurship and
Education
NOTES
Being a multi-disciplinary subject, entrepreneurship researchers constantly
interact with researchers of other disciplines in order to create a body of useful
knowledge. However, there is a lack of a good platform for researchers in various
disciplines to come together and become aware of what others are doing. There is
a lack of a systematic body of knowledge from which learners can derive principles
and practice in real life.
Lack of qualified faulty members to teach entrepreneurship, lack of
entrepreneurship education evaluation to measure the effects and impact of
entrepreneurship programmes on learning, attitudes and behaviours, lack of funding
are some of the obstacles to development and continuation of entrepreneurship
education.
3.6
Summary
Entrepreneurs are born, they are made also. They are spontaneous, they
may not be spontaneous, they may not emerge on their own; they may be shaped,
influenced and motivated by outside forces. We know that entrepreneurial skills,
attitudes and behaviours can be learnt. Entrepreneurship offers opportunities for
life-long learning. An early beginning - right from nursery level and continuing
through youth and adulthood to higher education and extending even after that
phase - is essential for entrepreneurship education. School drop outs, and those
who are economically and socially excluded should be reached out in a
comprehensive manner.
Entrepreneurship is influenced by a multitude of factors. It is the outcome
of several environmental variables such as personality traits, personal skills, family
background, financial position, social norms, cultural set up, government policy
etc. Education plays a significant role in developing entrepreneurs by shaping their
mindset, attitudes, and overall personality. It has to provide hands-on learning
opportunities to students to get outside exposure, to know and acquire the appropriate
skills required for business success along with projecting career role models.
Entrepreneurship education is directed at developing and inculcating entrepreneurial
capabilities among students. Entrepreneurship education reflects the relevancy of
education to classrooms and strives for empowerment.
It is observed that students seeking admission to various courses join
educational institutions with dreams and ambitions of their own. Many of them go
Business
Entrepreneurship - II
55
Entrepreneurship and
Education
NOTES
in for salaried employment. Few have an urge to set up their own enterprises or
run family businesses or diversify into creative ventures to generate income for
the self and create employment opportunities for others also. Initiative, vision and
enthusiasm of such enterprising youth play an important role in shaping their career.
Transformation of dreams into reality requires planning, management skills and a
passion for creativity. Institutional learning should inculcate innovation, creative
business skills, out-of-box thinking. Innovative thinking, analysis and research must
become an intrinsic part of academic curriculum. Education system should
encourage collaborative work with industries, R&D organizations, and the society
in general to promote barrier free learning and enterprise. In order to encourage
original thinking and to stimulate entrepreneurial passion among students, institutions
need to orient them both in theory and in practice. Teachers should be
entrepreneurial. Ideas be discussed to set up own startup companies. Industrialists
and successful alumnus be invited to motivate the budding entrepreneurs by telling
their success stories.
3.7
Key Terms
 Locus of control: it refers to an individual’s perception about the
underlying main causes of events in his/her life. Locus of control as a
principle was developed by Julian Rotter in 1954. A more internal locus
of control is seen as desirable. In general, it seems to be psychologically
healthy to perceive that one has control over those things which one is
capable of influencing.
 Lateral thinking: is solving problems through an indirect and creative
approach using reasoning that is not immediately obvious and involving
ideas that may not be obtainable by using only traditional step-by-step
logic. The term was coined by Edward de Bono in 1967.
3.8
Questions and Exercises
Questions
1. Discuss the obstacles to entrepreneurship education.
2. What should constitute entrepreneurship education?
3. Explain the need for entrepreneurship education.
4. Peter Drucker says. “When a subject becomes totally obsolete, we make
it a required course”. Comment in the context of entrepreneurship
education.
5. Present your own ideas freely about entrepreneurship education.
6. Write in detail about the significance of entrepreneurship education.
Exercise
56
Business
Entrepreneurship - II
1. Visit various websites, collect information about entrepreneurship
education in different countries and prepare a report.
Multiple Choice Questions
Entrepreneurship and
Education
1. Which one of the following alternatives is true?
i.
Ordinary persons cannot become entrepreneurs
ii.
Entrepreneurship is something to be done by special people
iii.
Both i and ii are true
iv.
Both i and ii are false
NOTES
2. ‘To be entrepreneurial’ means
i.
Being creative and innovative
ii.
Continuously striving for excellence and perfection
iii.
Both i and ii
iv.
None of the above
3. Pick up the wrong alternative
i.
Entrepreneurship education is relevant at all levels of education
right from nursery to higher education
ii.
Entrepreneurship has to be taught to the students of all faculties
iii.
Both i and ii are right
iv.
Both i and ii are wrong
4. Which of the following is an obstacle of entrepreneurship education?
i.
Lack of qualified faculty to teach entrepreneurship
ii.
Lack of funding
iii.
Overemphasis on inborn traits of entrepreneurs
iv.
All the above
5. Pick up the wrong alternative
i.
Entrepreneurs are very few in number in society.
ii.
Due to high cost of education students look for a job career with
higher starting salaries.
iii.
Entrepreneurs are born and not made
iv.
Entrepreneurship is a risky proposition with an uncertainty about
its outcome in terms of income, market acceptability and societal
sanction.
6. Choose the correct statement
i.
Entrepreneurship is a journey from ‘rags to riches’
ii.
Entrepreneur is an exceptionally gifted person
iii.
Overemphasis on inborn traits and gifted personality of
entrepreneurs discourages common people to choose
entrepreneurship career
Business
Entrepreneurship - II
57
Entrepreneurship and
Education
iv.
Entrepreneurs are blessed with a special ability and wonderful skills
by their birth
7. Which one of the following is wrong?
NOTES
i.
There is no need for students interaction with industry practitioners
ii.
The subject of entrepreneurship has to be taught effectively
iii.
Student should be made to practice entrepreneurship in their institutes
iv.
Students should be given opportunity to practice entrepreneurship
under the close supervision and proper guidance of experienced
businessman
8. Which of the following is an objective of entrepreneurship education?
i.
Development of communication abilities
ii.
Development of analytical abilities
iii.
Development of global perspective and awareness
iv.
All the above
9. Which one of the following alternatives is true for entrepreneurship education?
i.
Faculty should be strong in research
ii.
There should be a mix of academic staff and practicing
entrepreneurs
iii.
Both i and ii are true
iv.
Both i and ii are false
Answers
Check Your Progress
1. True
2. True
3. True
4. True
7. Academic entrepreneurship i.e. application of innovative methodologies
for teaching/learning process
11. true
12. true
Multiple Choice Questions
1. iv
58
Business
Entrepreneurship - II
2. i
3. iv
Entrepreneurship and
Education
4. iv
5. iii
6. iii
NOTES
7. i
8. iv
9. iii
3.9
Further Reading
Shankar Raj, Entrepreneurship Theory and Practice, Tata McGraw Hill
Education, Noida, 2012.
Hisrich Robert D., Peters Michael P., Shepherd Dean A., Entrepreneurship,
Tata McGraw Hill Education Pvt. Ltd., New Delhi, 2010
Business
Entrepreneurship - II
59
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
Unit 4 : ETHICS AND SOCIAL
RESPONSIBILITIES OF AN
ENTREPRENEUR
Structure
4.0 Introduction
4.1 Unit Objectives
4.2 Entrepreneur and Business Ethics
4.2.1Nature of Business Ethics
4.2.2 Scope of Ethics
4.2.3 Need of Ethics in Business
4.3 Social Responsibilities of an Entrepreneur
4.4 Role of Mission, Vision and Code of Conduct
4.5 Summary
4.6 Key Terms
4.7 Questions and Exercises
4.8 Further Reading
4.0
Introduction
Being an Entrepreneur is a challenging job as one has to do all business
activities correctly. The decisions taken by an entrepreneur may be viewed as
appropriate or inappropriate, legal or illegal, ethical or unethical and these decisions
have an impact on the society. One wrong action taken will affect the whole
society. Entrepreneur has to be ethical and socially responsible for all his business
activities. This unit discusses about the concept of entrepreneurship, business ethics
and social responsibilities of an entrepreneur. It also discusses about mission, vision,
values and code of conduct of a business organisations and its importance for an
entrepreneur for making ethical decisions.
4.1
Unit Objectives
After reading this unit you should be able to:
 Define business ethics
 Understand entrepreneurship and ethics
 Know nature scope and need of ethics
 Understand entrepreneur’s social responsibilities
60
Business
Entrepreneurship - II
 Know about Mission, Vision, Code of Conduct
4.2
Entrepreneur and Business Ethics
Globalization has posed a challenge before all of us and one should strive hard
of become globally competitive to meet this challenge. In this context, entrepreneurship
has assumed greater importance in the last decade. It is going to be the most vital
topic of discussion and study in the initial stages of 21st century. Successful new
business ventures are the result of combination of right planning, effort, innovation
& the environment. This right combination can only be achieved by the entrepreneurs.
They try to enrich economic system and give an impetus to economic development.
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
The origin of term ‘entrepreneurship’ is from Western Societies which means
to undertake. This term was used to refer to army leaders in early sixteenth century
but later in eighteenth century was used to refer a merchant who bought and sold
goods at uncertain prices.Often the term ‘entrepreneur’ and ‘entrepreneurship’
are used interchangeably but they are conceptually different. The Organization
for Economic Cooperation and Development (OECD) defines entrepreneurs as
“essential agents of change who accelerate the generation, application and spread of
innovative ideas and in doing so not only ensure efficient use of resources, but also
expand the boundaries of economic activities”. An entrepreneur is a change agent. He
is a creator.
Higgins has defined Entrepreneurship as “Entrepreneurship means the function
of seeing investment and production opportunity, organizing an enterprise to undertake
new production process, raising capital, hiring labor, arranging for supply of raw
materials and selecting top managers for day to day operations of the enterprise.”
Entrepreneurship is a creation of an entrepreneur; it is an enterprise or a
venture. Entrepreneurship is the skill of an individual to organize, own and run a
business profitably. Task of an entrepreneur is to explore opportunities, customize at
low cost, convert data into knowledge,develop capacity for knowledge & skill into
action anddevelop management education for sustainable change and growth. This
task leads towards doing business by exploring opportunities by investing money to
earn profit against the risk taken. To successfully run business an entrepreneur has
to perform various functions which are the objectives of the business.
An entrepreneur has to achieve business goals and objectives by performing
following functions.
1. Risk -Assumption and Bearing: In a business profit is reward for
assuming and bearing risk. An entrepreneur has a skill for assuming all
the risks involved in business activity. Some of the business risks are
insurable while some are not. Business environment is dynamic as tastes
and preferences of consumers are ever changing, technology is changing
fast, and all the risks associated with such dynamism are not insurable.
In this ever changing business environment one of the important functions
of an entrepreneur is to assume and bear risk in such a manner to minimise
risk and avoid any loss which is possible only by skills, knowledge,
initiatives and proper decision making of an entrepreneur.
Check Your
Progress
1. Define the term
“Entrepreneur”
2. Define the term
“Entrepreneurship”
2. Decision Making: An entrepreneur must be able to take proper
decisions at every step to run the business successfully. The entrepreneur
has to take decision regarding which industry will be suitable for him to
run business. Further he has to decide regarding the business activities
to be undertaken, what is to be produce, technology to be adopted, and
Business
Entrepreneurship - II
61
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
size of business, location and services to be offered to the customers.
These all are crucial decisions which decide success of any business
activity. An entrepreneur undertakes only those business activities which
offer him best reward in terms of profits and future prospects for
development and growth.
3. Functions of Manager: Raising finance, procurement of raw materials,
planning of production, supplier management, distribution of goods, various
recruitments and selection, manpower planning, directing, organising,
controlling etc. are the various functions of a manager. An entrepreneur
has to follow all the above functions on the basis of the size and nature
of business. Entrepreneurs have to perform these managerial functions
effectively for the success and growth of the business.
Entrepreneurs must be able to convert ambitions into business goals, motivate
and inspire employees. They must have risk bearing approach and attitude and have
professional functional expertise to select business, manage finance personally and
develop leadership and various other skills to run business enterprise successfully.
Check Your
Progress
3. What are the
functions of an
entrepreneur
to
achieve business goals
and objectives?
Further, an entrepreneur is expected to conduct all his business activities
ethically. Ethics is the term originated from the Greek word Ethos which means
the character of a community, group, person, etc. It refers to the moral philosophy
or code of morals practiced by an individual or a group. It is a science which deals
with what is right and what is wrong. Ethics are classified into following categories:
1. Descriptive ethics: It is the scientific description of what ethics is.
The moral standards, practices, moral codes etc. to judge an action
whether it is right or wrong.
2. Normative ethics: This approach involves both the standard normative
ethical theory and also its application to particular disciplines, actions, classes
of actions for the ethical judgment. Clear norms or codes are set which
clearly guides for social interaction in a community. Business ethics comes
under this categorization. Entrepreneur or a business manager applies
normative standards of moral judgment to the business decisions undertaken.
3. Meta-ethics: It is scientific study of the methods, the meaning and the
language (all concepts) of ethics. It is a study of the universal principles
that direct right and wrong human actions.
Ethical principles govern what is right and what is wrong. Business ethics is
an application of standards and values to specific business decisions in relation
with business goals and objectives.
Business ethics means the ethics followed in business while making any decision
or solving any problem. It can be defined as the principles and standards that lead towards
acceptable business conduct. The various stakeholders such as customers, government,
competitors, general public etc. determine acceptability of behavior of business.
62
Business
Entrepreneurship - II
It is expected that all the business decisions should be ethical that is doing things
rightly which is possible only when there is commitment for doing right things. This
commitment flows from top to bottom in an organization. It is utmost necessary for an
entrepreneur being at top level in the organization to behave in ethical manner as his
personal values and beliefs system will influence every decision taken. Successful
entrepreneurs have the skill to scrutinize every situation and with their firm belief
system and personal values they put the same into practice. Entrepreneurs are well
versed with various ethical traps and the fact that they are accountable to the society.
So for an entrepreneur it is must to be aware about various ethical issues.
From the year 1990s there is an increasing trend in the field of studying
business ethics. This trend was the outcome of central importance given on individual
financial gain and the grandiose display of wealth in 1980s decade. Further, the
financial scandals in late 1980s which affected environment adversely raised
questions regarding ethical conduct of the business
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
There are various philosophies, theories and approaches in business ethics
which describe its basics of and it’s constitutes. Business ethics as a subject has
being expanded over the years which have raised its complexity and difficulty
level to manage the core area. There are many theories which have contradictory
view point. This has led to adoption of pragmatic approach by managers while
dealing with any ethical issues.
4.2.1 Nature of Business Ethics
Business ethics as a discipline is on the rise and developing. The most recent
studies on business ethics are done in United States of America. The risk of being
penalized by the courts for unethical behaviour is highest in US which has resulted
in grown and strong ethics movement there. So it may be rightly referred as
American Subject.
Check Your
Progress
4. What do you mean
by ethics?
Business ethics adheres on regulatory, legal, professional and organisational
standards keeping on commitments and promises made and enduring by general
principles of truth, honesty, fairness and respect.
5. Define Business
ethics?
Business ethics structure includes moral judgement and its specification; moral
judgement and its justification; moral judgement and its moral standards; moral
judgement and its logical reasoning; moral judgement and its moral responsibility.
6. What are the
various categories in
which ethics is
classified?
There is no such specific criterion available for moral judgement but there
is open criticism if it not logical, not based on facts and moral principles.
Logical: Moral judgement is considered only if it is logical with appropriate
reasoning and evidence. It should be correlated with the standards set, the policies
and conduct logically.
Facts: Moral judgement is considered only if it is based on the facts. All the
relevant information should be gathered to support the judgement.
Moral Principles: Moral judgement is considered only if it is based on
acceptable moral principles, standards to make it reliable.
Business ethics is a subject where there are various opinions regarding
ethical principles and it is like a moral web as what is right or wrong depends on
situation and there is no universal set of ethical principles which govern what is
right and what is wrong. This fact realisation has changed the thinking regarding
effective approaches for businesses and its stakeholders like employees to behave
in ethical manner. The traditional approach was to lay down rules, principles and
system which were to be followed by the people and the businesses. One had to
do compliance of the rules and principles drafted. These rules are difficult to
draft; they become outdated till the system is adopted which affects the efficiency
of business adversely. This scenario has resulted in evolution in the traditional
approach leading to inculcate ethical values in businesses, corporate bodies,
employees, stakeholders that inhabit it although there will always be some level of
compliance to rules necessary. To accomplish this successfully it is outmost
necessary for a business to have vision regarding what is the reason behind their
existence and this vision should be shared with all its stakeholders. Further, they
must also have collective conviction about acceptable standards of behaviour.
Business
Entrepreneurship - II
63
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
A lot of individuals are sceptical about business ethics movements. Business
ethics is a matter of importance as it affects adversely the business in terms of reputation,
money and prices of stock if there is any evidence about unethical behaviour reported
against the business. Whereas the businesses or corporate who are considered ethical
are trusted by their various stakeholders and turnout to be a successful entity.
There are some business scandals which have their derivation due to not
enough consider given to morality and ethics. There are violations of principles
like ‘caveat emptor’ (let the buyer be aware) which is against the customers
interest. So it is outmost necessary for businesses to decide its standards and code
of conduct. Total Quality Management (TQM) implementation by the businesses
have focus on continuous improvement which is based on the basic principles that
consumers’ interest cannot be ignored and all business procedures to be defined
and prepare code of conduct that shall impart value judgement. This trend of
TQM implementation has increased interest in business ethics.
4.2.2 Scope of Ethics
Check Your
Progress
7. From where the
concept of ethics was
originated?
8. What must be
criterion for moral
judgement?
Ethics is described scientific in nature. Ethics is a science because it aspires
at systematic knowledge. So it has its own sphere which deals with judgment
about human conduct with logical and systematic clarification of right or wrong
relating with the highest Good of human. Ethics is also considered as branch of
philosophy as there is no clearly defined line between descriptive science, normative
science, ethics and philosophy. The difference is only of intensity and degree.
Ethics is therefore the philosophical or scientific treatment of goodness or morality
and it is closely related to many other sciences.
Ethics is also known as moral act. It is an applied discipline that is concern with
a particular human action and it also evaluate to what level it is attuned with the
general principles set. Ethics is not a positive science which deals with judgement of
facts and it not even practical science like medical science which is concerned with
ways for realisation of an end result. Ethics is neither an art as it it does not instructs us
how to live morally.Ethics is a wider concept. It is the normative science of conduct
stating what should be done rather than what is actual situation or a case. Ethics
basically deals with values and not facts it does not instructs us how to live morally. It
judges the conduct based on standards sets and values. So it is a normative science
based on norms and standards to judge a human conduct. All aspects of life are literally
covered under ethics as there is no such conduct which can be an exception to moral
consideration. Ethics is a science of behavior and conduct .It is concerned with standards
to which our behavior or conduct should conform. If the behavior or an action conforms
to standard it is considered as ethical if not then it is unethical.
The significance of ethics lies in its application. In ethics standard principles
have to be related to an individual’s circumstance or situation just like in the theory
of relativity in physics the laws or principles are applied to the factors and elements
being considered. Ethics as normative science tries to find intention of the particular
action, nature or motives behind the action whether it is voluntarily done or not
etc. These questions related to motives or intentions are psychological which provide
inputs about ethics. It is essential to know the intention behind the human conduct
before adjudging its moral value. Task of ethics is to establish the character of
good, right, virtue and duty as it is concerned with highest good.
64
Business
Entrepreneurship - II
The span of ethics includes all human action and investigates what is good
or bad. Freedom of human being is also discussed in ethics and it sees into law,
duty, virtue and conscience. Responsibilities for actions, sense of duty, moral
obligations also come unader preview of ethics.
Men are not machines and have freedom of will so their each conduct is
meaningful and ethical considerations are applicable for each action of a human
being. Political Science which is considered as science of government regulates
the state by formulating laws and checking whether they are followed or not by
setting up complete mechanism of control by threat of punishment. Many laws
are formulated to regulate the actions and conduct of human being in the state for
public welfare and ethics deals with moral welfare that is highest good. Ethical
principles cannot be externally imposed by threat of punishments but they are
self-imposed so it is an inward motive to be morally correct.
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
Ethics laws must be applicable to every law, decisions and act, may it be
political law or economical law. A truly moral human being follows ethics not
because of fear from punishment but he is self-motivated, in any situation given
that individual will not behave unethically. The one who follows ethics because of
external forces will be moved with the situation and might get involved in unethical
thing like burglary, theft if a situation comes or circumstances permits so.
Economics is a science which aims at make certain economic welfare of
public is also closely associated with ethics as it is no longer believed to be science
of wealth but welfare. Welfare means benefit which a very broad concept in
economics it literally means material welfare concerned with economic goods and
services. Economics is related with production and distribution of wealth, goods
and services and it is considered as positive science as its aim is to ascertain laws
related to production and distribution of wealth, goods and services. These laws of
economics must be value based unlike laws of physical science related to object
governance. In economics laws of demand and supply are in consideration with
human beings and their needs so values is integral part of economics.
Ethics is basically related to economics, political science, sociology, law and
legal study, psychology, culture study, environmental study and all the branches of
knowledge in pursuit of highest good. New technology has widened the scope of
ethics to address issues related to cyber ethics etc.
Check Your
Progress
9. Explain why ethics
is normative science?
4.2.3 Need of Ethics in Business
Ethics in economic activities cannot be ignored. All the economic activities
like commerce, trade and industry are carried with profit motive. Business activity
can be successful only if earns profit and if it continuously incurs losses the motive
won’t be solved, so the business activity has to be stopped or closed down. There
are many continuous loss making public sector enterprises in some countries where
there expenses are more than income (more input less output) in such situations the
government has to compensate for these unproductive management. In such cases,
ultimate burden is on general public which cannot be continued for long time.
The public sector enterprise Soviet Union collapsed mainly because of
inefficiently managed and incurring losses. So any business activity may it be of
private or public sector will survive only if it makes profit. In business one must
take due care for selecting the means to earn profit. Not only the motive but also
the means adopted to realize our end also determine the moral value of conduct.
Intention which is considered the object for moral judgment is formed with both
motive and means adopted to realize it. To earn profits quickly if suspicious and
questionable means are adopted this leads towards awful and disastrous
consequences like in US there was collapse of some business houses.
There are various financial scams going on around the globe. There are
malpractices, criminal activities going around us leading towards moral lapses. As
Business
Entrepreneurship - II
65
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
discussed earlier ethics is self - imposed one can only be told to be ethical by
showing the law but can’t be forced. But it is a need of an hour for businesses to
follow ethics in interest of general public.
The business should not be only earn profit but also should consider the
social implications of its decisions.
4.3
Social Responsibilities of an Entrepreneur
Business is an important constituent of society and its existence is because
of the society. The business environment comprises of various stakeholders such
as the entrepreneurs, employees, customers, suppliers, dealers etc those who are
directly linked with business and the general public in vicinity of the business, the
entire society who are indirectly linked with the business. For a business to sustain
in long run it is imperative for an entrepreneur to be morally and socially responsible
towards the society.
Entrepreneurs are considered as change agents of the society. The
entrepreneurs must try to apply their skills and business processes for creating an
environment where society is benefited at large. Entrepreneurs are accountable
for every activity and process which is related to society .So it is their social
responsibility towards the society to create and sustain social value. This is possible
only when they are continuously involved in learning, adapting to changes in
environment and innovating.
Followings are the major responsibilities that an entrepreneur should take to
be answerable and responsible towards the stakeholders:
1. Achievement Motive: Entrepreneurs have to overcome various
obstacles, hindrances, misfortunes to run business successfully to achieve
the set business goals. The determination and motive of entrepreneur to
achieve predetermined goals gives the strength and creates a good
environment.
2. Bearer of Risk: Entrepreneurs take into consideration various
environmental factors and take calculated and moderate risk rather than
just gambling.
3. Opportunist: Entrepreneurs always try to explore and seek new
opportunities and convert them into feasible, realistic and achievable
approach.
4. Determination: Entrepreneurs are determined to achieve goals by hard
work and efforts. Although discouraged by risks, difficulties and
uncertainties they overcome it and achieve their goals.
5. Uncertainties: Entrepreneurs are having achievement motive so they
should tackle uncertainties with their analytical abilities.
6. Business Plan: Realistic business plans are to be prepared and rigorously
followed.
Entrepreneurs are independent and job giver, they have self-confidence,
and successful entrepreneurs do not hesitate change decisions as per circumstances
and take prompt feedback about their performance.
66
Business
Entrepreneurship - II
These characteristics play important role for the stakeholder and it’s the
responsibility of the entrepreneur to be ethical and responsible towards various
stakeholders.Entrepreneur has to be ethical and socially responsible for all his
business activities
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
4.4
Role of Mission, Vision and Code of Conduct
Stakeholders whether internal or external have major influence on the
business activities. So it is the social responsibility of the entrepreneur to
communicate the purpose and values of business to its stakeholders.
Mission and vision are both concern with purpose of the business and these
statements are usually communicated in written form. These statements convey
about business organization’s purpose of existence, why they are, where they will
lead towards, what they will value. The businesses which clearly communicate
their mission and vision perform better and are successful because they know
where they have to go and how so all their strategies to achieve the goals and
objectives are aligned with vision and mission of the business.
Check Your
Progress
10. What are major
responsibilities of an
entrepreneur?
Mission
Mission of the organization states its reasons for its existence and how it
aspires to serve its stakeholders. Mission of the organization is the answer to various
question raised regarding the basic purpose or fundamentals for the existence of an
organization. The mission statement can change or remain same for the entire life of
the organization depending on the expansion and growth of the organization. Mission
basically conveys the task assigned by an organization to itself.
Vision
Vision of the organization states aspiring future position of the organization.
It is competency to see and aim for the position in future through direction and key
objectives. It is future oriented analysis discussing the scenario of success. This
statement states what business wants to become.
Values
Values are stated code of conduct that directs the organizations. Values are
the beliefs and faiths of a human being or a group that initiate civilization. For a
business organization they are foremost prerogatives.
Strategy
It is a path set by the business organization to achieve desired goals and
objectives.
Mission Statements and Vision Statement
Mission and vision statement play vital role in strategy development, setting
goals and objectives and communicating the stakeholders the purpose of the
organization. If the internal stakeholders like employees properly understand
mission, vision and values of the business they are able to do strategic planning in
right direction and are able to achieve goal and objectives leading toward success
of the organization. Vision statement acts as bridge between mission and strategy.
These statements guide in development of strategy and measuring goals achieved.
Business
Entrepreneurship - II
67
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
Code of Conduct
Code of conduct or ethics is generally prepared by the business organizations
to establish and clarify the standards for behavior within the organizations. A code
of conduct is a set of rules which govern the various tasks in the business
organization. Ethical codes and honor codes are related concepts.
For example in The Companies Act, 2013 in SCHEDULE IV [See section 149(8)]
code for independent directors is specified as follows:
The Code is a guide to professional conduct for independent directors.
Adherence to these standards by independent directors and fulfillment of their
responsibilities in a professional and faithful manner will promote confidence of
the investment community, particularly minority shareholders, regulators and
companies in the institution of independent directors.
I. Guidelines of professional conduct: An independent director shall:
(1) Uphold ethical standards of integrity and probity;
(2) act objectively and constructively while exercising his duties;
(3) exercise his responsibilities in a bona fide manner in the interest of the
company;
(4) Devote sufficient time and attention to his professional obligations for
informed and balanced decision making;
(5) not allow any extraneous considerations that will vitiate his exercise of
objective independent judgment in the paramount interest of the company
as a whole, while concurring in or dissenting from the collective judgment
of the Board in its decision making;
(6) Not abuse his position to the detriment of the company or its shareholders
or for the purpose of gaining direct or indirect personal advantage or
advantage for any associated person;
(7) Refrain from any action that would lead to loss of his independence;
(8) Where circumstances arise which make an independent director lose
his independence, the independent director must immediately inform the
Board accordingly;
(9) Assist the company in implementing the best corporate governance
practices.
Thus an entrepreneur has to prepare a code of conduct and follow it to
achieve its mission and vision ethically and with responsibility toward society.
4.5
68
Business
Entrepreneurship - II
Summary
An entrepreneur has to achieve business goals and objectives by performing
functions of risk -assumption and bearing, decision making and managerial
functions. Business ethics comes under this categorization of normative ethics
Ethical principles govern what is right and what is wrong. Business ethics is an
application of standards and values to specific business decisions in relation with
business goals and objectives.Business ethics adheres on regulatory, legal,
professional and organisational standards keeping on commitments and promises
made and enduring by general principles of truth, honesty, fairness and respect.
There is no such specific criterion available for moral judgement but there is open
criticism if it not logical, not based on facts and moral principles. Ethics is basically
related to economics, political science, sociology, law and legal study, psychology,
culture study, environmental study and all the branches of knowledge in pursuit of
highest good. New technology has widened the scope of ethics to address issues
related to cyber ethics etc. For a business to sustain in long run it is imperative for an
entrepreneur to be morally and socially responsible towards the society. Stakeholders
whether internal or external have major influence on the business activities. So it is
the social responsibility of the entrepreneur to communicate the purpose and values
of business to its stakeholders. Mission and vision are both concern with purpose of
the business. An entrepreneur has to prepare a code of conduct and follow it to
achieve its mission and vision ethically and with responsibility toward society.
4.6
Key Terms
 Entrepreneur: Is a change agent and a creator, owner of a enterprise.
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
Check Your
Progress
11. What is meant by
Mission?
12. What is meant by
Vision?
13. What is meant by
Code of conduct?
 Entrepreneurship:It is the skill of an individual to organize, own and
run a business profitably.
 Ethics: It refers to the moral philosophy or code of morals practiced by
an individual or a group. Business Ethics: The principles and standards
that lead towards acceptable business conduct.
 Descriptive ethics: The moral standards, practices, moral codes etc.
to judge an action whether it is right or wrong.
 Normative ethics: It involves both the standard normative ethical theory
and also its application to particular disciplines, actions, classes of actions
for the ethical judgment.
 Meta-ethics: It isscientific study of the methods, the meaning and the
language (all concepts) of ethics.
 Mission: States organizations reasons for its existence
 Vision: States aspiring future position of the organization..
 Values: Stated code of conduct that directs the organizations.
 Strategy: It is a path set by the business organization to achieve desired
goals and objectives.
 Code of Conduct: Is a set of rules which govern the various tasks in
the business organization.
4.7
Questions and Exercises
Short Answer Questions
1. Define the terms “Entrepreneur” and “Entrepreneurship”
2. What do you mean by ethics?
3. Define Business ethics?
Business
Entrepreneurship - II
69
Ethics and Social
Responsibilities of an
Entrepreneur
4. What must be criterion for moral judgement?
5. What is meant by Mission, Vision and Code of conduct?
6. Distinguish between Mission and Vision
NOTES
Long Answer Questions
1. Explain in detail concept of entrepreneur and entrepreneurship?
2. Explain in detail functions of an entrepreneur to achieve business goals
and objectives?
3. What are the various categories in which ethics is classified?
4. Explain why ethics is normative science?
5. What are major responsibilities of an entrepreneur?
6. Explain nature, scope and need of business ethics?
7. Discuss about social responsibilities of an entrepreneur.
8. Explain role of Mission, Vision and code of conduct for organizational
goals and objectives?
Multiple Choice Questions
1. The origin of term ‘entrepreneurship’ is from........... Societies.
a.
Indian
b.
Eastern
c.
Western
d.
Asian
2. Entrepreneurship term was used to refer to ............... in early sixteenth
century.
a.
Army Leaders
b.
Merchant
c.
Navy Officer
d.
Labourer
3. Entrepreneurship term was used to refer to ............... in early sixteenth
century.
70
Business
Entrepreneurship - II
a.
Army Leaders
b.
Merchant
c.
Navy Officer
d.
Labourer
4. Entrepreneurs have to perform which of the following functions of an
entrepreneur to achieve business goals and objectives.
a.
Risk -Assumption and Bearing
b.
Decision Making
c.
Functions of Manager
d.
All of the above.
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
5. Ethos is a ...........word.
a.
French.
b.
Greek
c.
English
d.
Japanese
6. Business ethic comes under which category?
a.
Descriptive ethics
b.
Normative ethics
c.
Meta-ethics
d.
None of the above
7. Study of the methods, the meaning and the language (all concepts) of
ethics is?
8.
a.
Descriptive ethics
b.
Normative ethics
c.
Meta-ethics
d.
None of the above
Which approach involves both the standard normative ethical theory
and also its application to particular disciplines, actions, classes of actions
for the ethical judgment?
a.
Descriptive ethics
b.
Normative ethics
c.
Meta-ethics
d.
None of the above
9. Which approach deals with the moral standards, practices, moral codes
etc. to judge an action whether it is right or wrong.
a.
Descriptive ethics
b.
Normative ethics
c.
Meta-ethics
d.
None of the above
Business
Entrepreneurship - II
71
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
10 Concept of ethics is originated from?
a.
Germany
b.
America
c.
India
d.
None of the above.
11. The criterion for moral judgement should be?
a.
logical and not factual
b.
illogical and not factual
c.
logical and factual
d.
Based on immoral principles
12. Path set by the business organization to achieve desired goals and
objectives is?
a.
Vision
b.
Mission
c.
Strategy
d.
Value
13. …… of the organization states aspiring future position of the organization.
a.
Vision
b.
Mission
c.
Strategy
d.
Value
14. …….are stated code of conduct that directs the organizations.
a.
Vision
b.
Mission
c.
Strategy
d.
Values
15. …..of the organization states its reasons for its existence
a.
Vision
b.
Mission
c.
Strategy
d.
Values
16. ………..is a set of rules which govern the various tasks in the business
organization
72
Business
Entrepreneurship - II
a.
Code of conduct
b.
Mission
c.
Strategy
d.
Values
Ethics and Social
Responsibilities of an
Entrepreneur
NOTES
Answers for Multiple Choice Questions
1- c
2- a
3- b
4- d
5- b
6- b
7- c
8- b
9- a
10- b
11- c
12- c
13- a
14- d
15- b
16- a
4.8
Further Reading
Gupta C.B., Srinivasan N.P., Entrepreneurship Development in India,
Sultan Chand and Sons, New Delhi, 2005
Shankar Raj, Entrepreneurship Theory and Practice, Vijay Nicole
Imprints Pvt. Ltd., Chennai, 2012
http://www.thefreelibrary.com/
opportunity+recognition+in+rural+entrepreneurship+in+developing...a0175110738
http://mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf
Business
Entrepreneurship - II
73
Recent Trends in
Entrepreneurship
UNIT 5: RECENT TRENDS IN
ENTREPRENEURSHIP
NOTES
Structure
5.0 Introduction
5.1 Unit Objectives
5.2 Intrapreneurship
5.3 Social Entrepreneurship
5.4 Women Entrepreneurship
5.5 Rural Entrepreneurship
5.6 Summary
5.7 Key Terms
5.8 Questions and Exercises
5.9 Further Reading
5.0
Introduction
“The greatest difficulty in the world is not for people to accept new ideas,
but to make them forget about old ideas”- John Maynard Keynes
Entrepreneurship falls under the wide field of social sciences. It is not like
basic science. Much of the research is applied and related with multiple fields. It
is difficult to generalize theory.
Prior to last three to four decades, large corporations were the primary
providers of employment. Consequently, study, research, training, analysis was
centered around large corporations - their management, their problems, strategies
and issues related with their employees. Comparatively few studies were conducted
on small enterprises, entrepreneurs and their problems.
74
Business
Entrepreneurship - II
In the last few decades, entrepreneurship has been attracting the attention
of government, academicians, and researchers. Government has realized the
significance of entrepreneurship and small businesses for economic development.
This resulted into development of various policies, institutions, associations, schemes,
incentives for facilitating development of entrepreneurship. Researchers have
started working on various areas of entrepreneurship. Large corporations have
realized the importance of entrepreneurial mindset and for promoting
entrepreneurship; they are launching corporate entrepreneurship programs. Young
generation has developed interest in entrepreneurial personalities. Increasingly
they are getting impressed by success stories of ventures like Apple, Microsoft,
Infosys, HCL, Hewlett Packard etc. With growing interest of various stakeholders
in entrepreneurship development, various institutions have introduced the subject
of entrepreneurship development in their curriculum of various courses and
programs. Some institutions launched full-fledged programs exclusively on
entrepreneurship. Institutions specially devoted to entrepreneurship have been
developed.
Recent Trends in
Entrepreneurship
NOTES
In this unit, we will have an overview of various contemporary issues and
emerging trends in entrepreneurship in domestic and global arena. This unit covers
topics like intrapreneurship, social entrepreneurship, women and entrepreneurship,
rural entrepreneurship, there is a need to be aware about possible opportunities
available in these emerging areas.
5.1
Unit Objectives
After going through this unit, you will be able to learn about the recent
trends in entrepreneurship such as
 Be aware about the need and importance of intrapreneurship
 Explain the difference between intrapreneurs and entrepreneurs
 Know the meaning and significance of social entrepreneurship
 Be familiar with problems and prospects of women entrepreneurship
 Understand the opportunities available for rural entrepreneurs
5.2
Intrapreneurship
Entrepreneurship is considered synonymous with small business.
Entrepreneurship development is supposed to be directed at development of small
business. However, it is beyond that. It not only prepares people to develop small
business, but it enables them to excel in whatever they do. It facilitates them to
strive towards perfection. It inculcates independent thinking and risk taking attitude.
It nurtures enterprising spirit among persons. Basically entrepreneurship
development is development of enterprising personality.
Study of entrepreneurship is meant for motivating and encouraging
entrepreneurs. It attempts to create awareness and sensitize prospective
entrepreneurs. The objectives are to make students identify themselves with
entrepreneurial personalities, to make them appraise their own skills.
In the society, along with entrepreneurs, there is a need of enterprising,
dynamic, innovative managers and business leaders. Society needs not just managers
who are traditional, rigid in their approach and perform the activities in a routine
manner so as to manage the show. On the other hand, entrepreneurial managers
are required everywhere. Managers with entrepreneurial outlook, managers with
innovative ideas are needed. Managers have to train themselves as intrapreneurs
– entrepreneurs within corporate. With entrepreneurial mindset and innovative
outlook only, challenges of the dynamic environment can be met.
In the late seventies the phenomenon of corporate brain drain was seen
worldwide. Highly paid experienced executives resigned their jobs to start their own
small businesses. The entrepreneurial talent could not be utilized in the corporate set
up. Their creative ideas and innovations were not accepted in the corporate. For
Business
Entrepreneurship - II
75
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
1. What is meant by
intrapreneurship?
Define in your own
words.
experimenting with their ideas and initiatives, they had to find out the outlet in the
form of entrepreneurial ventures.
In 1976, Norman Macras wrote in the London Economist that successful
big corporations should become ‘confederations of entrepreneurs’. An American
management expert, Gifford Pinchot III wrote his famous book ‘Intrapreneuring’
and used the term ‘intrapreneurs’ to describe the persons who resigned from their
well-paid executive positions to launch their own ventures. These executives turned
entrepreneurs achieved phenomenal success in their new ventures. Some of them
stood in competition with the companies they left. This type of entrepreneurs
came to be known as intrapreneurs. He suggested that well-established companies
should learn to make use of entrepreneurial talents within to avoid stagnation and
decline.
Intrapreneurs are creative. They have a desire to achieve. They are dynamic.
They avoid stagnation and decline. They exercise their innovative ideas and launch
new products, services and processes and enable the companies to adapt to the
dynamic environment and achieve growth and prosperity. For this to happen, there
is a need of such an organization culture which would allow the executives to act
like entrepreneurs. They should get a status within the corporate similar to that of
an entrepreneur in the society. They should get freedom, power, autonomy and
resources required for development and application of their ideas. Such persons
are ‘intra-corporate entrepreneurs’ or ‘intrapreneurs’. Such personalities aspire
to run their own show. They do not like to work under others. They do not like
taking orders from others.
Intrapreneurship is the process in which big corporate encourage
entrepreneurial characteristics in their own managers. Intrapreneurs are intracorporate entrepreneurs. They have all the entrepreneurial qualities but not having
a business of their own. They need a system and an organization culture that
would allow them to operate like entrepreneurs. They need adequate financial
resources, freedom and autonomy for application of their ideas. The system should
provide such selected enterprising executives a status within the corporation similar
to that of an entrepreneur. They introduce new products/services/ideas. They are
not after money. They have a deep desire of achievement.
Managers should be encouraged to be entrepreneurs within the corporate.
They should not go outside. Entrepreneurial managers are interested in risk taking
culture in which they are guaranteed security and rewards.
Entrepreneurial culture implies a set of values, norms and traits that are
conducive to the growth of entrepreneurship. Corporate culture focuses on
emergence of new opportunities. It adopts the means of capitalizing on them; it
creates organization structure which is appropriate for pursuing the opportunities.
Entrepreneurial culture should be differentiated from administrative culture.
Administrative culture is the corporate culture which focuses on existing
opportunities, organizational structures and control procedures. An ideal
administrator would ask such questions as “what resources do I control? What
structure determines our organization’s relationship to its market? How can I
minimize the impact of others on my ability to perform? What opportunity is
appropriate?” on the other hand, an ideal entrepreneur is concerned with very
different questions such as “where is the opportunity? How do I capitalize on it?
What resources do I need? How do I gain control over them? What structure is
the best?”
76
Business
Entrepreneurship - II
Intrapreneurial process
The process of intrapreneurship involves both analytical and creative
activities. According to Pierce and Dunham, the intrapreneurial process takes
place in four sequential steps:
Step I: Solo Phase: During this step, the typical entrepreneur works alone.
The first task for the intrapreneur is to clearly identify the intrapreneurial idea.
Then, the idea is developed and subjected to three feasibility tests.
1. Will the idea provide identifiable benefits to the customers or clients?
2. Is the idea compatible with the organisation’s resources and overall
strategy?
3. Is the idea and its potential implementation compatible with entrepreneur’s
personal character and skills?
Step II: Network Phase: During this step the entrepreneur shares the idea
with other organizational members, seeks feedback and suggestions for
improvement of the idea.
Step III: Boot Legging Phase: During this step, the entrepreneur begins to
form a project team and some levels of product prototype development outside
the normal operational mode of the company.
Step IV: Formal Team Phase: During this step, the idea becomes a formal
organizational venture with formal organizational support.
Corporate applications of entrepreneurship
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
State whether true or
false:
2.
The
term
‘intrapreneur ’ was
coined in America in
the late seventies.
3. An American management expe
4. rt Gifford Pinchot
used
the
term
‘intrapreneurs’ to describe the persons who
resigned from their
well-paid executive
positions to launch
their own ventures.
The major activity of entrepreneurship is to set up and start a new business
venture. In fact, besides start ups, there are four other corporate applications of
entrepreneurship. According to Aleksander Mandic, theses are: the strategic corporation,
the nimble exploiter, the self-sustaining innovator, the reawakening giant.
The core elements of entrepreneurship are creativity and innovation, an
ability to apply creativity, risk taking, focus on creating value, drive and passion.
Depending upon the role of the leader, each of these involves the core elements of
entrepreneurship with varying emphasis.
Entrepreneurial behavior of a large corporate is often manifested in making
bold strategic moves. It is the visionary leader in entrepreneurial role that inspires
a strategic orientation to develop new ways of creating shareholder value. Such
entrepreneurs are often engaged in developing new businesses for their companies.
Corporations following nimble exploiter approach pay less emphasis on
creativity and innovation than to the drive for executing good ideas and making
them success in market place. They capitalize on established ideas on the basis of
their strengths.
3M, Sony, Nokia and HP are the examples of self-sustaining innovators.
They believe in spreading entrepreneurial behavior throughout the organization by
using a different leadership model that helps to innovate in changing markets,
developing new products ahead of their competitors.
Reawakening giants are those large corporations, which are being dormant on
innovative front and with the change in leadership, i.e., getting an entrepreneurial chief
executive, have become active. The changed mechanism introduces entrepreneurial
behavior in the industrial giants that have succumbed to cultural inertia.
Business
Entrepreneurship - II
77
Recent Trends in
Entrepreneurship
NOTES
Distinction between an Entrepreneur and Intrapreneur
Intrapreneurship is the practice of entrepreneurship within an existing
enterprise. Is it really different from entrepreneurship? What exactly is the
difference? Is there something in common? Let us see.
Entrepreneurial mindset is the common thread between intrapreneurship
and entrepreneurship. However, there are several inherent differences between
these two dimensions which are discussed below:
Both the entrepreneur and the intrapreneur are creative and innovative.
Both of them perform the function of organization and management. But the context
within which they operate and the degree of risk they bear are different.
An entrepreneur is an independent businessman who bears entire risk of his/
her business. He/she has to arrange for the investment on his/her own whereas
intrapreneur need not invest directly. An intrapreneur is an organization employee and
need not bear business risk. He/she works from within his/her organization. Intrapreneurs
bear no financial risk, no personal risk. There is no sharing of profit or loss. They
already are employed and receive a steady income with benefits. They are more
secure having a special position within large enterprises. Intrapreneurs create new
products/services/new ventures. Their reward is limited to promotions or bonus.
Entrepreneurs build their enterprises from scratch. They have a limited
access to resources. Intrapreneurs have the support of their parent organizations
with good access to various resources. They get resources, technical aid, support
as well as encouragement from their parent organizations. They benefit from being
a part of networking within their parent organizations.
Both entrepreneurs and intrapreneurs seek autonomy and freedom. They
have a fairly long-term perspective. Entrepreneurs are more independent in decision
making. There is no framework available for them. They are free thinkers.
Intrapreneurs are free to think out-of-the-box but they are accountable for their
ideas, activities, decisions and actions. They have to work within organizational
framework considering existing business priorities. They have to report to their
superiors. They are required to be careful about corporate history, corporate culture,
corporate hierarchy, corporate practices, rules and regulations of their organizations.
Entrepreneurs search markets to acquire resources for new ventures
whereas intrapreneurs look for unutilized/idle organizational resources. They need
to sell their own ideas and gather approval in the light of existing business priorities
of the enterprises.
78
Business
Entrepreneurship - II
An intrapreneur or corporate entrepreneur has personality traits like
entrepreneurs who work independently on their own. Intrapreneurs are
organizational employees with entrepreneurial talent. Both these personalities are
creative. Both of them have basic entrepreneurial traits, and instincts. Regarding
entrepreneurial skills; the ability to identify opportunities and trace required resources
to exploit the promising opportunities, the drive to organize those resources together
and maintain the productive combination of those resources for the sake of a
gainful productive activity is commonly present in both of them. But the propensity
and willingness to take risks is not prominent in intrapreneurs whereas entrepreneurs
are risk takers. Intrapreneurs do not have the courage to work independently;
however, within the secured environment, they can initiate and launch their own
innovative ideas and experiment with new ventures/designs/processes etc. He/
she understands organizational hierarchy and power structure within organizations.
He/she is capable of convincing influential people, the superiors and other
stakeholders and skillfully gets the things done through them. He/she needs excellent
networking skills. He/she always work in the light of the corporate strategy,
philosophy and value systems.
Recent Trends in
Entrepreneurship
NOTES
5.3
Social Entrepreneurship
Entrepreneurship has been a well-defined area within economic theory since
Schumpeter published his seminal work in 1911. But social entrepreneurship was
not a core element in such general entrepreneurship theory. It was very rarely
mentioned or referred in textbooks or review articles on entrepreneurship. Steyart
and Hjorth stress that research on and development of social entrepreneurship
was undertaken, until recent years, by scholars and experts who typically did not
belong to the field of entrepreneurship. Lepoutre and others point to the fact that
research in the field is characterized by case studies and success stories, and
lacks a theoretical base and therefore generalizability.
Business schools and universities are launching various education
programmes in social entrepreneurship and social enterprise. Academicians and
practitioners in the area are taking interest in this field. Research on entrepreneurship
was, in its initial phase, driven in the USA and Europe by practitioners and
researchers. The field is composed of a mixture of common trends and
backgrounds on one hand, and of a considerable amount of variation in the ways
social entrepreneurship is emerging.
Check Your
Progress
5. —— search
markets to acquire
resources for new
ventures whereas
—look for unutilized/
idle organizational
resources.
The term ‘social entrepreneur’ is new in its usage, but the practice of social
entrepreneurship is not new. Florence Nightingale, who revolutionalized the theory
of hospital conditions in the late 1800s and John Durand, who started working with
mentally retarded people in the early 1960s, are the examples of exceptional persons
bringing about social change whom we label today as social entrepreneurs. According
to Nicholls, the term ‘social entrepreneur’ was first introduced in 1972 by Banks,
who noted that social problems could also be deployed by managerial practices.
According to Leviner, Crutchfield and Wells; William Drayton first coined the
phrase, ‘social entrepreneurship’ for which he later received a MacArthur
Foundation Fellowship commonly known as ‘genius’ grant. For Drayton, the term
social entrepreneur describes an individual who conceives of and relentlessly
pursues a new idea designed to solve societal problems on a very wide scale by
changing the systems that undergird the problems. This definition includes two
main elements. First, the entrepreneur must seek to creation of new ideas, and its
impact on a wide societal scale; he/she will not rest until the new idea has been
broadly adopted at the national and even international level. Second, the
entrepreneur must seek systemic change, defined as the fundamental reform of
existing societal systems and/or the creation of new ones.
In the words of Drayton, “The job of a social entrepreneur is to recognize
when a part of society is stuck and to provide new ways to get it unstuck. He or
she finds what is not working and solves the problem by changing the system,
spreading the solution and persuading entire societies to take new leaps. Social
entrepreneurs are not content just to give a fish or teach how to fish. They will not
rest until they have revolutionized the fishing industry”.
Social entrepreneurs are creative. They have vision. They are capable of
implementing their problem solving ideas into actual practice. They have systemschanging new ideas. Such ideas have the potential to profoundly change the
practices of a particular field. They see opportunities for change and innovation
Business
Entrepreneurship - II
79
Recent Trends in
Entrepreneurship
NOTES
and devote themselves completely for making that change happen. They have the
patience and perseverance to wait for years for the change to happen. They
convince people to accept change, to modify their behaviour. People believe them
on the basis of their ethical behavior. The trust created in the mind of people about
entrepreneurs’ intentions increases the success rate.
During the 1970s and 1980s, the subject of social entrepreneurship gained
practical relevance under different labels. In the 1990s, the subject attracted
attention from the government and academia. The Italian government created the
first social firm model by adopting a specific legal form for social co-operatives in
1991. The UK government followed in 2004 by introducing the Community Interest
Company, a second juridical form for social enterprise within Europe. In the same
period, researchers started working on the subject. At the same time, some highly
successful social entrepreneurs like Muhammad Yunus, founder of the Grameen
Bank for microfinance and recipient of the Nobel Prize in 2006, attracted media
attention. Social entrepreneurship has been acknowledged as a new type of
entrepreneurship which is based on a social wealth creation rather than generation
of economic wealth as its main objective. According to some researchers, social
entrepreneurship activities have far reaching economic effects. They enhance
growth, reduce poverty, and improve social development.
Social entrepreneurship is an interdisciplinary concept. It means different
things to different people in different places because the geographical and sociocultural and socio-economic contexts in which they appear is different.
Fowler defines social entrepreneurship as the creation of viable (socio-)
economic structures, relations, institutions, organisations and practices that yield
and sustain social benefits.
According to Alvord, Brown and Letts, “social entrepreneurship creates
innovative solutions to immediate social problems and mobilizes the ideas, capacities,
resources and social arrangements required for sustainable social transformations”.
Austin, Stevenson and Wel-Skillern define social entrepreneurship as
innovative, social value creating activity that can occur within or across the nonprofit, business, or government sectors.
Mair and Marti view social entrepreneurship broadly as a process involving
the innovative use and combination of resources to pursue opportunities to catalyze
social change and/or address social needs.
In the words of Sharir and Lerner, social entrepreneurship is to apply business
strategies for the purpose of more effective confrontation with complex social
problems.
To quote Zahra, Gadajiovic, Newbaum and Shulman, “social entrepreneurship
encompasses the activities and processes undertaken to discover, define, and exploit
opportunities in order to enhance social wealth by creating new ventures or
managing existing organizations in an innovative manner”.
In the words of J. Gregory Dees, “Social entrepreneurs play the role of
change agents in the social sector, by:
 Adopting a mission to create and sustain social value (not just private
value),
80
Business
Entrepreneurship - II
 Recognizing and relentlessly pursuing new opportunities to serve that
mission,
 Engaging in a process of continuous innovation, adaptation, and learning,
 Acting boldly without being limited by resources currently in hand, and
 Exhibiting a heightened sense of accountability to the constituencies
served and for the outcomes created
All the definitions focus social mission as the main motive of social
entrepreneurs. Social entrepreneurs are different from other types of entrepreneurs
regarding their purpose and what they try to maximise. Social entrepreneurs usually
take in hand a social need that is ignored and not tackled by others. They typically
address areas of unsatisfied social needs. They deal with creation of new social
opportunities that the public or private sectors have failed to tackle. They wish to
maximize some form of social impact. Business entrepreneurs intend to maximise
profits or shareholder wealth.
Social entrepreneurs are the reformers and revolutionaries. They make
fundamental changes in the social sector. They attack the underlying causes of
problems, rather than simply treating symptoms.
A social enterprise can be defined as an enterprise created with an intention
of solving a social cause. It is created with the objective of solving a social challenge
or a need that exists in the society. It is the need of the hour that more and more
social enterprises must be promoted. It may or may not generate profit, but it
provides satisfaction. However, efforts have to be made to ensure that it earns
more than it spends. Social entrepreneurs face various problems in fulfilling their
social mission. Lack of finance for the development of social capital is one of
major difficulties being faced by social entrepreneurs.
There are significant differences between social entrepreneurs and business
entrepreneurs. Their dreams, vision, mission, their methods are different. The
distinguishing features of social entrepreneurs are their passion for specific causes
and their vision, mission and guiding values and their range of skills in their work.
Social entrepreneurs measure their success primarily in terms of social value
creation rather than profit. Its success can be measured by its impact, sustainability
of the activities, satisfaction level of the stakeholders, adaptability to local culture,
alignment and commitment to long term goals. Well managed social venture can
trigger sustainable development process to a certain extent.
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
State whether true or
false:
6. Social entrepreneu
rship has been
acknowledged as a
new
type
of
en t r ep re ne u r s h i p
which is based on a
social wealth creation
rather than generation
of economic wealth as
its main objective.——
7. Social entrepreneur
ship activities have far
reaching economic
effects. They enhance
growth,
reduce
poverty, and improve
social development.
——
Social entrepreneurs are entrepreneurs with a social mission. Their focus is
on mission-related impact. Wealth is just a means to an end for them. For business
entrepreneurs, wealth creation is a way of measuring value creation. Whether
they create value or not, matters for business entrepreneurs, since they are driven
by market dynamics. If they do not shift resources to more economically productive
uses, they tend to be driven out of business. The profit that a venture generates is
a reasonably good indicator of the value it has created. Survival or growth of a
social enterprise is not a proof of its efficiency or effectiveness in improving social
conditions. It is difficult to measure social value creation.
Fowler highlighted three broad categories of socially entrepreneurial activities.
He made a distinction between economic activities that simultaneously provide
social benefits and those that do not.
Social enterprises are different from many non-profit organizations due to
their entrepreneurial approach to strategy, and their adoption of innovation in the
pursuit of social goals.
Business
Entrepreneurship - II
81
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
8. The main motive of
social entrepreneurs is
——
Different types of social sector organizations such as charities, social
activists, and philanthropic organizations operate in pursuit of certain societal values
such as human rights, economic fairness, equal opportunity, freedom of expression,
consumer rights, environmental protection etc.
Social entrepreneurs are entrepreneurs with a social mission and not profit
motive. Their goal is to create social value. They are the change agents in the
social sector. They look not only at profit, but also at the role they play in improving
lives and the world overall. They solve social problems or those that find innovative
methods to make profits, while keeping in mind the impact on the community
within which they operate.
A review of research on social entrepreneurship indicates various
characteristics traits similar with commercial entrepreneurs such as the ability to
detect opportunities, the drive to innovate, the willingness to bear risks, and the
display of proactive behaviour towards survival, growth and serving the market.
However, they differ with reference to their motivation to engage in social activities.
Social entrepreneurs intend to tackle social issues, introduce change and make a
difference.
In this manner, social entrepreneurship is an entrepreneurial activity with
an embedded social purpose. It has also been called the simultaneous pursuit of
economic, social and environmental goals by enterprising ventures. It comprises
all activities and processes to enhance social wealth. Social entrepreneurs usually
start with small, local efforts. They often target problems that have a local
expression but global relevance. Social entrepreneurs have profound implications
in the economic system – creating new industries, validating new business models,
allocating resources to neglected societal problems.
5.4
Women Entrepreneurship
Women constitute around half of the total population. Constitutionally they
enjoy equal status with men. The fundamental rights are equally guaranteed to men
and women. With exception of certain laws like personal laws etc., legal provisions
accord equal status to women. Although constitutional and legal provisions are nondiscriminatory, women in actual practice are treated as a weaker section. The attitude
of society has been prejudiced and biased against women through generations and
therefore women entrepreneurship could not be improved.
However, with changing times, things are getting changed for better. Women
are no more confined to the four walls. They are performing exceedingly well in
various areas of human endeavour. With the advent of Women’s decade,
urbanization, technical progress, women’s education and women’s movement, the
number of women starting their own enterprises is on the increase.
Women are increasingly turning to entrepreneurship driven by economic
motives, desire for independence, and better social status. Entrepreneurship provides
them satisfaction, economic independence, and flexibility in working hours and
operations. Entrepreneurship enables them to contribute significantly to the national
development.
While discussing entrepreneurship development, it is essential to study
development of women entrepreneurship.
82
Business
Entrepreneurship - II
The definition of entrepreneurship had never been differentiated on the basis
of sex. Therefore it could be extended to women entrepreneurship. In the words of
Dr. V. G. Patel, “Once an enterprise stats, the difference between male and female
must be forgotten, because an entrepreneur is an entrepreneur, business is business
and profit and loss strictly depend upon entrepreneurial competencies”. Very true.
No one will disagree with this viewpoint. After enterprise starts functioning; except
in few cases, both men and women face almost similar problems. But issues and
processes before initiation of entrepreneurial venture differ significantly on the basis
of gender. Decision about venturing into entrepreneurial career involves various
difficulties and risks for a woman. When we consider women entrepreneurship as a
special category, there is a need to throw light on gender role, gender inequality,
gender discrimination and related issues.
There is a difference in socialization of girls and boys. Patterns of behavior,
career goals, tasks to be performed, games to be played etc are different for boys
and girls. Girls are protected from the outside world. Being brought up in isolated
and protected atmosphere, they do not get exposure to the outside world which
resulted in lack of confidence. They fear to accept risk, challenges as well as
responsibilities. They are encouraged for household, domestic duties. They are
made submissive, obedient. They are discouraged for taking initiative, being
assertive or independent. When they exhibit such qualities, they get disapproval
from family and society. Many feminine values are not conducive for
entrepreneurship. The socialization process does not encourage women for
entrepreneurial career since it makes them fearful of failure, doubtful of success,
and reluctant to take risk. The greatest barrier to women is their wrong perception
of themselves. They are so conditioned that they too accept this image of themselves.
Often they are made conscious of gender differences, dos and don’ts, they begin
to believe it and it leads to low self-esteem. Low self-esteem develops negative
attitude and approach which is not desirable for entrepreneurship.
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
9. Distinguish social
entrepreneurs from
business ntrepreneurs.
Women have some desirable and relevant traits regarding entrepreneurship
such as dedication to work, tolerance, soft behavior, sensitiveness, patience. They
do have the capacity to work hard at all ages. They are more capable of facing
risk and absorbing misfortunes than men. According to a psychologist, “women
are expected to be inter-personal experts. They facilitate, respond, and empathize.
The ability to tolerate ambiguity and judge many things at once, often attributed to
women, is a vital, but often underrated managerial skill”.
Women entrepreneurship may be defined as women or a group of women
who initiate, organize, and operate a business enterprise. Women entrepreneurs
are expected to innovate, initiate, or adopt an economic activity.
Women entrepreneurs are those who deviate from their sole role of nurser,
carer, and rearer; and are actively engaged in the task of initiating, organizing and
managing their own enterprises and getting attractive returns out of these activities.
They are self-employed and create employment opportunities for others in the society.
Government of India defines women enterprise as an enterprise owned and
controlled by women, with a minimum financial interest of 51% of capital and
giving at least 51 % of employment in the enterprise to women.
Dr. V. G. Patel identified three types of women who take to entrepreneurship.
Chance entrepreneurs are those who started business without any preparation,
clear goals or plans. They are lucky to come across opportunities which they grab.
Forced entrepreneurs are compelled by circumstances and responsibilities falling
on them to take over the existing business. Created entrepreneurs are those who
Business
Entrepreneurship - II
83
Recent Trends in
Entrepreneurship
NOTES
are properly identified, motivated, encouraged and developed through Entrepreneurship
Development Programmes (EDPs). They are the ones for whom various schemes
are being designed by financial institutions and commercial banks.
Women entrepreneurship is full of challenges since women entrepreneurs
have to play multiple roles and have to face public prejudice and criticism. In small
enterprise it is difficult to separate problems of entrepreneur from the problems of
enterprise. The problems faced by women entrepreneurs are multi-dimensional
and multifaceted. A woman entrepreneur faces additional hurdles than her male
counterpart. She has to face problems faced by entrepreneurs in general, and
another set of problems relates to her womanhood. The various problems faced
by women entrepreneurs are not isolated but they are interlinked with each other
and have to be looked into as an integrated whole.
At the beginning of enterprise, women entrepreneurs suffer from lack of
awareness about opportunities. They have limited exposure to the outside
environment. Lack of education further aggravates the problem. The main start-up
problems of women entrepreneurs are lack of courage and fear of failure, preference
for secure job, lack of family support, lack of information about institutional assistance
and government schemes. Further, the main operational problems faced by women
entrepreneurs consist of inadequate finance, severe competition, lack of business
training, poor knowledge of market, lack of skilled labour etc. Regarding entrepreneurial
problems because of womanhood, the major problems are male domination, family
responsibilities, shyness due to femininity, poor mobility, financial dependency, bias
of officials about incompetence and lack of professionalism, poor risk taking ability,
public prejudice and criticism, lack of co-lateral security etc. Dual responsibilities of
home and business often give rise to home-work role conflicts of various kinds.
While making a balance between domestic duties and business demands, women
entrepreneurs have to fight family opposition and various social constraints; and
establish themselves as independent entrepreneurs.
5.5
Rural Entrepreneurship
75% of the world’s poor live in rural areas that are deprived of the resources
and policies which are in favour of urban development. The imbalance in development
affects adversely both rural and urban population. Rural people do not get adequate
opportunities to sustain their lives. And the burden of supporting the rural and urban
population falls upon cities. Rural population move to already overcrowded cities in
search of jobs. The phenomenon of urbanization puts an immense pressure on physical
and social infrastructure and economic opportunities.
Majority of the rural population depends directly and indirectly on small
scale food crop agriculture, fishery, pastoral animal husbandry or rural wage labour
associated with plantations etc. In the light of problems like low agricultural
productivity, volatile weather conditions, soil erosion etc, rural people need to
diversify their sources of income and employment.
84
Business
Entrepreneurship - II
Rural entrepreneurs are from rural areas i.e. from villages. Rural
entrepreneurship is gaining more and more importance in today’s scenario. Majority
of India still lives in villages. We have agriculture based rural economy which
necessitate improvement in lives of farmers and other rural people. It is
very
important to promote local industry and to protect basic fundamental industries like
food, agriculture etc. It can reduce skewed distribution towards urbanization. It
creates jobs at local level. Almost every location has some specialty. There is a need
of identifying and promoting specialties at various locations. Rural artisans can earn
their living at local level by practicing their basic skills. Creation of enterprises brings
out overall improvement in rural life by making them provide an easy access to basic
health care facilities, education and without making them lose their traditional skills
and culture. Rural entrepreneurship is a tool to improve life and infrastructure.
Village industries have been classified as agro-based industries, mineral-based
industries, forest-based industries, hand-made paper and fiber, rural engineering and
bio-technology, polymer and chemical based industries, and service industry. Some
of the rural entrepreneurship opportunities include agriculture, food, hand-made goods,
arts and handicrafts, rural tourism, renewable energy, education. With an effective
utilization of local skills and talents, rural ventures can be promoted.
Rural entrepreneurs can be classified in various ways. Farm entrepreneurs
are persons whose primary occupation and main source of livelihood is farming.
Artisan entrepreneurs possess skills acquired through family traditions and or
through training. Merchant and trader entrepreneurs mostly deal in retail
business providing necessary products for household or agricultural inputs. Tribal
entrepreneurs are mostly in tribal areas comprising of forests and hilly terrains
dealing with the resources available in their regions.
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
10. Define woman
entrepreneur in your
own words. ———
Most of the rural enterprises face problems of finance, technology, human
resources, management etc. Family environment and society is not conducive for
rural entrepreneurship due to lack of awareness and knowledge about entrepreneurial
opportunities. Due to absence of tangible security and credit in the market, rural
entrepreneurs find it difficult to raise external funds. High cost of finance, poor
financial background, lack of financial knowledge, disadvantage of geographic location
for market access, high transportation cost, lack of coordination pose problems for
rural entrepreneurs. Lack of access to technology, and infrastructure, inadequate
technical knowledge, outward migration of young, well-educated and professionals
are the obstacles. Various other problems faced by rural entrepreneurs are
accessibility of rural areas, lack of skilled labour, uneducated workers, low literacy
rate, traditional society, cultural backwardness, small size of local markets, inadequate
money for promotion, limited reach for print media, small size and low population
densities of rural communities, less developed transport and communication
infrastructure, their social and economic linkages, limited access to essential services
such as information and advice, heavy dependence on middlemen for marketing,
indigenous methods of storage, limited opportunities for networking and collaboration.
In spite of these challenges, rural areas present many opportunities as the
source of primary raw materials, leisure related activities, personal rural tourism and
hospitality sectors, second-home. They are being popular tourism and leisure and
cultural destinations. People seek pleasure in music, art, literature, architecture that
forms part of rural cultural heritage. The concept of agro-tourism i. e. holidays on
farms is becoming increasingly popular. Urban population is attracted towards wideopen spaces, pollution free environment, wildlife, tranquility of several locations in
rural areas, opportunities for recreation, spirituality, and connection with nature. Youth
are interested in experiences associated with hiking, climbing, canoeing, hunting,
skiing, spelunking. Business opportunities can be found in adventure parks, children’s
parks, venues for special events etc. Emerging global challenges in areas such as
food security, preserving biodiversity, preservation of natural resources and ecosystem, combating climatic change, increasing rural-urban interdependency also
present new opportunities for rural areas and for rural entrepreneurs.
The Government of India supports rural socio-economic development through
various schemes like Pradhan Mantri Gram Sadak Yojana, Mahatma Gandhi
Business
Entrepreneurship - II
85
Recent Trends in
Entrepreneurship
NOTES
National Employment Guarantee Act (MGNREGA-2005), Swarnjayanti Gram
Swarozgar Yojana (SGSY), Indira Awas Yojana (IAY), National Social Assistance
Programme (NSAP), National Land Records Modernization Programme
(NLRMP), and Integrated Watershed Management Programme (IWMP).
Council for Advancement of People’s Action and Rural Technology
(CAPART) launched Prime Minister’s Rural Development Fellowship (PMRDF)
programme, Public cooperation (PC), Advancement of Rural Technology (ARTS),
Organization of Beneficiaries (OB),
5.6
Summary
Intrapreneurship is the process in which big corporate encourage
entrepreneurial characteristics in their own managers. Intrapreneurs are intracorporate entrepreneurs. They have a desire to achieve. If they are not provided
with freedom, autonomy, adequate resources; they leave the organization and launch
their own ventures. They are creative. With their creative ideas, they enable their
companies to adapt to the changing environment and achieve growth and prosperity.
Rural entrepreneurship plays an important role for economic development
in developing countries like India. Rural entrepreneurship helps in development of
backward regions and removes poverty. Rural entrepreneurs need support for
infrastructure development, investment in agriculture, promotion of non-farm rural
activities, education, health services etc.
Social entrepreneurs are interested in social mission. They create and sustain
social value by engaging in the process of innovation and adaptation. They tackle
a social need that is unattended by others. They create new social opportunities.
They bring about social changes. They strive to maximise some form of social
impact. They face numerous difficulties in fulfilling their social mission.
Women entrepreneurs are mainly motivated by economic incentives, desire
for independence, and better social status. They get satisfaction, economic
independence, and flexibility of operations, work location and working hours through
entrepreneurship. In addition to the problems faced by entrepreneurs in general,
they have to face additional problems related to their womanhood. They have to
maintain an appropriate degree of work- home balance.
5.7
Key Terms
 Bootlegging (business): In economics and business economics
literature, Kenneth Knight introduced the notion of bootlegging in 1967.
Bootlegging is defined as research in which motivated individuals secretly
organize the innovation process.
5.8
Questions and Exercises
Questions
86
Business
Entrepreneurship - II
1. Define women entrepreneurs. Discuss the functions performed by
women entrepreneurs.
2. The greatest problem of women entrepreneurs is that they are
women. Discuss.
3. Give an account of problems faced by women entrepreneurs in
establishing and developing their enterprises.
4. Discuss the measures taken by the Government of India to promote
women entrepreneurship in India.
5. Define rural entrepreneurship. Appreciate the need for and importance
of rural entrepreneurship in India.
6. Give an account of the Government’s policy measures taken over the
period for developing rural entrepreneurship.
Recent Trends in
Entrepreneurship
NOTES
Check Your
Progress
11. Explain the significance of rural entrepreneurship. ——
7. Write a note on role of NGOs in rural entrepreneurship.
8. How can rural entrepreneurship be developed? Elaborate.
9. How will you distinguish intrapreneur from entrepreneur?
10. What do you understand by intrapreneurship? How does it differ from
entrepreneurship?
Exercise
1. Meet at least one social entrepreneur, one rural entrepreneur, one
intrapreneur and one woman entrepreneur and prepare a report about
your interaction with them.
Multiple Choice Questions
1. An American management expert —————————— used the
term ‘intrapreneurs’ to describe the persons who resigned from their
well-paid executive positions to launch their own ventures. i
i.
Gifford Pinchot
ii.
Norman Macras
iii.
Both
iv.
None of the above
2. Choose the wrong alternative
i.
Intrapreneurs do not have the courage to work independently
ii.
Entrepreneurs search markets to acquire resources for new ventures
iii.
Intrapreneurs are organizational employees with entrepreneurial talent
iv.
Intrapreneurs do not have personality traits like entrepreneurs
3. Pick up the wrong alternative
i.
Both entrepreneurs and intrapreneurs seek autonomy and freedom.
ii.
Intrapreneurs are organizational employees with entrepreneurial talent.
Business
Entrepreneurship - II
87
Recent Trends in
Entrepreneurship
NOTES
iii.
Intrapreneurs are more independent in decision making.
iv.
Both entrepreneur and intrapreneur are creative and innovative
4. Social entrepreneurs are not content just to give a fish or teach how to
fish. They will not rest until they have revolutionized the fishing industry.
Who said this?
i.
Drayton
ii.
Fowler
iii.
Schumpeter
iv.
None of the above
5. ———————————————, founder of Grameen Bank for
microfinance, is successful social entrepreneur
i.
Mohmamd Yunus
ii.
Drayton
iii.
Fowler
iv.
Drucker
6. Pick up the wrong alternative
i.
Social entrepreneurs typically address areas of unsatisfied social needs
ii.
Social entrepreneurs intend to maximise profits or shareholder wealth
iii.
Social entrepreneurs deal with creation of new social opportunities
that the public or private sectors have failed to tackle
iv.
Social entrepreneurs wish to maximize some form of social impact
7. Select the true alternative
i.
Chance entrepreneurs are those who started business without any
preparation, clear goals or plans
ii.
Forced entrepreneurs are compelled by circumstances and
responsibilities falling on them to take over the existing business
iii.
Created entrepreneurs are those who are properly identified,
motivated, encouraged and developed through EDPs
iv.
i, ii, and ii are true
8. Tick the wrong statement
88
Business
Entrepreneurship - II
i.
Farm entrepreneurs are persons whose primary occupation and
main source of livelihood is farming
ii.
Artisan entrepreneurs possess skills acquired through family
traditions and or through training
iii.
Both i and ii are right
iv.
Both i and ii are wrong
9. Which of the following schemes of the Government of India support
rural socio-economic development?
i.
Indira Awas Yojana
ii.
Pradhan Mantri Gram Sadak Yojana
iii.
Swarnjayanti Gram Swarozgar Yojana
iv.
All the above
Recent Trends in
Entrepreneurship
NOTES
Answers
Check Your Progress
2. True
3. True
4. entrepreneurs intrapreneurs
5. True
6. True
7. social mission
Multiple Choice Questions
1. i
2. iv
3. iii
4. i
5. i
6. ii
7. iv
8. iii
9. iv
5.9
Further Reading
www.slideshare.net
https://www.ashoka.org/sites/ashoka/files/
UnderstandingtheImpactChapterPDF.pdf
Taneja Satish, Entrepreneur Development, Himalaya Publishing House, 2010
Mirjana Radovic-Markovic(Ed), Rural Entrepreneurship: Opportunities
and Challenges, Faculty of Business Economics and Entrepreneurship,
Belgrade, 2013
Business
Entrepreneurship - II
89
Entrepreneurship
Development and
Governement-I
NOTES
UNIT 6 : ENTREPRENEURSHIP
DEVELOPMENT AND
GOVERNMENT-I
Structure
6.0 Introduction
6.1 Unit Objectives
6.2 An Overview of Industrial Policies in India
6.3 Five-year Plans
6.4 Summary
6.5 Key Terms
6.6 Questions and Exercise
6.7 Further Reading
6.0
Introduction
MSMEs play a crucial role in providing large employment opportunities at
comparatively lower capital cost than large industries. They help in industrialization
of rural and backward areas, thereby, reducing regional imbalances, assuring more
equitable distribution of national income and wealth. MSMEs are complementary
to large industries as ancillary units. In this manner, this sector contributes
enormously to the socio-economic development of the country.
MSME sector consisting of 36 million units provides employment to over 80
million persons. The sector through more than 6,000 products contributes about
8% to GDP besides 45% to the total manufacturing output and 40% to the exports
from the country. MSME sector has the potential to spread industrial growth across
the country and can be a major partner in the process of inclusive growth.
Entrepreneurship does not develop automatically and spontaneously. Its
emergence and development depends upon availability of favourable and supportive
conditions. These factors are broadly classified as economic, social and
psychological factors. Some of these factors are positive and conducive for
emergence of entrepreneurship. On the other hand, some factors are negative
and create inhibiting milieu to entrepreneurship development. Government also
influences emergence and growth of entrepreneurship through plans, policies, and
various supportive measures. In this section, we will discuss various industrial
policies and five-year plans announced by India after independence.
6.1
90
Business
Entrepreneurship - II
Unit Objectives
After going through this unit, you will be able to
 Know about the role of government in developing and promoting small
enterprises in the country
 Review India’s industrial policies for development and promotion of
small enterprises in the country.
Entrepreneurship
Development and
Governement-I
NOTES
 Understand the role of five year plans in shaping industrial as well as
economic development of the country
6.2
An Overview of Industrial Policies in India
After getting independence in 1947, India had big challenges to face. For
bringing about economic development and growth, need of rapid industrialization
was felt and the Government introduced Industrial Policy Resolution in 1948. In
the subsequent years, India’s industrial policy evolved through successive Industrial
Policy Resolutions and Industrial Policy statements. Specific priorities for industrial
development were also laid down in the successive Five Year Plans.
Industrial Policy of 1948
The first Industrial Policy Resolution announced in 1948 laid down broad
outlines of the strategy of industrial development. At that time the Constitution of
India had not taken final shape nor was the Planning Commission constituted.
Moreover, the necessary legal framework was also not put in place. The Resolution
was somewhat broad in scope and direction. Yet, an important distinction was
made among industries to be kept under the exclusive ownership of Government
i.e. the public sector, those reserved for private sector and the joint sector.
The IPR 1948 for the first time accepted the importance of small enterprises
in the overall industrial development of the country. It was well realized that small
enterprises are particularly suited for utilization of local resources and for creation
of employment opportunities. However, they have to face acute problems of raw
materials, capital, skilled labor, marketing etc. Therefore, emphasis was laid in the
IPR, 1948 that these problems are small enterprises should be solved by the central
government with co-operation of the state government. The main thrust of IPR,
1948 regarding small enterprises was ‘protection’.
For the development of small scale industrial sector it was decided to develop
this sector on co-operative lines as far as possible. The 1948 Industrial Policy was
to lay the foundation of a mixed economy where both the private and public
enterprises were to be given importance and work together to develop economy
to accelerate the pace of industrial development.
Subsequently, the Indian Constitution was adopted in January 1950, the
Planning Commission was constituted in March 1950 and the Industrial (Department
and Regulation) Act (IDR Act) was enacted in 1951 with the objective of
empowering the Government to take necessary steps to regulate the pattern of
industrial development through licensing. This paved the way for the Industrial
Policy Resolution of 1956 which was the first comprehensive statement on the
strategy for industrial development in India.
Check Your
Progress
1. The main thrust of
IPR, 1948 regarding
small enterprises was
——
Industrial Policy, 1956
IPR 1948 set the nature and pattern of industrial development in the country.
The post-IPR, 1948 period was marked by significant developments taken place in the
country. e.g. planning has proceeded in an organized manner and the first five year
Business
Entrepreneurship - II
91
Entrepreneurship
Development and
Governement-I
NOTES
plan 1951-56 had been completed. Industries (Development and Regulation) act 1951
was introduced to regulate and control industries in the country. The parliament has
also accepted the socialist pattern of society as the basic aim of social and economic
policy during this period. Prime industries such as coal, steel, aircraft, ship- manufacturing,
telecom, mineral oil and fertilizer were kept in central government. It was on this
background a new industrial policy resolution IPR, 1956 was declared.
The Industrial Policy Resolution - 1956 classified industries into three
categories. The first category comprised 17 industries (included in Schedule A of
the Resolution) exclusively under the domain of the Government. These included
inter alia, railways, air transport, arms and ammunition, iron and steel and atomic
energy. The second category comprised 12 industries (included in Schedule B of
the Resolution), which were envisaged to be progressively State owned but private
sector was expected to supplement the efforts of the State. The third category
contained all the remaining industries and it was expected that private sector would
initiate development of these industries but they would remain open for the State
as well. It was envisaged that the State would facilitate and encourage development
of these industries in the private sector, in accordance with the programmes
formulated under the Five Year Plans, by appropriate fiscal measures and ensuring
adequate infrastructure. Despite the demarcation of industries into separate
categories, the Resolution was flexible enough to allow the required adjustments
and modifications in the national interest.
To encourage small sector, in the policy resolution, various steps were proposed
such as: i. direct subsidy was provided to small scale sector, ii. Suitable taxation
relief was given to this sector, iii. It was made objective of the State to protect small
scale sector by advancing technical assistance required for the production and
improvement of competitiveness. The 1956 IPR allowed foreign capital participation
in Indian economic development but the major share should belong to India.
IPR 1956 aimed towards removal of regional disparities through development
of regions with low industrial base. Accordingly, adequate infrastructure for industrial
development of such regions was duly emphasized. Given the potential to provide
large-scale employment, the Resolution reiterated the Government’s determination
to provide all sorts of assistance to small and cottage industries for wider dispersal
of the industrial base and more equitable distribution of income. The Resolution, in
fact, reflected the prevalent value system of India in the early 1950s, which was
centered on self-sufficiency in industrial production. The IPR 1956 was a landmark
policy statement and it formed the basis of subsequent policy announcements.
The IRP 1956 provided that along with continuing policy support to the
small sector, it also aimed to ensure that decentralized sector acquires sufficient
vitality to self-supporting and its development is integrated with that of large scale
industry. To mention, some 128 items were reserved for exclusive production in
the small sector. Besides, the Small Sector Industries Board (SSIB) constituted a
working group in 1959 to examine and formulate a development plan for small
scale industries during the third five year plan, 1961-66. In the third five year plan
period, specific developmental projects like ‘Rural Industries Projects’ and
‘Industrial Estates Projects’ were started to strengthen the small sector. As regards
SSI sector, the resolution envisaged two important roles- manufacturing of consumer
goods such as cloth and manufacturing of component for the newly established
industry as part of the programme for long-term industrial development.
92
Business
Entrepreneurship - II
Thus to the earlier emphasis on ‘protection’ was added ‘development’. The
IRP 1956 for small scale industries aimed at ‘protection plus development’. In a
way, the IPR 1956 initiated the modern SSI in India.
Industrial Policy Measures in the 1960s and 1970s
Monopolies Inquiry Commission (MIC) was set up in 1964 to review various
aspects pertaining to concentration of economic power and operations of industrial
licensing under the IDR Act, 1951. While emphasizing that the planned economy
contributed to the growth of industry, the Report by MIC concluded that the industrial
licensing system enabled big business houses to obtain disproportionately large
share of licenses which had led to pre-emption and foreclosure of capacity.
Subsequently, the Industrial Licensing Policy Inquiry Committee (Dutt Committee),
constituted in 1967, recommended that larger industrial houses should be given
licenses only for setting up industry in core and heavy investment sectors, thereby
necessitating reorientation of industrial licensing policy.
In 1969, the Monopolies and Restrictive Trade Practices (MRTP) Act was
introduced to enable the Government to effectively control concentration of
economic power. The Dutt Committee had defined large business houses as those
with assets of more than Rs.350 million. The MRTP Act, 1969 defined large business
houses as those with assets of Rs. 200 million and above. Large
Industries were designated as MRTP companies and were eligible to
participate in industries that were not reserved for the Government or the Small
scale sector.
The new Industrial Licensing Policy of 1970 classified industries into four
categories. First category, termed as ‘Core Sector’, consisted of basic, critical and
strategic industries. Second category termed as ‘Heavy Investment Sector’,
comprised projects involving investment of more than Rs.50 million. The third
category, the ‘Middle Sector’ consisted of projects with investment in the range of
Rs.10 million to Rs.50 million. The fourth category was ‘De-licensed Sector’, in
which investment was less than Rs.10 million and was exempted from licensing
requirements. The industrial licensing policy of 1970 confined the role of large business
houses and foreign companies to the core, heavy and export oriented sectors.
The Industrial Policy Statement - 1973
With a view to prevent excessive concentration of industrial activity in the
large industrial houses, this Statement gave preference to small and medium
entrepreneurs over the large houses and foreign companies in setting up of new
capacity particularly in the production of mass consumption goods. New
undertakings of up to Rs.10 million by way of fixed assets were exempted from
licensing requirements for substantial expansion of assets. This exemption was
not allowed to MRTP companies, foreign companies and existing licensed or
registered undertakings having fixed assets of Rs.50 million and above.
Entrepreneurship
Development and
Governement-I
NOTES
Check Your
Progress
2. In the —— five year
plan period, specific developmental projects
like ‘Rural Industries
Projects’ and ‘Industrial
Estates Projects’ were
started to strengthen
the small sector.
3. In ——, the monopolies and restrictive
Trade
Practices
(MRTP) Act was introduced to enable the
Gov. to effectively
control concentration
of economic power.
4. The Dutt Committee had defined large
business houses as
those with assets of
more than Rs.———
million.
5. The MRTP Act,
1969 defined large
business houses as
those with assets of
Rs. ——— million
and above
The Industrial Policy Statement -1977
This Statement emphasized decentralization of industrial sector with increased
role for small scale, tiny and cottage industries. It also provided for close interaction
between industrial and agricultural sectors. Highest priority was accorded to power
generation and transmission. It expanded the list of items reserved for exclusive
production in small scale sector from 180 to more than 500. For the first time, within
small scale sector, a tiny unit was defined as a unit with investment in machinery and
equipment up to Rs.0.1million and situated in towns or villages with a population of
less than 50,000(as per 1971 census). Basic goods, capital goods, high technology
industries important for development of small scale and agriculture sectors were
clearly delineated for large scale sector. It was also stated that foreign companies
that diluted their foreign equity up to 40 per cent under Foreign Exchange Regulation
Business
Entrepreneurship - II
93
Entrepreneurship
Development and
Governement-I
NOTES
Act (FERA) 1973 were to be treated at par with the Indian companies. The Policy
Statement of 1977 also issued a list of industries where no foreign collaboration of
financial or technical nature was allowed as indigenous technology was already
available. Fully owned foreign companies were allowed only in highly export oriented
sectors or sophisticated technology areas. For all approved foreign investments,
companies were completely free to repatriate capital and remit profits, dividends,
royalties, etc. Further, in order to ensure balanced regional development, it was
decided not to issue fresh licenses for setting up new industrial units within certain
limits of large metropolitan cities (more than 1 million population) and urban areas
(more than 0.5 million population).
During the two decades, after IPR, 1956, the economy witnessed lopsided
industrial development skewed in favor of large and medium sector on one hand
and increase in unemployment on the other. This situation led to a renewed emphasis
on industrial development. This gave emergence to IPR, 1977. The policy statement
categorically mentioned: The emphasis on industrial policy has been mainly on
neglecting cottage industries, relegating small industries to a minor role. The main
thrust of the new industrial policy will be on effective promotion of cottage and
small scale industries widely dispersed in rural areas and small towns. It is the
policy of the government that whatever can be produced by small and cottage
industries must only be so produced. The IPR, 1977 accordingly classified small
sector into three categories:
i. Cottage and household industries which provide self-employment on a
large scale.
ii. Tiny sector incorporating investment in industrial units in plant and
machinery up to Rs. 1 lakh and situated in towns with a population of
less than 50000 according to 1971 census.
iii. Small scale industries comprising of industrial units with an investment
up to Rs. 10 lakhs and increase of ancillary with an investment up to
Rs.15 lakh
The measures suggested for promotion of small scale and cottage industries included:
1. Reservation of 504 items for exclusive production in small scale sector
2. Proposal to set up in each district an agency called ‘District Industry
Center (DIC)’ to serve as a focal point of development for small scale
and cottage industries. The scheme of DIC was introduced in 1978. The
main objective of setting up DIC was to promote under a single roof all
the services and support required by small and village entrepreneurs
What followed from above is that to the earlier thrust of ‘protection’ (IPR,
1948) and of ‘development’ (IPR, 1956), the IPR, 1977 added ‘promotion’. Thus, as
per the IRP 1977, the small sector was, thus to be protected, developed and promoted.
IPR, 1980
The Government of India adopted a new Industrial Policy Resolution (IPR)
on 23rd July 1980. The main objective of IPR, 1980 was defined as facilitating an
increase in industrial production through optimum utilization of installed capacity
and expansion of industries. As to the small sector, the resolution envisaged:
94
Business
Entrepreneurship - II
i. Increase in investment ceilings from Rs. 1 lakh to Rs 2 lakhs in case of
tiny units, from Rs. 10 lakhs to Rs. 20 lakhs in case of small-scale units
and from Rs. 15 lakhs to Rs. 25 lakhs in case of ancillaries.
ii. Introduction of the concept of nucleus plants to replace the earlier scheme
of the district industry center in each industrially backward district to
promote the maximum small-scale industries here.
iii. Promotion of village and rural industries to generate economic viability
in the villages compatible with the environment.
Entrepreneurship
Development and
Governement-I
NOTES
iv. As many as 836 items were reserved for exclusive manufacture in smallscale sector.
v. A new scheme of central investment subsidy exclusively for small-scale
sector in rural and backward areas capable of generating more
employment at lower cost of capital had been mooted and implemented.
vi. With a view to improve competitiveness of products manufactured in
small- sector, programme of technology up gradation will be implemented
under the umbrella of an apex technology development centre in Small
Industries Development Organization (SIDO)
vii. Greater emphasis on training of women and youth under Entrepreneurship
Development Programme (EDP) and to establish a special cell in SIDO
for this purpose.
viii. Implementation of de-licensing of all new units with investment of Rs.25
crores in fixed assets in non-backward areas and Rs.75 crores in centrally
notified backward areas. Similarly, de-licensing shall be implemented in
case of 100% export oriented units (EOU) set up in Export Processing
Zones (EPZ) up to an investment ceiling of Rs. 75 lakhs.
The policy support of IPR 1980 was initiated to re-emphasize a boost to the
industrial take-off envisaged in IPR 1956. The thrust areas of IPR 1980 were industrial
infrastructure, optimum utilization of installed capacity, higher productivity promotion
of agro-based industries, promotion of export-oriented and import-substitute industries,
consumer protection and quality services. Small scale Industrial (SSI) sector was
again treated as the most important sector for generation of wage employment and
development of entrepreneurial spirit among the people of India.
With a view to promote industrialization of backward areas in the country,
the Government of India announced in June, 1988 the Growth Centre Scheme
under which 71 Growth Centers were proposed to be set up throughout the country.
Growth centers were to be endowed with basic infrastructure facilities such as
power, water, telecommunications and banking to enable them to attract industries.
Thus, IRP 1980 re-emphasized the spirit of the IPR 1956. The small-scale
sector still remained the best sector for generating wage and self-employment
based opportunities in the country.
IPR 1990
The basic objective of IPR 1990 was to introduce the policy of economic
liberalization and to simplify the procedures and formalities, rules and regulations
with a view to widening the technological base of industry to raise the level of
output. The investment limit for SSI in plant and machineries was increased to
Rs.60 lakhs, greater emphasis was given to training of youth and women under
Entrepreneurship Development programme and an apex bank namely Small
Industries Development Bank of India (SIDBI) was established in 1990 to assist
entrepreneurs in small scale sector.
Business
Entrepreneurship - II
95
Entrepreneurship
Development and
Governement-I
NOTES
The Industrial Policy Statement of 1991 stated that “the Government will
continue to pursue a sound policy framework encompassing encouragement of
entrepreneurship, development of indigenous technology through investment in
research and development, bringing in new technology, dismantling of the regulatory
system, development of the capital markets and increased competitiveness for the
benefit of common man”. It further added that “the spread of industrialization to
backward areas of the country will be actively promoted through appropriate
incentives, institutions and infrastructure investments”.
New Small Enterprise Policy
The Government of India, for the first time, tabled the new small enterprise
policy titled ‘Policy measures for promoting, and strengthening and supplementing
small, tiny and village enterprises’ in the parliament on August 6, 1991. The main
thrust of new small enterprise policy is to impart more vitality and growth impetus
to the sector to enable it to contribute its mite fully to the economy, particularly in
terms of growth output, employment and exports. The sector has been substantially
de-licensed. Concerted efforts would be made to deregulate and de-bureaucratize
the sector with a view to remove all fetters on its growth potential, on one hand,
and reposing greater faith in small and new entrepreneurs, on the other.
The salient features of this new small enterprise policy are as under:
1. The investment ceiling in plant and machinery for small-scale industries
was raised from Rs. 35 lakhs to Rs. 60 lakhs and correspondingly, for
ancillary units from Rs. 45 lakh to Rs. 75 lakh.
2. Increase in the investment limit in plant and machinery of tiny enterprise
from Rs.3 lakhs to Rs. 5 lakhs, irrespective of the location of the
enterprise,. provided the unit is located in an area having a population of
50,000 as per 1981 census.
3. Inclusion of industry- related services and business enterprises,
irrespective of their location, as small scale industries.
4. To introduce a Limited Liability Partnership Act. This would limit the
financial liability of the new entrepreneurs to the capital invested.
5. Introduction of a scheme of Integrated Infrastructural Development
(including technological back-up services) for small-scale industries.
6. Introduction of factoring services to help solve the problems of delayed
payments to small sector.
7. Market promotion of small-scale industries products through co-operative/
public sector institutions, other specialized professional/marketing agencies
and the consortium approach.
8. With a view to improve the competitiveness of the products manufactured
in the small-scale sector, program of technology up-gradation will be
implemented under the umbrella of an apex technology development
center in small industries development organization (SIDO)
9. To accord priority to small and tiny sector in the allocation of indigenous
raw materials.
96
Business
Entrepreneurship - II
10. Setting up of an export development center in the Small Industries
Development Organization (SIDCO).
11. To widen the scope of the National Equity Fund (NEF), to enlarge the
single window scheme and also to associate commercial banks with the
provision of composite loans.
The IPR 1990 was announced during June 1990. The important elements
included in the resolution to boost the development of small-sector were as follows:
Entrepreneurship
Development and
Governement-I
NOTES
i. As many as 836 items were reserved for exclusive manufacture in smallscale sector.
ii. To ensure both adequate and timely flow of credit facilities for the smallscale industries, a new apex bank known as ‘small industries development
bank of India’ (SIDBI) was established in 1990.
iii. Greater emphasis on training of women and youth under entrepreneurship
development and to establish a special cell in SIDO for this purpose.
iv. Implementation of de-licensing of all new units with investment of Rs.
25 crores in fixed assets in non-backward areas and Rs. 75 crores in
centrally notified backward areas. Similarly, de-licensing shall be
implemented in the case of 100% export oriented units set up in export
processing zones up to an investment ceiling of Rs. 75 lakhs.
6.3
Five Year Plans
Plans spell out how the resources of a nation should be applied for use.
The concept of five-year plans has been borrowed from the former Soviet Union,
the pioneer in national planning. Since 1947, the Indian economy has been premised
on the concept of planning. Planning commission develops, executes and monitors
the Five-Year Plans. (The Planning Commission had been restructured and renamed
as National Institution for Transforming India (NITI) Aayog from 1st Jan. 2015 by
Union Government of India).The planned economic development in India began in
1951 with the inception of First Five Year Plan.
First Plan (1951-56):
The first Prime Minister Pandit Nehru presented the first five year plan to
the Parliament of India. The first five-year plan mainly focused on development
of the primary sector. The objectives of this plan were to increase food production,
to fully utilize available raw materials, to correct the disequilibrium in the economy
which was created by the Second World War and partition of India; to build
economic overheads such as roads, railways, irrigation, power etc; to reduce
inequalities in income and wealth. An important feature of this phase was active
role of state in all economic sectors.
Many irrigation projects were initiated during this period, including the Bhakra
Dam and Hirakud Dam. At the end of the plan period in 1956, five Indian Institutes
of Technology were started as major technical institutions. The University Grants
Commission (UGC) was set up to take care of funding and take measures to
strengthen higher education in the country. Contracts were signed to start five
steel plants which came into existence in the middle of the second five-year plan.
Industrial production increased during the plan period. Production of millmade cloth and locomotives exceeded the plan targets. Many new industries like
oil refining, ship-building, aircraft, railway were established during the plan.
Check Your
Progress
6. The Planning
Commission had been
restructured
and
renamed as ——from
1st Jan. 2015 by Union
Government of India
Business
Entrepreneurship - II
97
Entrepreneurship
Development and
Governement-I
NOTES
During the first five year plan small scale and cottage industries couldn’t be
given adequate importance. Still, attempts were made to set-up organizational and
policy base which could help to rehabilitate such industries. About Rs. 30 crores
were allotted for development of village and small-scale industries during the first
plan. Six all India boards were set up or reconstituted during this plan period.
These were:
i. The All-India Handlooms Board set up in October 1952.
ii. The All-India Handicrafts Board, constituted in November, 1952
iii. The Silk-board, constituted in November 1952
iv. The Coir board set up in July 1954
v. The Small Scale Industries Board set up in November 1952
vi. The All India Khadi and Village Industries Board, originally set up in
February 1953, and recognized as an autonomous commission in Aril, 1951
Second Plan (1956-61)
The second plan was particularly in the development of the public sector. It
was to set India on the path of industrialization. The objective of this plan: a
sizable increase in national income so as to raise the level of living; rapid
industrialization of the country with particular emphasis on the development of
basic and key industries; a large expansion of employment opportunities by
developing labor-intensive projects and small scale industries; reduction in
inequalities of income and distribution; to attain annual growth rate of 5%.
The plan was an ‘industrial and transport plan’ in contrast to the first plan
which was called ‘agriculture and irrigation’ plan. India started producing large
quantities of machinery, machine tools for agriculture, industry and transport, heavy
electrical equipment and scientific instrument. Another development in this plan
period was production of new items such as tractors, newsprint, motor cycles,
and scooters, sulpha and antibiotic drugs DDT etc.
Hydroelectric power projects and five steel plants at Bhilai, Durgapur, and
Rourkela were established. Coal production was increased. More railway lines
were added in the north east.The Tata Institute of Fundamental Research was
established as a research institute in 1957.
In the second five year plan the program of village and small industries
was based on Karve committee report. A provision of Rs. 200 crores was made in
this plan period for the development of handloom, khadi village and small industries
including ‘ambar chakra’ program. Special stress was laid on the establishment of
industrial cooperatives in every field. By 1960-61, 634 industries were also
constructed under the initiative of the government and a provision of Rs. 15 crores
was made available for this purpose in the second plan.
Third Plan (1961-66)
98
Business
Entrepreneurship - II
In the third plan emphasis was on long-term development. The third plan
stated that during the five-year period, the Indian economy, “must not only expand
rapidly, but at the same time become self-reliant and self-generating”. Objectives:
an increase in national income of more than 5% annually; an increase in agricultural
produce and to achieve self-sufficiency by increasing food-grain production;
expansion of basic industries, the aim being to meet the requirements arising from
increased industrialization within 10 years by means of available resources; utilizing
the country’ manpower resource to the maximum and ensuring significant growth
in employment; greater equality of opportunities, more even distribution of economic
power and reducing wealth and income disparities.
The third five year plan stressed agriculture and improvement in production
of wheat; the focus was however shifted towards defense industry and Indian
army. Many cement and fertilizer plants were built. Many primary schools were
started in rural areas, in an effort to bring democracy to grass root level, panchayat
elections were started and the states were given more development responsibilities.
State electricity boards and state secondary education boards were formed. States
were made responsible for secondary and higher education. State road
transportation corporations were formed and local road building became a state
responsibility.
Entrepreneurship
Development and
Governement-I
NOTES
Three Annual Plans (1966-69) Plan holiday for 3 years
Due to miserable failure of the third plan, the government was forced to
declare ‘plan holidays’ (from 1966-67, 1967-68, and 1968-69). Three annual plans
were drawn during this intervening period. During 1966-67 there was again the
problem of draught. Equal priority was given to agriculture, its allied activities, and
industrial activities, and industrial sector. The main reasons for plan holidays were
Indo-Pak war, two successive years of severe drought, devaluation of currency,
lack of resources, and increase in inflation. The main objective of the annual plans
was to remove strains in the economy arising from the sharp-fall in agricultural
production and to curb the inflationary pressure.
The annual plans helped in uplifting the economy. Agricultural production
increased, recession was controlled, strains and stresses on the economy were
removed and the pace of development initiated in the earlier plans were kept up
paving the way for starting the fourth plan.
During the third year plan (1960-61 to 1965-66) the main objectives were to
improve the productivity of the workers in small industries to enlarge the availability
of institutional finance, promotion of small industries as ancillary to large industries.
During this plan period a sum of Rs. 240.75 crores were spent on the development
of cottage and small scale industries in India in the public sector.
Fourth Plan (1969-74)
The government nationalized 14 major Indian banks and the Green revolution
in India advanced agriculture.
The objectives of small industries program are as follows:
i. To improve the production techniques and enable them to produce quality
goods and to bring them t a viable level.
ii. To promote decentralization and dispersal of industries and
iii. To promote agro based industries.
These were expected to be achieved through giving facilities for:
a. Research
b. Design and development
c. Industrial extension service
d. Enlarged testing
Business
Entrepreneurship - II
99
Entrepreneurship
Development and
Governement-I
e. Promoting schemes for supply f machines on hire purchase with the
assistance of the banks.
Fifth Plan (1974-79)
NOTES
A major attack on the Mahalanobis strategy came from the World Bank
economists in the early seventies. They argued that the most important problem of
the third world countries was that of removal of poverty, and that growth, by itself,
could not be relied upon to achieve this objective. Therefore, the highest priority
should be given to removal of poverty. In addition to removal of poverty and
attainment of self-0reliance, the fifth plan had the objectives: 5.5% overall rate of
growth in GDP; expansion of productive employment and full utilization of existing
skills and equipment; a national programme for minimum needs and extended
programme of social welfare; emphasis on additional production of 125 MT of
food with extended agricultural research and education; emphasis on basic and
key industries producing goods for mass consumption; to promote export and import
substitution; to adopt institutional, fiscal and other measures to reduces social,
economic and regional inequalities in the country.
The only significant changes in the plan were that the area of private sector
was extended and more liberal imports were allowed. The plan was terminated in
1978, its fourth year, due to change in the Government at the Centre.
This plan laid stress on employment, poverty alleviation (Garibi Hatao) and
justice. The plan also focused on self-reliance in agricultural production and defense.
The Electricity Supply Act was amended in 1975 which enabled the central
government to enter into power generation and transmission.
The Indian national highway system was introduced and many roads were
widened to accommodate the increasing traffic. Tourism also expanded.
Rolling Plan (1978-80)
The Rolling plan consists of three kinds of plans that were proposed. The
First plan is for the present year which comprises annual budget and second is a plan
for a fixed number of years which may be 3, 4 or 5 years. Plan number two is kept
changing as per the requirements of the Indian economy. The Third plan is a
perspective plan which is for long terms i.e. for 10, 15 or 20 years. There is no
fixation of dates for commencement and termination of the plan in the rolling plans.
The strategy of development was designed as follows:
a. Developing and promoting entrepreneurship and providing a package of
consultancy service so as to generate maximum employment and selfemployment opportunities.
b. Facilitating fuller utilization of the skills and equipment of the person,
and, progressively improving the production techniques
c. Promoting these industries in selected growth centers in semi-urban and
rural areas including backward areas.
For this purpose, a total outlay of about Rs. 1,600 crores was made available
for the development of small industries.
Sixth Plan (1980-85)
100
Business
Entrepreneurship - II
The draft of the sixth five-year plan was presented in 1978. However, the
plan was terminated with the change of government in Jan. 1980. The new sixth five
year plan was affected in April 1980. The plan stated “the basic task of economic
planning in India is to bring about a structural transformation of the economy so as to
achieve a high and sustained rate of growth, a progressive improvement in the standard
of living of the masses leading to the eradication of poverty and unemployment and
provide the material base for a self-reliant socialist economy”.
Entrepreneurship
Development and
Governement-I
NOTES
The objectives of the sixth plan: to eliminate unemployment and
underemployment; to raise the standard of living of the poorest of masses; to
reduce disparities in income and wealth; to provide basic needs of life such as
drinking water, health care, roads in rural areas and minimum services for those
living in urban area; to achieve self-reliance.
The plan was able to achieve most of its targets. The average annual growth rate
was around 5%.food production increased to 151.5 MT. The growth in individual sectors
was also satisfactory. Some of the segments of the economy achieved self-reliance.
The plan paid special attention to the removal of poverty through rural
development programmes like Integrated Rural Development Programme (IRDP),
National Rural Employment Programme (NREP), and Rural Landless Employment
Guarantee Programme (RLEGP).
This plan marked the beginning of economic liberalization. Price controls
were eliminated and ration shops were closed. Family planning was expanded in
order to prevent overpopulation.
It envisaged further improvement in the levels of production, creation of
additional employment opportunities, and expanded effort in export promotion.
Seventh Plan (1985-90)
The draft of the seventh plan was approved on Nov. 9, 1985 by the national
Development Council. It was set with a 15-year perspective. The objectives:
decentralization of planning and full public participation in development; removal
of poverty and reduction in income disparities; the maximum possible generation
of productive employment; self-sufficiency in food at higher level of consumption;
higher level of social consumption, particularly in education and health and other
basic amenities; a higher degree of self-reliance through export promotion and
import substitution; improved capacity utilization and productivity; efficiency,
modernization and competition in industry; integration of science and technology
into the main stream of development planning;
The seventh plan marked the comeback of Congress party to power. The
plan laid stress on improving productivity level of industries by upgrading technology.
The main objectives of the plan were to establish growth in areas of increasing
economic productivity, production of food grains and generating employment.
As an outcome of the sixth plan, there had been steady growth in agriculture,
controls on rate of inflation, and favourable balance of payments which had provided
a strong base to the seventh plan. The plan had strived towards socialism and energy
production at large. The thrust areas of the seventh plan were social justice, removal
of oppression of the weak, using modern technology, agricultural development, antipoverty programmes, full supply of food, clothing and shelter, increasing productivity
of small and large scale farmers and making India an independent economy.
Annual plans (1990-1992):
1989-91 was a period of economic instability in India.The eighth plan could
not take off in 1990 due to the fast changing political situation at the centre and the
Business
Entrepreneurship - II
101
Entrepreneurship
Development and
Governement-I
NOTES
years 1990-91 and 1991-92 were treated as annual plans. The eighth plan was
finally launched in 1992 after the initiation of structural adjustment policies.
In 1991, India faced a crisis in foreign exchange (forex) reserves, left with
reserves of only US$1 billion. Thus, under pressure, the country took the risk of
reforming the socialist economy.
Eighth Plan (1992-97)
The eighth five-year plan was launched immediately after the initiation of
structural adjustment policies and macro stabilization policies.
Dr. Manmohan Singh launched India’s free market reforms that brought
the nearly bankrupt nation back from the edge. It was the beginning of privatization
and liberalization in India. Modernization of industries was a major highlight of the
Eighth plan. Meanwhile India became a member of World Health Organization on
1 Jan. 1995. This plan can be termed as, the Rao and Manmohan model of
economic development. the major objectives included controlling population growth,
poverty reduction, employment generation, strengthening the infrastructure,
institutional building, tourism management, human resource development,
involvement of Panchayati raj, Nagarpalikas, NGOs, decentralization and people’s
participation,
Objectives: generation of adequate employment to achieve near full
employment level by the turn of the century; containment of population growth
through people’s active co-operation and an effective scheme of incentives and
disincentives; universalization of elementary education and complete eradication
of illiteracy among people in the age group of 15 to 35 years; provision of safe
drinking water and primary healthcare facilities, including immunization; growth
and diversification of agriculture to achieve self-efficiency in food and generation
of surplus for exports; strengthening the infrastructure in order to support growth
process on a sustainable basis.
It was totally a different plan from the earlier plans as it was formulated in
a changed context of economic liberalization. It focuses among others on human
development, employment in rural areas, setting up small ‘Agri-business
Consortium’ to bring together farmers, the business community, banking institutions,
scientific organizations and various governmental bodies. Ten areas have been
identified. They are food crops, oilseeds, cotton, sugarcane, aquaculture,
horticulture, sericulture, dairy development, poultry and agro-forestry for intensive
attention. The objective is to improve the efficiency of production and post-harvest
technologies and develop suitable marketing networking which would lead to
creation of more jobs, as well as, income generation.
The main advocacy of the eighth plan has been employment generation as
the motive force for economic growth. In order to fulfill this objective, small and
village industries have been assigned an extremely important role. The important
plan proposals include:
i. The plan has reiterated that timely and adequate availability of credit is
of more importance than concessional credit. From this point of view,
with the sanction of composite loans under single window concept,
concessional loans to state corporations for infrastructure development
have been introduced.
102
Business
Entrepreneurship - II
ii. In order to upgrade technology, the eight plan propose to establish
appropriate tool rooms and training institutes.
iii. The growth center approach has been accepted as a suitable measure
for industrial dispersal and is under implementation. During the eighth
plan, establishment of 70 growth centers was completed. Establishment
of functional industrial estates with the substantial agricultural vegetables
and horticultural products as was also proposed.
Entrepreneurship
Development and
Governement-I
NOTES
iv. Like growth centers, the eight plan also envisaged to set-up integrated
infrastructure development centers for tiny units. For this, the center,
the state governments and industry associations were to be involved.
Ninth Plan (1997-2002)
Atal Bihari Vajpayee was the Prime Minister of India during the Ninth fiveyear Plan. The plan tried primarily to use the latent and unexplored economic potential
of the country to promote economic and social growth. It offered strong support to
the social spheres of the country in an effort to achieve the complete elimination of
poverty. This plan saw joint efforts from public and private sectors in ensuring economic
development of the country. New implementation measures in the form of Special
Action Plans (SAPs) were evolved during the Ninth five-year plan to fulfil targets
within the stipulated time with adequate resources. The SAPs covered the areas of
social infrastructure, agriculture, information technology and water policy.
The main objective of the plan was to correct historical inequalities and increase
economic growth in the country. Other aspects which constituted the plan were
population control, generating employment by giving priority to agriculture and rural
development, reduction of poverty, ensuring proper availability of food and water for
the poor, availability of primary health care facilities and other basic necessities, primary
education to all children in the country, empowering the socially disadvantaged classes
like SC, ST and other backward classes, developing self-reliance in terms of agriculture,
acceleration in the growth rate of the economy with the help of stable prices.
The special feature of the ninth plan was the priority set out by the Prime
Minister in the list titled ‘Special Action Plan’ (SAP). It concentrated on five
areas: food and agriculture; physical infrastructure; health, education and drinking
water; information technology and water resources
The ninth plan made two significant changes in the conceptual strategy of
planning for women. First, for empowerment of women, the plan made efforts to
create an enabling environment where women could freely exercise their rights.
Secondly, the plan attempted ‘convergence of existing services’ available in both
women-specific and women-related sectors. To this effect, it directed both the
centre and the states to adopt a special strategy of women’s component plan
(WCP) through which not less than 30 per cent of funds/benefits flow to women
from all the general development sectors.
In ninth plan government of India has announced the following new policy
initiatives for the small-scale sector.
In the ninth plan, government of India has announced the following new
policy initiatives for the small-scale sector.
i. Announcement of a new credit insurance scheme in the budget for
providing adequate security to banks and improving flow of investment
credit to SSI units, particularly export oriented and tiny units.
ii. The working capital limit for SSI units is determined by the banks on the
basis of 20% of their annual turnover. The turnover limit for this purpose
has been enhanced from Rs. 4 crore to Rs. 5 crore
Business
Entrepreneurship - II
103
Entrepreneurship
Development and
Governement-I
NOTES
iii. To increase the reach of banks to the tiny sector, leading by banks to
non-banking financial companies or other financial intermediaries for
purposes of on-leading to the tiny sector, has been included within he
definition of priority sector for bank lending
iv. Exemption from excise duty, as given to SSI units, will be extended to
goods bearing a brand name of another manufacturer in rural areas
v. A national program for rural industrialization has been announced
vi. To co-ordinate the latest development with regard to the WTO, a cell has
been set-up in the office of DC (SSI) associations and SME units, regarding
recent developments, prepare policies for SSIs in tune with the WTO
agreements and organizing WTO sensitization seminars and workshops
vii. Cotton yarn has been included in the general excise exemption scheme
for SSIs
viii. Small job workers, engaged in printing of glazed tiles, have been exempted
from excise duty
ix. The investment limit for small scale and ancillary undertakings has been
reduced from existing Rs. 3 crore to Rs. 1 crore
Tenth Plan (2002-2007)
The main objectives of the tenth plan were attain 8% GDP growth per year,
reduction of poverty rate by 5% by 2007, providing gainful and high-quality
employment, reduction in gender gaps in literacy and wage rates by at least 50%
by 2007. 20-point program was introduced.
Taking note of the inabilities of the earlier five year plans, especially which
of the 9th five year plan, the tenth plan decides to take up a resolution for immediate
implementation of all the policies formulated in the past. It deals with increasing
the mobility of all the available financial resources of India, and optimizing them as
well; setting up of state-of-the-art infrastructure for all the existing industries in
India; encourage the initiative of capacity building within Indian industrial sector;
creating a friendly, amiable and pleasant investment environment in India;
encouraging sufficient transparency in the corporate sectors of India; introduction
of reforms in the industrial sectors, which are more investor friendly in nature.
In the tenth plan in order to enhance the competitive strength of the small
scale sector, the government introduced an incentive scheme from their technological
up gradation and quality improvement. The scheme provides incentive to those small
scale/ ancillary industries who have acquired ISO-9000 certification. The incentive
scheme provides reimbursement of the charges for acquiring ISO-9000 certification
to the extent of 75% of the cost, subject to a maximum of Rs. 75,000 in each case.
The scheme has been operation since March 1994 and 1384 SSI/ ancillary units
have been already benefited from this scheme till 31st March 2001.
Eleventh Plan (2007-2012)
104
Business
Entrepreneurship - II
The basic theme of this plan period is ‘inclusive growth’. The broad vision
for 11th plan included several inter related components like rapid growth reducing
poverty and creating employment opportunities, access to essential services inn
health and education, especially for the poor, extension of employment opportunities
using National Rural Employment Guarantee Progrmme, environmental
sustainability, reduction of gender inequality etc. The objectives are: rapid and
inclusive growth (poverty reduction), emphasis on social sector (including agriculture
and rural development) and delivery of service therein, empowerment through
education and skill development, reduction of gender inequality, environmental
sustainability, to increase growth rate in agriculture, industry and services to 4%,
10% and 9% respectively, reduce total fertility rate to 2.1, provide clean drinking
water for all by 2009, increase agriculture growth to 4%.
Entrepreneurship
Development and
Governement-I
NOTES
Twelfth Plan (2012-17)
Twelfth plan commenced at a time when global economy was going through
a financial crisis. It emphasizes that the first priority must be to bring the economy
back to rapid growth while ensuring that the growth is both inclusive and sustainable.
Inclusiveness is to be achieved through poverty reduction, promoting group equality
and regional balance, reducing inequality, empowering people etc whereas
sustainability includes ensuring environmental sustainability, development of human
capital through improved health, education, skill development, nutrition, information
technology etc and development of institutional capabilities, infrastructure like power,
telecommunication, roads, transport etc.
6.4
Summary
India has mainly followed three regimes after independence regarding industrial
policies. These are the planned or controlled period till the end of 1970s, the limited
liberalization period of the 1980s and the post-reform period beginning in early 199s.
In 1948, immediately after independence, the government introduced the
Industrial Policy Resolution. It outlined the approach to industrial growth and
development. It adopted mixed economic system approach, where in public and
private sectors were to operate together
After adoption of the Constitution, the Industrial Policy was comprehensively
revised and adopted in 1956. The Policy Resolution introduced the proposals to
liberalize the Industrial Policy by relaxation to MRTP and FERA Acts, re-defining
the investment limits, de-licensing and exemption to same categories of industrial
sector, incentives for export promotion, broad banding of industries, introduction
of cottage industries and several other financial concessions.
The Industrial Policy Resolutions of 1948 and 1956 reflected the desire of
the Indian State to achieve self-sufficiency in industrial production. Huge
investments by the State in heavy industries were designed to put the Indian industry
on a higher long-term growth trajectory. With
limited availability of foreign exchange, the effort of the Government was
to encourage domestic production. This basic strategy guided industrialization until
the mid-1980s.
In the light of new challenges, came Industrial Policy of 1973, 1977, 1980,
1982-83, 1990 with very minor changes.
Till the onset of reform process in 1991, industrial licensing played a crucial role
in channeling investments, controlling entry and expansion of capacity in the Indian
industrial sector. As such industrialization occurred in a protected environment, which
led to various distortions. Tariffs and quantitative controls largely kept foreign competition
out of the domestic market, and most Indian manufacturers looked on exports only as
a residual possibility. Little attention was paid to ensure product quality, undertaking
R&D for technological development and achieving economies of scale.
Check Your
Progress
7. —— used to develop, execute and
monitor the Five-Year
Plans.
Business
Entrepreneurship - II
105
Entrepreneurship
Development and
Governement-I
NOTES
The industrial policy announced in 1991, however, substantially dispensed
with industrial licensing and facilitated foreign investment and technology transfers,
and threw open the areas hitherto reserved for the public sector. The policy focus
in the recent years has been on deregulating the Indian industry, enabling industrial
restructuring, allowing the industry freedom and flexibility in responding to market
forces and providing a business environment thatfacilitates and fosters overall
industrial growth. The future growth of the Indian industry as widely believed, is
crucially dependent upon improving the overall productivity of the manufacturing
sector, rationalisation of the duty structure, technological upgradation, the search
for export markets through promotional efforts and trade agreements and creating
an enabling legal environment.
New Industrial Policy of 1991brought out the catchwords of liberalization,
globalization and privatization with three sets of reforms: first deregulation,
delicensing controls and debureaucratization of industrial licensing systems; two,
liberalization of foreign trade and currency transactions and third, institute several
measures to facilitate foreign direct investment inflows. All these measures were
launched in the year 1991 and since then, further liberalization has been introduced
every year with each new budget.
6.5
Key Terms
 Industrial policy of a country: It is the official strategic effort to
encourage the development and growth of manufacturing sector of the
economy. The Government takes efforts aimed at improving
competitiveness and capabilities of domestic firms and promoting
structural transformation
 Planning commission: The planning commission was set up in March
1950 in pursuance of declared objectives of the Government to promote
a rapid rise in the standard of living of people by efficient exploitation of
resources of the country, increasing production and offering opportunities
to all for employment service of the community.
 NITI Aayog: Government of India has set up NITI Aayog (National
Institution for Transforming India) in place of the Erstwhile Planning
Commission, as a means to better serve the needs and aspirations of
people of India
6.6
Questions and Exercise
Questions
1. Write in detail about the main features of industrial policies of India.
2. Highlight the main developments of five year plans.
3. Discuss the impact of New Industrial Policy 1991.
4. What is the role of five year plans in development of MSMEs?
5. Explain the impact of industrial policies on development of small
enterprises.
106
Business
Entrepreneurship - II
Multiple Choice Questions
1. In the third five-year plan period, which project(s) were started to
strengthen the small sector?
i.
Rural Industries Projects
ii.
Industrial Estates Projects
iii.
Both i and ii
iv.
None of the above
Entrepreneurship
Development and
Governement-I
NOTES
2. The Sixth plan paid special attention to the removal of poverty through
rural development programmes like
i.
Integrated Rural Development Programme (IRDP),
ii.
National Rural Employment Programme (NREP)
iii.
Rural Landless Employment Guarantee Programme (RLEGP).
iv.
All the above
3. The objectives of first five-year plan were:
i.
To increase food production
ii.
To fully utilize available raw materials
iii.
To build economic overheads such as roads, railways, irrigation,
power etc to reduce inequalities in income and wealth
iv.
All the above
4. Which one of the following happened during the second five year plan?
i.
Hydroelectric power projects and five steel plants
ii.
Tata Institute of Fundamental Research
iii.
Both i and ii
iv.
None of the above
5. The basic theme of the eleventh plan period is ——
i.
Inclusive growth
ii.
industrial and transport plan
iii.
agriculture and irrigation
iv.
none of the above
Answers
Check Your Progress
1. protection
2. third
Business
Entrepreneurship - II
107
3. 1969
Entrepreneurship
Development and
Governement-I
4. 350
5. 200
NOTES
6. National Institution for Transforming India (NITI) Aayog
7. Planning commission
Multiple Choice Questions
1. iii
2. iv
3. iv
4. iii
5. i
6.7
Further Reading
Dayanandan R., Arputharaj A. Nilasco, Entrepreneurship Development
and Small Business Management, Deep & Deep Publications, New Delhi, 2012
Misra S. K., Puri V.K., Indian Economy, Himalaya Publishing House,
2012
108
Business
Entrepreneurship - II
UNIT 7 : ENTREPRENEURSHIP
DEVELOPMENT AND
GOVERNMENT - II
Entrepreneurship
Development and
Government - II
NOTES
Structure
7.0 Introduction
7.1 Unit Objectives
7.2 Ministry of MSME
7.3 Schemes of M/o MSME
7.4 Office of the Development Commissioner (MSME)
7.5 Schemes and Programmesof O/o DC(MSME)
7.6 Summary
7.7 Key Terms
7.8 Questions and Exercises
7.9 Further Reading
7.0
Introduction
Entrepreneurship development is the need of the hour. In the light of ‘Make
in India, Digital India, and Made in India’ movement, MSMEs play a vital role for
strengthening of Indian economy. MSMEs have been contributing to spreading
entrepreneurial culture in the society. They are widely dispersed across all sectors
of economy. They produce a wide range of products and services to meet local as
well as global markets. The contribution of MSME is 8 per cent of GDP, 45 per
cent of manufacturing output and 40 per cent of exports of the country. Our
Government is making all-round and comprehensive efforts for development of
entrepreneurship and promotion of MSMEs. Various Ministries and government
departments provide remarkable support to entrepreneurship development through
their policies, schemes and programmes.
Ministry of MSME has a number of schemes and programs for MSMEs
and entrepreneurs. In this section, we will discuss a number of programmes and
schemes of the Ministry which are meant for small businesses. This compilation
would benefit all entrepreneurs including first generation, established, family
businesses, women, scheduled castes, scheduled tribes, handicapped, exservicemen, marginalized communities, minorities etc for enabling them in creating
enterprises. Our Government emphasizes inclusive concept in enterprise creation.
7.1
Unit Objectives
After going through this unit, you will be able to
 Give an account of government policies which are meant for support of
MSMEs and development of entrepreneurship
Business
Entrepreneurship - II
109
 Know about the support of Ministry of MSME for entrepreneurship
development
Entrepreneurship
Development and
Government - II
 Be aware about the role and functions of Office of the Development
Commissioner (MSME)
NOTES
7.2
Ministry of Micro, Small and Medium
Enterprises (M/o MSME)
Ministry of Micro, Small and Medium Enterprises (M/o MSME)
promote growth and development of MSME sector, including Khadi, Village and
Coir industries, in co-operation with concerned Ministries/Departments, State
Governments and other Stakeholders, through providing support to existing
enterprises and encouraging creation of new enterprises.
On 9th May 2007, subsequent to an amendment of the Government of India
(Allocation of Business) Rules, 1961, erstwhile Ministry of Small Scale Industries
and the Ministry of Agro and Rural Industries were merged to form the Ministry of
Micro, Small and Medium Enterprise (M/o MSME). This Ministry now designs
policies and promotes/facilitates programmes, projects and schemes and monitors
their implementation with a view to assisting MSMEs and helps them to scale up.
The primary responsibility of promotion and development of MSMEs is of
the State Governments. However, the Government of India, supplements the efforts
of the State Governments through various initiatives. The role of the Ministry of
Micro, Small and Medium enterprises (M/o MSME) and its organisations is to
assist the States in their efforts to encourage entrepreneurship, employment and
livelihood opportunities and enhance the competitiveness of MSMEs in the changed
economic scenario. The schemes/programmes undertaken by the Ministry and its
organizations seek to facilitate/provide:
i) adequate flow of credit from financial institutions/banks;
ii) support for technology up-gradation and modernization;
iii) integrated infrastructural facilities;
iv) modern testing facilities and quality certification;
v) access to modern management practices;
vi) entrepreneurship development and skill up-gradation through appropriate
training facilities;
vii) support for product development, design intervention and packaging;
viii) welfare of artisans and workers;
ix) assistance for better access to domestic and export markets and
x) cluster wise measures to promote capacity building and empowerment
of the units and their collectives.
Organizational set-up
110
Business
Entrepreneurship - II
The implementation of policies and various programmes/schemes for
providing support services to MSMEs are undertaken through the following
organizations of the Ministry
Office of Development Commissioner (MSME):
The Office of Development Commissioner (MSME) headed by the Special
Secretary and Development Commissioner (MSME), being an apex body for
formulating and overseeing implementation of the policies for the development of
MSMEs in the country, is playing a very positive and constructive role for
strengthening this vital sector. It functions through a network of MSME-DIs,
Regional Testing Centres, Footwear Training Institutes, Production Centres, Field
Testing Stations and specialized institutes. It renders services such as advising the
Government in Policy formulation for the promotion and development of MSMEs;
providing techno-economic and managerial consultancy, common facilities and
extension services to MSME units; providing facilities for technology upgradation,
modernization, quality improvement and infrastructure; developing human resources
through training and skill upgradation etc.
Entrepreneurship
Development and
Government - II
NOTES
Check Your
Progress
1. What is meant by
intrapreneurship?
Define in your own
words.
M/o MSME has two Divisions called Small & Medium Enterprises (SME)
Division and Agro & Rural Industry (ARI) Division:
The SME Division is allocated the work, inter-alia, of administration,
vigilance and administrative supervision of the National Small Industries Corporation
(NSIC) Ltd., a public sector enterprise and the three autonomous national level
entrepreneurship development/training organizations: National Institute for Micro,
Small and Medium Enterprises (NI-MSME), Hyderabad, National Institute for
Entrepreneurship and Small Business Development (NIESBUD), NOIDA, Indian
Institute of Entrepreneurship (IIE), Guwahati. The Division is also responsible for
implementation of the schemes relating to Performance and Credit Rating and
Assistance to Training institution, among others. SME Division is also responsible
for preparation and monitoring of Results-Framework Document (RFD) as
introduced in 2009 by the Cabinet Secretariat under Performance Monitoring and
Evaluation System (PMES).
The ARI Division looks after the administration of two statutory bodies
viz. Khadi & Village Industries Commission (KVIC) and Coir Board and a newly
created organization called Mahatma Gandhi Institute for Rural Industrialisation
(MGIRI), Wardha. It also supervises implementation of the Prime Minister’s
Employment Generation Programme (PMEGP).
Khadii is, the proud legacy of our national freedom movement, and the
father of the nation. Khadi and village industries (KVI) are two national heritages
of India. The KVI sector creates employment at a very low per capita investment.
The KVI sector serves the basic needs of processed goods of the vast rural
sector of the country. It also provides sustainable employment to rural artisans.
Coir industry is an agro-based traditional industry, which originated in the
state of Kerala and proliferated to other coconut producing states like Tamil Nadu,
Karnataka, Andhra Pradesh, Orissa, West Bengal, Maharashtra, Assam, Tripura
etc. It is an export oriented industry. It has greater potential to enhance exports by
value addition through technological interventions and diversified products like
Coir Geo textiles etc. The acceptability of Coir products has increased rapidly due
to its environmental friendly image.
Business
Entrepreneurship - II
111
Entrepreneurship
Development and
Government - II
Fig. 7.1 Organizational structure of the Ministry of Micro, Small &
Medium Enterprises
NOTES
Check Your
Progress
1. Ministry of ———
and Ministry of ——
merged to form
Ministry of Micro,
Small and Medium
enterprises (MSME)
2. Match the pairs:
“A”
i. NIESBUD
ii. MGIRI
iii. NIMSME
iv. IIE
“B”
a. Hyderabad
b. Noida
c. Guwahati
d. Wardha
3. M/o MSME has
two Divisions called —
112
Business
Entrepreneurship - II
The implementation of policies and various programmes/schemes for
providing infrastructure and support services to MSMEs is undertaken through its
attached office, namely the Office of the Development Commissioner [(O/o DC
(MSME)], National Small Industries Corporation (NSIC), Khadi and Village
Industries Commission (KVIC), the Coir Board, and three training institutes viz.,
National Institute for Micro, Small, and Medium Enterprises (NI-MSME)
Hyderabad, National Institute for Entrepreneurship and Small Business
Development (NIESBUD), Noida, Indian Institute for Entrepreneurship (IIE),
Guwahati and Mahatma Gandhi Institute for Rural Industrialization (MGIRI),
Wardha, a society registered under Societies Registration Act, 1860.
National Board for Micro, Small & Medium Enterprises (NB-MSME):
The development work in MSMEs involves several departments/ministries
and several organisations of Central/State Governments. To facilitate coordination
and inter-institutional linkages and in pursuance of the MSME Development Act,
2006, a National Board for Micro, Small & Medium Enterprises (NB-MSME)
consisting of a total of 47 members has been constituted consisting of 20 nonofficial members. It is an apex advisory body constituted to render advice to the
Government on all issues pertaining to the MSME sector. It examines the factors
affecting promotion and development of MSMEs, reviews existing policies and
programmes and make recommendations to the Government for formulating the
policies and programmes for the growth of MSMEs. The Minister in charge of
MSME of the Government of India is the Chairman and the Board comprises
among others State Industry Ministers, some Members of Parliament, Secretaries
of various Departments of Government of India, financial institutions, public sector
undertakings, industry associations and eminent experts in the field. The board
meets periodically to take stock of the issues pertaining to the MSME sector.
7.3
Schemes of Ministry of Micro, Small and Medium
Enterprises(M/o MSME)
Major plan schemes implemented by the Ministryof MSME are listed below:
Entrepreneurship
Development and
Government - II
NOTES
i. Schemes for MSME sector
National Manufacturing Competitiveness Programme
Lean Manufacturing Competitiveness Programme
Promotion of Information and Communication Tools (ICT) in MSME
sector (NMCP Scheme)
Technology Upgradation and Quality Certification Support to MSMEs
(NMCP Scheme)
Support for Entrepreneurial and Managerial Development of SMEs
through Incubators (NMCP Scheme)
Design Clinic Scheme for MSMEs (NMCP Scheme)
Enabling Manufacturing sector to be competitive through Quality
Management Standards (QMS) and Quality Technology Tools (QTT)
(NMCP
Scheme)
ISO 9000/14001/HACCP Reimbursement Scheme (NMCP Scheme)
Building Awareness on Intellectual Property Rights for the MSME (NMCP
Scheme)
Marketing Assistance and Technology Upgradation Scheme for MSMEs
(NMCP Scheme)
Credit Guarantee Scheme for MSMEs
Credit Linked Capital Subsidy Scheme (CLCSS)
MSE Cluster Development Programme (MSE-CDP)
Performance & Credit Rating Scheme
Marketing Assistance Scheme
International Cooperation Scheme
Assistance to Training Institutions Scheme
Survey, Studies and Policy Research
ii. Schemes for Khadi& Village Industries Sector
Prime Minister’s Employment Generation Programme (PMEGP)
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
Market Development Assistance Scheme for Khadi&Polyvastra
Interest Subsidy Eligibility Certificate for Khadi and Polyvastr
Business
Entrepreneurship - II
113
Entrepreneurship
Development and
Government - II
iii. Schemes for Coir Sector
Coir VikasYojana
Coir UdyamiYojana
NOTES
Coir S & T Yojana (Plan S & T)
Recent initiatives of the Ministry
ASPIRE: A Scheme for Promoting Innovation and Rural
Entrepreneurship
Revamped Scheme of Fund for Regeneration of Traditional Industries:
SFURTI
New Initiatives under PMEGP
Revamped Coir UdyamiYojana (CUY) & Coir VikasYojana (CVY)
Technology Centre Systems Programs
Change of definition of MSMEs
National Portal for filing of EM
Quality Management System (ISO) in Ministry of MSME, KVIC and
Coir Board
District Industry Profile
Skill Mapping
Digital Initiatives: e-Office in Ministry of MSME, Aadhar based
Attendance, Social media, Mobile friendly website, Web portal for MSME naukri,
Web portal for MSME shopping
Salient features of the main schemes implemented by the Ministry of
MSME are explained below:
International Co-operation (IC) scheme:
The scheme is implemented by the Ministry of MSME with the objectives
of technology infusion and/or upgradation of Indian MSMEs, their modernization
and promotion of their exports. The scheme encompasses the following activities:
i. Deputation of MSME business delegations to other countries for exploring
new areas of technology infusion/upgradation, facilitating joint ventures,
improving the market of MSME’s products, foreign collaborations, to
visit international exhibitions/trade fairsetc;
ii. Participation by Indian MSMEs in international exhibitions, trade fairs,
and buyer-seller meets in foreign countries
iii. Participation in international exhibitions, trade fairs held in India having
international participation;
iv. Holding international conferences and seminars on topics and themes of
interest to Indian MSMEs.
114
Business
Entrepreneurship - II
Significant meetings with foreign dignitaries and delegations: M/o MSME
and its organizations like O/o DC(MSME) and NSIC hold discussions with foreign
delegations for enhancement of bilateral cooperation for the mutual benefits of
MSMEs on the two countries.
Entrepreneurship
Development and
Government - II
Market Development Assistance (MDA) on production scheme:
The scheme is to help khadi sector to reorient their activities extending
adequate emphasis towards increasing artisans’ earnings as well as ensuring quality
of khadi to customers. MDA on production is an assistance proposed to be provided
on cost of production of khadi and polyvastra by the certified khadi institutions.
The khadi institutions having valid khadi certificate and categorized as A+, A, B
and C only are eligible to avail MDA from KVIC. A fixed portion of MDA assistance
will go directly to artisans as special incentive/bonus and increase their earnings.
NOTES
Assistance to Training Institutions (ATI):
Entrepreneurship development and training is one of the key elements for
the promotion of MSMEs, especially for creation of new enterprises by first
generation entrepreneurs. In order to inculcate the entrepreneurial culture amongst
the first generation of entrepreneurs on a regular basis, as mentioned above, the
Ministry has set up three national level Entrepreneurship Development Institutes
viz; (NI-MSME) (1960) at Hyderabad, National Institute for Entrepreneurship
and Small Business Development (NIESBUD) (1983) at NOIDA (Uttar Pradesh)
and Indian Institute of Entrepreneurship (IIE) (1993) at Guwahati, as autonomous
societies. These institutes are engaged in developing training modules; undertaking
research & training; and providing consultancy services for entrepreneurship
development & promotion of MSMEs, including enhancement of their
competitiveness.
The Ministry has also been supporting the efforts of State Governments/
Union Territories, industry associations, financial institutions, technical/management
institutions, other non-government organizations (NGOs) etc for establishment of
new training institutions as well as strengthening the infrastructure of existing
training institutions.
In order to accelerate and promote entrepreneurship by providing support
for strengthening of training infrastructure as well as training programmes, the
Ministry has been implementing an important scheme viz. Assistance to Training
Institutions (ATI). The main objectives of the scheme are development to indigenous
entrepreneurship from all walks of life for developing new micro and small
enterprises, enlarging the entrepreneurial base and encouraging self-employment
in rural as well as urban areas, though providing training to first generation
entrepreneurs and assisting them in setting up of enterprises.
Under ATI scheme, assistance is provided to existing and new training
institutions for establishment of Entrepreneurship Development Institute (EDI)
and strengthening of their training infrastructure, on a matching basis. The
assistance is for creation of infrastructure. The land is to be provided by the State
Government or any other institution or by the applicant. Financial assistance is for
construction of building, purchase of training aids/equipments, office equipments,
computers and for providing other support services e.g. libraries/data bases etc.
Assistance is also provided under the scheme to following training
institutions for conducting Entrepreneurship Development Programmes (EDPs),
Entrepreneurship-cum-Skill Development Programmes (ESDPs) and Training of
Trainers (ToTs) programmes in the areas of entrepreneurship and /or skill
development-
Business
Entrepreneurship - II
115
Entrepreneurship
Development and
Government - II
NOTES
National level EDIs (including branches),
Training institutions established by Partner Institutions (PIs) of national
level EDIs,
Training/incubation Centres of NSIC,
Training-cum-Incubation Centres (TICs),
Other training institutions with proven professional competency, capacity
and experience, approved under the scheme.
Scheme of Surveys, Studies and Policy Research:
The objectives of the scheme are:
i. To collect relevant and reliable data on various aspects and features of
MSMEs engaged in manufacturing and services
ii. To study and analyse, on the basis of empirical data, the constraints and
challenges faced by MSMEs as well as opportunities available to them
iii. To use results of these surveys and analytical studies for policy research
and designing appropriate strategies and measures of intervention by
the Government to enable the enterprises to enhance their efficiency
and competitiveness
Scheme of Fund for Regeneration of Traditional Industries (SFURTI):
The Ministry of MSME is implementing a cluster-based scheme titled
‘Scheme of Fund for Regeneration of Traditional Industries (SFURTI)’ for
development of around 100 clusters in khadi, village and coir sectors to make
industries in KVI and coir sectors more productive and competitive and to increase
employment opportunities in rural areas of the country.
The objective of SFURTI is to establish a regenerated, holistic, sustainable
and replicable model of integrated cluster-based development of traditional industries
in KVI and coir sectors. This primarily means: more competitive traditional industries
with more market-driven, productive and sustained employment for the participants;
strengthened local socio-economic governance system of the industry clusters,
with the active participation by local stakeholders that can help to continue undertake
development initiatives by themselves; and building up innovated and traditional
skill, improved technologies, advanced process, market intelligence and new models
of public-private partnerships, so as to gradually replicate similar models of clusterbased regenerated traditional industries.
KVIC and Coir Board are the Nodal Agencies for implementation of the
scheme and are also responsible for holding and disbursement of funds to the
identified implementing agencies (IAs) and monitoring of the scheme under the
overall supervision of the Scheme Steering Committee (SSC). The Secretary
(MSME) is the chairman of SSC and representatives of Planning Commission,
State Bank of India; Indian Banks Association; National Bank for Agriculture and
Rural Development (NABARD) are inter-alia, members of SSC.
Implementing Age ncies (IAs) under SFURTI are non-Government
organizations (NGOs), Institutions of the Central and State Governments and semiGovernment institutions with suitable expertise to undertake cluster development.
116
Business
Entrepreneurship - II
Under this scheme, 17 reputed national level institutions with expertise in
cluster development methodology were appointed as Technical Agencies (TAs) to
provide technical support to the NAs and the IAs. The responsibilities of the TAs
also include assisting the NAs in identification of clusters, conducting training of
the Cluster Development Executives (CDEs) and other officials of the IAs and
NAs, validation of cluster action plans, monitoring and evaluation etc.
Cluster Development Executives (CDEs) are appointed by the
Implementing Agencies exclusively for each cluster and are located in the cluster
on full time basis and are responsible for implementation of the Scheme in the
assigned cluster. CDEs undergo prescribed training in cluster development
methodology organized by the NA through the TA. The responsibilities of CDE
include conducting the diagnostic study, preparation and implementation of the
annual action plans of the cluster; promoting linkages with institutions; building
local governance framework etc.
Entrepreneurship
Development and
Government - II
NOTES
Rajiv Gandhi Udyami Mitra Yojana (RGUMY):
In order to improve the success rate of EDP trainees in the establishment
of new enterprises, the Ministry had launched this scheme called as Rajiv Gandhi
UdyamiMitraYojana (a scheme for promotion and handholding of micro and small
enterprises). Under this scheme, the ‘UdyamiMitras’ are providing guidance and
assistance to potential entrepreneurs registered with them in preparation of project
report, arranging finance, selection of technology, marketing tie-ups with buyers,
installation of plant and machinery as well as obtaining various approvals, clearances
and NOCs. For providing this handholding assistance to new entrepreneurs,
‘udyamimitras’ are paid handholding charges under the scheme.The objective of
RGUMY is to provide handholding support and assistance to potential first generation
entrepreneurs, who have already successfully completed EDPs/ Skill Development
Training (SDPs)/Entrepreneurship-cum-Skill Development Training Programme
(ESDPs)/Vocational Training Programmes (VTs) through the selected lead agencies
i.e. ‘UdyamiMitras’ in the establishment and management of new enterprises, in
dealing with various procedural and legal hurdles and in completion of various
formalities required for setting up and running of the enterprise.An ‘Udyami Helpline’
(a Call Centre for MSME) with a Toll Free No. 1800-180-6763 has been set up to
provide information, support, guidance, and assistance to first generation entrepreneurs
as well as other existing entrepreneurs to guide them regarding various promotional
schemes of the Government, procedural formalities required for setting up & running
the enterprise and help them in accessing bank credit etc.
A Scheme for Promotion of Innovation, Entrepreneurship, and AgroIndustry (ASPIRE)
The scheme is designed to provide the necessary skill set for setting up
business enterprises and also to facilitate the market linkages available to
entrepreneurs and to provide hand holding for a critical period to ensure selfsustainability. The main objectives of the scheme are to: create new jobs and
reduce unemployment; promote entrepreneurship culture in India; grassroots
economic development at district level; facilitate innovative business solution for
unmet social needs; and promote innovation to further strengthen the
competitiveness of MSME sector.
The Corpus will be dedicated to the following uses: automation of
agricultural practices and activities related thereto, value addition to agriculture
and forest produce,recycling of agricultural pre/post-harvest wastages, off farm
but farm linked, animal husbandry etc, business models for aggregation and value
addition relevant for rural areas, business models for creation of local employment
in rural areas, and business models for social impact.
Check Your
Progress
4. In order to inculcate
the entrepreneurial
culture amongst the
first generation of entrepreneurs on a regular basis, the Ministry
of MSME has set up
three national level
Entrepreneurship Development Institutes.
These are:
i.————————
ii————————
iii————————
Business
Entrepreneurship - II
117
Entrepreneurship
Development and
Government - II
NOTES
7.4
Role and Functions of Office of the Development
Commissioner {O/o DC (MSME)}
Office of the Development Commissioner (MSME) was established as
Micro, Small and Medium Enterprises – Development Organisation
(MSME-DO) [earlier known as SIDO- Small Industries Development
Organisation] in 1954 on the basis of the recommendations of the Ford Foundation.
MSME –DO, headed by Additional Secretary & Development Commissioner
(MSME), being an apex body for formulating and overseeing implementation of
policies for development of MSME in the country, is playing a very positive and
constructive role for strengthening this vital sector by rendering comprehensive
services including consultancy through institutional set up of its field organizations
spread over different parts of the country. It has been working as an attached
office to the Ministry of Small Scale Industries (now Ministry of Micro, Small and
Medium Enterprises) since 6th September 2001. It has over 60 offices and 18
autonomous bodies under administrative control.These autonomous bodies include
Tool Rooms, Training Institutions and Technology Development Centres. It provides
link between the Ministry/Department and field organizations. It functions through
a network of MSME Development Institutes (MSMEDIs), Regional Testing
Centres, Footwear Training Institutes, Production Centres, Field Testing Stations
and specialized institutes.
The major functions of the Organisation are
i. Advising the Government in policy formulation for the promotion and
development of MSME units,
ii. Providing techno-economic and managerial consultancy, common facilities
and extension services to the MSME sector,
iii. Providing for technology up-gradation, modernization, quality improvement
and infrastructure,
iv. Developing human resources through training and skill up-gradation,
v. providing economic information services;
vi. Maintaining a close liaison with the Central Ministries, Planning
Commission, State Governments, Financial Institutions and other
Organisations concerned with development of MSMEs;
vii. Evolving and coordinating policies and programmes for development of
MSMEs as ancillaries to large and medium scale industries.
Over the years, MSME-DIs have served a very useful purpose as a catalyst of
growth of small enterprises through its vast network of field organizations spread over
different parts of the country. The organization has a network of 30 MSME Development
Institutes (MSME-DIs); 28 Branch MSME-DIs; 4 MSME Testing Centres (MSMETCs); 7 Field Testing Stations (MSME-TSs); 18 Autonomous Bodies – which include 10
MSME Tool Rooms (MSME-TRs); 6 MSME Technology Development Centres
(MSME-TDCs) and 2 MSME Footwear Training institutes (MSME-TDC-CFTIs). There
are also 2 departmental Training Institutes (MSME-TIs).
The details of number of Schemes for the MSE’s sector implemented by
it are given below:
118
Business
Entrepreneurship - II
MSME Development Institutes (MSME-DIs) –30 MSMEDIs and
28 branch MSME DIs have been set up in the State capitals and other industrial
cities all over the country. They provide techno-managerial consultancy assistance
and rendering necessary assistance to MSMEs by conducting various programmes
like seminars, industrial motivational campaigns, feasibility reports, area survey
reports. The main activities of these institutions are assistance/consultancy to
prospective entrepreneurs, assistance/consultancy rendered to existing units,
preparation of state industrial profiles, preparation/updation of district industrial
potential surveys, project profiles, EDPs, motivational campaigns, production index,
Management Development Programmes (MDPs), skill development programmes,
vendor development programmes for ancillarisation, quality control and up-gradation,
export promotion, ancillary development, common facility workshop/lab, preparation
of directory of specific industry, intensive technical assistance, coordination with
DICs, linkage with state government functionaries, market surveys, promotion of
handholding programme called Rajiv Gandhi UdyamiMitraYojana (RGUMY) for
micro and small enterprises, National Manufacturing Competiveness Programme
(NMCP), Cluster Development Programme, Public Procurement Policy.
Entrepreneurship
Development and
Government - II
NOTES
Besides, the institutes reorient their activities in accordance with the policy
initiatives taken by the Ministry of MSME, Government of India from time to time
for promotion and development of MSMEs.
MSME Tool Rooms (MSME-TRs): The 10 MSME Tool Rooms
(MSME-TRs) set up under the Indo-German and Indo-Danish collaborations assist
MSMEs in technology upgradation. These are located at Ludhiana, Ahmedabad,
Indore, Aurangabad, Kolkata, Bhubaneshwar, Jamshedpur, Jalandar, Hyderabad
and Guwahati. MSME-Tool Rooms provide good quality tooling through design
and production of tools, moulds, jigs and fixtures, components etc. these Tool Rooms
also provide training and consultancy in the area of tool engineering. These tool
rooms apart from conducting various short term courses and vocational training
programmes for school drop outs, also organize different long term courses such
as Post-graduate Diploma in Tool Design and CAD CAM’.
MSME-Technology Development Centres (MSME-TDCs) –
MSME-Technology Development Centres (MSME-TDCs) are product-specific
centres for addressing product specific problems and rendering technical services,
developing and upgrading technologies and manpower development and training
in respective product groups like Foundry and Forging; Electronics; Fragrance
&Flavour; Sport Shoes; Electrical Measuring Instruments and Glass etc.
MSME-TDCs include the Electronics Service & Training Centre (ESTC),
Ramnagar,Institute for Design of Electrical Measuring Instruments (IDEMI),
Mumbai and Process and Product Development Centre (PPDC), Agra. The main
objective of these TDCs is to develop human resources for meeting the requirements
for transfer of technology in respective product fields. These centres are also
running training courses as per the requirements of the industry.
MSME Testing Centres (MSME-TCs) –MSME Testing Centres
(MSME-TCs) at Chennai, Kolkata and Mumbai have facilities for quality
upgradation, training/consultancy in testing, quality control, quality management,
process quality control systems etc.
Office of DC(MSME) is operating four MSME-Testing Centres (formerly
RTCs) located at New Delhi, Mumbai, Chennai, and Kolkata. MSME-Testing
Centres provide testing and calibration facilities to industries in general and Micro,
Small & Medium Enterprises in particular for raw materials, semi-finished and
Business
Entrepreneurship - II
119
Entrepreneurship
Development and
Government - II
NOTES
finished products, manufactured by them. The Centres are equipped with stateof-the-art indigenous and imported equipments in the disciplines of chemical,
mechanical, metallurgical and electrical engineering to undertake performance
test, type test, and acceptance test of semi-finished, finished products etc. The
Centres also undertake calibration works for Measuring Instruments for equipments
conforming to international standards. These centres are accredited by
internationally recognized National Accreditation Board of Testing and Calibration
Laboratories (NABL) certification as per ISO (17025).
Field Testing Stations (MSME-TSs)- The 7 Field Testing Stations
(MSME-TSs) provide focused testing services in the cities of Bangalore, Bhopal,
Ettumanur, Jaipur, Hyderabad, Kolhapur and Puducherry which have significant
concentration of MSMEs. These testing stations extend facilities for testing of various
products viz. chemicals, dye-stuffs, lamps, rubber products, castings and forgings,
paints and varnishes, domestic electrical appliances, general engineering etc.
These Testing Stations in fact act as extension of the MSME-TCs thereby
serving the needs of the industries situated in far-flung areas. The MSME-Testing
Stations are regularly modernizing/upgrading their facilities to cater to the need of
industries in general and Micro, Small & Medium sector in particular, situated in
their locality.
MSME-Technology Development Centres (Central Footwear
Training Institutes) -MSME- Technology Development Centres (Central
Footwear Training Institutes) (MSME-TDC-CFTI) at Agra and Chennai are
engaged in developing designs and development of footwear and also providing
training for skill development footwear industry.
Check Your
Progress
5. Office of the Development Commissioner (MSME) was
established as ———
- in 1954
6. MSME-DO stands
for ———
7. MSME-DO was
previously known as
——
8. —— is an apex
body for formulating
and overseeing implementation of policies
for development of
MSME in the country
120
Business
Entrepreneurship - II
MSME-Training-cum-Product Development Centres (TPDCs)Four Training-cum-Product Development Centres (TPDCs) are set up for agroand
food processing industries in the campus of MSME-DI at Ludhiana, Kanpur, Indore
and Guwahati.
7.5
Office of DC(MSME) Schemes
Office of Development Commissioner operates a number of schemes for
MSME sector. These are:
Credit Linked Capital Subsidy Scheme(CLCSS): The Ministry of MSME
is operating a scheme namely Credit Linked Capital Subsidy Scheme (CLCSS) for
technology upgradation of MSEs.The Scheme aims at facilitating technology upgradation
of micro and small enterprises by providing 15% capital subsidy (limited to a maximum
of Rs. 15.00 lakh) for purchase of plant and machinery.
Credit Guarantee Fund Scheme for Micro and Small Enterprises:
The Government launched this scheme with the objective of making credit available to
MSEs, particularly micro enterprises for loans up to Rs. 100 lakh without collateral/
third party guarantees. The scheme is being operated by the Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE) set up jointly by the Government of
India and Small Industries Development Bank of India (SIDBI).
Scheme of Micro Finance Programme: The Ministry has been operating
a scheme of Micro Finance Programme which has been tied up with the existing
Micro Credit Scheme of SIDBI. Under the scheme, the Government of India
provides funds to SIDBI under ‘Portfolio Risk Fund’ which is utilized for security
deposit requirements of loan from the MFIs/NGOs.
Micro and Small Enterprises Cluster Development Programme
(MSE-CDP) – This is being implemented for holistic and integrated development
of micro and small enterprises in clusters through soft interventions (such as
diagnostic study, capacity building, marketing development, export promotion, skill
development, technology upgradation, organizing workshops, seminars, training,
study visits, exposure visits etc.), hard interventions (setting up of Common facility
Centres), and infrastructure upgradation (create/upgrade infrastructural facilities
in the new/existing industrial areas/clusters of MSEs).
Entrepreneurship
Development and
Government - II
NOTES
National Manufacturing Competitiveness Programme (NMCP) –
It is the nodal programme of the Government of India to develop global
competitiveness among Indian MSMEs, conceptualized by National Manufacturing
Competitiveness Council (NMCC). There are eight components under the NMCP
targeted at enhancing the entire value chain of the MSME sector: scheme for
providing support for entrepreneurial and managerial development of SMEs through
incubators; scheme for building awareness on Intellectual Property Rights (IPRs)
for MSMEs; Lean Manufacturing Competitiveness scheme for MSMEs; enabling
manufacturing sector to be competitive through Quality Management Standards
(QMS) and Quality Technology Tools (QTT); technology and quality upgradation
support to MSMEs; marketing assistance and technology upgradation scheme for
MSMEs; design clinic scheme for MSMEs; promotion of information and
communication tools (ICT) in MSME sector.
ISO-9000/ISO-14001/HACCP Certification Reimbursement
Scheme: The scheme envisages one time reimbursement of charges for acquiring
ISO 9000/14001/HACCP certification in Micro and Small Enterprises (MSEs).
Training programmes: MSME-DIs are conducting variety of training
programmes for first generation potential entrepreneurs, existing industrial workers
and supervisory personnel such as Industrial Motivation campaigns,
Entrepreneurship Development Programmes, Entrepreneurship cum Skill
Development Programmes, Management Development Programmes, Officers’
Training Programme within the O/o DC (MSME). To educate MSE entrepreneurs
about scientific packaging techniques, latest design of packaging technology,
improve their packaging standards and to highlight the importance of packaging in
marketing; Office of DC(MSME) has been organizing specialized training
programmes on packaging for exports for MSE units through field offices i.e.
MSME-DIs in collaboration with Indian Institute of Packaging (IIP), Mumbai.
Vendor Development Programme (VDPs) for ancillarisation:VDPs
are being organized by MSME-DIs in every corner of the country to provide
common platform for MSEs as well as large public sector institutions to interact
with each other with a view to identifying emerging demands of buyer organizations,
while simultaneously providing an opportunity for displaying capabilities of MSEs
and their industrial ventures.VDPs are also aimed to create awareness on Public
Procurement Policy to make SME units understand the requirements of goods/
services for various CPSUs and to display the strength of SME units in the form
of exhibition. An exhibition is also organized for displaying the products of MSMEs
(sellers) and requirements of large scale organizations (buyers). Souvenirs are
published containing details of participants after every NCDP.
SSI-MDA Scheme: Office of DC (MSME) has been providing assistance
under Marketing Development Assistance Scheme to MSEs for getting exposure
to international markets and exploring possibility of export of their products by
exhibiting them through participation in international trade fairs under MSME India
stall. The scheme offers funding upto 75% in respect of to and fro air fare for
Business
Entrepreneurship - II
121
Entrepreneurship
Development and
Government - II
NOTES
participation by MSME entrepreneurs in overseas fairs/trade delegations. The
scheme also provides for funding for producing publicity material (upto 25% of
costs) sector specific studies (uptoRs. 2 lakhs) and for contesting anti-dumping
cases (50% up to Rs. 1 lakh) for individual MSMEs and associations.
Financial assistance for using Global standards (GSI) in bar-coding: Office
of DC (MSME) provides financial assistance for reimbursement of 75% of onetime registration fee (under SSI-MDA scheme) w.e.f.1st Jan. 2002 and 75% of
annual recurring fee for first three years (under NMCP scheme) w.e.f.1st Apr.
2007 paid by MSEs to GSI India for using of Bar coding.
Purchase and price preference policy- this is administered through Single
Point Registration Scheme of NSIC. Under this, 358 items are reserved for exclusive
purchase from MSMEs by Central Government. Other facilities include tender
documents free of cost, exemption from earnest money and security deposit and
15% price preference in central government purchases for individual MSMEs.
SENET (Small Enterprise Network): The objective of the project was to
set up an Electronic Information and Resource Centre Network to meet the information
resource requirements of small enterprise sector. The activities broadly covered under
the SENET XI plan are maintenance of AMC of computers, servers, printers, UPS,
networking requirements, facility management, lease line/broad band connection etc,
upgradation/replacement of computers of hardware available at headquarter and its
30 field MSME-DIs; maintenance of website of Office of DC(MSME), website of 30
MSME-DIs providing connectivity through leased lines/broadband.
National Awards: The Ministry of MSMEs, with a view to recognize the
efforts and contribution of MSMEs, gives national awards annually to selected
entrepreneurs and enterprises under the scheme of national awards.The awards
are given to MSMEs for outstanding performance in entrepreneurship, research
and development, innovation, lean manufacturing techniques and quality products.
Special awards are given to honour one outstanding woman entrepreneur, one
outstanding entrepreneur from SC/ST community and one entrepreneur from North
Eastern region. National awards are also given to banks for excellence in MSE
lending and excellence in lending to micro enterprises. Under the scheme, an
exhibition is also organized for MSMEs during the India International Trade Fair
(IITF) at Pragatimaidan to exhibit products manufactured by MSMEs/national
awardees. National awards form MSEs and for medium enterprises are given for
encouraging in house research and development efforts.
Advertising and publicity is undertaken by the office of the DC(MSME) for
creating awareness amongst people through print and electronic media about the policies,
programmes and activities of the Ministry of MSME for the development of MSMEs.
Laghu Udyog Samachar:LaghuUdyogSamachar, a monthly journal in
Hindi and English of MSME, is published by the Office of the DC(MSME) and
distributed by the Controller of Publications to disseminate updated information
for the benefit of prospective and existing entrepreneurs.
122
Business
Entrepreneurship - II
The Information and Facilitation Counter (IFC): The Information
and Facilitation Counter (IFC)provides speedy and easy access to information to
public on the services and activities of the Ministry of MSME and its organizations.
Copies of important brochures, pamphlets, books etc are also made available to
entrepreneurs by IFC. Other activities of IFC include dissemination of information
on technical schemes, project reports and details of various programmes
implemented by the M/o MSMS and Office of the DC(MSME); making available
information relating to policies concerning MSMEs and schemes of various State
Governments for promotion of MSMEs; providing information about filling of
Memorandum and other different provisions of the MEMED Act, 2006 and supplying
information about credit policies of the government, statistics related to MSMEs,
technical and marketing aspects concerning MSMEs and reservation/de-reservation
in MSMEs etc.
Entrepreneurship
Development and
Government - II
NOTES
Modernization of MSME libraries: Office of the DC(MSME) is
maintaining libraries at its headquarters at Nirman Bhavan and its entire field
institutes. The libraries are maintaining technical books, journals, reports, project
profiles and statistical surveys and copies of other related government publications
etc. The MSME libraries are being equipped with computers, Photostat machines,
internet connectivity etc.
Collection of Statistics of MSMEs:The Statistics and Data Bank Division
of the O/o DC(MSME) collects, compiles and disseminates statistical information on
various economic parameters like number of MSMEs, employment, fixed investment
and production in MSMEs under the centrally sponsored scheme of ‘collection of
statistics’. Conduct of census, sample survey, collection of index of industrial production
data, wholesale price index data and updation of frame (details of enterprises registered
and/or entrepreneurs memorandum filed) are covered under the scheme.
The role of the M/o MSME is to assist the States/Union Territories in
their efforts to promote growth and development of MSMEs. The main focus of
the schemes/programmes undertaken by the organizations of the Ministry is to
provide/facilitate a wide range of services and programmes required for accelerating
the development of MSMEs. There are several schemes/programmes wherein
women are provided extra benefits/concessions/assistance, M/o MSME implements
two specific schemes for women i.e. the scheme of TREAD and Mahila Coir
Yojana, the details of which are explained below:
Trade Related Entrepreneurship Assistance and Development
(TREAD) Scheme for Women:This scheme envisages economic empowerment
of women through development of their entrepreneurial skills in non-farm activities.
The three major components of the scheme are:
i. Government’s grant up to 30% of the total project cost to the NonGovernment Organisations (NGOs) for promoting entrepreneurship
among women. The remaining 70% of the project cost is financed by
the lending agency as loan for undertaking activities as envisaged in the
project
ii. Government’s grant up to Rs. 1 lakh per programme to training institutions/
NGOs for imparting training to women entrepreneurs subject to such
institutions/NGOs contributing their share to extent of minimum 25% of
the GOI grant and 10% in case of NER.
iii. Need-based Government’s grants up to Rs. 5 lakh to National
Entrepreneurship Development Institutions and any other institutions of
repute for undertaking field surveys, research studies, evaluation studies,
designing of training modules etc.
While implementing various schemes of this Ministry, efforts are made to
ensure adequate participation of women in them.
Mahila Coir Yojana:‘Mahila Coir Yojana’ is the first women oriented
self-employment scheme launched in the coir industry during 1994 which provides
self-employment opportunities to rural women artisans in regions producing coir
Business
Entrepreneurship - II
123
Entrepreneurship
Development and
Government - II
NOTES
fibre. The Scheme envisages distribution of motorized ratts for spinning coir yarn
to women artisans after giving training. Women spinners are trained for two months
in spinning coir yarn on motorized ratt at the Coir Board’s training centres.
Prime Minister’s Employment Generation Programme and Women:
Relaxation is provided to women beneficiaries under PMEGP launched in 200809 as follows:
i. For urban women beneficiaries, margin subsidy is provided at the rate of
25% of the project cost while it is 35% for women in rural areas
ii. In case of women entrepreneurs, beneficiary’s contribution is 5% of the
project cost while in case of others, it is 10% of the project cost
Check Your
Progress
9. ———, a monthly
journal in Hindi and
English of MSME, is
published by the
Office of the DC
(MSME)
iii. Bank finance in the form of loan is 95% of the project cost in case of
women and other weaker section borrowers and 90 per cent of the
project cost in case of the others
7.6
Summary
The primary responsibility of promotion and development of MSMEs is of
the State Governments. However, the Government of India, supplements the efforts
of the State Governments through various initiatives.
Ministry of MSME promote growth and development of MSME sector,
including khadi, village and coir industries in co-operation with concerned industries/
Departments, State governments and other stakeholders through providing support
to existing enterprises and encouraging new enterprise creation. Ministry of MSME
designs policies, promotes/facilitates programmes, projects and schemes and
monitors their implementation for assisting MSMEs and help them scale up.
M/o MSME has two divisions called Small and Medium Enterprises (SME)
Division and Agro and Rural Industry (ARI) Division
The implementation of policies and various programmes and schemes for
providing support services to MSMEs are undertake through the following
organisations of the Ministry: Office of Development Commissioner (MSME),
National Small Industries Corporation (NSIC), National Institute for Micro, Small,
and Medium Enterprises (NI-MSME), National Institute for Entrepreneurship and
Small Business Development (NIESBUD), Indian Institute of Entrepreneurship
(IIE), Khadi and Village Industries Commission (KVIC)., Coir Board and Mahatma
Gandhi Institute for Rural Industrialization (MGIRI).
124
Business
Entrepreneurship - II
The recent initiatives of M/o MSME are: Promulgation of MSMED Act,
2006; Khadi and Village Industries Commission Act, 1956; Prime Minister’s
Employment Generation Programme; Procurement Policy for MSEs; Task Force
on MSEs; 4th All India Census of MSMEs; Enhanced Credit Flow to the MSE
sector; Credit Guarantee scheme; National Manufacturing Competitiveness
Programme; Micrro& Small Enterprises Cluster Development Programme;
Technology Centre Systems Programme; Credit Linked Capital Subsidy Scheme;
Entrepreneurship and Skill Development; Rajiv Gandhi UdyamiMitraYojana;
Performance and Credit Rating Scheme; National Small Industries Corporation;
Khadi Reform Development Programme; Market Development Assistance
Scheme; Workshed Scheme for Khadi Artisans; Scheme for Enhancing Productivity
and Competitiveness of Khadi Industry and Artisans; Scheme for Rejuvenation,
Modernisation and Technological Upgradation of Coir Industry; Scheme of Fund
for Regeneration of Traditional Industries (SFURTI); Mahatma Gandhi Institute
for Rural Industrialization (MGIRI); National Board for MSMEs; Announcements
for MSME Sector in Union Budget 2013-14; Launch of MSME Virtual Clusters;
Inter-Ministerial Committee for Accelerating Manufacturing in MSME.
Ministry of MSME implements two specific schemes for women – Trade
Related Entrepreneurship Assistance and Development (TREAD) scheme for
women and Mahila Coir Yojana.
Entrepreneurship
Development and
Government - II
NOTES
Office of the Development Commissioner (MSME) was established as
MSME-Development Organisation. It has been working as an attached office to
the M/o MSME. It functions through a network of MSME Development Institutes
(MSMEDIs), Regional Testing Centres, Footwear Training Institutes, Production
Centres, Field Testing Stations, and specialized institutes.
Office of Development Commissioner operates a number of schemes for
MSME sector such as Credit Linked Capital Subsidy Scheme, Credit Guarantee
Fund Scheme for Micro and Small Enterprises, Scheme of Micro Finance
Programme, Micro and Small Enterprises Cluster Development Programme,
National Manufacturing Competitiveness Programme, ISO-9000/IS)-14001/
HACCP Certification Reimbursement Scheme, Training Programmes,Vendor
Development Programme for Ancillarisation, SSI-MDA scheme, SENET (Small
Enterprise Network). National awards, advertising and publicity,
LaghuUdyogSamachar, Information and Facilitation Counter, Modernisation of
MSME libraries, collection of Statistic of MSMEs.
7.7
Key Terms
 Microfinance – A source of financial services for entrepreneurs and
small businesses lacking access to banking and related services
 Non-governmental organisation – An organization that is neither a
part of a government nor a conventional for-profit business. NGOs are
usually set up by ordinary citizens. NGOs may be funded by governments,
foundations, businesses or private persons
 Cluster: A group of enterprises located within an identifiable and as far
as practicable, contiguous area, producing same/similar services
7.8
Questions and Exercises
Questions
1. Discuss the role of MSME-DO as a nodal agency in promoting MSMEs in India.
2. Explain the functioning of MSME-DIs.
3. Present an account of various schemes of the Ministry of MSME.
4. Describe the role of the Ministry of MSME for the promotion and
development of MSMSs.
5. Explain the functioning of the office of Development Commissioner (MSME).
Business
Entrepreneurship - II
125
Entrepreneurship
Development and
Government - II
Exercise
1. Meet an entrepreneur and discuss him/her about various schemes of
Ministry of MSME.
NOTES
Multiple Choice Questions
1. The SME Division is allocated the work of administration, vigilance and
administrative supervision of ————————————
i.
NSIC
ii.
Coir Board
iii.
KVIC
iv.
MGIRI
2. The ARI Division looks after the administration of ————————
i.
NIESBUD
ii.
MGIRI
iii.
NIMSME
iv.
NSIC
3. —————————————————, a monthly journal in Hindi
and English of MSME, is published by the Office of the DC (MSME)
i.
LaghuUdyogSamachar
ii.
Udyojak
iii.
Udyogvarta
iv.
SEDME
4. Ministry of MSME implements the following scheme for women
i.
TREAD scheme
ii.
Mahila coir Yojana
iii.
Both i and ii
iv.
None of the above
5. ———————————————promote growth and development
of MSME sector, including Khadi, Village and Coir industries.
126
Business
Entrepreneurship - II
i.
Ministry of Micro, Small and Medium Enterprises
ii.
Ministry of Small Scale Enterprises
iii.
Ministry of Agro and Rural Industries
iv.
All the above
Answers
Check Your Progress
1. Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries
2. i.
b
ii.
d
iii.
a
iv.
c
Entrepreneurship
Development and
Government - II
NOTES
3. Small & Medium Enterprises (SME) Division and Agro & Rural Industry
(ARI) Division
4. National Institute for Micro, Small and Medium Enterprises (NI-MSME),
National Institute for Entrepreneurship and Small Business Development
(NIESBUD), Indian Institute of Entrepreneurship (IIE)
5. Micro, Small and Medium Enterprises – Development Organisation (MSMEDO) [earlier known as SIDO- Small Industries Development Organisation]
6. Micro, Small and Medium Enterprises Development Organization
7. SIDO- Small Industries Development Organisation
8. Micro, Small and Medium Enterprises – Development Organisation
(MSME-DO)
9. Laghu Udyog Samachar
Multiple Choice Questions
1. i
2. ii
3. i
4. iii
5. i
7.9
Further Reading
http://dcmsme.gov.in/ANNUALREPORT-MSME-2013-14P.pdf
www.dcmsme.gov.in/AnnualReport_2012-13.pdf
www.nimsme.org/ranzo/uploads/articles/MSME_Scheme
www.npcindia.gov.in
www.sphconsultants.com/icsi
www.wasmeinfor.org
www.msme.gov.in
Business
Entrepreneurship - II
127
Intrepreneurship
Development and
Govermnet - III
NOTES
UNIT 8: ENTREPRENEURSHIP
DEVELOPMENT AND
GOVERNMENT - III
Structure
8.0 Introduction
8.1 Unit Objectives
8.2 Policy Initiatives of the Government
8.3 Summary
8.4 Key Terms
8.5 Questions and Exercise
8.6 Further Reading
Appendix I
Appendix II
8.0
Introduction
Entrepreneurs as creators of enterprises and small businesses are the prime
movers of the economy. We have a dedicated Ministry for Micro, Small and
Medium Enterprises (MSMEs) which is consistently pronouncing policies, schemes
and programmes for entrepreneurship culture creation. Other ministries also help
and support entrepreneurs through various initiatives with reference to skill
development programmes, technology support, marketing assistance, consultancy,
research, credit flow etc. In this unit, policies, programmes and schemes dealing
with development of entrepreneurship and promotion of MSMEs of various
ministries/government departments are explained in detail.
8.1
Unit Objectives
After going through this unit, you will be able to
 Be familiar with the role of Government in promoting entrepreneurship
 Give an account of government policies and schemes which are meant
for support of MSMEs and development of entrepreneurship
 Know about the support of Ministry of MSME, various other Ministries
and Government departments for entrepreneurship development
128
Business
Entrepreneurship - II
8.2
Policy Initiatives of the Government
Implementation of Micro, Small, and Medium Enterprises Development
Act, 2006
Intrepreneurship
Development and
Govermnet - III
NOTES
For the sake of supporting entrepreneurship, Government of India has come
up with MSME Development Act 2006 with effect from 2nd October 2006.
Subsequently both the Central and State Governments have taken effective steps
towards implementation of the Act. While the Central Government has framed a
number of Rules and issued Notifications in respect of the Act, different State
Governments have also issued notifications under the Act as detailed below:
i. Notification of Authority for receiving Memoranda for Micro and Small
Enterprises (MSEs): All States & UTs have issued the necessary
Notifications nominating the authority for receiving Entrepreneurs
Memorandum for MSEs.
ii. Notification of Rules of MSE-Facilitation Council (MSEFC): All States
& UTs with the exception of Arunachal Pradesh, Assam and Manipur
have issued Notifications providing for Rules of MSEFC.
iii. Notification of Constitution of MSEFC: All States & UTs except Sikkim
have issued the Notifications for constitution of MSEDC.
The MSMED Act was notified in 2006 to address policy issues affecting
MSMEs as well as the coverage and investment ceiling of the sector. The act
seeks to facilitate the development of these enterprises as also enhance their
competitiveness. It provides the first ever legal framework for recognition of the
concept of ‘enterprise’ which comprises both manufacturing and service entities.
It defines medium enterprises for the first time and seeks to integrate the three
tiers of these enterprises, namely, micro, small and medium. The Act also provides
for a statutory consultative mechanism at the national level with balanced
representation of all sections of stakeholders, particularly the three classes of
enterprises and with a wide range of advisory functions. Establishment of specific
funds for the promotion, development and enhancing competitiveness of these
enterprises, notification of schemes/programmes for this purpose, progressive credit
policies and practices, preference in Government procurements to products and
services of the micro and small enterprises, more effective mechanisms for
mitigating the problems of delayed payments to micro and small enterprises and
assurance of a scheme for easing the closure of business by these enterprises, are
some of the other features of the Act.
Definitions of Micro, Small and Medium Enterprises: The definition of micro,
small and medium industry according to MSME Development Act 2006is given below:
Check Your
Progress
1. For the sake of
s u p p o r t i n g
e n t r e p r en e u r s h i p ,
Government of India
has come up with
MSME Development
Act 2006 with effect
from ——
In accordance with the provision of Micro, Small and Medium Enterprises
Development Act, 2006 the Micro, Small and Medium enterprises (MSME) are
classified in two classes:
Manufacturing enterprises: the enterprises engaged in the manufacture or
production of goods pertaining to any industry specified in the first schedule to the
Industries (Development and regulation) Act, 1951. The manufacturing enterprises
are defined in terms of investment in plant and machinery.
Service enterprises: the enterprises engaged in providing and rendering of
services and defined in terms of investment in equipment.
Business
Entrepreneurship - II
129
Intrepreneurship
Development and
Govermnet - III
NOTES
Manufacturing sector
Enterprises
Investment in plant and machinery
Micro enterprises
Does not exceed twenty five lakh rupees
Small enterprises
More than twenty five lakh rupees but
does not exceed five crore rupees
Medium enterprises
More than five crore rupees but does
not exceed ten crore rupees
Service sector
Enterprises
Investment in equipment
Micro enterprises
Does not exceed ten lakh rupees
Small enterprise
More than ten lakh rupees but does not
exceed two crore rupees
Medium enterprises
More than two crore rupees but does
not exceed five crore rupees
The limit for investment in plant and machinery/equipment for manufacturing/
service enterprises, as notified, vide S.O. 1642 (E) dtd.29-09-200 are as under
The term ‘village industries’ has been redefined in amended KVIC Act,
1956 as ‘any industry located in a rural area which produces any goods or renders
any service with or without the use of power and in which the fixed capital
investment per head of artisan or worker does not exceed Rs. one lakh (Rs. one
lakh and fifty thousand in case of village industry located in a hilly area) or such
other sum as may be, by notification in the Official Gazette, be specified from time
to time by the Central Government”.
Check Your
Progress
Reservation/de-reservation of products for manufacture in the Micro and
Small Enterprise sector:
2. At present, only —
items are reserved for
exclusive manufacture
in micro and small
enterprise sector.
The Policy of Reservation of Products for exclusive manufacture in SSI
(now MSEs) was initiated in 1967 with the objective of achieving socio-economic
development, through development and promotion of small units all over the country.
This was expected to result in countering the challenges of regional industrial
imbalances, employment generation through self-employment ventures, increased
productivity etc. however, with the gradual opening of the economy, de-reservation
had to be resorted to for providing opportunities to MSEs for technological upgradation; promotion of exports and achieving economies of scale. Accordingly,
the MSEs are being encouraged to modernize and enhance their competitiveness
for facing the challenges arising out of liberalization and globalization of the economy.
The items are reserved/de-reserved in accordance with section 29(B) of
the Industries (Development & Regulation) Act, 1951, which, inter-alia, provides
for the constitution of an Advisory Committee headed by the Secretary (MSME).
The Advisory Committee makes its recommendations for reservation/dereservation in light of the factors like economies of scale; level of employment,
possibility of encouraging and diffusing entrepreneurship in industry; prevention of
concentration of economic power and any other factor which the Committee may
think appropriate. At present, only 20 items are reserved for exclusive manufacture
130
Business
Entrepreneurship - II
in micro and small enterprise sector. A list of items reserved for exclusive
manufacture in micro and small enterprises is at annexure I.
Intrepreneurship
Development and
Govermnet - III
National Manufacturing Competitiveness Programme (NMCP)
Providing competitive edge to the units in the MSME sector in the global
environment has been one of the important cornerstones of the policies being
pursued by the Government for sustenance of the sector. With a view to build
capacity of Indian micro, small and medium manufacturing enterprises for
overcoming competition in the global markets and facing challenges being posed
by entry of the multinationals in domestic markets, the M/o MSME is implementing
National Manufacturing Competitiveness Programme (NMCP). The objective of
NMCP is to ensure healthy growth of the MSME manufacturing sector. There
are eight components of NMCP which are:
NOTES
i. Support for Entrepreneurial and Managerial Development of SMEs
through Incubator (INCUBATOR)
ii. Building Awareness on Intellectual Property Rights (IPRs)
iii. National Programme for Application of Lean Manufacturing (LEAN)
iv. Enabling Manufacturing sector to be competitive through Quality
Management Standards and Quality Technology Tools (QMS/QTT)
v. Technology Up-gradation and Quality Certificate Support to SMEs
(TEQUP)
vi. Marketing assistance for SMEs and Technology Up-gradation activities
(MARKETING)
vii. Design Clinic Scheme to bring Design expertise to the manufacturing
sector (DESIGN)
viii. Promotion of ICT in Indian manufacturing sector (ICT)
ix. Mini Tool Room (discontinued)
x. Bar Code (merged with MDA scheme)
Prime Minister’s Task Force on MSMEs
The Prime Minister had announced setting up of the Task Force in August
2009 when representatives of prominent MSME associations met him to highlight
their issues and concerns. Accordingly, the Task Force was constituted on 2nd
September 2009 to reflect on the issues raised by the associations and formulate
an agenda for action after discussions with all stakeholders. Its members included
Member, Planning Commission; Secretaries of concerned Government
Departments; Deputy Governor, Reserve Bank of India (RBI); Chairman and
Managing Director, Small Industries Development Bank of India (SIDBI) and
representatives of associations.
The implementation of detailed recommendations, over 6 major thematic
areas including credit, marketing, labour, rehabilitation and exit policy, infrastructure,
technology, skill development and taxation, is being monitored periodically by the
Steering Group constituted under the chairmanship of Principal Secretary to the
Prime Minister. Action has been completed on a substantial number of
recommendations. Further, a Council on MSMEs under the chairmanship of Hon’ble
Prime Minister had been set up to lay down broad policy guidelines and review the
development of MSME sector.
Check Your
Progress
1. Ministry of ———
and Ministry of ——
merged to form Ministry of Micro, Small
and Medium enterprises (MSME)
2. Match the pairs:
“A”
i. NIESBUD
ii. MGIRI
iii. NIMSME
iv. IIE
“B”
a. Hyderabad
b. Noida
c. Guwahati
d. Wardha
3. M/o MSME has
two Divisions called —
Business
Entrepreneurship - II
131
Intrepreneurship
Development and
Govermnet - III
NOTES
Public Procurement Policy for goods produced and services rendered by
MSEs
The Public Procurement Policy for MSMEs, 2012 mandates that every
Central Ministry/Department/Public Sector Undertaking shall set an annual goal
of procurement from MSMEs from 2012-13 and onwards with the objective of
achieving an overall procurement of minimum of 20 % of total annual purchases
of products produced and services rendered by MSEs, in a period of three years.
Policy has also earmarked a sub target of 4% out of the 20%, from MSMEs
owned by SC/ST enterprises. Further, MSEs shall be facilitated by providing them
tender sets free of cost and exempting MSEs from payment of earnest money to
reduce transaction cost of their business.
Every Central Government Ministry/Department/PSU shall report the goals
set with respect to procurement to be met from MSEs and the achievement made
thereto in their annual reports. They shall also prepare annual procurement plan
for purchases and upload the same on their official website so that MSEs may get
advance information about requirement of procurement agencies. All the Chief
Ministers of State Governments have also been advised to formulate similar policy
for MSEs in their states. A grievance cell has been constituted for redressing of
the grievances for MSEs.
The Policy will help to promote MSEs by improving their market access
and competitiveness through increased participation by MSEs in Government
purchases and encouraging linkages between MSEs and large enterprises.
Government Purchase and Price Preference Policy for MSMEs
In order to provide assistance and support to Micro and Small Enterprises
(MSEs) for marketing their products, under the present Government Purchase
and Price Preference Policy for MSEs, Government of India has been extending
various facilities to the MSEs registered with National Small Industries Corporation
(NSIC) under its Single Point Registration Scheme:
i. Issue of tender sets free of cost
ii. Exemption from payment of Earnest Money
iii. Waiver of Security Deposit up to the Monetary Limit for which at the
unit is registered and
iv. Price preference up to 15% over the quotation of large-scale units
In addition to the above facilities, 358 items are also reserved for exclusive
purchase from MSE sector.
Market Development Assistance Scheme (SSI-MDA)
The scheme offers funding for:
i. Participation by manufacturing small and micro enterprises in international
trade fairs/ exhibitions under MSME India stall
ii. Sector specific market studies by Industry associations/ export promotion
council/ federation of Indian export organization
iii. Initiating/ contesting anti-dumping cases by SSI associations and
132
Business
Entrepreneurship - II
iv. Reimbursement of 75% of one time registration fee and 75% of annual
fee paid to GSI (formerly EAN India) by small and micro units for the
first three years or barcode.
The objectives of the scheme are to encourage small and micro exporters in
their efforts at tapping and developing overseas market; to increase participation of
representatives of small/ micro manufacturing enterprises under MSME India stall at
International trade fairs/ exhibitions; to enhance export from small/ micro manufacturing
enterprises; and to popularize the adoption of barcoding on a large scale.
Intrepreneurship
Development and
Govermnet - III
NOTES
Prime Minister’s Employment Generation Programme (PMEGP)
A new scheme “Prime Minister’s Employment Generation Programme
(PMEGP)’ has been launched in 2008-09 with the merging of the erstwhile Prime
Minister RojgarYojana (PMRY) and Rural Employment Generation Programme
(REGP) schemes of the Ministry. The guidelines of the Scheme are available on
the website of the Ministry of MSME (www.pmegp.in; www.org.in).
The main objectives of PMEGP are:
 To generate employment opportunities in rural as well as urban areas
 To bring together widely dispersed traditional artisans/ rural and urban
unemployed youth and give them self-employment opportunities to the
extent possible at the place;
 To provide continuous and sustainable employment to a large segment
of traditional and prospective artisans and rural and urban unemployed
youth; and
 To increase the wage earning capacity of artisans
The salient features of the scheme are as follows:
Any individual above 18 years of age, is eligible
No income ceiling has been prescribed for assistance
For setting up of projects costing above Rs. 10 lakh in the manufacturing
sector and above Rs. 5 lakh in the business/service sector, the beneficiaries should
possess educational qualification of having passed at least VIII standard
Assistance under the scheme is available only for new projects sanctioned
Self Help Groups (SHGs) including those belonging to BPL are also eligible
for assistance provided they have not availed benefits under any other scheme
The borrower is required to bring in own contribution of 10 per cent of the
project cost. In the case of beneficiaries belonging to SC/ST and borrowers from other
weaker sections, etc, the beneficiary’s contribution is 5 per cent of the project cost.
Banks will sanction loan for the balance of the project cost (90% or 95% as
the case may be). After sanction of the credit by the bank and after the beneficiary
has undergone EDP training, eligible amount of margin money will be kept in term
deposit for three years in the account of the borrower at the financing bank branch,
which will be credited to the borrower’s loan account after a period of two years
from the date of first disbursement of loan
The permissible margin money assistance is kept at a higher level as
compared PMRY and REGP.
Business
Entrepreneurship - II
133
Intrepreneurship
Development and
Govermnet - III
NOTES
Check Your
Progress
3.A new scheme ——
has been launched
with the merging of the
erstwhile Prime Minister RojgarYojana
(PMRY) and Rural
Employment Generation
Programme
(REGP) schemes of
the Ministry.
4. The SEZ Act 2005
envisages key role for
the —— (State/Central) Government(s) in
export promotion and
creation of related infrastructure.
5. What are the objectives of the SEZ Act.?
The following agencies are involved in implementation of PMEGP:
At national level, KVIC is the single Nodal Agency for implementation of
PMEGP. At the State level, the Scheme is implemented through State Directorates
of KVIC; State Khadi and Village Industries Boards (KVIBs) and District
Industries Centres of State Governments.
Besides, finance is arranged through the following institutions:
27 public sector banks, all regional rural banks, co-operative banks approved
by State Level Task Force Committee headed by the Principal Secretary
(Industries/Commissioner (Industries), Private Sector Scheduled Commercial Banks
approved by Principal Secretary (Industries)/Commissioner (Industries), Small
Industries Development Bank of India (SIDBI).
Special Economic Zones in India
India was one of the first in Asia to recognize the effectiveness of the
Export Processing Zone (EPZ) model in promoting exports, with Asia’s first EPZ
set up in Kandla in 1965. With a view to overcome the shortcomings experienced
on account of the multiplicity of controls and clearances; absence of world-class
infrastructure, and an unstable fiscal regime and with a view to attract larger
foreign investments in India, the Special Economic Zones (SEZs) Policy was
announced in April 2000. The SEZ Act, 2005, supported by SEZ Rules, came into
effect on 19th Feb, 2006, providing for single window clearance on matters relating
to central as well as state governments.The SEZ Act 2005 envisages key role for
the State Governments in export promotion and creation of related infrastructure.
The main objectives of the SEZ Act are: generation of economic activity;
promotion of exports of goods and services; promotion of investment from domestic
and foreign sources; creation of employment opportunities; development of
infrastructure facilities.
The SEZ Rules provide for:
Simplified procedures for development, operation, and maintenance of the
Special Economic Zone and for setting up and conducting business in SEZs;
Single window clearance for setting up of an SEZ;
Single window clearance for setting up a unit in a Special Economic Zone;
Simplified compliance procedures and documentation with an emphasis on
self-certification
Industrial Estate Programme
An industrial estate is a place where the required facilities and factory
accommodation are provided by the government to the entrepreneurs to establish
their industries..The main objectives of industrial estate are:
i. To provide infrastructure and accommodation facilities.
ii. To encourage the development of small-scale industries.
iii. To decentralize industries to the rural and backward areas
iv. To encourage ancillarisation in surrounding major industrial units.
134
Business
Entrepreneurship - II
Types of industrial estates:
1. On basis of functions: On this basis, industrial estates are broadly classified
into two types:
(a) General type industrial estates: these are also called as conventional
or composite industrial estates. These provide accommodation to a
wide variety and range of industrial concerns.
Intrepreneurship
Development and
Govermnet - III
NOTES
(b) Special type industrial estate: This type of industrial estates is
concerned for specific industrial units, which are vertically or
horizontally interdependent.
2. On the basis of organization set-up: On this basis, industrial estates are
classified as follows:
i.
Government industrial estates
ii.
Private industrial estates,
iii.
Co-operative industrial estates, and
iv.
Municipal industrial estates
3. On the basis of other variants: On the basis of other variants, industrial
estates are classified into the following types:
i.
Ancillary industrial estates: In such industrial estates, only those
small scale units are housed which are ancillary to a particular
large industry. Examples of such units are like one attached to the
HMT, Bangalore.
ii.
Functional industrial estates: Industrial units manufacturing the same
product are usually housed in these industries estates. These
industries estates also serve as a base for expansion of small units
into larger units.
iii.
The workshop-bay: Such types of industrial estates are constructed
mainly for very small firms engaged in repair works.
Industrial Estate Program in India is perhaps the biggest undertaken by any
developing country. The program started in 1952 when the first such estate was
established at Hadapsar in Maharashtra. The main objective of the program is to
encourage and support the creation, expansion and modernization of SSI through
provision of factory accommodation, common service facilities and assistance
and servicing throughout all stages of establishment and operation and developing
sub-contracting relationship within small-scale and large-scale industries and
specialized manufacturing activities. Subsequently, the program has also assumed
the role of regional development through provision of built-in factory accommodation
with the requisite facilities and services in semi-urban, rural and backward areas.
Mega Food Park Scheme
The scheme of Mega Food Park aims at providing a mechanism to link
agricultural production to market by bringing farmers, processors and retailers
together so as to ensure maximizing value addition, minimizing wastages, increasing
farmers’ income and creating employment opportunities particularly in rural sector.
The Mega Food Park scheme is based on ‘cluster’ approach and envisages a
well-defined agri/horticultural processing zone containing state-of-the art processing
facilities with support infrastructure and well-established
Business
Entrepreneurship - II
135
Intrepreneurship
Development and
Govermnet - III
NOTES
supply chain. With a view to promote investment in Mega Food Park, Ministry of
Finance has covered Food Park including Mega Food Park under infrastructure
category.
Based on the feedback received from industry, the Ministry of Food
Processing Industries revised the food park scheme which was taken up under
the 10th Plan. The revised scheme has been named as Mega Food Park Scheme.
The scheme envisages setting up of 10 Mega Food Parks in high production areas
across the country and provides for a grant of up to Rs. fifty crores for each food
park to be implemented by a consortium of companies.
The Scheme was launched to help achieve the Vision 2015 of the Ministry of
Food Processing Industries which aims at increasing the processing of perishables
from the current 6% to 20%, value addition from the current 20% to 35% and at
increasing India’s share in global food trade from the current 1.5% to 3%. The
primary objective of the scheme is to provide adequate infrastructure near farms,
transportation, logistics and centralized processing centres. The main feature of the
scheme is a cluster based approach. The scheme aims at facilitating the establishment
of a strong food processing industry backed by an efficient supply chain, which will
include collection centres, primary processing centres, and clod chain infrastructure.
The food processing units would be located at a central processing centre.
It is expected that each mega food park would have about 30-35 food
processing units with collective investment of about 250 crores that would eventually
lead to a annual turnover of 400-500 crores and generate employment (direct and
indirect) for about 30000 people.
The scheme provides for a grant of 50% (75% for NE region) of the capital
cost excluding land cost, subject to a ceiling of Rs. 50 crores.
Industrial Infrastructure Up-gradation Scheme (IIUS)
Check Your
Progress
4. In order to inculcate
the entrepreneurial
culture amongst the
first generation of entrepreneurs on a regular basis, the Ministry
of MSME has set up
three national level
Entrepreneurship Development Institutes.
These are:
i.————————
ii————————
iii————————
Industrial Infrastructure Up-gradation Scheme (IIUS)was launched in 2003,
recast in 2009 and now launched as modified IIUS in 2013, as a central sector
scheme to enhance competitiveness of industry by providing quality infrastructure
to catalyze and promote industrial growth, employment generation, and technology
up-gradation. Central assistance up to 75% of the project cost subject to a ceiling
of Rs. 50 crore was given for each project. State Implementing Agencies (SIA)
such as SIDCs can apply for funding under the Modified IIUS.
Projects would be sanctioned to upgrade infrastructure in industrial estates/
parks/areas and Greenfield projects could be supported in backward areas, including
NER. However, priority would be given to upgrade infrastructure in existing cluster
over Greenfield cluster. The scope will cover the components that are need based.
Priority would be for those project components that cannot be assisted under
available schemes of government of India or funded from state resources. An
illustrative list of project components eligible for assistance is given below:
Technical infrastructure: Common Facility Centers (CFCs), Research and
Development-Product development and technical demonstration facility, CETP
and other environment protection infrastructure, training infrastructure, quality
certification and bench marking.
Social infrastructure: Social infrastructure like dormitories/ hostels for
working women.
136
Business
Entrepreneurship - II
Physical infrastructure: Solid waste management/ treatment, water supply,
roads, captive power plant.
National Medicinal Plant Board (NMPB)
The National Medicinal Plant Board (NMPB) has formulated schemes and
guidelines for financial assistance and different areas of medicinal plants covers
order promotional and commercial schemes applicable both for government and
non-government organizations. Promotional schemes mainly includes surveys,
conservation, herbal garden, extension activities, demand supply studies, R and D,
value addition etc. and commercial schemes mainly includes production of quality
planting material, large scale cultivation, post-harvest technology studies, innovative
marketing mechanism, etc. 30% of the capital investment in the industry is granted
for cultivation of medicinal plants, processing, research etc. the limit is Rs. 9 lakh.
Intrepreneurship
Development and
Govermnet - III
NOTES
Department of Scientific and Industrial Research (DSIR), Ministry of
Science and Technology
The primary endeavor of DSIR is to promote R&D by industries, support a
larger cross section of small and medium industrial units to develop state-of-theart globally competitive technologies of high commercial potential, catalyze faster
commercialization of lab-scale R & D, enhance the share of technology intensive
exports, strengthen industrial consultancy & technology management capabilities
and establish use friendly information network to facilitate scientific and industrial
research in the country. It also provides a link between scientific laboratories and
industrial establishments for transfer of technologies through National Research
Development Corporation (NRDC) and facilitates investment in R & D through
Central Electronics Limited (CEL).
The specific schemes under 12th Five Year Plan programme are:
Access to knowledge for technology development and dissemination
Building industrial R & D and Common Research Facilities
Patent Acquisition and Collaborative Research and Technology Development
Promoting Innovations in Individuals, Start-ups and MSMEs
Rural Employment Generation Programme (REGP)
KVIC launched REGP with effect from 1995 for generation of jobs under the
KVI sector in rural areas of the country. The term rural area has been defined under
KVIC Act, 1956 as: any area classified as village as per the revenue records of the
state, irrespective off population. It also includes an area classified as village as
town, provided its population does not exceed 20,000 as per 1991 census. The term
village industries has been defined as any industry located in rural area which produces
any goods or renders any service with or without the use of power and in which fix
capital investment per head of artisan or worker does not exceed Rs. 50,000 or such
other sum as may be specified by central government from time to time.
The scheme is applicable to all village industries set up in rural areas. The
eligible agencies under the scheme are individuals (rural artisans/entrepreneurs),
institutions, co-operative societies, trusts and SHGs for projects up to Rs. 25 lakhs.
Under the programme, capital subsidy in the form of margin money is provided at
the rate of 25% of the project cost up to Rs. 25 lakhs. In case of weaker section
beneficiary viz. SC/ST/OBC/Women/physically handicapped/ex-servicemen and
for hill border and tribal areas, north eastern region, Sikkim, Andaman &Nikobar
islands, Lakshadeep; margin money grant will be at the rate of 30 per cent of the
remaining cost of the project. Under the scheme, the borrower is required to
invest his/her own contribution of 10 per cent of the project cost. In case of SC/
Business
Entrepreneurship - II
137
Intrepreneurship
Development and
Govermnet - III
NOTES
ST and other weaker section borrowers, the beneficiary’s contribution will
be 5% of the project cost.
Banks will sanction 90 per cent of the project cost in case of general category
borrowers and 95 per cent of the project cost to weaker section beneficiaries/
institutions and disburse full amount of the loan. After the sanction of the credit
facility by the bank branch, eligible amount of margin money will be kept in term
deposit of two years in the account of the borrower at the leading bank branch
which will be credited to the borrower’s loan account after a period of two years
from the date of first disbursement of loan.
Presently KVIC is implementing REGP through all public sector banks, all
regional rural banks, co-operative banks approved by state KVIBs and other
financing institutions of state and central government as approved by KVIC.
Once the project is sanctioned by financing branch of the bank, before
releasing the second installment of loan, beneficiary is to be imparted 3-day training
arranged by the state/regional director.
Ministry of Rural Development
Department of Rural Development is implementing a number of programmes
in rural areas through the state governments for poverty reduction, employment
generation, rural infrastructure habitat development, provision of basic minimum
service etc. The important programmes presently being implemented by the
department are Pradhan Mantri Gram SadakYojana (PMGSY), Swarnjayanti Gram
SwarojgarYojana (SGSY), Rural Housing (Indira AwaasYojana), DRDA
Administration, Training schemes etc
Swarnjayanti Gram SwarozgarYojana (SGSY)
Under Swarnjayanti Gram SwarozgarYojana (SGSY) of the Union Ministry
of Rural Development, a holistic programme of micro enterprises was launched
from 1999 covering all aspects of sustainable self-employment in rural areas. It
envisages organization of the poor, with preference for self-help groups of women
in particular, and capacity building through SHGs, training, credit-cum-subsidy,
technology, infrastructure, and marketing intervention. At the field level, District
Rural Development Agency (DRDA) operates the scheme through Panchayat
samities. Training and Technology Development Centre (TTDC) is established
under DRDA for organizing training activities and counselling services. Group
approach is adopted for implementing the scheme, though individual beneficiaries
are also assisted. Women are given preference.
The objective of SGSY is to bring the assisted poor families (swarojgaries)
above the poverty line by ensuring appreciable sustained level of income over a
period of time. The objective is to be achieved inter alia organizing the rural poor
into Self Help Groups (SHGs) through the process of social mobilization, their
training and capacity building and provision of income generating assets.
138
Business
Entrepreneurship - II
A one-time subsidy given is at 30% of project outlay, up to a maximum of Rs.
7,500/-; for SCs/STs at 50% of project outlay, up to a maximum of Rs. 10,000. For
groups of SHGs, subsidy will be at 50% of project outlay, subject to a maximum of
Rs. 1.25 lakh. There is no monetary limit on subsidy for irrigation projects. Subsidy
will be back-ended. Revolving fund up to Rs. 25,000 is given for each group at Rs.
1,000 per member in the initial stage. Apart from the Central scheme of SGSY, state
governments also allocate matching grant equal to savings made by SHGs. Women
and weaker sections are the focus of poverty eradication effort under SGSY. 50%
of the benefits under the programe are earmarked for SCs/STs, 40% for women,
and 3% for disabled persons. Creation of infrastructure, skill development, capacity
building and promotion of marketing of goods are all part of the programme.
SwarnaJayantiShahariRozgarYojana (SJSRY)
Intrepreneurship
Development and
Govermnet - III
NOTES
SJSRY was launched in 1997 after subsuming the earlier three schemes for
urban poverty alleviation, namely Nehru RozgarYojan (NRY), Urban Basic Services
for the Poor (UBSP), and Prime Minister’s Integrated Urban Poverty Eradication
Programme (PMIUPEP). The key objective of the scheme was to provide gainful
employment to the urban unemployed or underemployed through the setting up of
self-employment ventures or provision of wage employment.
National Science and Technology Entrepreneurship Development Board
(NSTEDB)
National Science and Technology Entrepreneurship Development Board
(NSTEDB), established in 1982, by the Government of India under the aegis of
Department of science and Technology, is an institutional mechanism to help
promote knowledge-driven and technology-intensive enterprises. The major
objectives of NSTEDB are to promote and develop high-end entrepreneurship for
Science and Technology (S & T) manpower as well as self-employment by utilizing
S & T infrastructure and by using S & T methods; to facilitate and conduct various
informational services relating to promotion of entrepreneurs; to network agencies
of the support system, academic institutions, and R & D organizations to foster
entrepreneurship and self-employment using S & T with special focus on backward
areas as well; and to act as a policy advisory body with regard to entrepreneurship.
The Board, having representations from socio-economic and scientific Ministries/
Departments, aims to convert ‘job-seekers’ into ‘job-generators’ through Science
& Technology (S&T) interventions.
The programs conducted by NSTEDB have created awareness among S&T
persons to take up entrepreneurship as a career. The academicians and researchers
have started taking a keen interest in such socially relevant roles and engaged
themselves in several programmes initiated by NSTEDB. About 100 organisations,
most of which are academic institutions and voluntary agencies, were drafted in the
task of entrepreneurship development and employment generation.
Following are the important initiatives of NSTEDB in terms of institutional
mechanism:
 Innovation and Entrepreneurship Development Centre (IEDC)
 Science and Technology Entrepreneurship Development (STED) Project
 Innovation - Science and Technology based Entrepreneurship
Development (i-STED)
 Science & Technology Entrepreneurs Park (STEP)
 Technology Business Incubator (TBI)
 For information dissemination TIMEIS (Technology Innovation Management
Entrepreneurship and Information Services)- web portal is available.
Software Technology Parks of India (STPI)
India has earned itself a reputation of an IT super power. Software technology
parks of India have played a seminal role in accomplishing this status.
Business
Entrepreneurship - II
139
Intrepreneurship
Development and
Govermnet - III
NOTES
Today STPIs across the country are synonymous with excellent infrastructure and
statutory support aimed at furthering IT in the country. Process development is
based on Quality Management System (QMS). STPI centers also adhere to ISO
9001 certification
Software Technologies Parks of India(STPI) were established and registered
as autonomous society under the society’s registration act 1860 under the
Department of Electronics and Technology, Ministry of Communications and
Information Technology, Government of India on 5th of June, 1991 with an objective
to implement STP scheme, set up and manage infrastructure facilities and provide
other services like technology assessment and professional training. The objective
of encouraging, promoting and boosting the software exports from India. The
objectives of Software Technologies Parks of India are:
To promote development and export of software services including IT
enabled services/ bio-IT
To promote statutory and other promotional services to exporters by
implementing software technology parks (STP)/ Electronics and Hardware
Technologies Park (EHTP) schemes and other such schemes which may be
formulated and entrusted from time to time by the government
To provide data communication services including value added services to
IT/IT enabled services (ITES) related industries
To promote micro, small and medium entrepreneurs by creating conducive
environment for entrepreneurship in the field of IT/ITES
Check Your
Progress
6. Pradhan Mantri
KaushalVikasYojana
(PMKVY) is the
flagship outcomebased skill training
scheme of the new
Ministry of ————
STPI maintains internal engineering resources to provide consulting, training
and implementation services. Services cover Network Design, System Integration,
Installation, Operation and maintenance of application networks and facilities in
varied areas.
Pradhan Mantri Kaushal VikasYojana (PMKVY)
Pradhan MantriKaushalVikasYojana (PMKVY) is the flagship outcomebased skill training scheme of the new Ministry of Skill Development and
Entrepreneurship (MSDE). The objective of the Scheme is to encourage skill
development for youth by providing monetary rewards for successful completion
of approved training programmes. Institutional arrangements comprising of National
Skill Development Corporation (NSDC), Sector Skill Councils (SSCs), Assessing
agencies and Training Partners are already in place for implementation of the
scheme. Specifically the scheme aims to:
Encourage standardisation in the certification process and initiate a process
of creating a registry of skills
Enable and mobilize a large number of Indian youth to take up skill training
and become employable and earn their livelihood. Increased productivity of the existing
workforce and align the training and certification to the needs of the country
Provide monetary awards for skill certification to boost employability and
productivity of youth by incentivizing them for skill trainings
Reward candidates undergoing skill training by authorized institutions at an
average monetary reward of Rs. 8000 per candidate
140
Business
Entrepreneurship - II
Benefit 24 lakh youth at an approximate total cost of Rs. 1500 crores.
8.4
Summary
Although there is a dedicated Ministry for MSME, number of other Ministries
in the Government of India have various schemes and programmes to help and
support entrepreneurs especially MSMEs. It is but essential to be aware about
such kind of information details and to take advantage of this for enterprise creation.
The following schemes are discussed in this unit:
Intrepreneurship
Development and
Govermnet - III
NOTES
Implementation of Micro, Small, and Medium Enterprises Development Act,
2006
Reservation/de-reservation of products for manufacture in Micro & Small
Enterprise sector
National Manufacturing Competitiveness Programme (NMCP)
Prime Minister’s Task Force on MSMEs
Public Procurement Policy for goods manufactured & services rendered
by MSEs
Government Purchase & Price Preference Policy for MSMEs
Market Development Assistance Scheme (SSI-MDA)
Prime Minister’s Employment Generation Programme (PMEGP)
Special Economic Zones in India
Industrial Estate Programme
Mega Food Park Scheme
Industrial Infrastructure Upgradation Scheme (IIUS)
National Medicinal Plant Board
Department of Scientific & Industrial Research (DSIR), Ministry of Science
& Technology
Rural Employment Generation Programme (REGP)
Ministry of Rural Development
Swarnjayanti Gram SwarojgarYojana (SGSY)
SwarnajayantiShahariRozgarYojana (SJSRY)
National Science & Technology Board (NSTEDB)
Software Technology Parks of India (STPI)
Pradhan MantriKaushalVikasYojana (PMKVY)
8. 5
Key Terms
 Industrial estates:Specific areas zoned for industrial activity in which
infrastructure such as roads, power, and other utility services is provided
to facilitate growth of industries and to minimize impacts on the
environment
Business
Entrepreneurship - II
141
Intrepreneurship
Development and
Govermnet - III
8.6
Questions and Exercises
Questions
NOTES
1. Explain the role of various ministries/government departments engaged
in the task of assisting entrepreneurs.
2. Discuss the role of Ministry of Rural Development in entrepreneurship
development.
3. Give an overall view of the government initiatives for small enterprises.
4. Discuss the need for institutional support to small entrepreneurs and
their enterprises.
5. Describe the role which Ministry of MSMEs play in developing small
enterprises in the country.
6. Describe the main features of Rural Employment Generation Programme
(REGP)
7. What do you know about Software Technology Parks of India?
8. Present the highlights of Prime Minister’s Employment Generation
Programme (PMEGP)
Multiple Choice Questions
1. The Public Procurement Policy for MSMEs, 2012 mandates that every
Central Ministry/Department/Public Sector Undertaking shall set an
annual goal of procurement from MSMEs from 2012-13 and onwards
with the objective of achieving an overall procurement of minimum of
——— % of total annual purchases of products produced and services
rendered by MSEs, in a period of three years
i.
20
ii.
10
iii.
5
iv.
50
2. Which one of the following alternatives is true regarding MSMED 2006?
i.
It addresses policy issues affecting MSMEs as well as the coverage
and investment ceiling of the sector.
ii. It provides the first ever legal framework for recognition of the
concept of ‘enterprise’ which comprises both manufacturing and service
entities.
iii. It defines medium enterprises for the first time and seeks to integrate
the three tiers of these enterprises, namely, micro, small and medium
iv.
142
Business
Entrepreneurship - II
All of the above
3. Government Purchase and Price Preference Policy for MSEs,
Government of India has been extending which one of the following
facilities to the MSEs registered with National Small Industries
Corporation (NSIC) under its Single Point Registration Scheme:
i.
Issue of tender sets free of cost
ii.
Exemption from payment of Earnest Money
iii.
Price preference up to 15% over the quotation of large-scale units
iv.
all of the above
Intrepreneurship
Development and
Govermnet - III
NOTES
4. SwarnaJayantiShahariRozarYojana (SJSRY) was launched in 1997 after
subsuming ————
i.
Nehru RozgarYojana (NRY) and Urban Basic Services for the
Poor (UBSP)
ii.
UBSP and Prime Minister’s Integrated Urban Poverty Eradication
Programme (PMIUPEP)
iii.
NRY and PMIUPEP
iv.
The three schemes for urban poverty alleviation, namely Nehru
RozgarYojana (NRY), Urban Basic Services for the Poor (UBSP),
and Prime Minister’s Integrated Urban Poverty Eradication
Programme (PMIUPEP)
5. Which of the following programme is presently being implemented by
the Department of Rural Development?
i.
Pradhan Mantri Gram SadakYojana (PMGSY)
ii.
Swarnjayanti Gram SwarojgarYojana (SGSY)
iii.
Rural Housing (Indira AwaasYojana)
iv.
All of the above
Check Your
Progress
1. 2nd October, 2006
2. 20
3.Prime Minister ’s
Employment Generation
Programme
(PMEGP)
4. State
6. Skill Development
and Entrepreneurship
(MSDE)
Answers
Multiple Choice Questions
1. i
2. iv
3. iv
4. iv
5. iv
8.7
Further Reading
https://www.stpi.in
www.ari.nic.in
www.commerce.nic.in
Business
Entrepreneurship - II
143
Intrepreneurship
Development and
Govermnet - III
www.commerrce.nic.in
www.dcmsme.gov.in
www.dcmsmse.gov.in
NOTES
www.dgft.gov.in/exim/2000/ftp2015-20E.pdf
www.dipp.nic.in
www.dsir.nic.in
www.india.gov.in
www.india.gov.in
www.mhupa.gov.in
www.mofpi.nic.in
www.nmpb.nic.in
www.nstedb.com
www.org.in
www.pmegp.in
www.rural.nic.in
www.sezindia.gov.in
144
Business
Entrepreneurship - II
Appendix I
List of the Items Reserved for Exclusive Manufacture by MSME Sector
Name of the Product
Food and allied industries
NOTES
1. Pickles and chutneys
2. Bread
3. Mustard oil (except solvent extracted)
4. Ground nut oil (except solvent extracted)
Wood and wood products
5. Wooden furniture and fixtures
Paper products
6. Exercise books and registers
Other chemicals and chemical products
7. Wax candles
8. Laundry soap
9. Safety matches
10. Fire works
11. Agarbattis
Glass and Ceramics
12. Glass bangles
Mechanical engg excluding transport equipment
13. Steel almirah
14. Rolling shutters
15. Steel chairs – all types
16. Steel tables – all other types
17. Steel furniture – all other types
18. Padlocks
19. Stainless steel utensils
20. Domestic utensils -Aluminium
Business
Entrepreneurship - II
145
Intrepreneurship
Development and
Govermnet - III
NOTES
146
Business
Entrepreneurship - II
Intrepreneurship
Development and
Govermnet - III
NOTES
Business
Entrepreneurship - II
147
Intrepreneurship
Development and
Govermnet - III
NOTES
148
Business
Entrepreneurship - II
Intrepreneurship
Development and
Govermnet - III
NOTES
Business
Entrepreneurship - II
149
Institutional Support For
MSMEs - I
UNIT 9 : INSTITUTIONAL SUPPORT FOR
MSMES - I
NOTES
Structure
9.0 Introduction
9.1 Unit Objectives
9.2 National Level Institutions
9.3 Summary
9.4 Key Terms
9.5 Questions and Exercise
9.6 Further Reading
9.0
Introduction
In this era of liberalization, privatization, globalization and digitization caused
by information revolution; tremendous opportunities have been emerging for
entrepreneurs. To exploit these opportunities, there is a need of skill development
and entrepreneurship development training, especially to people from industrially
backward regions and rural areas. Entrepreneurship development and training is
one of the essential inputs for development of micro and small enterprises (MSEs),
particularly the first generation entrepreneurs. Institutional support system is
necessary at three stages of enterprise development: Initiation or promotion, day
to day management, expansion and diversification.
The government – both Central and State – have set up several institutions
to assist budding entrepreneurs to establish their enterprises. The support provided
by these institutions include provision of money at concessional rates, provision of
machinery on hire-purchase basis, distribution of raw materials, construction of
infrastructural facilities, conducting Entrepreneurship Development Programmes
(EDPs) and training, project appraisals, rendering consultancy, undertaking industrial
surveys, marketing assistance etc. Role and functioning of some national level
government institutionsis described in the following section.
9.1
Unit Objectives
After going through this unit, you should be able to
 Give an account of national level institutions for supporting MSMEs
 Understand the type of assistance provided by various national level
institutions for initiation and development of enterprises
150
Business
Entrepreneurship - II
9.2
National Level Institutions
The most important development in the post-independence period has been
the growth of a number of key institutions to promote, assist and develop entrepreneurs
to initiate industrial growth in the country. The country has lead a strong foundation,
broad based its infrastructure and provided needed support and assistance.
Institutional Support For
MSMEs - I
NOTES
Functioning of some national level institutions for support of MSMEs is
explained below:
National Small Industries Corporation (NSIC) Ltd., an ISO 90012008 certified Company, was established in 1955 by the Government of India with
a view to promote, aid and foster the growth of small industries in the country.
NSIC is a self-sustaining dividend paying company. It continues to remain at the
forefront of industrial development throughout the country with its various
programmes and projects to assist the MSMEs in the country. The main functions
of the Corporation are to promote, aid and foster the growth of micro and small
enterprises in the country, generally on a commercial basis; supply of machinery
and equipment (Hire-Purchase scheme, Lease scheme), provision of financial
assistance, assistance for procurement of raw materials, establishment of
Technology Transfer Center (TTC), arrangement of marketing assistance, and
priority in government purchase program.
It provides a variety of support services to micro and small enterprises by
catering to their different requirements in the areas of raw material procurement;
product marketing; credit rating; acquisition of technologies; adoption of modern
management practices, etc. The NSIC is directly operating different programmes
by a dedicated team of professionals at all levels and operates through 157 offices
located all over India and one office located at Johannesburg (South Africa) to
manage operations in African countries.
They also have tenders, databases, global trade leads etc that can be
availed by members. This kind of information makes entrepreneurs aware about
opportunities and enhances network possibilities.
One of the main requirements of MSMEs is steady and timely availability
of raw materials. Raw material distribution has been given top priority. NSIC,
through its distribution network, has been supplementing the availability of raw
material to a large number of MSMEs scattered all over the country. Arrangements
have been made with bulk manufacturers to provide raw materials to micro and
small enterprises as per their requirements. Raw material assistance to MSMEs
at competitive rates with good quality and in time delivery not only enhances the
competitive capacity of small units but also arrests sickness of the enterprises.
Check Your
Progress
1. What are the main
functions of NSIC?
Support services offered to MSME sector: NSIC provides integrated
support services in the areas of marketing, technology, finance etc. NSIC is also
implementing the schemes of marketing assistance and performance and credit
rating on behalf of the Ministry of Micro, Small & Medium enterprises.
Marketing support: NSIC acts as a facilitator and has devised a number
of schemes to support enterprises in their marketing efforts both in domestic and
foreign markets. For raw material distribution, NSIC has signed agreements/
MoUs with the major bulk producers i.e. NALCO, BALCO for aluminium, SAIL,
RINL for iron steel, CPCL for paraffin wax, CIL for coal and IOCL for polymer
products etc. These arrangements facilitate MSMEs in getting material at the
manufacturer’s price with the priority of dispatch.
Business
Entrepreneurship - II
151
Institutional Support For
MSMEs - I
NOTES
MSEs in their individual capacity face problems to procure and execute
large orders. NSIC, forms consortia of micro and small units manufacturing the
same products, thereby pooling in their capacity which provides comfort level to
the concerned MSEs as suppliers and also to buyers. The Corporation applies for
tenders on behalf of consortia of Micro & Small Enterprises (MSEs) and secure
orders for bulk quantities. These orders are then distributed amongst MSEs in
tune with their production capacity.
NSIC operates a Single Point Registration Scheme under the Government
Purchase Programme. The micro and small enterprises registered under this Scheme
get the following benefits: issue of tenders free of cost, advance intimation of
tenders issued by DGS&D (Directorate of Supplies and Disposals), exemption
from payment of Earnest Money Deposit (EMD), the tender participating MSEs
quoting price within price band of L1+15% shall also be allowed to supply a portion
upto 20% of requirement by bringing down their price to L1 price where L1 is
non-MSE; and issue of competency certificate.
To show case the competencies of Indian MSMEs, NSIC facilitates
MSMEs participating in international exhibitions, fairs etc on concessional terms
under the Marketing Assistance Scheme of the M/o MSME through partially
meeting the cost towards rent of stall as well as airfare.
Large and institutional buyers such as railways, defense, communication
departments and large companies are invited to participate in buyer-seller meets
to enrich micro and small enterprises’ knowledge regarding terms and conditions,
quality standards etc required by the buyers.
Marketing Assistance Scheme of the M/o MSME is being implemented
through the Corporation. The main objective of the scheme is to enhance the
competitiveness of MSMEs; to provide them a platform for interaction with
individual/institutional buyers; to update them with prevalent market scenario and
to provide them a forum for redressing their problems. MSMEs are supported
under the Scheme for capturing new market opportunities through organizing/
participating in various domestic & international exhibitions/trade fairs, buyer-seller
meets, intensive-campaigns and other marketing events.
Technology support: NSIC offers the following technology support services
through its Technical Services Centres and Extension Centres: material testing
facilities through accredited laboratories; product design including CAD; common
facility support in machining, EDM, CNC etc; energy and environment services at
selected centres and practical training for skill upgradation.
Credit support: the Corporation is providing credit facilitation to MSMEs
through its various schemes such as Meeting credit needs of MSMEs through tieup arrangement with banks; Financing procurement of raw materials and marketing
activities; Performance & credit rating scheme for small enterprises.
152
Business
Entrepreneurship - II
Support services: NSIC had established a Marketing Intelligence Cell for
collecting and disseminating both domestic and international marketing intelligence
in coordination with other concerned departments/agencies. Marketing Intelligence
Cell is acquiring and analyzing information in order to understand the market (both
existing and potential customers) to determine current and future needs and
preferences, attitudes and behavior of the market, assess changes in the business
environment that may affect the size and nature of market in future. The beneficiaries
are MSMEs seeking business collaborations and co-production opportunities, joint
ventures, exporters and importers and those looking for technology transfer.
NSIC has expanded its existing B2B web portal into an integrated e-marketing
web portal www.msmemart.com that is not only useful for generation of leads for
expanding businesses but it is also the most economical and fastest medium for
brand creation, recognition of small enterprises and marketing of their products.
Training-cum-incubation centres were started with a view to create selfemployment opportunities by imparting training to unemployed people. The scheme
is being operated under PPP (Private Public Partnership) mode where private
partners are associated with NSIC. At these centres, exposure in all areas of
business operations is provided such as business skills, ideas for structure of an
enterprise, identification of appropriate technologies, hands on experience on
working projects, financial linkages etc.
Institutional Support For
MSMEs - I
NOTES
Under international Co-operation, the focus of activities at the enterprise
level is on the entrepreneurs and the objective is to initiate long term and sustainable
enterprise to enterprise co-operation between Indian small enterprise and enterprises
in target countries. This is achieved by exchanging business delegations and organizing
one-on-one business meetings among the enterprises of both the countries. Main
features of international co-operation are : exchange of business/technology missions
with various countries; facilitating enterprise to enterprise co-operation, technology
transfers & other forms of sustainable collaboration; explore new markets & areas
of co-operation; identification of new export markets by participating in exhibitions
abroad; sharing of Indian experiences with other developing countries.
Khadi & Village Industries Commission (KVIC), established under
the Khadi and Village Industries Commission Act, 1956, is a statutory organization
under the aegis of the M/o MSME, engaged in promoting and developing khadi
and village industries (KVI) for providing employment opportunities in rural areas,
thereby strengthening the rural economy. KVIC has been identified as one of the
major organizations in the decentralized sector for generating sustainable rural
nonfarm employment opportunities at a low per capita investment. It undertakes
activities like skill improvement, transfer of technology, research and development,
marketing etc and helps in generating employment/self-employment opportunities
in rural areas. This helps in checking migration of rural population to urban areas
in search of employment opportunities. The details of role and functions of KVIC
are mentioned below:
The main objectives of KVIC include:
i. the social objective of providing employment in rural areas
ii. the economic objective of producing saleable articles and
iii. the wider objective of creating self-reliance amongst people and building
up a strong rural community unit
KVIC functions with its Head Office at Mumbai and six Zonal Offices
located at New Delhi, Bhopal, Bengaluru, Kolkata, Mumbai and Guwahati and 36
State/Divisional Offices spread all over the country to facilitate speedy implementation
of KVI programme. At the Central Office level, different Directorates have been
constituted for coordinating the functions like training, marketing, funding, economic
research, the Prime Minister’s Employment Generation Programme (PMEGP) etc.
PMEGP is the merger of the schemes of PMRY (Prime Minister’s RozgarYojana)
and REGP (Rural Employment Generation Programme) with a higher level of subsidy
than that available under PMRY and REGP. This Scheme is being implemented
through KVIC as the national level nodal agency.
Check Your
Progress
2. —— is a statutory
organization under the
aegis of M/o MSME
engaged in promoting
and developing khadi
and village industries
(KVI) for providing
employment opportunities in rural areas,
thereby strengthening
the rural economy.
3. Prime Minister’s
Employment Generation
Programme
(PMEGP) is the
merger of the schemes
of ——————
Business
Entrepreneurship - II
153
Institutional Support For
MSMEs - I
NOTES
Khadi and Village Industries (KVI) programmes are implemented through
33 State/Union Territories (UTs) Khadi and Village Industries Boards (KVIBs);
5,000 registered institutions; 30,129 cooperative societies and banks/financial
institutions. The Khadi programme is implemented through institutions registered
either with KVIC or State/UT KVIBs. In the case of village industries, KVIC is
implementing the Prime Minister’s Employment Generation Programme (PMEGP).
It also implements cluster development activities in traditional industries under Scheme
of Fund for Regeneration of Traditional Industries (SFURTI) as a Nodal Agency.
While the KhadiProgrammes comprise hand spun and hand woven cotton,
woolen, muslin and silk varieties, the Village Industries (VI) Programmes have
been classified into seven broad groups such as mineral based industry. Forest
based industry, agro based and food processing industry, polymer and chemical
based industry, rural engineering and bio-technology industry, handmade paper
and fibre industry and service and textile industry.
The Coir Board is a statutory body established under the Coir Industry
Act, 1953 for promoting overall development of the coir industry and improving
the living conditions of the workers engaged in this traditional industry. The activities
of the Board for development of coir industries, inter-alia, include undertaking
scientific, technological and economic research and development activities;
developing new products & designs; and marketing of coir and coir products in
India and abroad. It also promotes co-operative organizations among producers of
husks, coir fibre, coir yarn and manufacturers of coir products, ensuring remunerative
returns to producers and manufacturers. The Board has promoted two research
institutes namely; Central Coir Research Institute (CCRI), Kalavoor, Alleppey
and Central Institute of Coir Technology (CICT), Bengaluru for undertaking
research activities on different aspects of coir industry, which is one of the major
agro based rural industries in the country.
The thrust areas for development of coir sector in the country are:
Modernization of production infrastructure by means of appropriate
infrastructure by means of appropriate technology without displacement of labour;
expansion of domestic market through publicity and propaganda; promotion of
export of coir and new products through undertaking market promotion measures
abroad; promotion of research and development activities like process improvement,
product development and diversification and elimination of drudgery and pollution
abatement; development of skilled manpower through training; extension of
research and development findings through field demonstrations; development of
coir industry in all coir producing states in association with the state governments.
154
Business
Entrepreneurship - II
Research and development in Coir Technology, Central Coir Research
Institute (CCRI), Kalavoor, Alleppey and Central Institute of Coir Technology (CICT),
Bengaluru, undertake research activities for different aspects of coir industry
beginning with the method of extraction of fibre to the processing and manufacture
of end products. The CCRI was established in 1959 and the CICT in 1980. Whereas
CCRI concentrates on research concerning both the white and brown fibre sectors,
CICT confines to the brown fibre sector. Identification of new user areas for utilization
of coir and coir waste (coir pith), modernization of production infrastructure for
elimination of drudgery in manual operation thereby attaining higher productivity and
improvement in quality are integral parts of research efforts. Research investigations
in CCRI have led to development of several new technologies for the coir industry
and it has been awarded the prestigious National Research and Development
Corporation (NRDC) Technology awards thrice in 1999, 2002, and 2004 for
innovations. The recent achievements of the Board include development of a versatile
loom, named as ‘Anupam’, and a mobile fibre extraction machine ‘“Swama’ for
extraction and manufacturing various coir products with ease and higher productivity
and development of a technology for pollution free retting.
The R & D activities of the Board concentrate in the following five areas:
modernization of production process, development of machinery and equipments,
product development and diversification, product development on brown coir,
development of environment friendly technologies, and technology transfer,
incubation, testing and service facilities.
Institutional Support For
MSMEs - I
NOTES
Domestic market promotion: promotion of sale of coir products in India
and elsewhere is one of the important functions of the Coir Board. The domestic
market promotion includes efforts for enhanced sale of coir products through
Board’s showrooms and sales outlets and also popularizing exhibitions in different
parts of the country, through audio and visual media, sales campaigns, press
advertisements, pamphlets, hoardings etc.
Export market promotion: export promotion is being implemented by the
Coir Board for sustainable development of the industry. Under this programme,
the Board in association with trade and industry is participating in major international
fairs/exhibitions on a country/product specific basis, organizing product promotion
programmes and catalogue shows, extending external market development
assistance to exports etc.
Development of production infrastructure: under this scheme, financial
assistance is provided for setting up new coir units and modernization of existing
units for the sustainable growth of coir sector.
Skill upgradation: the Coir Board imparts training in processing of coir to
artisans and workers engaged in the coir industry through its training centres i.e.
National Coir Training and Design Centre (NCT&DC), Kalavoor, Alleppey and
Research-cum-Extension Centre, Tenkasi, Tamin Nadu. The regular training
courses being conducted at these institutes are
i. Advanced training course (one year)
ii. Artisans’ training course (six months)
iii. Training in motorized ratt spinning under Mahila Coir Yojan a (two months)
iv. Training in coir handivraft and coir ornaments
The Board is also conducting training activities in different training centres
to suit the convenience of the coir workers at far off places who cannot attend the
above regular training centres. The Field Training Centres are run with the help of
NGOS/Co-operative Societies engaged in coir activities.
Quality improvement: the Coir Board organizes Quality Improvement
Programmes (QIPs) every year to motivate entrepreneurs to take up coir production
and to create quality consciousness among the coir workers in various processing
activities viz. spinning, dyeing and improving quality of yarn and coir products.
Mahila coir yojana and welfare measures: Mahila Coir Yojana is the first
women oriented self-employment scheme in the coir industry which provides selfemployment opportunities to rural women artisans in regions producing coir fibre.
The conversion of coir fibreinto yarn on motorized ratt in rural households provides
scope for large scale employment, improvement in productivity and quality, better
working conditions and higher income to workers. The Scheme envisages distribution
of motorized rats to women artisans after giving training for spinning coir yarn.
Business
Entrepreneurship - II
155
Institutional Support For
MSMEs - I
NOTES
Entrepreneurship Development Programmes (EDP): according to estimates
of the Coir Board, only about 40per cent of the total production of coconut husk is
being utilized in the coir industry. For generating employment avenues in the coir
sector, utilization of husk has to be increased considerably for which more new
units are required to be set up. In order to motivate and identify prospective
entrepreneurs for setting up and managing new coir units, the Coir Board organizes
EDPs engaging professionally competent and reputed organisations
The national level institute namely ‘Mahatma Gandhi Institute for Rural
Industrialization (MGIRI)’ (erstwhile Jamnalal Bajaj Central Research Institute
- JBCRI) has been established as a society under Societies (Registration) Act,
1860 at Wardha, Maharashtra, to strengthen the R&D activities in KVI sector.
The main functions of the Institute are to improve the R&D activities in the rural
industrial sector through encouraging research, extension of R&D, quality control,
training and dissemination of technology related information.
The main objectives of the institute as enunciated in its Memorandum of
Association include:
i. to accelerate rural industrialization for sustainable village economy so
that KVI sector co-exists with the main stream
ii. attract professionals and experts to Gram Swaraj
iii. empower traditional artisans
iv. innovation through pilot study/field trials
Check Your
Progress
4. The ——— is a
statutory body established under the Coir
Industry Act, 1953 for
promoting overall development of the coir
industry and improving
the living conditions of
the workers engaged
in this traditional industry.
5. ———is the first
women oriented selfemployment scheme
in the coir industry
which provides selfemployment opportunities to rural women
artisans in regions producing coir fibre.
156
Business
Entrepreneurship - II
v. R&D for alternative technology using local resources
The strategy adopted by MGIRI to realize the above objectives includes
setting up linkages with other reputed institutes of excellence, sponsor projects in
mission mode, provide services to rural entrepreneur’s pilot projects and transfer
of technology, specialized HRD programmes, resource survey etc.
The activities of MGIRI are being carried out by its six divisions each
headed by a senior scientist/technologist:
Chemical industries division: the main focus of this division is to promote
quality consciousness and consistency in the area of food processing, organic foods
and other products of rural chemical industries. It also provides a comprehensive
quality testing support and is working towards developing field worthy kits, techniques
and technologies to facilitate the cottage and small scale units in this area.
Khadi and textiles division: the activities mainly carried out by this division are
to improve the productivity, value addition and quality of products manufactured in
khadi institutions by introducing new technologies and by providing quality assurance
support. It also works towards facilitating eco-friendly products and methods.
Bio-processing and herbal division: this division of MGIRI prepares
technology package and simple quality assurance methods to facilitate production
and utilization of organic manures, bio-fertilizers and bio-pesticides to promote
rural entrepreneurs. this division is also making efforts to develop new formulations
using ‘Panchagavya’ and their quality assurance procedures and facilities.
Rural energy and infrastructure division: this division has been mandated
to develop user-friendly and cost-effective technologies utilizing commonly available
renewable resources of energy to facilitate rural industries and also to carry out
audit of traditional rural industries so as to make them energy efficient.
Rural crafts and engineering division: this division is to help upgrade the
skills, creativity and productivity of rural artisans and encourage value-addition
and improve the quality of their products.
Management and systems division: this division provides information and
communication technology based solutions for rural industries with a view to enhance
their global competitiveness.
National Institute for Micro, Small and Medium Enterprises (NIMSME), formerly known as National Institute of Small Industry Extension Training
(NISIET), was setup in 1960 at New Delhi as a department of Central Government
under the Ministry of Commerce and Industry and was initially known as Central
Industrial Extension Training Institute (CIETI). Subsequently, in 1962, it was shifted
to Hyderabad and converted into an autonomous society. The institute was renamed
as National Institute for Micro, Small and Medium Enterprises (NI-MSME), w. e.
f. 11th April 2007.
Institutional Support For
MSMEs - I
NOTES
Check Your
Progress
6. Mahatma Gandhi
Institute for Rural Industrialization
(MGIRI) was previously known as ——
In line with the national objective of economic development through
industrialization, and based on the expertise that is available, the Institute has
identified some thrust areas that need expertise that need emphasis and exploration.
These are: entrepreneurship research, women entrepreneurship, technology upgradation & transfer, policy issues, NGO networking, environment concerns, cluster
development, management consultancy, quality management services, financial
services and information services.
Activities of the Institute are organized through Schools of excellence;
each school consisting of them focused centers and cells. The Academic Council
is the nucleus coordinating body, which formulates academic activities and
programmes with quantitative and qualitative benchmarks by providing a framework
for assessment and evaluation addressing contextual variations.
Enterprise promotion and entrepreneurship development being the central
focus of MI-MSME’s functions, the Institute’s competencies converge on the
following aspects:
Enabling enterprise creation
Capacity building for enterprise growth and sustainability
Creation, development and dissemination of enterprise knowledge
Diagnostic and development studies for policy formulation and
Empowering the under-privileged through enterprises
The Institute has been playing an important role in rendering research and
consultancy services to different ministries of Government of India. The Institute
has been rendering services to MSMEs through Intellectual Property Facilitation
Centre (IPFC) and to the Handicraft Artisans through Resource Centre for
Traditional Paintings (RCTP).
The Institute has benefited not only the Indian micro, small and medium
enterprises (MSMEs) but also those in other developing countries through a plethora
of activities and thus helped in promoting self-employment and enterprise
development. The Institute is constantly evolving in accordance with the changing
times, modifying its focus with the emerging needs of MSMEs and providing solutions
in the form of consultancy, training, research, and education. NI-MSME’s
programmes are designed to have universal relevance for successfully training the
entrepreneurs to face challenges and emerging competition in the era of globalisation.
Business
Entrepreneurship - II
157
Institutional Support For
MSMEs - I
NOTES
NI-MSME has developed profitable interface with several international
agencies like CFTC (Commonwealth Fund for Technical Co-operation), UNESCO
(United Nations Educational, Scientific and Cultural Organisation), UNDP (United
Nations Development Programme), Ford Foundation, GTZ of Germany, USAID
(United States Agency for International Development), and ILO (International
LabourOrganisation), to name a few.
National Institute for Entrepreneurship & Small Business
Development (NIESBUD), NOIDA was set up in 1983 as an apex institution in the
field of entrepreneurship development to promote, support and sustain entrepreneurship
and small business through training, education, research and consultancy services. It
is an autonomous institute under the administrative control of M/o MSME. The major
areas of intervention of the Institute are conducting of training programmes, research/
review/evaluation activities, publications & training aids, cluster development activities,
garment incubation-cum-training centre, intellectual property facilitation centre,
employment generation/assistance, hand-holding assistance for enterprise creation,
consultancy services (national and international etc).
The major activities of the Institute include evolving model syllabi for
training various target groups; providing effective training strategies, methodology,
manuals and tools; facilitating and supporting Central/State Governments and other
agencies in executing programs of entrepreneurship and small business
development; maximizing benefits and accelerating the process of entrepreneurship
development; and conducting programs for motivators, trainers and entrepreneurs.
The Institute helps other Entrepreneurship Development Institutions in various
ways, such as developing syllabi in entrepreneurship for different target groups,
training of faculty, developing training aids etc.
The Institute has been accomplishing the task of providing entrepreneurial
orientation/motivation and familiarization with stages/steps towards enterprise
creation and management, to all the desired categories through traditional/
conventional EDPs. For the sake of taking EDPs to the doorsteps of members of
different target groups, especially students, throughout the length and breadth of
the country; e-learning module on EDP was launched by the Institute. The Institute
is also in the process of developing e-leaning module on project management and
export documentation and procedures.
The Institute conducts a series of training programmes for NehruYuva
Kendra, Ministry of Youth Affairs, Government of India; SamajikSuvidhaSangam,
Government of NCT of Delhi under SJSRY and National Scheduled Castes Finance
and Development Corporation (NSFDC). The activities of NIESBUD are being
diversified. Different organizations are being approached/are approaching for
different training programmes for various target groups.
The Institute has been empanelled as an implementing agency under
“SeekhoaurKamao” scheme of Ministry of Minority Affairs, Government of India.
The institute has offered its services to various State Skill Development
Missions for undertaking a set of activities. The idea behind the endeavour is to
provide mentoring services for integrated development.
158
Business
Entrepreneurship - II
As per the mandate of the government for inclusive growth, the Institute
continued to encourage the participation in its training activities of the participants
belonging to SC/ST/OBC. Besides the Entrepreneurship-cum-Skill Development
Programmes under the ATI Scheme of the Ministry, the persons belonging to
these target groups are also encouraged through publicity etc to increasingly
participate in other programmes/activities of the institute.
In accordance with the policy directions/guidelines of the Government for
accelerating the spread of entrepreneurial culture among women, the Institute
continued with its activities having focus on this target group and encouraged
women candidates for participation in its different activities especially ESDPs.
Institutional Support For
MSMEs - I
NOTES
Indian Institute of Entrepreneurship (IIE) was set up at Guwahati in
1993. It took over NI-MSME’s NER Centre w. e. f. 1st April, 1994. The Institute’s
activities are focused in the areas of stimulating, supporting, and sustaining
entrepreneurship development with special emphasis on North Eastern region.
The regional office of IIE at Dehradun, Uttarakhand, has been merged with
NIESBUD, Noida with effect from 1st April 2013.
Check Your
Progress
IIE has expanded its activities to a great extent covering all facets of
MSME activities such as organizing training programmes/workshops/seminars/
meets. The Institute has obtained ISO-9001-2000 certification from the Bureau of
Indian Standards. The Institute has expanded its canvas of activities not only in
terms of geographical coverage but also in terms of diversification into various
related areas of the activities pertaining to socio-economic development. The
Institute regularly organises training programmes and undertakes research and
consultancy services in the field of promotion of MSMEs and entrepreneurship.
7. —— has been
empanelled as an
implementing agency
under “Seekhoaur
Kamao” scheme of
Ministry of Minority
Affairs, Government
of India.
The promotion of new entrepreneurs has been the major focus of training
activities organised by the Institute. The Institute under the sponsorship of the
Ministry of MSME, Government of India has initiated a unique programme of
Comprehensive Entrepreneurship Development (CEDP) on gemstones processing
and hosiery & woolen garment manufacturing. The Institute organizes rural, general
and women EDPs and sector specific EDPs. IIE with its professional expertise,
has launched the Post Graduate Diploma Course in Management and
Entrepreneurship (PGDME), which is the first of its kind in the entire Eastern and
North Eastern Region. Creating awareness amongst college and university teachers
and students about entrepreneurship has been one of the focus areas of the Institute.
The Institute has been organising seminars, workshops, meets and conferences
for providing an enabling platform for interaction and exchange of views by various
agencies and entrepreneurs.
IIE organizes training programmes such as ESDPs under the scheme for
ATI, Ministry of MSME, Skill Development programmes (SDPs), EDPs, MDPs
and various other programmes. The Institute also engages with implementation of
Rajiv Gandhi Udyami MitraYojana (RGUMY) and CSR activities of corporate
houses etc. It has been giving special thrust upon the upliftment of weaker sections
of the society. It organizes programmes for SC, ST, and women folk of rural and
tribal areas to promote livelihoods.
The Regional Resource Centre (RRC) of the IIE has been organizing BuyerSeller Meets for cluster artisans and units implemented by it. These Meets are
humble attempts at giving a platform to cluster artisans and household units to reach
to a wider market. RRC has been working for Cluster Development with projects
sponsored by a number of agencies like DC-MSME, DC-Handloom and KVIC.
Providing consultancy services to entrepreneurs is a apart of IIE’s initiative
for self-employment. Handholding support for enterprise creation is provided to
all those who approach the institute for support. The entire process of support in
this direction has been generated through the RGUMY.
National Productivity Council (NPC) is a national level organization
under the Ministry of Commerce and Industry, providing training, consultancy and
undertaking research in the area of productivity. Established as a registered society
Business
Entrepreneurship - II
159
Institutional Support For
MSMEs - I
NOTES
in 1958, it is an autonomous, tri-partite, non-profit organization with equal
representation from the government, employers and workers’ organizations, apart
from technical and professional institutions and other interests on its governing
council. It promotes enhancement of productivity culture in the nation. NPC is
aiming to promote the cause of productivity in industry, agriculture, service,
infrastructure and other sectors of the economy. It aims to help in achieving
sustained all round development in India, leading to enhancement of quality of life
of people in general. The concept of productivity as perceived by NPC
encompasses not only a more efficient use of resources, but also of quality,
environmental protection and integrated economic and social development. NPC
aims at promoting these as a part of its objectives and activities. Besides providing
training, consultancy and undertaking research in the area of productivity, NPC
also implements the productivity promotion plans and programmes of the Tokyo
based Asian Productivity Organisation (APO), an inter-governmental body of which
the Government of India is a founder member.
Entrepreneurship Development Institute of India (EDII),
Ahmedabad, is an autonomous non-profit institution, set up in 1983, sponsored by
financial institutions, such as Industrial Development Bank of India (IDBI), Industrial
Finance Corporation of India (IFCI), Industrial Credit and Investment Corporation
of India (ICICI) and State Bank of India (SBI). The Government of Gujarat
provided assistance for the setting up of EDII.
EDI aims at creating a multiplier effect on opportunities for selfemployment, augmenting the supply of competent entrepreneurs through training,
augmenting the supply of entrepreneur trainer-motivators, participating in institution
building efforts, inculcating the spirit of in youth, promoting micro enterprises at
rural level, developing and disseminating new knowledge and insights in
entrepreneurial theory and practice through research, facilitating corporate
excellence through creating intrapreneurs (entrepreneurial mangers), improving
managerial capabilities of small scale industries, sensitizing the support system to
facilitate potential and existing entrepreneurs establish and manage their enterprises,
collaborating with similar oragnisations in india and other developing countries to
accomplish the above objectives.
EDII conceptualizes and designs several strategic programmes through
innovative training techniques and updated information and documentation. It
regularly organizes trainers’ meets of ED organizations to facilitate experience
sharing. It has supported the creation of centres for entrepreneurship development
in various states to achieve institutionalization of ED activities.
Indian Council of Small Industries (ICSI) is recognized by the Government
of India as a premier National Apex of Small Scale Enterprises. ICSI encompasses
within it fold over 1500 Associations of the decentralized sector. It was founded in the
year 1979. ICSI caters the need of Small, Tiny, Rural, Cottage enterprises and artisans.
ICSI fosters the spirit of self-employment amongst the youth in preference to the
wage employment and in the process tries to build up a nationwide movement for selfemployment. It is committed to protect, project and promote the interest of the Village
and Small Industry Sector. Being an apex body, ICSI is representing in various
Committees of the Central and State Governments, Autonomous Bodies and has
emerged as strong advocacy organization of the SSI sector.
160
Business
Entrepreneurship - II
Bureau of Indian Standards (BIS) - Bureau of Indian Standards (BIS),
the national standards body has been successfully promoting and nurturing standards
movement within the country since 1947. BIS came into existence on 1st of April
1947 through an act of parliament. It took over the staff, assets, liability and
functions of the erstwhile Indian Standards Institutions (ISI) with an enlarged
scope and enhanced powers for harmonious development of activities of
standardization, marking and quality certification of goods and for matters connected
there with or incidental thereto.
Council of Scientific and Industrial Research (CSIR), the premier
industrial R&D organization in India, constituted in 1942, aims to provide industrial
competitiveness, social welfare, strong S&T base for strategic sectors and
advancement of fundamental knowledge.Today CSIR is recognised as one of the
world’s largest publicly funded R&D organisations having linkages to academia,
R&D organisations and industry. CSIR’s 37 laboratories not only knit India into a
giant network that impacts and add quality to the life of each and every Indian but
CSIR is also party to the prestigious Global Research Alliance with the objective
of applying global knowledge pool for global good through global funding. CSIR’s
R&D portfolio embraces areas as diverse as Aerospace, Biotechnology,
Chemicals…indeed, almost the ABC-Z of Indian Science!
Institutional Support For
MSMEs - I
NOTES
National Research Development Corporation (NRDC)established
in 1953 by the Government of India with the primary objective to promote,, develop
and commercialise technologies/know-how/inventions/patents/processes emanating
from various national R & D institutions/Universities and is presently working
under the administrative control of the Department of Scientific and Industrial
Research, Ministry of Science and Technology. During the past six decades of its
existence and in pursuance of its corporate goals, NRDC has forged strong links
with the scientific and industrial community in India and abroad and developed a
wide network of research institutions, academia, and industry and made formal
arrangements with them for the commercialization of know-how developed in
their laboratories and is now recognized as a large repository of wide range of
technologies spread over almost all areas of industries viz. agriculture and agroprocessing, chemicals including pesticides, drugs and pharmaceuticals, biotechnology, metallurgy, electronics and instrumentation, building materials,
mechanical, electrical and electronics etc. NRDC also undertakes a number of
activities for encouragement and advancement of research, promotion of inventions
and innovations such as meritorious inventions awards, techno-commercial support,
technical and financial assistance for IPR protection, value addition services and
support for further development of technologies and much more.
National Industrial Development Corporation Ltd: The National
Industrial Development Corporation (NIDC) was established in the year 1954 by
the Central Government to bring about a balanced development of industries both
in private and public sectors. Its main objective is to promote small and medium
scale industries. The following functions are being undertaken by the NIDC:
a) It gives emphasis on manufacture of capital goods and machine tools
b) It undertakes industrial potential survey and seeks cooperation from
private entrepreneurs to establish more industries in private sector
c) It extends financial assistance for rehabilitation and modernization of
industries like cotton textiles, jute industry and machine tools industry.
d) It also can supply machinery, technical counseling and any other facility
which the industrial units need from time to time
e) The most important of NIDC is to assist that type of industrial units
which are conducive to the economic development of the country.
Business
Entrepreneurship - II
161
Institutional Support For
MSMEs - I
NOTES
NIDC plans and formulates projects for setting up new industries or for
developing new lines of production. It undertakes establishment of such undertakings
which in the opinion of the central government would contribute to industrial
development of the country.
The main objective of the corporation is promotion of industries rather
than granting of finance. It builds up industrial schemes of its own or collaborates
with private industry. It can also render assistance for modernization of industries.
Central Institute of Hand tools, Jalandhar has been set up with a view
to provide technology support services, and trained manpower to engineering
industry in general and the hand tools industries in particular to achieve global
standards.
Institute for Design of Electrical Measuring Instruments(IDEMI)
was set up by Government of India in 1969 in Mumbai as a service to instrument
industry organisation. The institute is looked upon a nodal centre in view of its
multifarious activities offered to suit various needs of the instrument industry.
ElectronicsService and Training Institute,Nainital (MSMETechnology Development Centre) has been established as a Government of India
society. The main objective of setting up this project is to develop human resources
to meet the essential requirements for transfer of technology in assembly and
manufacturing of electronics items and parts.
Central Manufacturing Technology Institute (CMTI) is R & D
organization focusing its efforts mainly on harnessing know-how in the
manufacturing technology sector to practical purposes and assisting technological
growth in the country. The establishment of Central Machine Tool Institute (CMTI)
at Bangalore in the 60s by the Government of India was a major event in the
history of Indian Machine Tool industry. The institute changed its name to Central
Manufacturing Technology Institute in 1992. The institute became functional in
1965 under the technical collaboration with institute for Machine Tools and
Production Engineering (VUOSO), Czech Republic.
Process cum product Development Centre for Sports Goods and
Leisure Time Equipment, Meerut was conceived in June 1985 as a United
Nations Development Programme (UNDP) assisted project with the developmental
objectives of upliftment of sports goods industries by making available appropriate
technology for upgrading the quality of sports goods so as to augment the export
of sports goods from India.
Central Institute of Plastics Engineering and Tools (CIPET) is an
ISO 9001:2008 QMS, NAB L, ISO/IEC 17020 accredited premier national institute
devoted to academic, technology support, & research activities for the growth of
polymer and allied industries in the country. All the CIPET centres have state of
art infrastructural facilities in the areas of design, CAD/CAM/CAE, tooling and
mould manufacturing, plastics processing, testing and quality control to cater to
the needs of polymer and allied industries in the country.
162
Business
Entrepreneurship - II
To provide the requisite quality and quantity of trained manpower at
different level, Government of India set up the National Institute of Foundry
and Forge Technology (NIFFT) in the year 1966 in collaboration with UNDPUNESCO at Ranchi. NIFFT has earned a reputation as a leading institute for
teaching, training, research & development, consultancy and documentation and
information retrieval services in metal casting and metal forming technology.
National Institute of Food Technology, Entrepreneurship and
Management (NIFTEM) has been set up at Kundli, Haryana by the Government
as an international centre of excellence, with a vision to work synergistically with
the industry and similar institutions within India and outside. It has been granted
the status of Deemed University under de-novo category by the Government.
Institutional Support For
MSMEs - I
NOTES
Indian Institute of Crop Processing Technology (IICPT),Thanjavur, is an
autonomous organization under the administrative control of Ministry of Food Processing
Industries (MFPI). This institute, established initially as a paddy research centre, has
been expanded to include other commodities such as millets, pulses and oil seeds.
Indian Grape Processing Board (IGPB) has been set up in Pune in
2009. The important functions and objectives of the board are to focus on research
and development, extension and quality up-gradation, market research and
information, domestic and international promotion of Indian wine; to foster
sustainable development of Indian wine industry; to formulate a vision and action
plan for the growth of Indian wine sector including research and development for
quality up-gradation in new technologies/processes.
National Meat and Poultry Processing Board (NMPPB): the mandate
of NMPPB is to oversee the growth and further promotion of meat and poultry
sector in the country.
9.3
Summary
Ministry of MSME looks after administration of National Small Industries
Corporation (NSIC), National Institute for Micro, Small, and Medium Enterprises
(NI-MSME), National Institute for Entrepreneurship and Small Business
Development (NIESBUD), Indian Institute of Entrepreneurship (IIE), Khadi and
Village Industries Commission (KVIC), Coir Board and Mahatma Gandhi Institute
for Rural Industrialization (MGIRI).
National Board for Micro, Small & Medium Enterprises (NB-MSME)
facilitates coordination and inter-institutional linkages between several departments/
ministries and organisations of Central/State Governments. National Productivity
Council (NPC) is an organization under Ministry of Commerce & Industry.
Other prominent institutions working for entrepreneurship development
are Entrepreneurship Development Institute of India (EDII), Indian Council of
Small Industry (ICSI), Council for Scientific and Industrial Research (CSIR),
National Research and Development Corporation (NRDC), CITD, Hand Tools
(CIHT), Institute for Defining Electrical Measuring Instrument (IDEMI), ESIT,
CMTI, PPDC-SG, CIPET, NIFFT, NIFTEM, IICPT, IGPB, NMPPB.
9.4
Key Terms
 Liberalization:A broad term that usually refers to fewer government
regulations and restrictions in the economy. When government liberalized
trade, it means it has removed tariff, subsidies, and other restrictions on
the follow of goods and services between the countries
 Privatization:It means withdrawal of the state from an industry or sector
partially or fully. It means transfer of ownership and/or management of
an enterprise from public sector to private sector. It means replacing
Business
Entrepreneurship - II
163
government monopolies with the competitive pressures of the
marketplace to encourage efficiency, quality and innovation in delivery
of goods and services
Institutional Support For
MSMEs - I
 Globalization:It means integration of the economy of the country with
the rest of the world economy and opening up of the economy for foreign
direct investment by liberalizing the rules and regulations and be creating
favourable socio-economic and political climate for global business
NOTES
 Digitization:The process of converting information in any form (text,
photographs, voice etc) into a digital formatwith suitable electronic devices
such as a scanner, or specialized computer chips so that the information
can be processed, stored, and transmitted through digital circuits,
equipment, and networks
 Information revolution:Development of technologies (such as
computers, digital communication, microchips) in the second half of the
20th century that has led to dramatic reduction in the cost of obtaining,
processing, storing, and transmitting information in all forms (text,
graphics, audio, video)
9.5
Questions and Exercise
Questions
1. Describe the institutional set up for entrepreneurship development in India.
2. Explain the role of Khadi and Village Industries Commission in
entrepreneurship development.
3. Write a brief note on entrepreneurship development schemes of Coir Board.
4. State the functions of National Small Industries Corporation (NSIC).
5. Explain the role of National Institute of Micro, Small, and Medium
Enterprises (NIMSME).
6. Write a note on promotional activities of National Institute of
Entrepreneurship and Small Business Development (NIESBUD).
7. Give an account of the efforts made by Mahatma Gandhi Institute for
Rural Industrialisation (MGIRI) to stimulate entrepreneurship in India.
8. Explain the role played by National Productivity Councils in promoting
entrepreneurs.
9. How does Entrepreneurship Development Institute of India promote
entrepreneurship?
10. Discuss the functioning of Indian Institute of Entrepreneurship.
Multiple Choice Questions
1. Which of the following function is performed by NSIC?
164
Business
Entrepreneurship - II
i.
Supply of machinery and equipment (Hire-Purchase scheme, Lease
scheme)
ii.
Provision of financial assistance
iii.
Assistance for procurement of raw materials
iv.
All the above
2. Which of the following is an objective of KVIC?
i.
The social objective of providing employment in rural areas
ii.
The economic objective of producing saleable articles
iii.
The wider objective of creating self-reliance amongst people and
building up a strong rural community unit
iv.
All the above
Institutional Support For
MSMEs - I
NOTES
3. Which one of the following statements is wrong regarding the Coir Board?
i.
The Board has promoted two research institutes namely; Central
Coir Research Institute (CCRI), Kalavoor, Alleppey and Central
Institute of Coir Technology (CICT), Bengaluru
ii.
It has been awarded the prestigious National Research and
Development Corporation (NRDC) Technology awards thrice in
1999, 2002, and 2004 for innovations
iii.
The recent achievements of the Board include development of a
versatile loom, named as ‘Anupam’
iv.
i, ii and iii are wrong
4. National Institute for Micro, Small and Medium Enterprises (NI-MSME)
was formerly known as
i.
National Institute of Small Industry Extension Training (NISIET)
ii.
Central Industrial Extension Training Institute (CIETI)
iii.
Both i and ii
iv.
None of the above
5. NI-MSME has developed profitable interface with several international
agencies like
i.
CFTC (Commonwealth Fund for Technical Co-operation)
ii.
UNESCO (United Nations Educational, Scientific and Cultural
Organisation)
iii.
UNDP (United Nations Development Programme
iv.
All the above.
Answers
Check Your Progress
2. Khadi & Village Industries Commission (KVIC)
Business
Entrepreneurship - II
165
3. PMRY (Prime Minister’s RozgarYojana) and REGP (Rural Employment
Generation Programme)
Institutional Support For
MSMEs - I
4. Coir board
NOTES
5. Mahila Coir Yojana
6. Jamnalal Bajaj Central Research Institute – JBCRI
7. National Institute for Entrepreneurship & Small Business Development
(NIESBUD)
Multiple Choice Questions
1. iv
2. iv
3. iv
4. iii
5. iv
9.6
Further Reading
http://dcmsme.gov.in/ANNUALREPORT-MSME-2013-14P.pdf
www.ari.nic.in
www.ciht.in
www.cipet.gov.in
www.citdindia.org
www.cmti_india.net
www.dcmsme.gov.in/AnnualReport_2012-13.pdf
www.ediindia.org
www.estcindia.com
www.fieo.org
www.idemi.org
www.laghu-udyog.gov.in
www.msme.org
www.nifft.ernet.in
www.ppdcmeerut.com
www.rural.nic.in
166
Business
Entrepreneurship - II
UNIT 10 : INSTITUTIONAL SUPPORT FOR
MSMES - II
Institutional Support For
MSMEs - II
NOTES
Structure
10.0 Introduction
10.1 Unit Objectives
10.2 Institutional Set Up for Financial Assistance
10.3 Institutional Set Up for Export Promotion
10.4 Summary
10.5 Key Terms
10.6 Questions and Exercises
10.7 Further Reading
10.0 Introduction
Entrepreneurship is instrumental in bringing about changes in all aspects
of the society, encouraging development and growth. It is observed that various
factors influence the progress and development of entrepreneurship in different
societies. The Government of India and State Governments have taken various
steps in promoting entrepreneurial activities. Institutional set up for financial
assistance and export promotion is discussed in the following sections:
10.1 Unit Objectives
After going through this unit, you will be able to
 Know about the institutions providing financial assistance to entrepreneurs
 Be aware about institutions which deal with export promotion
10.2 Institutional Set Up for Financial Assistance
The details of some important institutions which provide financial assistance
to entrepreneurs are presented below:
Industrial Development Bank of India (IDBI)
Prior to 1964, there was not any apex organization to co-ordinate the
functions of various financial institutions. Then, V.V. Bhatt rightly pointed dynamic
leadership in the task of promoting a widely diffused and diversified and yet viable
process of industrialization. It was to fulfill this objective, the Government decided
to establish IDBI.
Business
Entrepreneurship - II
167
Institutional Support For
MSMEs - II
NOTES
IDBI was established on July 1, 1964 under the Act of Parliament as the
principal financial institution in the country. Initially, it was set up as wholly owned
subsidiary of the Reserve Bank of India. In February 1976, IDBI was made an
autonomous institution and its ownership passed on from the Reserve Bank of
India to the Government of India.
IDBI provides assistance to small-scale industries through its scheme of refinance
and, to a limited extent, through its bills rediscounting scheme. As it is not feasible for
IDBI to reach a large number of small-scale industries scattered all over the country, the
flow of its assistance to this vast number has thus been indirect in the form of refinancing
of loans granted by the banks and the State Financial Corporations (SFCs).
IDBI has shown its particular interest in development of small-scale industries.
Of particular mention is the setting up of the Small Industries Development Fund
(SIDF) in May 1986 to facilitate development and extension of small-scale industries.
In 1988, IDBI also launched National Equity Fund Scheme (NEFS) for providing
support in the nature of equity to tiny and small-scale industries engaged in
manufacturing, cost not exceeding Rs. 5 lakhs. The scheme is administered by IDBI
through nationalized banks. IDBI has also introduced single window assistance scheme
for grant of term loans and working capital assistance to a new, tiny and small enterprise.
Check Your
Progress
1. In February 1976,
IDBI was made an
autonomous institution
and its ownership
passed on from the
Reserve Bank of
India to the———
In order to make IDBI’s coordinating role more effective, the Narsimham
committee has suggested that IDBI should give up its direct financing function
and perform only promotional apex and refinancing role in respect of other
institutions like SFCs and SIDBI, etc. the direct lending function should be trusted
to a separate finance company, especially set up for this purpose.
The main functions of IDBI are as follows:
a) The IDBI provides assistance to the small scale sector through its scheme
of refinance and bills rediscounting scheme.
b) The financial assistance has been indirect in the form of refinancing of
loans granted by the commercial banks and the State Financial
Corporations (SFCs).
c) In order to assist the small sector, IDBI has set up Small Industries
Development Fund (SIDF) in May 1986. This fund basically aims at
providing a focal point to coordinate financial and non-financial inputs
required for growth of small industries sector.
d) In association with Government of India, IDBI has constituted National
Equity Fund (NEF) to prevail equity type of support to tiny and small
scale units which are engaged in manufacturing activities. The scheme
is administered by IDBI through nationalized banks.
e) The IDBI has also introduced the single window assistance scheme for
grant of term loans and working capital assistance to small, tiny and
medium scale enterprises.
f) The IDBI has also set up a Voluntary Executive Corporation Cell (VECI)
to utilize the services of experts, professionals for counseling small units
and for providing consultancy support in specified areas.
Industrial Finance Corporation of India Ltd. (IFCI)
168
Business
Entrepreneurship - II
The Government of India set up IFCI under IFCI Act in July 1948. Since
July 1, 1993, it has been brought under the Companies Act, 1956. IFCI extends
financial assistance to industrial sector through rupee and foreign currency loan,
underwriting/direct subscriptions to shares/debentures and guarantees and also
offers financial services through its facilities of equipment procurement, equipment
finance, buyers’ and suppliers’ credit, equipment leasing and finance to leasing
and hire-purchase companies. It also provides merchant banking with its Head
office in Delhi and a bureau in Bombay.
Institutional Support For
MSMEs - II
NOTES
The financial resources of IFCI are constituted of the following three
components:
i. Share capital
ii. Bonds and debentures
iii. Other borrowing.
Industrial Development Bank of India, schedule banks, insurance
companies, investment trusts and co-operative banks are the shareholders of IFCI.
Apart from the paid-up capital and reserves, the major sources of IFCI are the
issues of bonds and debentures, borrowing from the Government, Reserve Bank
of India, Industrial Development Bank of India and foreign loans.
In recent years, the IFCI has started new promotional schemes, such as:
i. Interest subsidy scheme for women entrepreneurs
ii. Consultancy fee subsidy schemes for providing marketing assistance to
small-scale industries
iii. Encouraging the modernization of tiny, small-scale ancillary units; and
iv. Control of pollution in the small and medium scale industries.
No doubt, IFCI has experienced impressive performance over the years.
At the same time, it is also true that there are certain flaws in its function which
have invited criticism from different quarters. To quote, the important ones are:
IFCI’s lending operations have encouraged concentration of wealth and
capital. It still pursues a discriminatory policy to the disadvantage of medium and
small-scale units.
Great delays in sanctioning loans and then making the amount of the loan
available
The IFCI has failed to exercise necessary control over the defaulting
borrowers.
Further, in many cases, the assistances have not been used for the specific
purpose for which they are given. Here also, the IFCI has failed to take any action
against such practices.
Though IFCI Ltd has performed in the best possible manner over the
years, due to lack of control over the defaulting borrowers, it is facing many problems
in recent years.
Industrial Credit and Investment Corporation of India Ltd. (ICICI):
Industrial Credit and Investment Corporation of India Ltd (ICICI) was
set up in January 1955 under the Indian Companies Act with the primary objective
of developing small and medium industries in the private sector. Its issued capital
has been subscribed by Indian banks, British Eastern Exchange and other companies
and general public in India.
Business
Entrepreneurship - II
169
Institutional Support For
MSMEs - II
ICICI performs the following functions:
i. It provides assistance by way of rupee and foreign currency loans,
underwriting and direct subscriptions to shares/debentures and guarantees
NOTES
ii. It offers variety of financial services such as deferred credit, leasing
credit, installment sale, asset credit and venture credit.
iii. It guarantees loans from other private investment sources.
Check Your
Progress
2. What are the
functions of ICICI?
ICICI has recently set up a Merchant Banking Division which is working
very creditably. It has also set up ICICI asset management company ltd. in June
1993 to operate schemes of ICICI mutual fund. Yet another subsidiary called ICICI
investors services Ltd. and ICICI Banking Corporation Ltd. have started operations.
Industrial Reconstruction Bank of India (IRBI):
Industrial Reconstruction Corporation of India (IRCI) was set up in
1971under the Indian companies act to act as an agency to rehabilitate the sick
units. But in the year 1984, the government of India renamed IRCI as Industrial
Reconstruction Bank of India (IRBI) by an act of parliament. Thereafter, it acts
as a reconstruction agency to revive, reconstruct and rehabilitate sick industrial
concerns. It looks after special problems of sick units and provides assistance for
their speedy reconstruction and rehabilitation. IRBI has to function as the principal
all-India credit and reconstruction agency for industrial revival, assisting and
promoting industrial development and rehabilitating industrial concerns.
IRBI had diversified its activities into ancillary lines such as consultancy
services, merchant banking and equipment leasing. All these activities are allied to
its task of rehabilitation of sick industrial units. Through its consultancy services,
IRBI attempts to help banks and financial institutions to assess intrinsic worth of
sick units which are seeking assistance for revival. Through its merchant banking
services, IRBI enables units in the process of amalgamation, merger and
reconstruction. Equipment leasing was, in fact, an extension of the IRBI hirepurchase scheme.
IRBI undertakes the following functions:
a) It provides financial assistance to industrial concerns.
b) It acts as an agency of state government as well as union government
and also of other financial institutions as per the authorization of the
government.
c) It provides consultancy and merchant-banking services for reconstruction
and development of industrial units.
d) It also helps in providing infrastructural facilities, raw materials,
machineries and other tools in the basis of hire-purchase and lease
schemes.
IRBI plays a significant role in promoting entrepreneurial and industrial
development in the country.
Small Industries Development Bank of India (SIDBI)
170
Business
Entrepreneurship - II
With a view to ensure larger flow of financial and non-financial assistance
to small scale sector, the government of India set up Small Industries Development
Bank of India under a special act of the parliament in October 1989 as a wholly-
owned subsidiary of IDBI. The bank commenced its operations from April 2,
1990 with its head office in Lucknow. SIDBI has taken over the outstanding portfolio
of IDBI relating to the small-scale sector. The chief functions of SIDBI are the
promotion and development of small scale industries by the way of financing. The
other important functions of SIDBI are as follows:
Institutional Support For
MSMEs - II
NOTES
 To initiate steps for technological up gradation and modernization of
existing small scale units
 To expand the channels for marketing the products of SSI sector in
domestic and international markets.
 To promote the employment oriented industries especially in semi-urban
areas to create more employment opportunities and thereby checking
migration of people to urban areas.
 To extend seed capital or soft loan assistance under the National Equity
Fund Scheme/ Mahila Udyam Nidhi Scheme.
 To grant direct assistance and refinance for exports of small scale sector
 To provide financial assistance to SFCs, SIDCs, commercial banks, RRBs
through existing credit delivery system
 To provide factoring and leasing service
 To provide financial assistance to the institutes, organizations for
undertaking entrepreneurship development programmes.
The most important feature of SIDBI is the special emphasis and the new
schemes of assistance for marketing support to the small scale sector.
SIDBIs financial assistance to small-scale industries is channelized through
the existing credit delivery system comprising state financial corporations, state
industrial development corporations, commercial banks and regional bank of India.
The other new scheme launched was venture capital fund exclusively for smallscale units. It enrolled itself as an institutional member of the OTC exchange
corpus of India (OTCEI). SIDBI also provides financial support to national small
industries corporation for providing leasing, hire-purchase and marketing support
to the industrial units in the small-scale sector.
National Bank of Agriculture and Rural Development (NABARD)
In pursuance of the recommendations of the committee for reviewing
arrangements for financing institutional credit for agriculture and rural development
(CRAFICARD), NABARD was set up to operate as an apex bank in agriculture.
NABARD’s resource was initially contributed by the central government and the
Reserve Bank of India. To meet its loan requirement, it draws funds from the
central government, the World Bank and other agencies. NABARD is empowered
to raise funds from market also.
The main functions of NABARD are as follows:
a) It acts as a refinancing institution and advances loans to agriculture,
small scale industries, and cottage and village industries.
b) It also provides financial assistance to handicrafts sector, rural artisans,
agriculturists, farmers and entrepreneurs engaged in allied non-farm
sector activities.
Check Your
Progress
3. With a view to
ensure larger flow of
financial and nonfinancial assistance to
small scale sector, the
government of India
set up —— under a
special act of the
parliament in October
1989 as a whollyowned subsidiary of
IDBI.
Business
Entrepreneurship - II
171
Institutional Support For
MSMEs - II
NOTES
c) It provides short-term, medium-term and long-term credit to the RRBs.
Co-operative banks and other financial institutions to promote integrated
rural development.
d) NABARD is entrusted with the responsibility of coordination among the
union And stat government, the planning commission and other state
level institutions engaged in promotion and establishment of small-scale,
village and cottage industries, rural art and crafts and micro-enterprises.
e) It undertakes entrepreneurship development programmes, skill up
gradation programme for tiny, small and medium scale entrepreneurs,
workshops and seminars to promote integrated rural development both
in agricultural and industrial sectors.
The following are the innovative initiatives of NABARD:
 Micro-finance programme
 Natural resources management initiatives
 Empowerment of rural women through micro-credit, micro-enterprise
and Self Help Group (SHG) programmes
 Creation of special funds to support innovations in neglected areas
 Creation of millions of rural employment opportunities through initiatives
like cluster development and rural entrepreneurship development
programmes
 Construction of infrastructure like roads, bridges and rural hats, etc
Commercial banks
Commercial banks assist in providing finance to entrepreneurs. Financial
assistance may take the form of term loan or working capital loan. In general,
commercial banks provide short-term loans in the shape of working capital to
small entrepreneurs, commercial banks but with the development of industrialization,
these banks have become more and more interested to advance long-term finance
to entrepreneurs.
For a long period, commercial banks did not come forward to extend
financial assistance to small-scale industries because of the SSIs weak economic
base. The first lead in the regard was taken by State Bank of India (SBI) in
consultation with Reserve Bank of India (RBI), in March 1956 by setting up a
pilot scheme for the provision of credit for small-scale industries. In the beginning,
the scheme for the provision of credit for small-scale industries was confined to 9
branches of the SBI which was later extended to all branches of the SBI. The
commercial banks started taking initiation in financing SSIs in a greater way only
after the bank nationalization in July 1969. Normally, the commercial banks provide
assistance for working capital requirements of SSIs. Over the years, they have
also started providing term finance as is indicated by the data compiled by RBI
that all the advances given to SSIs by the commercial banks, the share of the term
loan accounted for nearly 30%. A notable feature in the financing of SSIs has
been the introduction of the Lead Bank Scheme by RBI. Under this scheme, each
district has been allotted to one scheduled commercial bank for intensive
development of banking facilities.
172
Business
Entrepreneurship - II
The introduction of Credit Guarantee Scheme, in 1960, was a big fillip in the
field of commercial bank financing to SSIs. Initially, this scheme was introduced in 22
districts on experimental basis. Later, it was extended to all over the country. Further,
the RBI set up a committee to look into the adequacy of institutional credit to SSIs.
Based on the recommendations of the committee, the RBI introduced a special package
of measures for financing SSIs and advised banks to take various measures aimed at
increasing the credit flow to the SSIS sector improved further with the stipulation on
foreign banks to extend at least 10% of their net bank credit to SSI sector and to
deposit the shortfall. It is interesting to mention that the bank credit to small-sector as
a percentage to total bank credit is on increase year after year.
Institutional Support For
MSMEs - II
NOTES
After nationalization in 1969, the commercial banks have extended their
activities to help small borrower an access to bank credit. These banks have
extended liberal credits facilities to the priority sectors such as agriculture and
agro-based industries, small scale industries. One of the key features is that timely
and adequate credit at low rate of interest is increasingly awaited by the small
scale entrepreneurs.
Regional Rural Banks (RRBs):
A rural bank scheme has been inaugurated in India on October 2, 1975
with the objective of establishing regional rural banks to finance credit needs of
small and marginal farmers, rural artisans, and agricultural labourers, small and
tiny entrepreneurs.
These banks came in to existence with the sponsorship of central
government, state government and specific commercial banks. The ratio of share
capital contributed by the above agencies for formation of RRB is 50:15:55
respectively. Though the RRBs resemble commercial banks in many respects,
they virtually differ from commercial banks in certain aspects, viz:
a. The area of operation of RRB is confined to a specific region consisting
of generally one or more districts in a state
b. This bank advances financial assistance to small and marginal farmers,
agricultural labourers, small entrepreneurs and persons of small means.
c. The interest charges of RRBs should not be higher than those of cooperative societies.
The functions of RRBs are as follows:
a. To provide loans and advances to small and marginal farmers, agricultural
labourers, artisans, etc.
b. To advance financial assistance to small entrepreneurs for establishing
small and tiny enterprises.
c. To assist entrepreneurs in handicrafts and cottage sector
d. To provide financial assistance to small entrepreneurs for development
of trade, commerce, industries, agriculture and other allied economic
activities in rural areas.
Life Insurance Corporation of India (LIC)
Life Insurance Corporation (LIC) was established under the LIC Act in
1956 as a wholly-owned corporation of the Government of India, on nationalization
of life insurance business in the country. LIC offers a variety of insurance policies
to extend social security to various segments of society. It has been deploying its
funds in accordance with plan priorities.
Business
Entrepreneurship - II
173
Institutional Support For
MSMEs - II
NOTES
Check Your
Progress
4. Name some institutions which provide financial assistance to
entrepreneurs.
As per its investment policy, LIC invests 75% and above in central and
state government’s securities including government-guaranteed marketable
securities and in the socially-oriented sector. It also provides loans for various
purposes like housing, water supply and sanitation, rural electrification, expansion,
diversification and industrial ventures, modernization of industry etc to benefit
individuals and groups. LIC provides term loans and underwriting/direct
subscriptions to shares and debentures of corporate sectors.
The private sector claimed higher share in total sanctions. It was distantly
followed by public sector and co-operative sector. As regards purpose-wise
assistance sanctioned, the new projects claimed maximum share in total sanctions,
followed by expansion/diversification and modernization/rehabilitation/balancing
equipment.
Unit Trust of India (UTI)
Unit Trust of India (UTI) was established by the Government of India
under an Act of Parliament. The chief objectives of UTI are:
i. To mobilize the savings of small investors through sale of units
ii. To channelize these savings towards corporate investment.
Over the years, the UTI has introduced a variety of schemes to meet the
need of diverse sections of investors. The UTI also provides assistance to the
corporate sector by way of term-loans and underwriting/direct subscription to
shares/debentures.The UTI has introduced many schemes which aimed at common
investors. These schemes are mainly Primary Equity Fund, Retirement Benefit
Plan, Grihalaxmi Unit Plan, Unit Scheme 1995 and Columbus India Fund. The
UTI also provides financial assistance to corporate sector in the form of term
loans and underwriting direct subscriptions to shares and debentures.
10. 3 Institutional Set Up for Export Promotion
The capability of Indian MSME product to compete in international market
is reflected in its share of about 34% in national export. In case of items like
ready-made garments, leather goods, processed foods, engineering items, the
performance has been commendable both in terms of value and their share within
the MSME sector while in some cases like sports goods, they account for 100%
share to the total exports of the sector.
Export promotion from small scale sector has been accorded high priority
in India’s export promotion strategy which includes simplification of procedures,
incentives for higher production of exports, preferential treatment to MSMEs in
the market development fund, simplification of duty drawback rules etc.
Directorate General of Foreign Trade (DGFT)
174
Business
Entrepreneurship - II
The Director General of Foreign Trade (DGFT), earlier known as chief
Controller of Imports and Exports (CCI&E) till 1991, is the agency of Ministry of
Commerce and Industry, Government of India responsible for administering laws
regarding foreign trade and foreign investment in India. DGFT is responsible for
execution of import and export policies of India, Foreign Trade Policy etc. DGFT
is the licensing authority for exporters, importers, and export and import business.
DGFT grants 10 digit IEC (Importer Exporter Code) which is a primary requirement
to Import Export. DGFT runs various schemes for trade promotion and facilitation.
For promoting exports and imports, DGFT establish its regional offices across the
country. DGFT plays a very important role in the development of trading relations
with various other nations.
The Government devised a series of export promotional schemes. EOU
and SEZ schemes are one among them, which provides an internationally
competitive duty free environment coupled with better infrastructural facilities for
export production.
Institutional Support For
MSMEs - II
NOTES
Export Oriented Unit Scheme
Export Oriented Units (EOUs) now constitute an important sector. The
EOU scheme introduced in early 1981, is complementary to the SEZ scheme
(erstwhile EPZ scheme). It adopts the same production regime but offers a wider
option in location with reference to factors like source of raw materials, port of
export, hinterland facilities, availability of technological skills, existence of an
industrial base, and the need for a larger area of land for the project.
An EOU can be set up by any entrepreneur for manufacture of goods
and also for rendering services. An EOU can be set up for repair, reconditioning,
re-making and re-engineering also. Trading activity is not allowed in the EOU
scheme. EOU unit is required to achieve only positive Net Foreign Exchange
(NFE) over a period of 5 years. EU can also be set up in the following sectors:
agriculture, animal husbandry, aquaculture, floriculture, horticulture, pisciculture,
viticulture, poultry or sericulture.
Salient features:
 No license required for import
 Exemption from Central Excise Duty in procurement of capital goods,
raw materials, consumables, spares etc from the domestic market
 Exemption from customs duty on import of capital goods, raw materials,
consumables, spares etc
 Reimbursement of Central Sales Tax (CST) on domestic purchase
 Supplies from DTA to EOU treated as deemed exports
 Reimbursement of duty paid on furnace oil, procured from domestic oil
companies to EOUs as per the rate of drawback notified by the
Directorate General of Foreign Trade
 100% Foreign Direct Investment permissible
 Exchange earners foreign currency (EEFC) Account
 Facility to retain 100% foreign exchange proceeds in EEFC Account
 Facility to realize and repatriate export proceeds within twelve months
 Further extension in time period can be granted by RBI and their
authorized dealers
 Re-export of imported goods found defective, goods imported from
foreign suppliers on loan basis etc
 Exemption from industrial licensing requirement for items reserved for
SSI sector
Business
Entrepreneurship - II
175
Institutional Support For
MSMEs - II
NOTES
 Profits allowed to be repatriated freely without any dividend balancing
requirement
 Access to domestic market up to 50% of FOB value of export on
concessional rate of duty
 Duty free goods to be utilized in two years. Further extension granted on
liberal basis
 Job work on behalf of domestic exporters for direct export allowed
 Conversion of existing Domestic Tariff Area (DTA) unit into an EOU
permitted
 Can produce duty-free inputs for supply of manufactured goods to
advance license holders
 Supply of ITA-I items in the domestic market which would be counted
for fulfillment of NFE
 EOUs in agriculture and horticulture engaged in contract farming may
be permitted to take out duty free goods
Trade Promotion Assistance
NIC is the National Portal of India developed with an objective to enable
a single window access to information and services being provided by various
Indian government entities. The contents in this portal mentioned below is the
result of a collaborative effort of various Indian government industries and
departments at the central/state/district
 Website of Ministry of Commerce and Industry
 Information of trade promotion assistance
 Invest India portal- guiding for investment in India
 India in business portal
 Agricultural and processed food products export development authority
 Information of foreign trade policy
 Information of trade agreements of India
 Information about international trade fairs
 Information on India and World Trade Organization (WTO)
 Basic chemicals, pharmaceuticals and cosmetics export promotion council
 Information on foreign trade
 Information on Indo-Myanmar boarder trade promotion
 Information on bilateral and regional free trade agreements
Foreign Trade Policy 2015-20 (FTP)
176
Business
Entrepreneurship - II
The new five year foreign trade policy, 2015-20 provides a framework for
increasing exports of goods and services as well as generation of employment and
increasing value addition in the country, in keeping with the ‘Make in India’ vision.
The focus of the government is to support both the manufacturing and services
sector with a special emphasis on improving the ease of doing business.
FTP 2015-20 introduces two new schemes namely ‘’Merchandise Exports
from India Scheme (MEIS)’’ for export of specified of goods to specified markets
and ‘’Services Exports from India Scheme (SEIS)’’ for increasing exports of notified
services, in place of a plethora of schemes earlier, with different conditions for
eligibility and usage. Measures have been taken to give a boost to export of defense
and hi-tech items.
Institutional Support For
MSMEs - II
NOTES
DGFT will continue to mentor new and potential exporters through the
‘Niryat Bandhu Scheme’. The scheme has been galvanized and re-positioned to
achieve the objectives of ‘skill India’. MSME clusters have been identified based
on the export potential of the product and density of the industries in the cluster for
focused interventions to boost exports. Outreach activities will be organized in a
structured way at these clusters with the help of export promotion councils and
other willing industry partners and knowledge partners ‘IPKP’.
Plantation Scheme
Various Plantation Schemes of Department of Commerce, Ministry of
Commerce and Industry, Government of India are noted below:
1. Rubber:
Rubber Development Scheme
Rubber Research Scheme
Scheme for Processing
Quality Up gradation and Product Development of NR
Scheme for Market Development and Export Promotion of NR
Scheme for Human Resource Development
2. Tea:
Plantation Development Scheme
Human Resources Development Scheme
Market Promotion Scheme
Quality up gradation and Product Diversification Scheme
Research and Development Scheme
3. Coffee:
Research and Development Scheme
Research and Development Scheme for Sustainable Coffee Procedure
Development Procedure for Coffee
Market Development Scheme
Weather (Rainfall) Insurance Scheme
Support for Coffee Processing and Export Promotion Schemes
Business
Entrepreneurship - II
177
Institutional Support For
MSMEs - II
4. Spices:
Export Development and Promotion of Spices
Export-Oriented Production and Post-harvest Improvement of Spices
NOTES
Export-Oriented Research Programs
Project on Pepper Production in Idukki, Kerala
Special Purpose Fund of Re-plantation and Rejuvenation of Cardamom
Spices Park
ASIDE Scheme (Assistance to States for Developing Export Infrastructure
and Allied Activities)
The objective of the scheme is to involve States/UTs in export effort by
providing assistance to State Governments/UT administrations for creating
appropriate infrastructure for development and growth of exports. Such involvement
will be based on the projected approach and projects are to be prioritized by States/
UTs to address the critical link both at the point off production and the point of
evacuation in the industrial cluster, largely within the contour of the first mile (at
the point of production) and the last mile (the point of evacuation) consideration.
The Export Promotion Industrial Park (EPIP), Export Processing Zone
(EPZ), Critical Infrastructure Balancing (CIB) and Export Development Fund
(EDF) for the North East and Sikkim schemes have been merged with the new
scheme since 2002-03.
The scheme shall provide an outlay for development of export infrastructure
which will be distributed to the States/UTs according to pre-defined criteria.
The outlay of the scheme will have two components: state component (80% of the
total outlay) and Central component (20% of the total outlay).
Export Promotion of Consultancy and Management Services from India
In the recent period, the trade policy in India reflects the strategic
importance of India’s comparative advantage of trade in services. The services
sector has been identified as a thrust sector for trade policy. Some of the key
initiatives of the government in promoting export of consultancy services are through
Market Development Assistance (MDA), Market Access Initiative (MAI) scheme,
proactive EXIM Policy and EXIM Bank schemes. Government also provides
exemption on service tax for export of consultancy services.
Export Promotion Council for EOUs and SEZs
Export Promotion Council for EOUs and SEZs (EPCES) has been set up
to service the export promotional needs of 100% Export Oriented Units (EOUs),
Special Economic Zone (SEZ) Units and Agri Economic Zones in the country.
This Council is a multi-product and scheme specific Export Promotion Council.
The EOUs/SEZ Units cover major industrial sectors, like textiles, garments and
yarn, food and agro products, electronics and software, chemical, engineering,
minerals granite etc.
178
Business
Entrepreneurship - II
The objectives of the Council are to promote exports from India and to
earn more foreign exchange for the country, to facilitate interaction between
exporting community and government both at the Central and State level, to canalize
financial assistance rendered by the Central Government to members for assisting
their export market development efforts, and to collaborate with other Export
Promotion Councils/Export Promotion Organisations in India and similar bodies in
foreign countries as well as with international organizations working in the field.
The main activities of the Council are providing financial assistance to
EOUs/SEZ Units through Market Development Assistance for export promotion
activities abroad, organizing Open Houses/Seminars/Workshops in different states
of the country for resolving their problems and eliciting suggestions for policy
making by Government, taking up issues affecting EOUs/SEZ with various
Ministries like Commerce, Finance, CBEC, CBDT, RBI, State Governments etc,
participating in trade fairs/exhibitions in India and abroad, informing members about
latest development s and changes in national and international trade scenario,
publishing a quarterly ‘EPCES News’, bringing out publications for use within
India and abroad, organizing buyer-seller meets with EOUs and SEZ Units for the
promotion of exports.
Commodity Boards
There are five statutory commodity boards under the Department of
Commerce. These boards are responsible for production, development and export
of tea, coffee, rubber, spices and tobacco.
Institutional Support For
MSMEs - II
NOTES
Check Your
Progress
5. What do you know
about
Export
Promotion Councils?
Export Inspection Council
The Export Inspection Council was set up as a statutory body on 1st Jan.
1964 under section 3 of the Export (Quality Control and Inspection) Act, 1963 to
ensure sound development of export trade of India through quality control inspection
and for maters connected therewith.
The Export Inspection Council was set up as a statutory body on 1st January,
1964 under the section 3 of the export act, 1963 to ensure sound development of
export trade of India through quality control and inspection and for matters
connected therewith. The council, an official export-certification body of India, is
located at New Delhi and is headed by a chairman. The council is assisted in its
functions by the EIAs, responsible for carrying out the work of quality control,
inspection and certification of notified commodities for exports under the export
act, 1963 located at Chennai, Delhi, Kochi, Kolkata, Mumbai, each having suboffices under them including laboratories at important ports and industrial centers
in India to cater to the requirements of the exporters of these places. The network
of its laboratories comprise main food labs at Chennai, Kochi, Kolkata and Mumbai,
having state-of-art equipment besides a number of field labs attached to various
sub-offices for microbiological testing supports reliable third party certification by
the organization.
Check Your
Progress
6. There are ———
———- statutory
commodity boards
under the Department
of Commerce. These
boards are responsible
for
production,
development and
export of —————
Indian Institute of Foreign Trade (IIFT):
IIFT was set up in 1963 by the Government of India (Ministry of Commerce
and Industry) as an autonomous organization to help professionalize the country’s
foreign trade management and increase exports by developing human resources;
generating, analyzing and disseminating data; and conducting research. The Institute
visualizes its role as:
A catalyst for new ideas, concepts and skills for the internationalization of
the Indian economy
Business
Entrepreneurship - II
179
Institutional Support For
MSMEs - II
NOTES
The primary provider of training and research-based consultancy in the
areas of international business, for the corporate sector, Government and the student
community, at large
An institution with proven capability to continuously upgrade its knowledge
base with a view to meet the requirements of the Government, trade and industry
through both sponsored and non-sponsored research and consultancy assignments.
Indian Institute of Packaging
The Indian Institute of Packaging is an autonomous body set up by the
Department of Commerce, in 1966 in partnership with the leading Indian packaging
and allied industries. The Institute has the objective of promoting exports by helping
innovate in design and development of packaging and also upgrade the packaging
standards at the national level. The institute endeavours to achieve this by organizing
educational courses and skill development programmes in packaging for the benefit
of students and in-service packaging professionals, testing and certification of
packaging, and provision of consultancy services to industry.
The institute has created research and model infrastructural facilities at
its location for training, design and development in packaging. Main activities of
the institute include training, education, research and development. It also conducts
tailor made training programmes and certificate courses to meet the requirement
of the industry. It runs residential training programmes for overseas participants in
association with the World Packaging Organization (WPO), Asian Packaging
Federation (APF), Ministry of External Affairs and Ministry of Food Processing
Industry, Government of India.
Marine Products Export Development Authority
The Marine Products Export Development Authority was set up as a
statutory body in 1972 under an act of parliament. The authority, with its
headquarters at Kochi and in field offices in all maritime states of India, is headed
by a chairman/chairperson. The authority is responsible for development of marine
industry with special focus on marine exports. Besides, it has trade promotion
offices at Tokyo and New York.
Agricultural and Processed Food Products Export Development Authority
The APEDA was established by the government of India under the
agricultural and processed food products export development authority act passed
by the parliament in December, 1985. The authority, with its headquarters at New
Delhi, is headed by a chairperson. APEDA has been serving the agri-export
community since its inception. To reach out to the exporters in different parts of
the country, in addition to 5 regional offices, APEDA has set up 13 virtual offices
at Thiruvananthapuram, Bhubaneshwar, Chennai, Raipur, Ahmedabad, Bhopal,
Luck now and Panaji. APEDA has been entrusted with the responsibility of export
promotion and development of 14 agricultural and processed food products groups
listed in the schedule to the APEDA act. In addition to this, APEDA has been
entrusted with the responsibility to monitor the import of sugar as well.
APEDA has been actively engaged in the development of markets besides
up gradation of infrastructure and quality to promote the export of agro products.
In its endeavor to promote agro exports, APEDA provides financial assistance to
the registered exporters under its schemes for market development, infrastructure
development, quality development and transport assistance.
180
Business
Entrepreneurship - II
Export Promotion Councils (EPCs)
These Councils are registered as non-profit organisations under the
Companies Act/the Societies Registration Act. The Councils perform both the
advisory and executive functions. These Councils are also the registering authorities
under the Export Import Policy, 1997-2002. These Councils have been assigned
the role and functions under the said Policy.
Institutional Support For
MSMEs - II
NOTES
There are fourteen export promotion councils under the administrative
control of the Department of Commerce, Ministry of Commerce & Industry –
There are nine export promotion councils under administrative control of the
Ministry of Textiles. Each Council is responsible for promotion of a particular
group of products, projects and services.
The basic objective of EPCs is to promote and develop exports of the
country. The main role of EPC is to project India’s image abroad as a reliable
supplier of high quality goods and services. the major functions of EPCs are: to
provide commercially useful information and assistance to their members in
developing and increasing their exports, to offer professional advice to their
members in areas as technology upgradation, quality and design improvement,
standards and specifications, product development, innovation etc; to organize visits
of delegations and its members abroad to explore overseas market opportunities;
to organize participation in trade fairs, exhibitions and buyer-seller meets in India
and abroad; to promote interaction between exporting community and the
Government both at the Central and State levels; and to build a statistical base and
provide data on the exports and imports of the country, exports and imports of
their members, as well as other relevant international trade data.
Federation of Indian Export Organisations (FIEO)
The Federation of Indian Export Organisations set up in 1965 is an apex
body of various export promotion institutions with its major regional offices at
Delhi, Mumbai, Chennai, and Kolkata. The main objective of FIEO is to render an
integrated package of services to various organizations connected with export
promotion. It provides, content, direction and thrust to India’s global effort. It also
functions as a primary servicing agency to provide integrated assistance to its
members comprising professional exporting firms holding recognition status granted
by the government, consultancy firms and service firms. The Federation organizes
seminar and arranges participation in various exhibitions in India and abroad. It
brings out ‘FIEO News’ for creating awareness amongst its member exporters
and importers.
The Federation of Indian Export Organisations represents the Indian
entrepreneurs’ spirit of enterprise in the global market. Known popularly as “FIEO”,
this apex body of Indian export promotion organizations was set up jointly by the
Ministry of Commerce, Government of India and private trade and industry in the
year 1965. FIEO is thus a partner of the Government of India in promoting India’s
exports. FIEO’s member organizations, comprising largely of export houses, trading
houses, and consultancy exporting firms, contribute in a major way to the total
exports of India. Exports by FIEO members comprise a wide range of consultancy
services, manufacturing, international trading, investment and joint ventures abroad.
FIEO forges strong links with counterpart organizations in several countries, as
we as international agencies to enable direct communication and interaction between
India and world businessmen.
Business
Entrepreneurship - II
181
Institutional Support For
MSMEs - II
NOTES
National Centre for Trade Information (NCTI)
The National Centre for Trade Information was incorporated on
31stMarch1956. It has a Board of directors for administration of its affairs which
includes representatives from Ministry of Commerce & Industry, National
Informatics Centre (NIC), Indian Institute of Foreign Trade (IIFT), Directorate
General of Commercial Intelligence & Statistics (DGCI&S), India Trade Promotion
Organisation (ITPO) and other Export Promotion Councils/Apex Bodies.
Major activities of NCTI comprise of trade data based research and
analysis, export potential research, Trade Data Analysis support to Department of
Commerce, support to trade and industry like creation and maintenance of websites,
website content management, market research/studies/surveys, creation of
databases – Importers/Exporters, Electronic Trading Opportunities (ETOs) or live
trade inquiries, uploading 52 issues of e-weekly ‘Trade Point – India’ on its website,
setting up Trade Information Centres, Trade Fair/exhibitions support etc
State Trading Corporation (STC)
STC was set up on 18th May 1956 primarily with a view to undertake
trade with East European countries and to supplement the efforts of private trade
and industry in developing exports from the country. It has arranged imports of
essential items of mass consumption (such as wheat, pulses, sugar, edible oils
etc.) into India and contributed significantly in developing exports of a large number
of items from India. The core strength of STC lies in handling exports/imports of
bulk commodities. Over the years, STC has also diversified into exports of steel,
iron ore, molasses and imports of bullion, hydrocarbons, minerals, metals, fertilizers,
petro-chemicals etc.
MMTC Limited
The MMTC Ltd was created in 1963 as an independent entity on separation
from State Trading Corporation of India. Primarily it deals in exports of minerals
and ores and imports of non-ferrous metals. In 1970, MMTC took over imports of
fertilizer raw materials and finished fertilizer. Over the years import and export of
various other items like steel, diamonds, bullion, agro, hydrocarbon, etc. were
progressively added to the portfolio of the company.
MMTC has been following the mantra of strategic diversification for
progress with much success, exploiting opportunities to expand base and open up
new business prospectus. It endeavors constantly to explore emerging opportunities
by synergizing and blending them with its own core competencies, thereby creating
new epicenters of growth and expanding its re as a trade organizer and facilitator.
The company has participated in various value-multiplier initiatives to enhance its
future sustainability through the JV and PPP route. MMTC has grown over the
years to become one of the largest trading organizations in India.
Subsidiary company
MMTC Transnational Pvt Ltd., Singapore is a wholly owned subsidiary
company of MMTC. During April-Sept, 2013, it has achieved a business turnover
of US$140 million. MTPL continues to enjoy prestigious ‘Global Trader Program’
(GTP) status awarded to it by International Enterprise, Singapore since FY 2000.
To expand and give impetus to growing trade between India and Africa,
MMTC has opened an office at Johannesburg, South Africa in January, 2011.
182
Business
Entrepreneurship - II
PEC Ltd
PEC Ltd.(formerly – the Project and Equipment Corporation of India Ltd.) was
carved out of the STC in 1971-72 to take over canalized business of STC’s (State
Trading Corporation of India Ltd.) railway equipment division to diversify into turn-key
projects especially outside India and to aid and assist in promotion of exports of Indian
engineering equipment. With effect from 23d May 1990 PEC Ltd. became a subsidiary
of the then newly formed Holding company, Bharat Business International Ltd. Therefore,
from 27th March 1991, PEC Ltd. became an independent company directly owned by
Government of India. The main functions of PEC Ltd. includes export of projects,
engineering equipment and manufactured goods, defense equipment & stores, import of
industrial raw materials, bullion and agro commodities, consolidation of existing lines of
business and simultaneously developing new products and new markets, diversification
in export of non-engineering items e.g. coal and coke, iron ore, edible oils, steel scraps etc
and structuring counter trade/special trading arrangements for further exports.
Institutional Support For
MSMEs - II
NOTES
Over the years, business of PEC Ltd. has diversified with industrial raw
materials, commodities and bullion constituting major part of its turnover and profit.
Some of the key initiatives have been consolidation of existing line of business and
selective diversification into sustainable business areas improving operational efficiency
and cost effectiveness. PEC Ltd. over last four decades has expanded its role to
become an integrated trading company and a provider of integrated facilitating services.
Export Credit Guarantee Corporation of India Limited (ECGC)
The Corporation was established in 1957 as the Export Risk Insurance
Corporation of India Ltd. Keeping in view the wider role played by the Corporation,
the name was changed to Export Credit Guarantee Corporation of India Ltd
(ECGC). ECGC is the premier organization in the country which offers credit risk
insurance cover to exporters, banks etc. The primary objective of the Corporation
is to promote country’s exports by covering the risk of export on credit. It provides
a range of insurance covers to Indian exporters against the risk of non-realization
of export proceeds due to commercial or political causes and different types of
guarantees to banks and other financial institutions to enable them to extend credit
facilities to exporters on liberal basis.
India Trade Promotion Organisation (ITPO)
The premier trade promotion agency of the Government of India for
organizing trade fairs, is committed to showcase excellence achieved by the country
in diverse fields especially trade and commerce. ITPO, as the nodal trade promotion
agency of the country, has had a pioneering role in the national trade growth
dynamics since its inception. Since its inception in 1992 and prior to that in its
earlier incarnations of Trade Fair Authority of India (TFAI) and Trade Development
Authority (TDA), ITPO has played a multi-faceted role in bringing out the strengths
of the Indian economy and giving a thrust to the country’s exports as a premier
export promotion organization. Apart from its role in bringing the Indian businesses,
particularly those in the MSMEs sector, closer to global markets, it was the first to
popularize trade fairs as a tool of trade promotion within the country.
The activities of ITPO include organizing of fairs and exhibitions in India;
participation in select overseas fairs and organizing of exclusive Indian trade shows
in select locations abroad; promotion through department stores, contact and
product promotion programmes and market surveys; information dissemination on
products and markets among trade and industry in India and abroad; organizing
seminars, conferences and workshops on trade-related issues; and upgradation of
the facilities of Pragati Maidan to exacting international standards.
Business
Entrepreneurship - II
183
Institutional Support For
MSMEs - II
NOTES
Export-Import Bank of India (EXIM BANK)
The Export-Import Bank of India, commonly known as EXIM Bank was
set up on January 1, 1982 to take over the operations of international finance wing
of IDBI and to provide financial assistance to exporters and importers to promote
India’s foreign trade. It also provides refinance facilities to commercial banks and
financial institutions against their export-import financing activities. The export
loans and guarantees portfolio of IDBI was taken over by EXIM Bank.
The important functions of the EXIM Bank are as follows:
i. Financing of export and import of goods and services both of India and
of outside India.
ii. Providing finance for joint ventures in foreign countries.
iii. Undertaking merchant banking functions of companies engaged in foreign
trade.
v. Providing technical and administrative assistance to the parties engaged
in export and import business.
v. Offering buyers’ credit and lines of credit to the foreign government and banks.
vi. Providing advance information and business advisory services to India
exporters in respect of multilateral funded projects.
It also has introduced the following programmes:
i. Export bills rediscounting
ii. Technology and consultancy
iii. Financing and relending facility to banks abroad
During the year 1994-95, the EXIM BANK introduced the Clusters of
Excellence programme for up gradation of quality standards and obtaining ISO
9000 certification in various parts of the country. The bank also entered into the
framework co-operation agreement with EBRD- European Bank for
Reconstruction and Development for acquiring advance information on EBRD
funded projects in order to enter in co-financing proposals with EBRD in eastern
Europe and CIS.
With a view to promote exports, EXIM Bank has introduced three schemes.
These are:
 Production equipment finance programme
 Export marketing finance
 Export vendor development finance
Thus, EXIM Bank plays a very important role in boosting export promotion
in the country.
184
Business
Entrepreneurship - II
The Bank offers a number of financing programmes for Export Oriented
Units (EOUs), importers and for companies making overseas investments. The
financing programmes cater to the term loan requirements of Indian exporters for
financing their new project, expansion, modernization, purchase of equipment, R
& D, overseas investments and also working capital requirements.
10.4 Summary
The institutions which provide financial assistance to entrepreneurs are
Industrial Development Bank of India (IDBI), Industrial Finance Corporation of
India Ltd. (IFCI), Industrial Credit and Investment Corporation of India Ltd. (ICICI),
Industrial Reconstruction Bank of India (IRBI), Small Industries Development
Bank of India (SIDBI), National Bank of Agriculture and Rural Development
(NABARD), commercial banks, Regional Rural Banks (RRBs), Life Insurance
Corporation of India (LIC), Unit Trust of India (UTI).
Institutional Support For
MSMEs - II
NOTES
Institutional set up for export promotion comprises Directorate General of
Foreign Trade (DGFT), Export Oriented Unit Scheme, Trade Promotion Assistance,
Foreign Trade Policy 2015-20 (FTP), Plantation Scheme, ASIDE Scheme
(Assistance to States for Developing Export Infrastructure and Allied Activities),
Export Promotion of Consultancy and Management Services from India, Export
Promotion Council for EOUs and SEZs, Commodity Boards, Export Inspection
Council, Indian Institute of Foreign Trade (IIFT), Indian Institute of Packaging,
Marine Products Export Development Authority, Agricultural and Processed Food
Products Export Development Authority (APEDA), Export Promotion Councils
(EPCs), Federation of Indian Export Organisations (FIEO), National Centre for
Trade Information (NCTI), State Trading Corporation (STC), MMTC Ltd., PEC
Ltd., Export Credit Guarantee Corporation of India Limited (ECGC), India Trade
Promotion Organisation (ITPO), Export-Import Bank of India (EXIM BANK)
10.5 Key Terms
 Export promotion: An umbrella term for economic policies,
development interventions and private initiatives to improve the trade
performance of an economic area (like countries or regions within
countries) or enterprises.
10.6 Questions and Exercise
Questions
1. Write in detail about the institutional set up for financial assistance.
2. Explain the role of IDBI in development of entrepreneurship.
3. Write an essay on institutional set up for export promotion.
4. Write in detail about the functioning of Export Promotion Councils
5. Explain the function performed by EXIM bank for export promotion.
Exercises
1. Collect information about starting an export oriented unit.
2. Visit any one of the institutions providing financial assistance to
entrepreneurs and seek information about various formalities required.
Business
Entrepreneurship - II
185
Institutional Support For
MSMEs - II
Multiple Choice Questions
1. Which of the following is false regarding IDBI?
NOTES
i.
It provides assistance to small-scale industries through its scheme
of refinance and, to a limited extent, through its bills rediscounting
scheme
ii.
It launched National Equity Fund Scheme (NEFS) for providing
support in the nature of equity to tiny and small-scale indurstries
engaged in manufacturing
iii.
Both are i and ii are true
iv.
Both i and ii are false
2. ———————— was set up to operate as an apex bank in agriculture.
i.
EXIM Bank
ii.
NABARD
iii.
HDFC
iv.
ICICI
3. Regarding RRBs and commercial banks, pick up the wrong statement
i.
The area of operation of RRB is confined to a specific region
consisting of generally one or more districts in a state
ii.
The interest charges of RRBs should not be higher than those of
co-operative societies.
iii.
Both i and ii are true
iv.
Both i and ii are false
4. Choose the wrong alternative
i.
The new five year foreign trade policy, 2015-20 provides a
framework for increasing exports of goods and services as well as
generation of employment and increasing value addition in the
country
ii.
FTP 2015-20 introduces two new schemes namely
“Merchandise Exports from India Scheme (MEIS)’’ and
“Services Exports from India Scheme (SEIS)”
iii.
Both i and ii are true
iv.
Both i and ii are false
5. The objective(s) of Export Promotion Councils is/are
186
Business
Entrepreneurship - II
i.
To promote exports from India
ii.
To earn more foreign exchange for the country
iii.
To facilitate interaction between exporting community and
government
iv.
All the above
Answers
Institutional Support For
MSMEs - II
Check Your Progress
1. Government of India
NOTES
3. Small Industries Development Bank of India
6. five, tea, coffee, rubber, spices and tobacco.
Multiple Choice Questions
1. iii
2. ii
3. iii
4. iv
5. iv
10.7 Further Reading
https://www. dgft.gov.in
https://www.nabard.org
https://www.stpi.in
www.commerce.nic.in
www.dcmsmse.gov.in
www.dgft.gov.in/exim/2000/ftp2015-20E.pdf
www.dgft.gov.in/exim/2000/ftp2015-20E.pdf
www.eouindia.gov.in
www.eximbankindia.in
www.fisme.org.in
www.iift.edu
www.india.gov.in
www.india.gov.in
www.indiatradefair.com
Business
Entrepreneurship - II
187
Institutional Support For
MSMEs - II
Appendix I
Export Promotion Councils under Department of Commerce
NOTES
EEPC India, Kolkata
Project Exports Promotion Council of India (PEPC), New Delhi
Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council
(Chemexcil), Mumbai
Chemicals and Allied Products Export Promotion Council (CAPEXIL), Kolkata
Council for Leather Exports, Chennai
Sports Goods Export Promotion Council, New Delhi
Gem and Jewellery Export Promotion Council, Mumbai
Shellac Export Promotion Council, Kolkata
Cashew Export Promotion Council of India, Kollam
Plastics Export Promotion Council of India, Mumbai
Pharmaceutical Export Promotion Council, Hyderabad
Export Promotion Councils for EOUs and SEZ, New Delhi
Indian Oil Seeds & Produce Export Promotion Council (IOPEPC), Mumbai
Services Export Promotion Council,Gurgaon
Export Promotion Councils under Ministry of Textiles
Handloom Export Promotion Council (HEPC)
Apparel Export Promotion Council (AEPC)
Cotton Textile Export Promotion Council (TEXPROCIL)
Synthetic and Rayon Textile Export Promotion Council (SRTEPC)
Indian Silk Export Promotion Council (ISEPC)
Wool and Woolens Export Promotion Council
Carpet Export Promotion Council (CEPC)
Export Promotion Council for Handicrafts (EPCH)
Power loom Development and Export Promotion Council (PDEXCIL)
Wool Industry Export Promotion Council
188
Business
Entrepreneurship - II
UNIT 11 : INSTITUTIONAL SUPPORT FOR
MSMES -III
Institutional Support For
MSMEs - III
NOTES
Structure
11.0 Introduction
11.1 Unit Objectives
11.2 Industries department, Government of Maharashtra
11.3 Directorate of Industries (DIs) of the State Government
11.3.1 MSME Development Institute, Mumbai
11.3.2 District Industries Centre
11.4 Industry Related Policies of Maharashtra Government
11.5 MSME Schemes of Maharashtra
11.6 Summary
11.7 Key Terms
11.8 Questions and Exercises
11.9 Further Reading
11.0 Introduction
Entrepreneurship is instrumental in bringing about changes in all aspects
of the society, encouraging development and growth. It is observed that various
factors influence the progress and development of entrepreneurship in different
societies. The Government of India and the State Governments have taken various
steps in promoting entrepreneurial activities. We will discuss the role and functioning
of the Government of Maharashtra with reference to promotion of MSMEs and
entrepreneurship development in this section.
11.1 Unit Objectives
After studying this unit, you should be able to:
 Know about Industries department, Government of Maharashtra
 Be aware about role and functions of Directorate of Industries of
Maharashtra state
 Understand various policies related with industrial development of
Maharashtra state
 Be familiar with MSME schemes of Maharashtra state
Business
Entrepreneurship - II
189
Institutional Support For
MSMEs - III
NOTES
11.2 Industries Department, Government of
Maharashtra
Industries Department of Government of Maharashtra comprises of the
following:
Maharashtra State Mining Corporation
Maharashtra Industrial Development Corporation
Maharashtra State Khadi and Village Industries Board
Directorate of Geology and Mining, Government of Maharashtra
Directorate of Government Printing and Stationary
Maharashtra State Mining Corporation (MSMC)
MSMC is a limited company fully owned by the Government of
Maharashtra, incorporated under Companies Act, 1956 in 1973. Its objectives are
To promote systematic development of various mines with a view to
conserve the mineral wealth of the nation
To purchase on-lease, or otherwise acquire any mines, mining rights, and
metalliferous land in the state of Maharashtra, or elsewhere, and any interest
therein, and to explore, work, exercise, develop, and turn to account the same
To crush, win, get quarry, smelt, calcine, refine, dress, amalgamates,
manipulate and prepare for market of utilization, ore, metal and beneficiation and
up gradation of major and minor minerals of all kinds, and to carry on any other
operations which may seem conducive to the company’s objectives.
Maharashtra Industrial Development Corporation (MIDC)
Maharashtra Industrial Development Corporation (MIDC) is a state owned
corporation established under special MIDC Act, 1961, for the purpose of securing
and assisting in the rapid orderly establishment of industries in industrial areas and
industrial estates in the state of Maharashtra. MIDC supplies developed plots
with necessary infrastructural facilities like internal roads, water, electricity and
other internal services to entrepreneurs in the industrial areas.
MIDC supports the investors who are interested in establishing their units
in the State in every possible way. Apart from providing planning support, the
agency makes various resources available such as Doing Business guides, profiles
of various manufacturing sectors, investment regions, districts, SEZs and monthly
newsletter ‘MahaConnect’ disseminating information and updates. MIDC also
has an investor facilitation team to facilitate and handhold the investor to make the
process simpler and smoother, team from Ernst and Young Advisory Services is
managing the Investor facilitation cell on behalf of MIDC.
190
Business
Entrepreneurship - II
Maharashtra State government acquires land on behalf of MIDC. The
corporation develops layout and infrastructure and carries out the process of land
allotment to investors. It provides land for manufacturing, assembling, distribution
and industrial amenities like hospital, petrol pump etc required for industrial area.
It deals with acquisition and disposal of land, provision of infrastructure facilities,
providing services – supply of potable water from MIDC’s own water treatment
plants, maintaining roads, street lights, drainage lines etc.
The State Government is implementing following important programmes
through MIDC:
Institutional Support For
MSMEs - III
1. Establishment of growth centres
2. Establishment of mini industrial area to cover all talukas in the state
NOTES
3. Setting up Five star industrial areas in the state
4. Construction of roads, drainage systems and provision for street lights in
the industrial areas
5. Establishment of effluent collection and disposal systems for Chemical
Zones
6. Implementing Government/Semi Government projects
Maharashtra State Khadi and Village Industries Board (MSKVIB)
The Maharashtra State Khadi and Village Industries Board (MSKVIB)
was established in the year 1962. The main functions of the board are to organize,
develop and expand activities of Khadi and Village Industries (KVI) in the state.
The Board provides financial assistance to individuals, registered institutions and
co-operatives. It also provides technical guidance and training to individual
beneficiaries and makes arrangements in marketing of products of village industries.
With a view to provide for encouragement, organization, development and
regulation of khadi and village industries in the State, the Board is constituted
under the Bombay Khadi & Village Industries Act, 1960. The main functions of
the Board are:
To start, encourage, assist and carry on khadi and village industries
To help people by providing them with work in their homes and to give
loans and other form of monetary help
To conduct training for increasing technical skills of artisans
To manufacture tools and implements required for khadi and village
industries
To arrange for supply of raw materials, tools and implements
To arrange for sale of finished products by opening stores, shops or organize
exhibitions
To encourage establishment of cooperative societies for the purpose
To endeavor and to impress upon public advantages of patronizing the
products of khadi and village industries
To provide monetary assistance, technical support and market access to
village industries
The Directorate of Beekeeping was established in 1946 at Mahabaleshwar
The following schemes and programmes are implemented by the Board:
Artisans Employment Guarantee Scheme: The scheme is implemented
by the Board since 1972 with the objectives: to generate employment for rural
artisans, to provide financial support, to provide technical assistance and marketing
Business
Entrepreneurship - II
191
Institutional Support For
MSMEs - III
NOTES
support, to mitigate migration of rural population to urban area, to uplift standard
of living of rural artisans
Prime Minister’s Employment Generation Program: as mentioned in Unit,
Ministry of MSME has started this scheme from August, 2008 by clubbing Prime
Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme
(REGP), with a view to strengthen micro entrepreneurs. Under this scheme, an
amount up to Rs. 25 lakhs for manufacturing industries and Rs. 10 lakhs for service
industries is made available as loan for commencing an industry in rural areas.
Special Component Plan: This scheme is being implemented by the Board
since 1989-81 under the 20 point programme clause no. 11 off Government of
Maharashtra, with the special assistance extended by Central Government. The
objectives of the scheme are: financial assistance in the form of loan and subsidy,
beneficiaries whose annual income is below Rs. 19,654 (for rural area) & Rs.
27,247 (for urban area), subsidy to the extent of 50% of project cost or Rs. 10,000
whichever is less.
Khadi Programme:
Village Industrial Estate:
Check Your
Progress
1. The main functions
of the Maharashtra
State Khadi and
Village Industries
Board are ——
Integrated Beekeeping, Bee-breeding and Honey Production Scheme: 75%
loan and 25% subsidy, free training and skill enhancement, introducing maser trainer
concept.
Marathwada Development Programme: 20% loan and 80% subsidy, honey
filtration plant in Marathwada region, incentives for master trainer who trains
bee-keepers and collects honey on behalf of Board.
Gramodyog vasahat: The scheme commenced in the year 1990 through
MIDC to provide small plots. Six village industrial estates are under development.
Carpentry & Blacksmithing Workshop:
Handmade Paper Production:
Directorate of Geology and Mining, Government of Maharashtra
The Directorate has twin functions of mineral exploration and mineral
administration. The Directorate is basically of a technical nature. The functions of
Directorate are controlled, planned and coordinated at the head office with the
assistance of technical and non-technical officers and staff.
Directorate of Government Printing and Stationary
Printing and stationary department is basically under the control of
Industries, Energy and Labor Department of the Government of Maharashtra. It
is a service department which is necessary for general management of the
government administration. But for optimum utilization of the government printing
presses and with an intention to make aware of the financial implication to the
government departments which send the work to the printing presses, the
government has declared the Government Printing and Stationary Department as
commercial department.
192
Business
Entrepreneurship - II
11.3 Directorates of Industries of the State
Government (DIs)
The small-scale industries sector is a State subject under the Indian
Constitution and, as such, the primary responsibility for all executive action in
regard to its development and implementation of programmes of assistance to it is
that of the State Government. The work relating to development of industries in
general and small-scale industries in particular is looked after by the Directorate
of Industries in each state and in each union territory. There are 22 such
Directorates all over the country. Each organization is staffed with administrative
and technical officers at the state headquarters and by a district industries officer,
with appropriate supporting staff, in each district.
Institutional Support For
MSMEs - III
NOTES
The State Directorates run various training schemes, production schemes
and common facilities schemes. They also provide facilities of developed industrial
land and built-up factory sheds in industrial estates, allocate quotas of scarce raw
materials, certify import requirements and organize industrial co-operatives. Their
functions are varied and have growth with development and diversification of
small industries sector. Each sector director of industries is assisted by an additional
director or a joint director and a number of deputy directors, assistant directors
and technical officers in charge of specific fields of activities. To the district level,
the work is looked after by district industries officer or assistant director of industries.
He/she is assisted by one or two inspectors, depending upon the quantum of work
and industrial importance of the district. In a number of states there are, at the
block level, extensive officers for industries to act as liaison officers between the
district industries office and the field.
Directorate of Industries is the executing agency for the Industries
department, Maharashtra. The Directorate of Industries is the major field
organization of the Industries Department headed by Development Commissioner
(Inds.). Every district has a District Industries Centre (DIC) headed usually by a
General Manager. The Directorate of Industries provides EMs in Part I & II to
Micro, Small and Medium Enterprises for manufacturing & service industries,
makes recommendations for import of raw materials and capital goods, Central
Purchase of Stores for the State Government, grants No Objection Certification
for location of industries, recommends license for industry and grants exemptions
of land for industrial use under the Urban Land Ceiling Act and for setting up of
co-operative industrial estate. It also implements programmes for the educated
unemployed. This department also prepares and implements State Government
industrial policies.
The Directorate of cottage and small-scale industries provides a wide
variety of assistance. The details are given below:
General assistance
1. Entrepreneurial development programmes
2. Industrial accommodation
3. Priority on telephone and power
4. Supply of machinery on hire-purchase
5. Scarce raw materials
Business
Entrepreneurship - II
193
Institutional Support For
MSMEs - III
6. Recommendation for import
7. Research grant and award of prizes
8. Modernization
NOTES
Marketing assistance
9. Export and marketing assistance
10. Reservation of items for state government purchase
11. Single point registration of NSIC
12. Earnest money exemption
13. 15% price preference
14. Quality marking
Financial assistance
15. Loan under BSAI act
16. Central/state investment subsidy
Figure 11.1 Organization Structure of Directorate of Industries,
Maharashtra State
11.3.1 MSME Development Institute (MSME-DI, Mumbai)
194
Business
Entrepreneurship - II
Office of the Development Commissioner (MSME), New Delhi, under
the Ministry of MSME, formulates the policy governing the Micro, Small and
Medium industries in the country. It chalks out schemes and programmes for
development of the MSME sector. It also monitors implementation of policies and
activities of promotion and development of MSME sector in the country through
its network of 28 MSME-Development Institutes in all the states, with active
involvement of State Directorate of Industries.
MSME-Development Institute, Mumbai was established in the year 1954
as Small Industries Service Institute, Mumbai. In the year 1960, it was shifted to
its own premises at Mumbai. This institute provides support/services to the State
Government as well as co-ordinates various activities for prospective and existing
entrepreneurs at the state level for promotion and development of small-scale
industries. 23 districts of Maharashtra are under the jurisdiction of this institute
and its branch Development Institute at Aurangabad. Another Institute at Nagpur
looks after the remaining 11 districts of Maharashtra
MSME-DI, Mumbai provides various types of extension services and
assistance in setting up of units, promoting and developing products and services
for the MSME. The Institute has technical officers to provide guidance in all
trades viz. metallurgy, mechanical, chemical, leather, electrical, electronic, food
industry, management and economic investigation, export and industrial design.
Some of the important services that MSMEDI Mumbai provides are as
Institutional Support For
MSMEs - III
NOTES
Check Your
Progress
2. ———, Mumbai
was established in the
year 1954 as Small
Industries Service
Institute
under:
Technical consultancy: Technical guidance, identification and preparation
of project profiles/reports, selection of equipment, machinery & raw materials
including layout, technical upgradation/quality control, technical seminars/
workshops/clinics
Managerial consultancy: This institute provides management consultancy
to MSME sector through various management related training programmes. It
also conducts in-plant consultancy studies wherever required. Techno-economic
studies and appraisal of project reports for banks and financial institutions are
done at the request of concerned financial institution/bank.
Check Your
Progress
3. Write down the
functions performed
by MSME-DIs.
Economic investigation: The institute provides assistance to small scale
industries in the areas of export marketing such as training in export marketing,
export packaging, seminars and awareness programs. It provides guidance to
entrepreneurs on potentials, prospects of products, procedures and publication of
bulletin etc.
Export promotion: This institute provides assistance to small scale industries
in areas of export marketing such as training in export marketing, export packaging,
seminars and awareness programmes. It provides guidance to entrepreneurs on
potentials, prospects of products, procedures and publication of bulletin etc.
Library: MSMEDI, Mumbai has a well-equipped library containing books,
technical journals, periodicals, project profiles, government circulars and books
relating to entrepreneurship, management etc. for MSME entrepreneurs for
reference.
11.3.2 District Industries Centre (DIC)
At State level, the Commissioner/Director of Industries implements policies
for the promotion and development of micro, small, medium, and large enterprises;
oversee the activities of field offices, that is, the District Industries Centre (DICs)
at the district level. District Industries Centre (DIC) is an executive arm of the
Industries Department.
It was started on May 8, 1978 with a view to provide integrated
administrative framework at the district level for promotion of small-scale industries
Business
Entrepreneurship - II
195
Institutional Support For
MSMEs - III
NOTES
in rural areas. The DICs are envisaged as a single window interacting agency
with the entrepreneur at the district level. Services and support to small entrepreneurs
are provided under a single roof through the DICs. They are the implementing arm
of the Central and State government of the various schemes and programmes.
Registration of small industries is done at the district industries centers. The SEEUY/
PMRY for employment generation is also implemented by the DICs.
The organizational structure of DICs consists of one general manager,
four functional managers and three project managers to provide technical service
in the area relevant to needs of district concerned. Management of the DICs is
done by the state governments. The scheme has now been transferred to the
states and from the year 1993-94, funds will not be provided by the central
government to the states for running the DICs.
The main functions are:
1. To work as a facilitator for overall industrial development of the district
2. To accept and register Entrepreneur Memorandum
3. To help to establish micro, small and medium scale industries
4. To implement various schemes like PMEGP, seed money, and DIC loan
for unemployed educated youth for self-employment
5. To encourage SSI sector by rewarding “District Awards” to small scale
industries
6. To coordinate the forum of Zilla Udyog Mitra Committee
7. To organize EDPs for unemployed youths for skill up gradation
8. To implement Package Schemes of Incentives
9. To work as Nodal agency for Central Government programmes
10. To conduct industrial potential surveys keeping in view the availability of
resources in terms of material and human skill, infrastructure etc.
11. To prepare an action plan to effectively implement the schemes identified.
12. To appraise the worthiness of the various proposals received from
entrepreneurs.
13. To function as the technical arms of District Rural Development Agency
(DRDA) in administering IRD and Training Rural Youth for Self
Employment (TRYSEM) programmes.
14. To assist the entrepreneurs in marketing their products and assess the
possibilities of ancillarisation and export promotion of the products.
15. To conduct artisan training programmes.
District Industrial Centers (DICs) provide support/facilities/concessions/
services in widely dispersed rural areas and other small towns. They extend services
such as economic investigation of local resources, supply of machinery and
equipment, provision of raw material, arrangement for credit facilities, marketing,
quality inputs, consultancy and extension services.
196
Business
Entrepreneurship - II
11.4 Industry Related Policies of Maharashtra
Government
Industrial policy has been formulated with a view to ensure all-round and
sustainable growth of industry in the State. The objectives of the policy are to
Institutional Support For
MSMEs - III
NOTES
Create conducive industrial climate in the State
Provide global competitive edge to the State’s industrial units
Achieve higher and sustainable economic growth with emphasis on
balanced regional development
Generate employment opportunities
Encourage greater private and public investment in industrial and
infrastructure development
These policy objectives can be realized through identification of thrust
areas; building up of quality infrastructure; encouraging investment in districts low
on ;Human Development index; attracting investment - both foreign and domestic;
harnessing local resources and local economic potential; strengthening SMEs
through promotion of quality competitiveness, research and development,
technology upgradation; strengthening institutional support etc.
Industrial Policy of Maharashtra 2013
Government of Maharashtra has adopted Industrial Policy, 2013 to attract
industries to Maharashtra. Industrial policy, 2013 focuses on the following:
 Increased focus on less developed regions of the state to bring them on
par with mainstream industrial development.
 Customized package of incentives for Ultra Mega and Mega industrial
investment.
 Holistic approach to MSME development.
 Initiatives to encourage employment-intensive industries.
 Path-breaking initiatives for investor facilitation
 Optimal utilization of land for industrial development
 Strengthening of industrial infrastructure
 Assistance to unviable sick units for easy exit and to viable sick units for revival
 Incentives to bring about sustainable industrial development.
Objectives of the Policy are:
 To retain Maharashtra’s leadership position in industrial investment within
the country
 To further accelerate investment flow to industrially underdeveloped
regions of the state
 To create more employment opportunities.
The Policy targets include
Business
Entrepreneurship - II
197
Institutional Support For
MSMEs - III
 To achieve manufacturing sector growth rate of 12-13% per annum
 To achieve manufacturing sector share of 28% of state GDP
 To create new jobs for 2 million persons
NOTES
 To attract investment of INR 5 lakh crore (INR 5 trillion)
Validity of the Policy is from 1st April 2013 to 31st March 2018.
The Industrial Policy, 2013 comprises of the following incentives for MSME
Projects:
 Industrial Promotion Subsidy – equal to VAT on local sales + CST payable
+ 20% to 100% of ITC on eligible finished products (in areas other than
A areas on annual basis
 Power tariff subsidy – eligible for new units. Located in Vidarbha,
Marathwada, North Maharashtra and districts of Raigad, Ratnagiri, and
Sindhudurg in Konkan. Extent of Rs. 1 per unit consumed in above
mentioned regions and in areas other than the above (except A areas) to
the tune of Rs. 0.50 per unit consumed. Three years from the date of
commencement of commercial production.
 Interest subsidy-at 5% p.a. maximum up to the value of electricity
consumed and bills paid for that year, will be admissible (in areas other
than A area)
Check Your
Progress
4.
State
the
objectives
of
Industrial Policy of
Maharashtra, 2013.
 Food processing sector- eligible units will be granted additional 10%
incentives and additional 1 year towards eligibility period
 Energy and water audit- 75% reimbursement of cost of water and energy
audit. Assistance by way of 50% grant limited to Rs. 1 lakh for water
audit and Rs. 2 lakh for energy audit. 50’% cost of capital equipment
required for undertaking measures to conserve water and energy limited
to Rs.5 lakh only.
 Additional incentive- incentives for improvement of quality
competitiveness, research and development, technology ugradation and
clear production measures will be continued with suitable modifications
 Stamp duty exemption- in addition to incentives listed above, eligible
MSMEs will be entitled to 100% stamp duty exemption within investment
period for acquiring land (including assignment lease rights and sell
certificate) and for term loan purposes. In A and B areas, stamp duty
exemption will be offered only to IT and BT units in IT and BT parks.
 Electricity duty exemption- eligible new MSMEs in C, D, D+ in no
Industries Districts and Naxalism affected areas will be entitled to
exemption from payment of electricity duty for tenure equal to the
eligibility period. In A and B areas, electricity exemption will be offered
to 100% export oriented MSMEs and IT/BT units for 7 years.
Special Economic Zones Policy
Government of India introduced the concept of special economic zones
(SEZ) in the year 2000 through a revision in the Export-Import Policy 1997-2002.
198
Business
Entrepreneurship - II
SEZ are specifically delineated duty-free enclaves treated as a foreign territory
for the purpose of industrial, service and trade operations with exemption from customs,
duties and a more liberal regime in respect of other levies, foreign investment and
other transactions. Domestic regulations, restrictions and infrastructure adequacies
are sought to be eliminated in the SEZ for creating a hassle free environment.
The state of Maharashtra has been in the forefront in attracting foreign
direct investment for accelerating the pace of economic growth. The SEZ scheme
seeks to create a simple and transparent system and procedures for enhancing
productivity and the ease of doing business in Maharashtra.
Institutional Support For
MSMEs - III
NOTES
According to Govt. of India guidelines, SEZ can be developed in public,
private or joint sectors or by the state government. They are expected to promote
establishment of large, self-contained areas supported by world class infrastructure
oriented towards export production.
Maharashtra Government has adopted SEZ policy for developing Special
Economic Zones in the State with effect from 10th Feb. 2006. The SEZs, earmarked
as duty-free enclaves, have a relaxed and business friendly policy regime, aimed
at promoting rapid industrial development and employment generation. It is expected
that this will trigger inflow of large foreign and domestic investments in infrastructure
for SEZs and productive capacities which will lead to generation of additional
economic activities and employment opportunities. The SEZ policy aims at creating
a simple and transparent system and procedures to attract large foreign and
domestic investment in infrastructure for SEZs in Maharashtra.
SEZ policy of Maharashtra provides attractive incentives as follows:
 Hundred per cent exemption from stamp duty and registration fees
 Permission for captive power generation
 Micro, small and medium enterprise policy highlights
 Government is planning to initiate measures for availability of cheap and
timely finance, technology up-gradation, up gradation of skill sets of those
employed in MSME enterprises and marketing
 Setting up of a special institution for the SMEs
Check Your
Progress
5. Government of
India introduced the
concept of special
economic zones (SEZ)
in the year ——
 New small scale industries are eligible for capital subsidy
 Special capital incentives are offered for setting up small-scale industries
in backward units
 Interest subsidy is also offered to new textile, hosiery and knitwear SSI
units
 Incentives to promote quality competitiveness, research and development
and technology up-gradation.
Maharashtra Biotechnology Policy, 2001
Biotechnology policy provides broad direction for orderly growth of
biotechnology industry in the state while defining various initiatives and incentives
for promotion of the sector industry to make it globally competitive. The policy
aims at providing adequate infrastructure, especially in the form of biotechnology
parks as well as development of research base to serve the needs of the sector.
The objectives of the policy are to:
 provide to the farmers the better, high-yielding, drought and pest-resistant
crops suited to the agro-climatic conditions of the state,
Business
Entrepreneurship - II
199
Institutional Support For
MSMEs - III
NOTES
 develop affordable and more cost-effective drugs and devices to counter
diseases,
 develop cheaper and effective technologies to purify water sources and
to deal with industrial effluents and urban wastes, etc.,
 improve the livestock in the state in order to increase the earning capacity
in rural areas,
 improve the marine stock to improve the productivity of the fishing
industry,
 enhance the value and utility of medicinal plants and traditional systems
of medicine by developing new products with global potential,
 develop and promote utilization of animal diagnostics and vaccines,
 augment feed and folder availability and processing,
 improve the overall nutritional security in the state,
 improve the quality of life through better health and better environment.
This has been achieved by:
 Establishment of Maharashtra Biotechnology Board and Maharashtra
Biotechnology Commission,
 setting up of a special Biotechnology Development Fund,
 creation of biotech parks and biotech resource center,
 Fiscal incentives including stamp duty and electricity duty exemptions
and other incentives available to IT units,
 establishment of grape processing industry board,
 creation of wine institute and wine parks at Nashik/Sangli,
 excise exemptions and other fiscal benefits.
Bio-technology Parks
Bio-technology policy was declared by the State Government in 2001 as
narrated above. Nine-SEZs under public sector are proposed in the State with total
estimated investment of Rs.4234 crores and employment generation of 0.98 lakh.
Public Bio-Tech (BT) parks are developed in the State at MIDC Jalna
and MIDC Hinjewadi (Pune), while four private BT parks are being developed in
the State with total investment of about Rs. 300 crores.
Infrastructure policy
200
Business
Entrepreneurship - II
In order to improve the management of existing industrial infrastructure in
the state, the state government is planning to set up ‘industrial township authorities’
in respective industrial areas. These authorities will be autonomous bodies
responsible for managing common infrastructure with active participation from
the industrial units located in the area. They will also collect taxes and revenues
for various services. In the first phase, 12 such industrial township authorities shall
be set-up. The government is also planning to develop industrial parks in the state
through private sector participation.
Tourism Policy of Maharashtra
Institutional Support For
MSMEs - III
The following measures have been taken to boost the tourism industry in
Maharashtra:
 Maharashtra Tourism Development Corporation to work as a single
window for clearance of tourism projects
NOTES
 Tax exemptions and electricity supply at industrial rates
 Ease in land allotment process
The action plan of the tourism policy in the light of long term vision 2025
comprise of development of infrastructure at tourist destinations, accessibility to
tourism destinations and wayside amenities, recreational facilities at destinations,
Public-Private Partnership, world heritage sites, cultural tourism, crafts, pilgrimage
circuits, rural tourism, fort/fort circuits, information kiosks, application of IT to
tourism.
Maharashtra’s Grapes Processing Industry Policy, 2001
This policy aims to provide orderly growth of the grape processing industry.
It consists of declaration as a preferential area, declaration as a small scale industry,
concessions in excise industry, concessions in sales tax, establishment of Wine institute,
establishment of Grapes board, facilities of food processing industries etc.
As on 30th December 2011, the total number of micro, small and medium
enterprises since inception i.e. after enactment of MSME Development 2006 are
around 1,65,214 providing employment opportunities to around 13,00,947 persons.
Maharashtra IT and ITES Policy, 2009
The State Government announced its first IT Policy in 1998. It was followed
by the IT and IT-Enabled Services (ITES) Policy in 2003 which provided
comprehensive support for further development in this sector in Maharashtra.
The new policy intends to consolidate and build upon the earlier initiatives
through focus on fields such as Animation, Visual effects and Gaming (AVGC)
which will provide considerable value addition, also in certain area such as IT
hardware and Telecom manufacturing.
The Government intends to promote its development across the State,
particularly in districts which are low in the Human Development Index (HDI) in
the interest of balanced regional growth and to provide local skills and
entrepreneurial talent with greater opportunities. For this purpose, the Policy
provides additional benefits to IT units and infrastructure around cities with high
potential as well as the most backward regions of Maharashtra, while continuing
to support investment in the leading areas.
A large, trained workforce with enhanced skill levels is a sine qua non for
the continued growth and value addition in IT sector, and its spread to other areas
in the State. The New Policy therefore laces emphasis on innovative measures to
promote capacity building, largely through public-private initiatives.
The Policy proposes path-breaking initiatives to promote ‘green’ IT and
electronic hardware, as well as e-waste recycling.
Business
Entrepreneurship - II
201
Institutional Support For
MSMEs - III
Strategic drivers of the Policy are:
 Promotion of Nagpur, Nashik, Aurangabad and low HDI districts
 Promotion of Focus sectors
NOTES
 Promotion of Green IT
 Promotion of Entrepreneurship and Innovation
 Promotion of Brand Maharashtra
Maharashtra Government has taken a number of initiatives to promote
development of IT and ITES sector in the state. The steps include formulation of
a progressive sector-specific policy, development of IT parks and knowledge
corridors. The State has offered various fiscal incentives to IT/ITES industries.
Besides, non-fiscal incentives like additional FSI, permitting software industry in
residential areas, suitable permissions to develop communication systems, selfcertifications under labour laws are also offered.
Check Your
Progress
6. The State Government announced its
first IT Policy in —. It
was followed by the
IT and IT-Enabled
Services
(ITES)
Policy in ——
In view of this, 36 public IT parks are established by MIDC and CIDCO.
New Maharashtra Textile Policy, 2011-17
New textile policy, 2011-17 lays emphasis on raising processing units at
various levels from cotton to manufacturing textiles for assured long term
development on priority basis in the cotton producing sector, expansion of textile
industry and growth of employment in the state.
The scheme of 10% capital subsidy of the eligible capital investment for
the new textile units set up in Marathwada (Aurangabad, Nanded, Latur, Jalna,
Beed, Prbhani, Osmanabad and Hingoli), Vidarbha (Akola, Amravati, Bhandari,
Buldhana, Chandrapur, Gadchiroli, Gondiya, Nagpur, Vardha, Washim, Yevatmal)
and north Maharashtra (Ahmednagar, Dhule, Jalgoan, Nandurbar and Nashik).
The said 10% capital subsidy shall be in addition to all the benefits available from
all sources including the assistance in respect of interest subsidy available under
the new textile policy of the state.
Udyog Mitra
A high power coordination committee called Udyog Mitra was established
in 1979. The Udyog Mitra, headed by the Development Commissioner (Inds.),
Government of Maharashtra, Mumbai consists of offices from SICOM, MIDC,
MSEB, MSFC, MSSIDC, and MCED. Its main function is to liaison on behalf of
the entrepreneurs for securing early clearances. Based on the feedback from
industries associations and entrepreneurs, it advises Government regarding change
in policy and facilitate decision making. It offers guidance to entrepreneurs in
regard rules and regulations. It is a single point contact for the entrepreneurs of
the area. For coordination at the district level, Zilla Udyog Mitra has been constituted
under the chairmanship of the Collector.
Co-operative Industrial Estate
202
Business
Entrepreneurship - II
The State Government has undertaken a program of developing industrial
estates in areas other than MIDC on a co-operative basis with the view to generate
more employment opportunities in rural areas. The state government is providing
several facilities in terms of contribution to share capital and technical guidance
for establishing industries in co-operative industrial estates.
11.5 MSME Schemes of the State of Maharashtra
Institutional Support For
MSMEs - III
Maharashtra’s Package Scheme of Incentives - 2013
In order to encourage the dispersal of industries to lesser developed areas
of the state, the government has been giving package of incentives to new industrial
units/expansion units set up in the developing regions of the state since 1964 under
a scheme popularly known as the package scheme of incentives.
NOTES
The package scheme of incentives introduce in 1964, has been amended
from time to time. The scheme as amended last is commonly known as the Package
Scheme of Incentives, 2007 (PSI) and is operative since 1st of April, 2007.
The state has recently discovered the new industrial policy, 2013 to ensure
sustained industrial growth through various innovative initiatives so as to further
improve the conducive industrial climate in the state and to provide global
competitive age to the industries in the state. The policy envisages grant of fiscal
and non-fiscal incentives to the industrial units with a view to help the units achieve
higher and sustainable economic growth with emphasis on balanced regional
development and employment generation through greater private and public
investment in industrial sector. It is therefore necessary to amend the Package
Scheme of Incentives – 2007, in the light of the Industrial Policy – 2013 and
introduce a new “Package Scheme of Incentives 2013”.
Applicability of PSI, 2013
Period of operation of PSI, 2013: the PSI, 20113 as may be amended by
the government from time to time shall remain in operation from 1st April, 2013 up
to 31st march, 2018.
Coverage under PSI, 2013
The following categories of eligible industrial units in private sector, cooperative, central-public sector, state public sector, joint sector shall be eligible to
be considered for incentives under the PSI, 20113
i. Industries listed in the first schedule of the industries ( development and
regulation) act, 1951 as amended from time to time
ii. Manufacturing enterprises as defined in the MSMED act, 2006
iii. Information technology, manufacturing units registered with the directorate
of of industries or the MIDC or the development commissioner Santa
Cruz electronic export processing zone (SEEPZ) or software technology
parks of India (STPI) in the state.
iv. Biotechnology manufacturing units as specified by the government from
time to time which are outside the purview of any registering authority
mentioned above
v. Cold storages
vi. Mechanized food/agro processing industries in the following sectors: dairy,
fruit and vegetable processing, grain processing, fish processing,
consumer foods including packed foods, non-alcoholic beverages from
fruits and vegetables.
vii. Central public sector units which satisfy the qualifying criterion
Business
Entrepreneurship - II
203
Institutional Support For
MSMEs - III
NOTES
Classification of areas for PSI, 2013
For the purposes of PSI, 2013 detailed taluka-wise classification of different
areas of the state as group A/B//C/D/D+ etc. on the basis of their level of industrial
development where
Group A: denotes industrially developed areas
Group B: denotes areas where some industrial development has taken
place, but are less developed than the areas under Group A
Group C: denotes areas which are less developed than those covered
under Group B
Group D: denotes the lesser developed areas of the State not covered
under Group A/Group B/Group C
Group D+: denotes the least developed areas not covered under Group A/
Group B/Group C/Group D
No Industry District: denotes district having no industries and not covered
under Group A/Group B/Group C/Group D & D+
Naxalism affected area: denotes area affected by naxalism
Implementing Agency:
For micro and small manufacturing enterprises,
Industrial units in the areas classified as B, C, D and D+ are offered
incentives on graded scales in the ascending order, according to size of investments
in the category of small-scale, medium and large scale units
Revised Seed Money Scheme
To encourage self-employment venture amongst unemployed youths, Govt.
has specially announced New Seed Money Scheme w.e.f.18.5.07 increasing project
cost limit from Rs.10 lakhs to Rs. 25 lakhs, reducing rate of interest on seed
capital from 10% to 6%. A special rebate of 3% is admissible for regular repayment
of seed capital.
Eligible educated unemployed gets 15% soft loan from D.I.C @ 6% as seed
money loan for the project cost upto Rs.25 lakhs and the upper limit of seed money
Rs.3.75 lakhs. In the interest of social justice, for all backward categories and handicapped youths, 20% seed money loan is eligible for the project cost up to Rs.10 lakhs.
Eligibility
1. Age limit - 18 to 50 years.
2. Minimum 7th Std. pass.
3. Domicile of Maharashtra State.
D.I.C Loan Scheme
204
Business
Entrepreneurship - II
Any rural service and cottage industry is eligible to get benefit under the
scheme. Soft loan from DIC for general categories 20% up to Rs. 40,000/- and
30% for SC/ST category upto Rs. 60,000/- against the project cost approved by
financial institutions. The value of plant and machinery should not be more than
Rs. 2 lakhs. Soft loan is admissible @ 4% interest p.a.
Prime Minister’s Employment Generation Programme (PMEGP)
Ministry of MSME has launched the new credit linked subsidy programme
called Prime Minister’s Employment Generation Programme for generation of
employment opportunities through establishment of micro enterprises in rural as
well as urban areas.
Institutional Support For
MSMEs - III
NOTES
PMEGP, a central sector scheme, is to be administered by the Ministry of
MSME. KVIC has been given the overall responsibility for implementing PMEGP
at the national level, it will do so in respect of the targets for rural areas, as defined
in the KVIC Act, through its State Offices and State Khadi and Village Industries
Boards (KVIBs). Implementation of PMEGP in urban areas and other rural areas
will be done through the State Governments (District Industries Centres (DICs)).
The newly introduced Rajiv Gandhi Udyami Mitra Yojana of M/o MSME can also
be tapped for providing handholding support to the beneficiaries under PMEGP.
Zilla Udyog Mitra
This is the Committee headed by the District Collector to sort out various
problems and difficulties industrial units. Committee consists of officers related to
industrial development aswell as industries associations.
District Award to Small Scale Entrepreneurs
Directorate of Industries has introduced a scheme of district awards in
1985 for promoting entrepreneurship and recognizing the achievements of successful
entrepreneurs in the sector of small scale industries.
Entrepreneurship Development Training Program (EDTP)
Entrepreneurship Development Training Programmes provide basic input
for Entrepreneurship development & up gradation of skill.
National Skill Development Mission
One of the major constraints faced by the manufacturing structure is skilled
man power. To address this, the national council on skill development was constituted
to prepare the national skill development policy. Under this National Council, the
state government has formed the State Management Policy of Skill Development
Initiative for Maharashtra and sectoral committee under the department of higher
and technical education. The state government will set up a Skill Development
and Enhancement Cell (SDEC) under principal secretary (industries).
The prime minister’s national council on skill development has spelt out
skill development as:
Create 500 million skilled people by 2022
Increasing capacity and capability of skill development programs
Harnessing inclusivity and reduced divisions such as male/female, rural/
urban, organized/unorganized, employment and traditional/ contemporary work place.
Supporting the supply of trained workers who are adjustable dynamically
to the changing demands of employment and technologies
No discrimination between private/public delivery and places importance
on incomes, user’s choice and competition among training providers and their
accountability
Business
Entrepreneurship - II
205
Institutional Support For
MSMEs - III
Establishing a framework for better coordination among various
ministries, states, industries and all other state holders
Maharashtra State Skill Development Mission
NOTES
With its contribution of about 13% to the GDP and with a share of
9.28% in the national population, government of Maharashtra has set a vision
of equipping 45 million people with employable skills by 2022. Maharashtra
state’s skilled development society is established as state nodal agency.
Following skills are implemented by MSSDS
i.
Modular Employable Scheme (MES)
Directorate General of Employment & Training (DGET), Ministry of
Labour and Employment launched Modular Employable Scheme (MES) with the
objectives: to provide vocational training to people utilizing the infrastructure
available in Govt., private institutions and industry; to build capacity in the area of
development of competency standards, course curricula, learning material and
assessment standards in the country.
Target beneficiaries are persons seeking certification of their skills acquired
informally, persons seeking skill up-gradation, early school drop-outs and others,
previously child labour and their families; minimum age of 14 years.
Key features of the scheme are: demand driven short term training based
on Modular Employable Skills (MES) identified and decided in consultation with
industry, flexible delivery mechanism (part time, weekends, full time, and on-site)
to suit needs of various target groups, certification on vocational training from
NCVT, testing of skills of an individual acquired informally on competency and
issue of NCVT certification on qualifying it successfully, 558 courses across 68
sectors (e.g. construction, manufacturing, automobile, hospitality, health care, BFSI,
organized retail, pharmaceutical & chemical, IT & ITES, textile, agro processing
etc),mandatory soft skill module, penalty to ensure post-training tracking of
beneficiaries.
ii.
National Urban Livelihood Mission (NULM) scheme
Ministry of Housing and Urban Poverty Alleviation, Government of India,
launched the National Urban Livelihood Mission scheme with the objective to reduce
poverty and vulnerability of the urban poor households by enabling them to access
gainful self-employment and skilled wage employment opportunities resulting in an
appreciable improvement in their livelihoods on a sustainable basis, through building
strong grassroots level institutions of the poor. Target beneficiaries are urban poor –
those living below the poverty line, including urban homeless. Target locations are all
district headquarter towns, and all other cities with a population of 100,000 or more
as per 2011 census. Key features of the scheme are:
 Training to the urban poor as per the skill demand from market, so that
they can set up self-employment ventures or secure salaried employment
 No minimum or maximum educational qualification
 Percentage of women beneficiaries under EST&P shall not be less than
30%
 Special provision of 3% reservation should be made for differently abled
under this programme
206
Business
Entrepreneurship - II
 At least 15% of the physical and financial targets shall be earmarked for
the minority communities
 Skill training will be linked to accreditation and certification and preferably
be undertaken on a Public-Private-Partnership (PPP) mode
Institutional Support For
MSMEs - III
NOTES
 The cost per beneficiary shall not exceed Rs. 15000
 A part of the payment will be linked to establishment of and satisfactory
performance of micro-enterprise for at least a period of at least 6 months
or retention in the placed jobs for at least a period of 6 months
 Skill training providers (STPs) will be responsible for at least 50 per cent
remunerative jobs or as decided by the National Skill Development Authority
iii.
Hunar se Rojgar Tak (HSRT) Scheme
Ministry of Tourism launched Humar se Rojgar scheme with the objective
of creating employable skills for the interested youth who are in the age group of
18-28 years and who are minimum 8th class pass. Target beneficiaries are minimum
eighth class within age group of 18 to 28 years. Following two courses are conducted
under this scheme – food production (8 weeks), food and beverage service (6
weeks), The key features of the scheme are: training cost Rs. 1500-1900 per
trainee, trainee with 90% and above attendance provided with stipend, joint
certificate of the State Governments/UT Admns. and the concerned institutes
shall be issued to the successful candidates.
11.6 Summary
Industries Department of Government of Maharashtra comprises of the
following: Maharashtra State Mining Corporation, Maharashtra Industrial
Development Corporation, Maharashtra State Khadi and Village Industries Board,
Directorate of Geology and Mining, Government of Maharashtra, and Directorate
of Government Printing and Stationary.
Further this unit covers Directorate of Industries of the State Government
(DI), MSME-DI, Mumbai, DIC.
Industry related policies of Maharashtra government discussed in this unit
are Industrial policy of Maharashtra, 2013, Special Economic Zone Policy,
Maharashtra Biotechnology Policy, 2001, Infrastructure policy, Tourism policy,
Maharashtra’s Grapes Processing Industry Policy, 2001, Maharashtra IT and ITES
Policy, 2009, New Maharashtra Textile Policy, 2011-17, Udyog Mitra, and Cooperative Industrial estate.
Various MSME schemes of Maharashtra state include Maharashtra’s Package
Scheme of Incentives 2013, Revised Seed Money scheme, DIC loan scheme, Prime
Minister’s Employment Generation Programme, Zilla Udyog Mitra, District award to
small scale entrepreneurs, Entrepreneurship Development Training Program, National
Skill Development Mission, Maharashtra State Skill Development Mission,
11.7 Key Terms
 Empowerment: The process of obtaining basic opportunities for
marginalized people, either directly by those people, or through the help
Business
Entrepreneurship - II
207
Institutional Support For
MSMEs - III
NOTES
of non-marginalized others who share their own access to these
opportunities. It also includes encouraging and developing the skills for
self- sufficiency with a focus on eliminating the future need for charity
or welfare in the individuals of the group
 Women empowerment: The process to make women independent in
all aspects from mind, thought, rights, decisions etc by leaving all social
and family limitations. It is to bring equality in the society for both male
and female in all areas.
 Self-help group (SHG): A village-based financial intermediary
committee usually composed of 10-20 local women or men. They come
together to contribute two-weekly or monthly dues as savings and provide
group loans to their members
11.8 Questions and Exercise
Questions
1. Explain the role of various institutions engaged in the task of assisting
entrepreneurs.
2. Discuss the State level institutions supporting small enterprises in India.
3. Give an overall view of support agencies for small enterprises.
4. Discuss the need for institutional support to small enterprises.
5. Describe the role which District Industries Centres (DICs) play in
developing small enterprises in the country.
6. Write about MSME schemes of Maharashtra government.
7. Discuss the government set up for support of MSMEs in
Maharashtra.
Exercise
1. Visit any one of the institutions explained in this unit and seek information
about its functioning.
Multiple Choice Questions
1. Which one of the following functions is related with MIDC?
208
Business
Entrepreneurship - II
i.
Monthly newspaper “Mahaconnect”
ii.
Supply of developed plots with necessary infrastructural facilities
iii.
Doing business guides
iv.
All the above
2. The State Government is implementing growth centres, mini industrial
areas, five starred industrial areas in the state through ————
i.
MIDC
ii.
MSFC
iii.
MSSIDC
iv.
DIC
Institutional Support For
MSMEs - III
NOTES
3. The main functions of the ————————————— are to
organize, develop and expand activities of Khadi and Village Industries
(KVI) in the state.
i.
MIDC
ii.
MSKVIB
iii.
Both i and ii
iv.
None of the above
4. The work relating to development of industries in general and smallscale industries in particular is looked after by the ——————— in
each state and in each union territory.
i.
Directorate of Industries
ii.
MSFC
iii.
Both i and ii
iv.
None of the above
5. Which of the following services are not provided by MSME-DI?
i.
Financial assistance
ii.
Export promotion
iii.
Economic investigation
iv.
Managerial consultancy
Answers
Check Your Progress
1. to organize, develop and expand activities of Khadi and Village
Industries (KVI) in the state
2. MSME-Development Institute
5. 2000
6. 1998, 2003
Multiple Choice Questions
1. iv
2. i
Business
Entrepreneurship - II
209
Institutional Support For
MSMEs - III
3. ii
4. i
5. i
NOTES
11.9 Further Reading
www.msmedimumbai.gov.in
www.doingbusinessinmaharashtra.org
https://www.maharashttra.gov.in
www.fasii.org
www.lubindia.com
www.sewa.org
www.fiwe.org
www.sphconsultants.com/icsi
www.msmc.gov.in
https://www.mahakaushalya.com
www.midcindia.org
www.maharashtratourism.gov.in
www.india.gov.in
www.sezindia.nic.in
www.msmedimumbai.gov.in/html/ISPMaharashtraFINAL.pdf
www.foodprocessingindia.co.in/state_pdf/Maharashttra/
IndustrialPolicyof Maharashtra2013highlights.pdf
www.doingbusinessinmaharshtra.org
http://mopsi.nic.in
www.mskvib.org
www.midcindia.org/
210
Business
Entrepreneurship - II
UNIT 12 : INSTITUTIONAL SUPPORT FOR
MSMES -IV
Institutional Support For
MSMEs - IV
NOTES
Structure
12.0 Introduction
12.1 Unit Objectives
12.2 Industry Associations
12.3 Institutional Set-up for Maharashtra State
12.4 Summary
12.5 Key Terms
12.6 Questions and Exercises
12.7 Further Reading
12.0 Introduction
Maharashtra has been in the forefront in sustaining industrial growth and
in creating environment conducive to industrial development. Investment friendly
industrial policies, excellent infrastructure and a strong and productive human
resources base have made it a favoured destination for manufacturing, export,
financial and service sectors. In this unit, we will discuss the institutional support
system in the state of Maharashtra and various industry associations working for
entrepreneurs and their enterprises.
12.1 Unit Objectives
After studying this unit, you should be able to:
 Get information about industry associations
 Be aware about the support system for entrepreneurs
 Know about institutional assistance for entrepreneurship development
in Maharashtra state
12.2 Industry Associations
Besides the Central and State governments and autonomous bodies, there
has been an emergence of NGOs to provide financial assistance, information,
training, marketing support, legal advice, consultancy and so on to small enterprises.
The 1991 SSI policy of the Government of India favoured assistance to SSIs
through NGOs. A few training programmes for unemployed youth to help set up
Business
Entrepreneurship - II
211
Institutional Support For
MSMEs - IV
NOTES
industries under the PMRY, have been assigned by State governments to some
NGOs. In the present scenario, the role of NGOs is assuming importance for
assistance to entrepreneurs, particularly under micro-financing activities.
Federation of Indian Micro & Small and Medium Enterprises (FISME)
Federation of Indian Micro & Small and Medium Enterprises (FISME),
an Indian NGO, though established in the year 1995, traces its origin to 1967 when
the National Alliance of Young Entrepreneurs (NAYE) was established to promote
small industries. The objectives of FISME are promoting entrepreneurship and
facilitating the creation of a competitive environment in the country and improving
the market access for Indian MSMEs in India and abroad. The major activities of
FISME can be broadly categorized as networking & training and research &
publication.
FISME is a member of National MSMS Board formed under MSME Act
2006. FISME is well represented in and consulted by SME policy making set-up
of the country and also works in close co-operation with major multilateral and
bilateral bodies in India such as United Nations Industrial Development Organization
(UNIDO), International Labour Organization (ILO), United Nations Conference
on Trade and Development (UNCTAD), Department for International
Development, United Kingdom (DFID), GTZ etc. Currently, under the multilateral
project strategies and preparedness for trade and globalization in India supported
by UNCTAD, DFID and Ministry of Commerce & Industry, FISME, as a Tier-I
partner, is leading 22 provincial SME bodies in 18 states.
Confederation of Indian Industry (CII)
Check Your
Progress
1.——— is the nodal
organization in India
for the International
Chamber of Commerce (ICC), Confederation of Asia-Pacific
Chamber of Commerce and Industry
(CACCI),
and
SAARC Chamber of
Commerce and Industry.
212
Business
Entrepreneurship - II
Confederation of Indian Industry (CII) is a non-government, not-for-profit,
industry-led and industry-managed organization. It works to create and sustain an
environment conducive to the growth of industry in India, partnering industry and
government alike through advisory and consultative process. It catalyses change
by working closely with the government on policy issues, enhancing efficiency
and competitiveness and expanding business opportunities for industry through a
range of specialized services and global linkages. The main objectives of CII are
to provide information, apart from advisory, consultative, and representative services
to industry and the government. CII also organizes industry exhibitions, specialized
sectoral trade fairs, and the India Engineering Trade fair. It also plays an important
role in promoting international industrial cooperation.
Federation of Indian Chambers of Commerce and Industry (FICCI)
Federation of Indian Chambers of Commerce and Industry (FICCI),
established in 1927, represents India’s industry and trade with a network of over
400 chambers and associations. It has business interaction and information exchange
arrangements with apex business bodies in 65 countries. FICCI is closely involved
with Central and State governments to suggest and mould business-friendly policies.
It is the nodal organization in India for the International Chamber of Commerce
(ICC), Confederation of Asia-Pacific Chamber of Commerce and Industry
(CACCI), and SAARC Chamber of Commerce and Industry.
Associated Chamber of Commerce and Industry of India (ASSOCHAM)
Associated Chamber of Commerce and Industry of India (ASSOCHAM),
established in 1920, represents a cross-section of business, industry, services, and
professions located in all regions of the country. Among these are constituent
chambers and associations comprising their members in different segments of
business and industry. The current thrust of ASSOCHAM is on ‘infrastructure for
accelerating economic growth’. Productivity, quality, and competitiveness are the
central agenda of ASSOCHAM’s professional services.
World Association for Small and Medium Enterprises (WASME)
Institutional Support For
MSMEs - IV
NOTES
World Association for Small and Medium Enterprises (WASME), a global
non-governmental organ spearheading the cause and development of Small and
Medium Enterprises (SMEs) world over since its inception in 1980. It has emerged,
over the years, as one of the most representative, effective and leading international
organisations, working towards the promotion of SMEs. The vision behind
establishment of WASME was to build a world private community of small
businesses, their supporting and financial institutions as a non-governmental
organization, not influenced by any government(s). WASME has members,
associates and network partners in different countries across the world. It enjoys
consultative/ observer status with concerned agencies in UN system such as
Economic and Social Council (ECOSOC), United Nations Conference on Trade
and Development (UNCTAD), World Intellectual Property Organisation (WIPO),
United Nations Industrial Development Organisation (UNIDO), United Nations
Commission on International Trade Law (UNICITRAL), United Nations Economic
and Social Commission for Asia and the Pacific (UNESCAP), ITC and International
Labour Organisation (ILO). It also cooperates actively with several
intergovernmental and international organizations such as World Customs
Organization (WCO), Organisation for Economic Co-operation and Development
(OECD), International Council for Small Business (ICSB), Asian and Pacific Centre
for Transfer of technology (APCTT), etc.
Federation of Associations of Small Industries of India (FASII)
Federation of Associations of Small Industries of India (FASII), set up in
1959 under the sponsorship of the Government of India. The Federation comprises
associations of micro and small enterprises. It offers services such as organizing
meetings/conferences/seminars/conventions, liaising with policy makers, analysis
and interpretation of policies, and taking up member’s difficulties with the concerned
department/organization for redressal.
Self Employed Women’s Association (SEWA)
Self Employed Women’s Association (SEWA) is a trade union registered
in 1972. It is an organization of poor, self-employed women workers. It was founded
in 1972 by Dr. Ela Bhat. These are women who earn a living through their own
labour or small businesses. SEWA’s main goal is to organise women workers for
full employment. Full employment means employment whereby workers obtain
work security, income security, food security, and social security (at least health
care, child care, and shelter). SEWA aims to mainstream marginalized, poor women
in the informal sector and lift them out off their poverty. SEWA initiatives for
women include Sewa bank, Health care, Child care, VimoSEWA (SEWA insurance),
Legal services, Capacity building of Sewa members, Housing and infrastructure,
and Video Sewa.
Check Your
Progress
2. Self Employed
Women’s Association
(SEWA) was founded
by ——
Federation of Indian Women Entrepreneurs (FIWE)
Federation of Indian Women Entrepreneurs (FIWE), founded in 1993, is
one of India’s premier institutions for women. It has branches in different states
of India with a membership base of 15,000 individual members/professionals and
28 member associations spread throughout India. The organization educates and
trains young aspirant, start-up women entrepreneurs for their right initiation into
Business
Entrepreneurship - II
213
Institutional Support For
MSMEs - IV
NOTES
business and does awareness programs and business counseling to aspirant women.
Besides, it provides hand-holding and networking opportunities to them as well as
women interested in growing their business further and creates a launching pad to
empower women in the regional economic framework and graduated from small
to medium enterprises. FIWE brings businesswomen to a common forum, ensuring
that their opinions, ideas and visions are collectively and effectively taken up with
policy-makers and various other agencies for their entrepreneurship development.
Laghu Udyog Bharati (LUB)
Laghu Udyog Bharti (LUB) was founded in 1995. Its main objective is to
promote and safeguard the interests of small enterprises. It also undertakes
entrepreneurial training, support technology upgradation, marketing services etc.
It has its representation on the national and state level government bodies connected
with small enterprises.
All India Association of Industries (AIAI)
The association aims to promote entrepreneurship and facilitate industrial
growth as trade and industry form an integral part of economic development of the
country. AIAI endeavors to meet various needs of enterprises by combining the
power of strategic partnerships and bringing together businesses, government agencies,
service providers and experts. International trade facilitation cell of AIAI promotes
international trade, enhance exchange of trade related information and trade
delegations, foster joint ventures, technology transfers, business alliances. AIAI
assists overseas enterprises seeking business opportunities in India by identifying
suitable partners for joint ventures, takeovers, and other commercial activities.
Confederation of Indian Industry (CII)
Confederation of Indian Industry (CII) works to create and sustain an environment
conducive to growth of industry in India, partnering industry and government alike through
advisory and consultative processes. CII is a non-government, not-for-profit, industry led
and industry managed organization, playing a proactive role in India’s development process.
Founded over 110 years ago, it is India’s premier business association, with a direct
membership of over 5800 organisations from private as well as public sectors including
SMEs and MNCs and indirect membership of over 95,000 companies from around 325
national and regional sectoral associations.
A facilitator, CII catalyses change by working closely with government on
policy issues, enhancing efficiency, competitiveness and expanding business
opportunities for industry through a range of specialized services and global linkages.
12.3 Institutional Set Up for Maharashtra State
State Financial Corporations (SFCs)
214
Business
Entrepreneurship - II
Industrial Finance Corporation of India (IFCI), set up in 1948, used to
provide financial assistance to only large-sized industrial undertaking. In order to
cater the financial requirements of a large number of small-scale units, the SFC
act was passed by the parliament on September 28, 1951 under which the State
Financial Corporations could be set up. The first SFC was set up in Punjab in
1953. The management of the SFC is similar to that of the IFCI. It has a board of
directors, a managing director and an executive committee. An SFC can open its
offices at different places within the state.
Functions of SFCs are as follows:
 The chief function of SFC is to advance term loans to small scale and
medium scale industries units
 It underwrites the issues of stocks, shares, bonds and debentures of
industrial units.
Institutional Support For
MSMEs - IV
NOTES
 It grants loans to the industrial concerns which is repayable within a
period not exceeding twenty years.
 It subscribes to debentures floated by industrial concerns
 It also provides financial assistance to small road transport operators,
tour operators, hoteliers, hospitals and nursing homes, etc.
SFCs provide term loans for acquisition of land, building, plant and
machinery, promotion of self-employment, encourage women entrepreneurs,
expansion of industry, and provide seed capital assistance. Financial assistance to
small and medium enterprises is provided by way of term loans, direct subscription
to equity/debentures, guarantees, discounting of bills of exchange and seed capital
assistance. SFCs operate a number of schemes of refinance of IDBI and SIDBI
and also extend equity type assistance. SFCs have tailor-made schemes for artisans
and special target groups such as SC/ST, women, ex-servicemen, physically
challenged and also provide financial assistance for small road transport operators,
hotels, tourism-related activities, hospitals, nursing homes and so on.
Maharashtra State Financial Corporation (MSFC)
Presently Maharashtra State Financial Corporation (MSFC) is defunct. It
is not assisting entrepreneurs for their financial needs.
State Industrial Development Corporations (SIDCs)
State Industrial Development Corporation (SIDC) set up under the
Companies Act, 1956, as wholly owned undertaking of State government, for promotion
and development of medium and large industries, acts as catalyst for industrial
development and provides impetus to further investment in the respective state.
SIDCs play an important role by developing land, providing industrial
infrastructural facilities in the form of readymade factory sheds and /or developed
plots together with facilities like roads, power, water supply, drainage, and other
amenities. SIDCs provide assistance by the way of term loans, underwriting and
direct subscription to shares/debentures and guarantees. They undertake a variety
of promotional activities such as preparation of feasibility reports, industrial potential
surveys, entrepreneurship development programmes and developing industrial areas/
estates. SIDCs are also private entrepreneurs or as wholly owned subsidiaries.
The SIDCs activities have now widened to include equipment leasing, providing
tax benefits under state governments package scheme of incentives, merchant
banking services and setting-up of mutual funds. Some of the SIDCs also offer a
package of developmental services such as technical guidance, assistance in plant
location and coordinator with other agencies.
Check Your
Progress
State whether true or
false.
3. SFCs provide term
loans for acquisition of
land, building, plant and
machinery, promotion
of self-employment,
encourage women entrepreneurs, expansion
of industry, and provide seed capital assistance.——
The SIDCs are agents of IDBI and SIDBI for operating its seed capital
scheme. Under the scheme, equity type assistance is provided to deserving first
generation entrepreneurs who possess necessary skill but lack adequate resources
required towards promoter’s contribution.
Business
Entrepreneurship - II
215
Institutional Support For
MSMEs - IV
NOTES
The major functions of these corporations include:
 Providing risk capital to entrepreneurs by the way of equity participation
and seed capital assistance.
 Grant of financial assistance to industrial units by the way of loans,
guarantees and of late, lease finance by some corporations;
 Promotional activities such as identification of project ideas through
industrial potential surveys, preparation of feasibility reports, selection
and training of entrepreneurs;
 Administering incentive schemes of central/state government;
 Developing industrial areas/estates by providing infrastructure facilities.
Since the actual range of activities being undertaken by individual SIDC
depends upon the specific responsibilities entrusted by respective state/union
territory, there is considerable diversity in activities among different SIDCs.
State Small Industries Development Corporations (SSIDCs),
Established under the Companies Act, 1956, as State government
undertakings, cater to the needs of small, tiny and village industries in their respective
State/Union Territory. Being operationally flexible, SSIDCs undertake a variety of
activities. The important functions performed by the SSIDCs include:
 To procure and distribute scarce raw materials.
 To supply machinery on hire purchase system.
 To provide assistance for marketing of the products of small-scale
industries.
 To construct industrial estates/sheds, providing allied infrastructure
facilities and their maintenance.
 To extend seed capital assistance on behalf of the State Government
concerned.
 To provide management assistance to production units.
Maharashtra Small Scale Industries Development Corporation (MSSIDC)
Established in 1962, Maharashtra Small Scale Industries Development
Corporation Limited (MSSIDC) was initially envisaged as an agency to supply raw
materials and to extend marketing assistance to small scale units. Its basic objective
was to help small scale industries to develop and grow to the fullest extent.
However, over the years, MSSIDC has become India’s leading corporation,
continuously responding to the expanding and diversified needs of Small Scale
Industries. It is increasingly assisting SMEs and rural industries and providing
support services like consultancy, counseling, marketing, training, import-exports,
entrepreneurship development programme, etc. MSSIDC gives a complete support
right from how to set up an SSI unit to selling products in market to arranging an
appropriate finance. Thus, MSSIDC provides a tailor-made service to fulfill the
specific needs of small enterprises.
Assistance provided to MSME units under Marketing Assistance Scheme:
216
Business
Entrepreneurship - II
* Government Rate Contracts participation
* Participation in the Tenders of Government Purchase Programmes
MSSIDC procures raw materials such as steel and coal from main
producers and supplies the same to small enterprises. There is a need of assured
and consistent supply of critical raw material to ensure quality of the end products,
in time production and maintaining the delivery schedules
Institutional Support For
MSMEs - IV
NOTES
MSSIDC is a Nodal agency for implementation of various schemes for
development of handicrafts and to preserve the languishing arts of handicrafts in
the State of Maharashtra. MSSIDC implements the schemes for development of
handicrafts of State Government as well as Government of India.
Handicraft Artisans can register themselves with MSSIDC. MSSIDC
also undertakes periodic surveys to register artisans. In addition to giving prime
display space for selling at MSSIDC’s Trimourti Emporia and annual exhibitions,
MSSIDC provides training to next generation of younger artisans and supports
artisans through assistance.
Commercial warehousing: Under this activity MSSIDC makes available
their godowns located at various places to the Government organizations, Public
Sector Undertaking, Small Scale Industries, other industries for storing their products
for the benefits of Industrial units. Provides warehousing facility at godowns located
at various places to Public Sector Undertakings. MSSIDC also undertakes handling
of material, if desired by customer.
Franking: MSSIDC provides facility of franking for all types of documents
except bill of exchange, Hundi, Insurance Documents and Share Transfer Deed.
Check Your
Progress
4. Established in 1962,
Maharashtra Small
Scale Industries Development Corporation
Limited (MSSIDC)
was initially envisaged
as————
Technical Consultancy Organizations (TCOs)
All India financial institutions, in collaboration with state level financial/
development institutions and commercial banks, established a network of Technical
Consultancy Organizations (TCOs) during the 70s and 80s, to cater to the consultancy
needs of small and medium enterprises and new entrepreneurs. Technical consultation
organizations provide a complete package of consultancy at reasonable rates to
small and medium enterprises, individual entrepreneurs, government departments
and agencies, various state level institutions, commercial banks and other institutions
in their tasks relating to industrial development and financing.
Though initially, TCOs focused on pre-investment studies, over the years
they have diversified their services to include:
i. Preparation of project profiles and feasibility studies
ii. Und ertaking industrial potential surveys
iii. Identification of potential entrepreneurs and providing them technical
and management assistance
iv. Undertaking market research and surveys for specific products
v. Undertaking energy audit and energy conservation assignments
vi. Project supervision and where necessary, rendering technical and
administrative assistance
vii. Taking up assignments on turn-key basis
viii. Undertaking export consultancy for export oriented projects based on
modern technology
Business
Entrepreneurship - II
217
Institutional Support For
MSMEs - IV
NOTES
ix. Offering management consultancy services, especially diagnostic studies,
sick units or for improvements in the existing units and their rehabilitation
programmes
x. Conducting entrepreneurship programmes and skill up gradation
programmes and
xi. Offering merchant banking services
All India financial institutions in collaboration with state level, financial/
development institutions and commercial banks established a network of Technical
Consultancy Organizations (TCOs). During the 70s and 80s, to cater to the
consultancy needs of small and medium enterprises and new entrepreneurs.
Technical consultation organizations provide a complete package of consultancy
packages at reasonable rates to small and medium enterprises. Individual
entrepreneurs, government departments and agencies, various state level
institutions, commercial banks and other institutions in their tasks relating to industrial
development and financing.
Though initially, TCOs focused on pre-investment studies, over the years
they have diversified their services to include:
1. Preparation of project profiles and feasibility studies
2. Undertaking industrial potential surveys
3. Identification of potential entrepreneurs and providing them technical
and management assistance
4. Undertaking market research and surveys for specific products
5. Undertaking energy audit and energy conservation assignments
6. Project supervision and where necessary, rendering technical and
administrative assistance
7. Taking up assignments on turn-key basis
8. Undertaking export consultancy for export oriented projects based on
modern technology
9. Offering management consultancy services, especially diagnostic studies,
sick units or for improvements in the existing units and their rehabilitation
programmes
10. Conducting entrepreneurship development programmes and skill up
gradation programmes and
11. Offering merchant banking services
Maharashtra Industrial and Technical Consultancy Organization Limited
(MITCON)
218
Business
Entrepreneurship - II
MITCON consultancy and engineering services Ltd. is an ISO 9001:2008
certified company, listed on SME platform (EMERGE) of national stock exchange
of India limited. MITCON was formed as a technical consultancy organization in
1982 jointly by Industrial Credit and Investment Corporation of India Ltd. (ICICI),
Industrial Development Bank of India (IDBI), Industrial Finance Corporation of
India (IFCI), State Industrial and Investment Corporation of India Ltd. (SICOM),
Maharashtra Industrial Development Corporation (MIDC), Maharashtra Small
Scale Industrial Development Corporation (MSSIDC) and various banks. MITCON
is headquartered at Pune (India) and has presence across the country through
offices at Mumbai, New Delhi, Ahmadabad, Chennai, Bangalore and Nagpur which
are equipped with high speed communication network with state of the art
infrastructure.
Institutional Support For
MSMEs - IV
NOTES
Over the last three decades, MITCON has gained proficiency in providing
corporate solutions in power generation, energy efficiency, renewable energy,
climate change and environmental management sectors. Over the years, it has
diversified in to providing services to banking, infrastructure and biotechnology
sectors. It provides solutions to clients depending on their requirements inter alia
including feasibility studies, detailed project reports, financial syndication, lender’s
engineer services, Environment Impact Assessment (EIA), basic and detailed
engineering, bid process management, project management, cluster development,
technical/financial restructuring, energy audits, corporate debt restructuring,
valuations, due diligence, qualitative and market research, assets/business valuation
and consultation services in wind power project registration.
MITCON provides services to small and medium enterprises (SMEs),
large corporate, banks, financial institutions and various government organizations.
MITCON prides itself in providing the best to existing and new entrepreneurs. It
has fostered good working relationships with various state and various government
organizations. With a comprehensive and clear understanding of business across
segments, MITCON’s goal is integrate environmentally responsible consulting in
to the frame work of every client’s project to maximize value and reduce the
environmental footprint.
State Industrial & Investment Corporation of Maharashtra Ltd.
(SICOM)
SICOM was established in 1966 by the Government of Maharashtra as a
state owned company with the objective of industrializing backward areas of the
state. It is a premier financial institution located in Mumbai, dedicated to catalyzing
development in industry, services and infrastructure sectors in India by providing
tailor-made financial solutions and advisory services to entrepreneurs, companies
in private and public sector and Government bodies. It is the nodal agency for
foreign direct investment in Maharashtra state. After 1994, SICOM has been
offering its services for projects located anywhere in India. It has launched a
venture fund with participation from SIDBI and UWB. The fund is targeted to
provide equity support to companies in Information Technology. Fund based
activities of SICOM include providing financial assistance by way of long term
loans, leasing, short and medium term loans, and bills discounting. The above
activities are supplemented by fee based activities like corporate advisory services,
mergers, amalgamations, and restructuring. SICOM’s infrastructure advisory
services include feasibility study, preparation of bid documents, loan syndication
and assisting in identification of joint venture partners.
SICOM has dedicated itself to providing entrepreneurs with a range of
fund-based and non-fund-based products and services. SICOM has been
responsible for catalyzing the development of infrastructure and industry in the
state of Maharashtra. After 1994, SICOM has been offering its services for projects
located anywhere in India.
Thrust areas for funding are as under:
Infrastructure: roads and bridges, small urban infrastructure projects e.g.
water supply, sanitation etc , construction equipments
Business
Entrepreneurship - II
219
Institutional Support For
MSMEs - IV
NOTES
Services sector: IT and IT enabled services, media and entertainment,
hospitals and healthcare, restaurants, multiplexes, shopping malls, education and
tourism
Manufacturing sector: financial assistance to new clients in this sector
would be restricted to existing companies in following segments with a 3 year
track record of profitability parameters (i.e. green channel norms) - auto ancillaries,
pharmaceuticals (bulk drugs and formulations), textile only under TUFS
(Technology Upgradation Fund Scheme), Liquor and Breweries, agro-based and
food processing, chemicals, electricals and electronics.
Advisory services to SME sector, corporates, infrastructure sector,
Government etc: guidance relating to setting up of projects/service facilities to
foreign and Indian agencies; structuring of financial needs for projects/services;
site selection services; assistance in arranging infrastructure required for projects/
service facilities; buying/selling and business activities; mergers and acquisitions;
liaison with Govt./Semi-Govt. organizations/industry associations/international
associations; feasibility studies; market and feasibility data acquisition; strategic
planning; restructuring analysis; marketing related support for industry/service
sectors; appraisal of self- financed cases for sales tax incentive purpose.
Maharashtra Centre for Entrepreneurship Development (MCED)
MCED was born out of the need to provide professional and practical
training on entrepreneurship to avoid range of potential entrepreneurs in
Maharashtra. It is a state government promoted organization sponsored by SICOM,
MSSIDC, MIDC, MSFC, MELTRO and MITCON. The headquarters of MCCED
is at Aurangabad and regional offices are at Mumbai, Pune, Nagpur, Nashik,
Amravati, Aurangabad, Kolhapur an Osmanabad and a trainer in each district.
To create self-employment MCED is conducting following training
programs:
 Entrepreneurship Development Program (EDP)
 Development Programs for Self-Employment (DPEP)
 Entrepreneurship Appreciation Program (EAP)
 Group Entrepreneurship Development Program (Gr.EDP)
 MICRO EDP
 Entrepreneurship Awareness Camps (EAC)
 Certificate Program for Developing Competent Personnel for SSI
Management
 Trainers Training Program
 Vocational Training Based EDPs (VTPs)
 Management Development Programs (MDPs/IDPs)
 Teacher’s Training Programs (TTPs)
 School/ College level EDPs
 MCED Manch
220
Business
Entrepreneurship - II
 Publication of Udyojak
 Entrepreneur Meet
 News Clipping Services
Institutional Support For
MSMEs - IV
 Organization of Exhibitions/Discussions/Workshops
 Industrial Data Bank
NOTES
Maharashtra Centre for Entrepreneurship Development (MCED) has been
a pioneer in espousing social and economic entrepreneurship since 1988. It is a
training institute in the core area of entrepreneurship development. It works as a
facilitator and guide for the creation and cultivation of entrepreneurial spirit and
the concept of ‘self-employment’ in a nation that is largely driven by third party
employment.
The objectives of MCED are: to spread entrepreneurial culture; to develop
entrepreneurs through systematic training; to disseminate information and data
regarding entrepreneurship; to help industries and institutions in mobilizing human
resources with an entrepreneurial approach; to create awareness about emerging
and future entrepreneurial opportunities and challenges; to develop competencies
in business internationalization; to conduct organization development programmes.
Maharashtra Agro-Industries Development Corporation (MAIDC)
Maharashtra Agro-Industries Development Corporation (MAIDC), a profit
oriented organization registered under the Companies Act, is founded in 1965 to
promote modernisation of agro sector through mechanization. Right from its
inception, MAIDC has been empowering farmer’s community to achieve higher
productivity in agriculture. The objective of the company is to make available to
farmers standard quality fertilizers, pesticides, agro engineering implements and
animal feed to the extent required and at the tie of requirement and at competitive
rates. Besides selling its manufactured fertilizers and pesticides under Krushi Udyog
(KU) brand, company also utilizes its network of over 1500 dealers throughout
Maharashtra to market supplementary products of other reputed companies. It
has developed several multipurpose agricultural implements such as Krushivator,
a tractor drawn implement. It has animal feed manufacturing unit at Chinchwad,
Pune, &Yeotmal. It has a small manufacturing unit of various fruit juices, squashes
syrups, jams, ketchups etc under the “Noga’ brand.
It has also been designated as State Nodal Agency by Ministry of Food
Processing Industries. In its role as State Nodal Agency it scrutinizes and forwards
various proposals of entrepreneurs under different schemes of assistance from
Government of India. It also helps entrepreneurs preparing projects, selecting area
etc. it has developed a Food Park at Butibori near Nagpur to provide common
infrastructure facilities for small to medium food processing un its. It is also in the
process of setting up a Flower Auction Centre at Mumbai.
Mahila Arthik Vikas Mahamandal (MAVIM)
Mahila Arthik Vikas Mahamandal (MAVIM) is the State Development
Corporation of Government of Maharashtra, established on 24th February 1975 on
the occasion of International Women’s year. MAVIM has been declared as a
Nodal agency by Government of Maharashtra on 20th January 2003 to implement
various women empowerment program through Self Help Groups (SHGs). The
mission of the corporation is “to bring about gender justice and equality for women,
investing in human capital and capacity building of women, thus making them
economically and socially empowered and enabling them to access sustainable
livelihoods”.
Business
Entrepreneurship - II
221
Institutional Support For
MSMEs - IV
NOTES
International Fund for Agricultural Development (IFAD) assisted
Maharashtra Rural Credit Program (MRCP) was implemented by MAVIM during
1994-2002. The programme proved successful in terms of providing access to
credit, information and knowledge to poor rural women. It facilitated MAVIM to
reorient its strategies for women empowerment and MAVIM had taken a
revolutionary decision in 2001 that not to implement any commercial schemes and
to take up only implementation of women empowerment programmes through the
medium of SHGs. MAVIM had implemented following developmental schemes
through medium of SHGs:
 Tejaswini Maharashtra Rural Women Empowerment Program
 Minority Women Empowerment Program (MWEP)
 4% Low Interest Rate Scheme
 Convergence of Agricultural Interventions in Maharashtra (CAIM)
 Skill Training For Women
 Maharashtra State Rural Livelihood Mission (MSRLM)
 Integrated Water Shed Management Program (IWMP)
MAVIM performs as a state level nodal agency to implement various
women empowerment schemes aided by central and state government to converge
with concerned departments of government, financial institutions, NGOs and SHGs
to meet the demands
Maharashtra Tourism Development Corporation (MTDC)
MTDC has been established under the Companies Act, 1956 (fully owned
by government of Maharashtra) for systematic development of tourism on
commercial lines. The corporation receives financial assistance from the state
government in the form of share capital an grants. The state government has
entrusted all commercial and promotional tourism activities to this corporation.
MTDC has since its inception being involved in the development and maintenance
of various tourist locations of Maharashtra. MTDC owns and maintains resorts at
all key tourist centers.
Leather Industries Development Corporation of Maharashtra (LIDCOM)
LIDCOM was established on 1st of May, 1974. LIDCOM has been brought
under the control of Social Welfare, Cultural Affairs and Sports Department from
Industries Department from 1996. The decision was taken in order to give financial
assistance to the community engaged in development of leather industry.
State sponsored schemes:
1. 50% subsidy scheme: under this scheme, loan up to Rs. 50,000 is
sanctioned to the applicant belonging to Charmakar community. Financial
assistance up to 50% of the sanctioned loan maximum to Rs. 1,000 is
waived of from the loan sanctioned.
222
Business
Entrepreneurship - II
2. Margin Money Scheme: under this scheme, loan for business related to
leather industry from Rs. 50,000 to Rs. 5 lakh is sanctioned to applicant
belonging to Charmakar community. Financial assistance up to 50% of
the sanctioned loan maximum to Rs. 10,000 is waived of from the loan
sanctioned. Corporate sanctions margin money of 20% of the project
investment at the rate of 4% per annum
Institutional Support For
MSMEs - IV
Central sponsored schemes:
1. Term Loan Scheme - National Scheduled Caste Finance and
Development Corporation, Ministry of Social justice and Empowerment
(NSFDC) and Corporation sanctioned loan to applicants belonging to
Charmakar community for self-employment purpose.
NOTES
2. Micro Credit Scheme (NSFDC): Loan up to Rs. 25,000 is sanctioned to
the applicant belonging to Charmakar community. Financial assistance
up to 50% of the sanctioned loan maximum to Rs. 10,000 is waived of
from the loan sanctioned
3. Women Empowerment Scheme (NSFDC): Loan of Rs. 25, 000 at 4%
interest rate comprising Rs. 15,000 loan amount and financial assistance
of Rs. 10,000 to women applicant belonging to Charmakar community
who are widows or reside in villages where there is no nationalized bank.
Training programs
Three to six months training program are arranged through government
authorized training centers to upgrade technical schemes related to business for
applicants belonging to Charmkar community. Training types- sewing, beauty parlor,
electric wiremen, turner/fitter, stitching sweaters on sewing machines, toy
manufacturing, Tv/Radio/Tape recorder mechanic, computer training, motor
winding, fabricator/welding, automobile repairing, leather footwear manufacturing.
Maharashtra State Power Loom Corporation
MSPC is established under the Companies Act, 1956 for the benefit of
power loom weavers and other ancillary workers in the power loom sector. Its
objectives are:
i.
To supply improved equipments and accessories required for power loom
industry
ii.
To supply raw materials required for power loom industry
iii.
To assist marketing of products of power loom weavers
iv.
To install and run dye-houses, plants for pre-weaving facilities, bleaching,
calendaring, mercerizing, printing, anti-shrink processing and other processing plants
required for power loom industry.
v.
To raise finance for the above purposes by issue of share capital,
debentures, bonds or by raising loans or accepting deposits with or without
guarantee of the Government of Maharashtra
vi.
To undertake study of and preparation of project reports, feasibility studies
and to act as general consultant in power loom trade
vii.
To establish, erect, buy, sell, organize, own, conduct, supervise, manage spinning
and weaving mills and carry on business of ginners, spinners, weavers, dyers,
manufacturers, balers and pressers of all kinds of fibrous materials and cultivation
thereof, tanning, preparing, colouring, dyeing and bleaching, processes and purchasing
and vending raw materials and manufactured articles, combing, bleaching, printing,
selling and otherwise dealing in all kinds of cloth, textiles, and goods made of fibres.
Business
Entrepreneurship - II
223
Institutional Support For
MSMEs - IV
NOTES
Maharashtra State Handloom Corporation
Maharashtra State Handloom Corporation was established in 1971 with a
socio-economic objective of providing employment to handloom weavers of the
state. The primary objective of the corporation is to ensure overall welfare and
growth of artisans and weavers. Its aim includes freeing artisans and weavers
from and skill can be enlarged, promoting financial welfare.
Maharashtra State Fisheries Development Corporation
The aims and objectives of MFDC are:
To promote develop scientifically exploit the marine as well as inland
fisheries resources and procure fish and other products
To acquire maintain and operate fishing vessels, nets , hooks and other
gears to raise overall production of fish within the state of Maharashtra and also
from the seas far and near
To sell and export fish fresh, frozen, processed or dry other aquatic products
either produced by the company or acquired or purchased from other agencies on
wholesale or retail or agency or by any other methods, either in this state or any
other state.
Maharashtra Economic Development Council (MEDC)
The Maharashtra Economic Development Council (MEDC) was
established in 1957 under the stewardship of (late) Dr. Gadgil, eminent economist
and former Deputy Chairman, Planning Commission. It was set up by participation
of prominent Chambers of Commerce, business and industries associations in
Maharashtra to facilitate rapid and balanced economic development of Maharashtra.
MEDC is the only organization focusing exclusive attention on economic
development of Maharashtra. With its sustained efforts, it has been facilitating
rapid and balanced economic and industrial development of the state. As a part of
this strategy, MEDC has accorded top priority to vital issues such as infrastructure
development, balanced regional development, industry-education partnership,
tourism and hospitality, agriculture and water resources, economic growth and
human development.
MEDC is a unique, apolitical and autonomous research organization
working proactively with state government, business and industry, economists,
educationists, professionals, bankers etc. MEDC’s mainstay is the policy research.
It brings out research memoranda and information circulars on various aspects of
economy in general and trade and industry in particular.
Maharashtra State Warehousing Corporation (MSWC)
MSWC is one of the oldest State Warehousing Corporations in the country.
It has introduced measures for providing economical services to farmers to store
their primary produce. MSWC encourages them to avail the facilities of scientific
storage by giving rebate up to 50%. Besides, rebate up to 50 % is also given to
farmers from SC/ST categories and notified tribal areas. Warehousing activities
of MSWC include scientific storage of food grains, fertilizers, industrial goods,
cotton bales, cement, and at some places it runs custom bonded warehouses and
container freight stations. Depositors can avail credit from banks by pledging
warehouse receipt issued.
224
Business
Entrepreneurship - II
Maharashtra State Road Development Corporation (MSRDC)
The state government has constituted the Maharashtra State Development
Corporation (MSRDC) to accelerate development of transport infrastructure in
the state.
Maharashtra Energy Development Agency (MEDA)
In line with the central government policy of Ministry of New and
Renewable Energy (MNRE), Maharashtra created Maharashtra Energy
Development Agency (MEDA) from July 1986. MEDA’s objective is to undertake
objective of renewable energy and facilitate energy conservation in the state of
Maharashtra, as a state nodal agency under the umbrella of MNRE for about a
decade since its establishment, MEDA did extensive work in the field of extensive
energy focusing on the rural areas and standalone devices. Integrated Rural Energy
Planning (IRDP) program was the main plank of its activities. MEDA has
undergone organizational restructuring from a largely rural ‘Stand Alone System’
oriented organization to a significant player in the field of generation of power
from renewable.
Institutional Support For
MSMEs - IV
NOTES
Check Your
Progress
Maharashtra Pollution Control Board (MPCB)
Maharashtra Pollution Control Board is implementing various environmental
legislations in the state of Maharashtra mainly including Water (Prevention and
Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act,
1981, Water (Cess) Act, 1977 and some of the provisions under Environmental
(Protection) Act, 1986 and the rules framed their under like, Biomedical Waste
(M and H) Rules, 2000, Municipal Solid Waste Rule, 2000 etc. MCB is functioning
under the administrative control of environment department of Government of
Maharashtra.
5.
Maharashtra
Pollution Control
Board is implementing
various environmental
legislations in the state
of Maharashtra such
as ————
Maharashtra Urban Infrastructure Development Company Ltd.
(MUIDCL)
In addition to these State-level corporations, four regional development
corporations (RDC) have been set up for the four regions of the State namely:
Western Maharashtra Development Corporation (WMDC) for Western
Maharashtra
Marathwada Development Corporation (MDC) for Marathwada
Development Corporation of Vidarbha (DCVL) for Vidarbha
Development Corporation of Konkan (DCK) for Konkan
The common primary objectives of these corporations are to undertake
activities based on the natural and human resources and demands in their respective
regions so as to generate employment from the root level in rural areas, besides
promoting and establishing industrial projects on their own or in the joint sector.
Maharashtra Chamber of Commerce, Industry & Agriculture (MACCIA)
Maharashtra Chamber of Commerce, Industry and Agriculture
(MACCIA), the apex Chamber of the State, plays a pivotal role in supplementing
and augmenting the efforts of Government for the economic development of the
State and advancement of its people. The Chamber was founded in 1927 by the
great visionary Late Seth Walchand Hirachand with the mission to unite and organize
the business class, then emerging in the pre-independent India. The Chamber had
the fortune to be nurtured by stalwarts and doyens of Indian industry. The Chamber
is affiliated to national level organisations of trade and industry such as Federation
Business
Entrepreneurship - II
225
Institutional Support For
MSMEs - IV
NOTES
of Indian Chambers of Commerrce & Industry (FICCI), New Delhi, International
Chamber of Commerce –National Committee, New Delhi, Indian Council of
Arbitration, New Delhi, All India Organization of Employers, New Delhi.
The Chamber is instrumental in founding and initially nurturing important
organizations like Maharashtra Economic Development Council (MEDC) and the
Federation of Co-operative Industrial Estates. The Chamber has also helped in
promoting the co-operative sector in areas such as Merchant Banking, Mini
Industrial Estates and Co-operative Industrial Estates throughout the State of
Maharashtra, especially in rural parts. Maharashtra Chamber has evinced special
interest in the development of certain regions like Konkan, Marathwada and
Vidarbha. MACCIA regularly receives trade delegations from various countries
of the world and has signed MOUs with a few of them for facilitating mutual
trade. It is a tradition of MACCIA to organize every year Convention of Members
of Parliament from Maharashtra at the residence of a Union Minister at New
Delhi. MACCIA organizes training programmes for working professionals and
students.
Chamber of Marathwada Industries & Agriculture (CMIA)
Chamber of Marathwada Industries & Agriculture is an association having
the membership from most of the leading industries, organisations and individuals
who are working for the cause of industries, industrialization and overall development
of Marathwada region for the last 39 years. CMIA is an organisation representing
small scale/medium scale/large scale industries of Marathwada region. It has close
association with national bodies such as CII, FICCI, ASSOCHAM etc.
For promoting a local industry, CMIA regularly undertakes various activities
to promote products and services of member units of CMIA. It organizes programs
such as buyer-seller meet, business visits, theme-based seminars, training programs
etc. special efforts are made to promote the member industries and their products
targeting export market. CMIA arranges a unique event ‘Maha expo’ for promoting
Marathwada as a potential destination for investment and showcasing the industry
of this region.
Maharashtra Industrial and Economic Development Association (MIEDA)
Maharashtra Industrial and Economic Development Association (MIEDA)
is a leading organization, represents manufacturing and service sector industries,
infrastructure, realty, power, IT, SMEs, co-operative and other businesses. It also
represents various organizations associations and chambers of the State to take up
the problems and issues with the state and central government. MIEDA is working
for development of industry improvement of infrastructure, business and export
promotion, industrialization in rural areas, technology transfer and joint ventures,
SME and entrepreneurship development, environmental conservation, tourism
promotion and other sectors in Maharashtra. MIEDA also carries out research and
studies on various potential areas to improve the growth and industrial development
and remove bottle necks to encourage more investment in various sectors.
226
Business
Entrepreneurship - II
MIEDA regularly organizes conferences, exhibitions, seminars, workshops
and interactive meetings with ministers, senior government officials, bankers, and
industrialists to share their view points. MIEDA is actively involved with various
organizations and chambers of commerce as well as government departments,
investment boards, SME organizations, young entrepreneurs’ forums, export
promotion councils and importers. MIEDA arranges trade promotion delegations
to various countries to promote bilateral trades, business opportunities and co-
operation, B 2 B meets, visit to SEZs, infrastructure and power projects, food
processing industry and specific industrial zone as per requirements.
MIEDA deals with activities such as industrial productivity/development
activities, export promotion and market development, investor’s meet in India and
abroad, tourism promotion events, environment protection, delegations and study
tours, channelize investment, bank finance and equity funding; agro and food
processing, industrial development; promote Public Private Participation in various
sectors; exhibitions, conferences, road shows and other sectors; organizations
various training and education programs encourage social and cultural activities.
Institutional Support For
MSMEs - IV
NOTES
12.4 Summary
The prominent industry associations working for entrepreneurship
development are Federation of Indian Micro & Small and Medium Enterprises
(FISME), Confederation of Indian Industry (CII), Federation of Indian Chambers
of Commerce & Industry (FICCI), Associated Chamber of Commerce and Industry
(ASSOCHAM), World Association for Small and Medium Enterprises (WASME),
Federation of Associations of Small Industries of India (FASII), Self Employed
Women’s Association (SEWA), Federation of Indian Women Entrepreneurs
(FIWE), Laghu Udyog Bharati (LUB), All India Association of Industries (AIAI),
Confederation of Indian Industry (CII).
The institutional support system for Maharashtra state consist of State
Financial Corporations (SFCs), Maharashtra State Financial Corporation (MSFC),
State Industrial Development Corporations (SIDCs), Maharashtra Industrial
Development Corporation, State Small Industries Development Corporations
(SSIDCs), Maharashtra State Small Scale Industries Development Corporation
(MSSIDC), Technical Consultancy Organizations (TCOs), Maharashtra Industrial
and Technical Consultancy Organization (MITCON), State Industrial and
Investment Corporation of Maharashtra Ltd. (SICOM), Maharashtra Centre for
Entrepreneurship Development (MCED), Maharashtra Agro-Industries
Development Corporation (MAIDC), Mahila Arthik Vikas Mahamandal (MAVIM),
Maharashtra Tourism Development Corporation (MIDC), Leather Industries
Development Corporation of Maharashtra (LIDCOM), Maharashtra State Power
Loom Corporation, Maharashtra State Handloom Corporation, Maharashtra State
Fisheries Development Corporation, Maharashtra Economic Development Council
(MEDC), Maharashtra State Warehousing Corporation (MSWC), Maharashtra
State Road Development Corporation (MSRDC), Maharashtra Energy
Development Agency (MEDA), Maharashtra Pollution Control Board (MPCB),
Maharashtra Urban Infrastructure Development Company Ltd. (MUIDCL),
Maharashtra Chamber of Commerce, Industry and Agriculture (MACCIA),
Chamber of Marathwada Industries and Agriculture (CMIA), Maharashtra
Industrial and Economic Development Association (MIEDA).
12.5 Key Term
 Consultancy: The act or an instance of consulting; the practice of giving
expert advice within a particular field
12.6 Questions and Exercises
Business
Entrepreneurship - II
227
Institutional Support For
MSMEs - IV
Questions
1. Give an account of the efforts made by Industries department to stimulate
entrepreneurship in Maharashtra.
NOTES
2. Describe the functions of District Industries Centres.
3. What are the institutions assisting entrepreneurial development in
Maharashtra.
4. What is the role of Maharashtra State Industrial Corporation in industrial
development?
5. How does MITCON promote entrepreneurship?
6. Write a brief note on entrepreneurial development schemes of Khadi
and Village Industries Board.
7. Explain the role of State and its agencies in promoting entrepreneurship.
8. Explain the role of SICOM to stimulate entrepreneurship.
9. Explain the various promotional activities of MSSIDC in entrepreneurial
development.
10. What are the functions of MAVIM?
Exercise
1. Meet two entrepreneurs and ask them about the help received from
various state-level institutions for their enterprises.
Multiple Choice Questions
1. —————— is the nodal organization in India for the International
Chamber of Commerce (ICC), Confederation of Asia-Pacific Chamber
of Commerce and Industry (CACCI), and SAARC Chamber of
Commerce and Industry.
i.
FICCI
ii.
ASSOCHAM
iii.
FISME
iv.
CII
2. —————— , an organization of poor, self-employed women workers,
is founded in 1972 by Dr. Ela Bhat.
228
Business
Entrepreneurship - II
i.
FIWE
ii.
SEWA
iii.
MAVIM
iv.
All the above
3. ——————play an important role by developing land, providing
industrial infrastructural facilities in the form of readymade factory sheds
and /or developed plots together with facilities like roads, power, water
supply, drainage, and other amenities
i.
MSFC
ii.
SIDCs
iii.
SSIDCs
iv.
None of the above
Institutional Support For
MSMEs - IV
NOTES
4. Which of the following is a function performed by MSSIDC?
i.
To procure and distribute scarce raw materials
ii.
To supply machinery on hire purchase basis
iii.
To provide assistance for marketing of the products of small scale
industries
iv.
All the above
5. Choose the wrong alternative
i.
MITCON undertakes industrial potential surveys
ii.
MITCON identifies potential entrepreneurs and provides them
technical and management assistance
iii.
MITCON focuses only on pre-investment studies
iv.
MITCON takes up assignments on turn-key basis
Answers
Check Your Progress
1. Federation of Indian Chambers of Commerce and Industry (FICCI)
2. Dr. Ila Bhat
3. True
4. an agency to supply raw materials and to extend marketing assistance
to small scale units
5. Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention
and Control of Pollution) Act, 1981, Water (Cess) Act, 1977 and some
of the provisions under Environmental (Protection) Act, 1986 and the
rules framed their under like, Biomedical Waste (M and H) Rules,
2000, Municipal Solid Waste Rule, 2000 etc.
Multiple Choice Questions
1. i
2. ii
3. ii
Business
Entrepreneurship - II
229
Institutional Support For
MSMEs - IV
4. iv
5. iii
NOTES
12.7 Further Reading
https://fisheries.maharashtra.gov.in
www.aiaiindia.com
www.ciionline.org
www.cmia-aurangabad.com
www.maccia.org.in
ww.mahaurja.com
www.maidcmumbai.com
www.mieda.in
www.mpcb.gov.in
www.mshcngp.org
www.mspc.org.in/
www.mswarehousing.com
www.muidcl.com
www.sewa.org
230
Business
Entrepreneurship - II
NOTES
Business
Entrepreneurship - II
231